<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1997;
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
PREMIER BANCSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
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GEORGIA 6025 58-1793778
(STATE OF OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF INCORPORA-
TION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
</TABLE>
2180 ATLANTA PLAZA
950 EAST PACES FERRY ROAD
ATLANTA, GEORGIA 30326
(404) 814-3090
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
STEVEN S. DUNLEVIE, ESQ.
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
SUITE 700, 1275 PEACHTREE STREET, NE
ATLANTA, GEORGIA 30309
(404) 872-7000
---------------
COPY TO:
ELIZABETH O. DERRICK, ESQ.
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
SUITE 700, 1275 PEACHTREE STREET, NE
ATLANTA, GEORGIA 30309
(404) 872-7000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G check the following box. [_]
CALCULATION OF REGISTRATION FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
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PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(2) FEE(2)
- -------------------------------------------------------------------------------------------------
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2,066,850
Common Stock, $1.00 par value... shares $5.84 $12,070,404 $3,658
- -------------------------------------------------------------------------------------------------
</TABLE>
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(1) The Registrant will deregister the indicated shares if the Registrant's
shareholders fail to approve the matter described above.
(2) In accordance with Rule 457(f)(2), the total registration fee has been
calculated based on the book value of such securities computed as of the
latest practicable date prior to September 30, 1997, the date of filing
the Registration Statement.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[PREMIER LETTERHEAD]
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders (the
"Meeting") of Premier Bancshares, Inc. ("Premier"), to be held at 2180 Atlanta
Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326, on November 20,
1997, at 10:00 a.m., local time, notice of which is enclosed.
The proposals to be presented at the meeting are (i) the approval of an
Agreement and Plan of Reorganization (the "Agreement"), entered into with
Citizens Gwinnett Bankshares, Inc. ("Citizens") on June 24, 1997, as amended
on July 24, 1997, September 15, 1997 and September 19, 1997, pursuant to which
Citizens will merge with and into Premier (the "Merger"); and (ii) the
approval of an amendment to the Premier Directors Stock Option Plan (the
"Premier Directors Plan").
Upon consummation of the Merger, each share of Citizens common stock
("Citizens Common Stock") issued and outstanding will be converted into and
exchanged for the right to receive eight shares of Premier common stock
("Premier Common Stock"). Holders of Citizens stock options will also receive
shares of Premier Common Stock in exchange for their options. Premier will
also assume the rights and obligations of the Citizens Directors Stock Option
Plan.
I urge you to read the accompanying Proxy Statement/Prospectus, which
includes a description of the proposed Merger and also provides other specific
information concerning the additional proposals to be presented at the
Meeting.
The proposals listed above have been approved unanimously by your Board of
Directors and are recommended by the Board to you for approval. Each member of
the Board of Directors has agreed to vote all shares of Premier Common Stock
owned by such member in favor of the Agreement, the Merger and the amendment
to the Premier Directors Plan. Consummation of the Merger is subject to
certain conditions, including approval of the Agreement by the holders of
Citizens Common Stock, and approval of the Merger by various regulatory
agencies.
IT IS IMPORTANT TO UNDERSTAND THAT APPROVAL OF THE AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF PREMIER COMMON STOCK ENTITLED
TO VOTE AT THE MEETING. CONSEQUENTLY, A FAILURE TO VOTE WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE AGREEMENT. THE AFFIRMATIVE VOTE OF A MAJORITY OF
THE PREMIER COMMON STOCK PRESENT IN PERSON OR REPRESENTED BY PROXY WILL BE
REQUIRED TO APPROVE THE AMENDMENT TO THE PREMIER DIRECTORS PLAN. IF YOU HAVE
ANY QUESTIONS CONCERNING THE DELIVERY OF THE ENCLOSED PROXY CARD, PLEASE CALL
ME OR BOBBIE BURTT AT (404) 814-3090.
Accordingly, whether or not you plan to attend the Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. The proposed Merger is a significant transaction for
Premier, and your vote on this matter is of great importance. ON BEHALF OF THE
BOARD OF DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE PROPOSALS TO BE
PRESENTED AT THE MEETING BY MARKING THE ENCLOSED PROXY CARD "FOR" THE
PROPOSALS.
Sincerely,
/s/ Darrell D. Pittard
Darrell D. Pittard
Chairman of the Board and Chief
Executive Officer
<PAGE>
[CITIZENS LETTERHEAD]
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders (the
"Meeting") of Citizens Gwinnett Bankshares, Inc. ("Citizens") to be held at
Citizens' main office, 3209 Buford Highway, Duluth, Georgia on November 20,
1997, at 10:00 a.m., local time, notice of which is enclosed.
At the Meeting, you will be asked to consider and vote on a proposal to
approve the Agreement and Plan of Reorganization entered into with Premier
Bancshares, Inc. ("Premier") on June 24, 1997, as amended on July 24, 1997,
September 15, 1997, and September 19, 1997 (the "Agreement") pursuant to which
Citizens will merge with and into Premier (the "Merger"). Upon consummation of
the Merger, each share of Citizens common stock ("Citizens Common Stock")
issued and outstanding will be converted into and exchanged for the right to
receive eight shares of Premier common stock ("Premier Common Stock"). Holders
of Citizens stock options will also receive shares of Premier Common Stock in
exchange for their options.
Following the Merger, I will initially become President of the East Metro
Division of Premier Bank, and will be elected to Premier's Board of Directors.
The remaining directors of Citizens will serve as members of Premier's
Marketing and Development Board for Gwinnett County. Darrell D. Pittard will
remain as Chairman and Chief Executive Officer of Premier and Robert C. Oliver
will remain as President and Chief Operating Officer of Premier.
Please read the enclosed Proxy Statement/Prospectus carefully and consider
thoughtfully the information set forth therein. The Agreement and the Merger
have been approved unanimously by your Board of Directors and are recommended
by the Board to you for approval. Each member of the Board of Directors has
agreed to vote all shares of Citizens Common Stock owned by such member in
favor of the Agreement and the Merger.
IT IS IMPORTANT TO UNDERSTAND THAT APPROVAL OF THE AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES OF CITIZENS COMMON STOCK ENTITLED
TO VOTE AT THE MEETING. CONSEQUENTLY, A FAILURE TO VOTE WILL HAVE THE SAME
EFFECT AS A VOTE AGAINST THE AGREEMENT. IF YOU HAVE ANY QUESTIONS CONCERNING
THE DELIVERY OF THE ENCLOSED PROXY CARD, PLEASE CALL ME OR DARRELL MOORE AT
(770) 476-3209.
Accordingly, whether or not you plan to attend the Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO
VOTE FOR APPROVAL OF THE AGREEMENT AND THE MERGER PRESENTED BY MARKING THE
ENCLOSED PROXY CARD "FOR" THE MERGER.
Sincerely,
/s/ Thomas J. Martin
Thomas J. Martin
President and Chief Executive
Officer
<PAGE>
[PREMIER LETTERHEAD]
PREMIER BANCSHARES, INC.
2180 ATLANTA PLAZA
950 EAST PACES FERRY ROAD
ATLANTA, GEORGIA 30326
(404) 814-3090
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 20, 1997
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Premier Bancshares, Inc. ("Premier") will be held at Premier's
main office, 2180 Atlanta Plaza, 950 East Paces Ferry Road, Atlanta, Georgia
30326 on November 20, 1997, at 10:00 a.m., local time, for the following
purpose:
1. Merger and Assumption of Citizens Directors Stock Option Plan. To
consider and vote on (i) the Agreement and Plan of Reorganization, dated as
of June 24, 1997, as amended on July 24, 1997, September 15, 1997 and
September 19, 1997 (the "Agreement"), by and between Premier and Citizens
Gwinnett Bankshares, Inc. ("Citizens") pursuant to which Premier will
acquire all of the issued and outstanding common stock of Citizens
("Citizens Common Stock") through the merger of Citizens with and into
Premier (the "Merger"), and each share of Citizens Common Stock will be
converted into shares of Premier common stock ("Premier Common Stock"), as
described more fully in the accompanying Joint Proxy Statement/Prospectus,
and (ii) the assumption of the rights and obligations of the Citizens
Directors Stock Option Plan.
2. Amendment to Premier's Directors' Stock Option Plan. To consider and
vote on an amendment to the Premier Bancshares, Inc. Directors Stock Option
Plan (the "Premier Directors Plan") to permit eligible directors of Premier
to defer receipt of retainer fees, meeting fees or both and have such
amounts applied to the grant of restricted common stock.
3. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning the Meeting to permit, if
necessary, further solicitation of proxies.
Approval of the Agreement requires the affirmative vote of a majority of the
shares of Premier Common Stock entitled to vote at the Meeting. The
affirmative vote of a majority of the Premier Common Stock present in person
or represented by proxy will be required to approve the amendment to the
Premier Directors Plan. Only shareholders of record at the close of business
on October 1, 1997 are entitled to receive notice of and to vote at the
Meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF PREMIER COMMON
STOCK VOTE "FOR" THE PROPOSALS LISTED ABOVE.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Meeting in person. The proxy may be
revoked by the person executing the proxy by filing with the Secretary of
Premier an instrument of revocation or a duly executed proxy bearing a later
date or by electing to vote in person at the Meeting.
By Order of the Board of Directors
/s/ Barbara J. Burtt
Barbara J. Burtt
Secretary
Atlanta, Georgia
, 1997
<PAGE>
[CITIZENS LETTERHEAD]
CITIZENS GWINNETT BANKSHARES, INC.
3209 BUFORD HIGHWAY
DULUTH, GEORGIA 30136
(770) 476-3209
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 20, 1997
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Citizens Gwinnett Bankshares, Inc. ("Citizens") will be held at
Citizens' main office, 3209 Buford Highway, Duluth, Georgia 30136, on November
20, 1997, at 10:00 a.m., local time, for the following purpose:
1. Merger. To consider and vote on the Agreement and Plan of
Reorganization dated June 24, 1997, as amended on July 24, 1997, September
15, 1997, and September 19, 1997 (the "Agreement") by and between Premier
Bancshares, Inc. ("Premier") and Citizens Gwinnett Bankshares, Inc.
("Citizens") pursuant to which (i) Premier will acquire all of the issued
and outstanding common stock of Citizens ("Citizens Common Stock") through
the merger of Citizens with and into Premier (the "Merger"), and (ii) each
share of Citizens Common Stock will be converted into shares of Premier
Common Stock, as described more fully in the accompanying Joint Proxy
Statement/Prospectus.
2. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning the Meeting to permit, if
necessary, further solicitation of proxies.
Approval of the Agreement requires the affirmative vote of a majority of the
shares of Citizens Common Stock entitled to vote at the Meeting. Only
shareholders of record at the close of business on October 1, 1997, are
entitled to receive notice of and to vote at the Meeting or any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF CITIZENS
COMMON STOCK VOTE "FOR" THE AGREEMENT AND THE MERGER.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Meeting in person. The proxy may be
revoked by the person executing the proxy by filing with the Secretary of
Citizens an instrument of revocation or a duly executed proxy bearing a later
date or by electing to vote in person at the Meeting.
By Order of the Board of Directors
Darrell W. Moore,
Secretary
Duluth, Georgia
, 1997
<PAGE>
JOINT PROXY STATEMENT
FOR THE SPECIAL MEETING FOR THE SPECIAL MEETING
OF SHAREHOLDERS OF SHAREHOLDERS
TO BE HELD ON NOVEMBER 20, 1997 TO BE HELD ON NOVEMBER 20, 1997
PREMIER BANCSHARES, INC. CITIZENS GWINNET
2180 ATLANTA PLAZA BANKSHARES, INC.
950 EAST PACES FERRY ROAD 3209 BUFORD HIGHWAY
ATLANTA, GEORGIA 30326 DULUTH, GEORGIA 30136
(404) 814-3090 (770) 476-3209
---------------
PROSPECTUS
OF
PREMIER BANCSHARES, INC.
2180 ATLANTA PLAZA
950 EAST PACES FERRY ROAD
ATLANTA, GEORGIA 30326
(404) 814-3090
FOR
2,066,850 SHARES OF COMMON STOCK
---------------
This Prospectus of Premier Bancshares, Inc., a bank and thrift holding
company organized and existing under the laws of the State of Georgia
("Premier"), relates to the shares of its common stock, par value $1.00 per
share ("Premier Common Stock"), which are issuable to the shareholders of
Citizens Gwinnett Bankshares, Inc. ("Citizens") upon consummation of the
proposed merger (the "Merger") described herein, pursuant to which Citizens
will merge with and into Premier pursuant to the terms of that certain
Agreement and Plan of Reorganization dated as of June 24, 1997, as amended on
July 24, 1997, September 15, 1997, and September 19, 1997, by and between
Premier and Citizens (the "Agreement"). A copy of the Agreement is attached to
this Joint Proxy Statement/Prospectus as Appendix A.
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) Citizens will merge with and into Premier, and
(ii) each outstanding share of the $10.00 par value common stock of Citizens
("Citizens Common Stock") will be converted into eight shares of Premier
Common Stock. Premier will survive the Merger and the separate existence of
Citizens will cease. Citizens Bank of Gwinnett will become a wholly owned
subsidiary of Premier but will immediately be merged with and into Premier
Bank. For a further description of the terms of the Merger, see "The Merger."
This Prospectus also constitutes a Joint Proxy Statement of Premier and
Citizens and is being furnished to their respective shareholders in connection
with the solicitation of proxies by their respective Boards of Directors. The
proxies solicited by the Citizens Board of Directors will be used at the
Special Meeting of Shareholders of Citizens (the "Citizens Meeting") to be
held on November 20, 1997, including any adjournment thereof, to consider and
vote on the proposed Merger and to transact such other business as may
properly come before the Citizens Meeting or any adjournments thereof. The
proxies solicited by the Premier Board of Directors will be used at the
Special Meeting of Shareholders of Premier (the "Premier Meeting") to be held
on November 20, 1997, including any adjournment thereof, to (i) consider and
vote on the proposed Merger, and the assumptions of the rights and obligations
under the Citizens Directors Stock Option Plan (the "Citizens Directors
Plan"), (ii) approve an amendment to the Premier Bancshares, Inc. Directors
Stock Option Plan (the "Premier Directors Plan"); and (iii) transact such
other business as may properly come before the Premier Meeting or any
adjournments thereof. This Joint Proxy Statement/Prospectus and the
accompanying proxy cards are first being mailed to shareholders of Premier and
Citizens on or about October , 1997.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL
AGENCY OR INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is , 1997.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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AVAILABLE INFORMATION...................................................... 1
INCORPORATION BY REFERENCE................................................. 2
SUMMARY.................................................................... 3
The Parties............................................................ 3
Special Meeting of Citizens Shareholders............................... 3
Special Meeting of Premier Shareholders................................ 4
The Merger; Exchange Ratio............................................. 4
Dissenters' Rights..................................................... 4
Reasons for the Merger................................................. 5
Fairness Opinions...................................................... 5
Effective Date......................................................... 5
Exchange of Stock Certificates......................................... 6
Regulatory Approvals and Other Conditions.............................. 6
Waiver, Amendment, and Termination of the Agreement.................... 6
Directors and Executive Officers Following the Merger.................. 6
Interests of Certain Persons in the Merger............................. 7
Material Federal Income Tax Consequences of the Merger................. 7
Accounting Treatment................................................... 7
Certain Differences in Rights of Shareholders.......................... 7
Comparative Market Prices of Common Stock.............................. 8
Comparative Per Share Data............................................. 8
Selected Pro Forma Financial Data...................................... 10
Additional Proposal Presented to Premier Shareholders Only............. 10
Certain Considerations................................................. 10
CERTAIN CONSIDERATIONS..................................................... 11
Management of Growth................................................... 11
Highly Competitive Business............................................ 11
Volatility of Stock Price.............................................. 11
Dependence on Senior Management........................................ 11
THE CITIZENS MEETING....................................................... 11
General................................................................ 11
Record Date; Vote Required............................................. 12
THE PREMIER MEETING........................................................ 12
General................................................................ 12
Record Date; Vote Required............................................. 13
THE MERGER................................................................. 14
General................................................................ 14
Treatment of Citizens Options and Assumption of Citizens Directors
Plan.................................................................. 14
Background of and Reasons for the Merger............................... 14
Fairness Opinions...................................................... 16
Effective Date of the Merger........................................... 24
Distribution of Stock Certificates After the Merger.................... 25
Conditions to Consummation of the Merger............................... 25
Regulatory Approvals................................................... 26
Rights of Dissenting Shareholders...................................... 26
Waiver, Amendment, and Termination of the Agreement.................... 27
Conduct of Business Pending the Merger................................. 28
Directors and Executive Officers Following the Merger.................. 28
Employment Agreements.................................................. 28
</TABLE>
<PAGE>
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Interests of Certain Persons in the Merger............................. 29
Material Federal Income Tax Consequences of the Merger................. 29
Accounting Treatment................................................... 30
Expenses and Fees...................................................... 31
Resales of Premier Common Stock........................................ 31
Description of Premier Common Stock.................................... 31
Certain Differences in Rights of Shareholders.......................... 31
Authorized Capital Stock............................................... 31
Removal of Directors................................................... 31
Vote Required for Shareholder Approval................................. 31
Actions by Shareholders Without a Meeting.............................. 31
Special Meeting of Shareholders........................................ 31
Number of Directors.................................................... 31
Certain Business Transactions.......................................... 31
COMPARATIVE MARKET PRICES AND DIVIDENDS.................................... 33
Premier Market Prices.................................................. 33
Citizens Market Prices................................................. 33
Recent Prices.......................................................... 33
Dividends.............................................................. 33
Shareholders of Record................................................. 34
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION............... 35
General................................................................ 35
BUSINESS OF PREMIER........................................................ 42
General................................................................ 42
Recent Developments.................................................... 42
Premier Bank, Central and Southern Bank and Central and Southern Bank
of North Georgia...................................................... 43
Premier Lending Corporation............................................ 44
Employees.............................................................. 44
SELECTED HISTORICAL FINANCIAL DATA OF PREMIER.............................. 45
MANAGEMENT OF PREMIER...................................................... 46
SECURITY OWNERSHIP OF PREMIER.............................................. 48
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................. 50
BUSINESS OF CITIZENS....................................................... 51
Markets................................................................ 51
Deposits............................................................... 51
Loans.................................................................. 51
Lending Policy......................................................... 51
Employees.............................................................. 52
Competition............................................................ 52
Properties............................................................. 52
Legal Proceedings...................................................... 52
SELECTED HISTORICAL FINANCIAL DATA OF CITIZENS............................. 53
CITIZENS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................... 54
CERTAIN REGULATORY CONSIDERATIONS.......................................... 69
General................................................................ 54
Payment of Dividends................................................... 70
Capital Adequacy....................................................... 71
Support of Subsidiary Institutions..................................... 72
Prompt Corrective Action............................................... 73
FDIC Insurance Assessments............................................. 74
Safety and Soundness Standards......................................... 75
</TABLE>
<PAGE>
<TABLE>
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Certain Applicable Thrift Regulations................................. 75
REPORT ON FORM 10-K....................................................... 77
EXPERTS................................................................... 77
OPINIONS.................................................................. 77
ADDITIONAL PROPOSAL FOR PREMIER SHAREHOLDERS.............................. 77
INDEX TO FINANCIAL STATEMENTS............................................. 79
PREMIER BANCSHARES, INC. FINANCIAL STATEMENTS............................. F-1
CITIZENS GWINNETT FINANCIAL STATEMENTS.................................... F-33
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION, AS AMENDED.............. A-1
APPENDIX B: OPINION OF BROWN, BURKE CAPITAL PARTNERS, INC................. B-1
APPENDIX C: OPINION OF THE CARSON MEDLIN COMPANY.......................... C-1
APPENDIX D: ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE........... D-1
APPENDIX E: AMENDED AND RESTATED PREMIER BANCSHARES, INC. DIRECTORS' STOCK
OPTION PLAN.............................................................. E-1
</TABLE>
<PAGE>
AVAILABLE INFORMATION
Premier is subject to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and, in accordance therewith,
files reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In
addition, such reports, proxy statements, and other information can be
inspected at the public reference facilities referred to above and at the
regional offices of the SEC at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. The SEC maintains a Web site that contains
reports, proxy and information statements and other information regarding
Premier. The address of such Web site is http://www.sec.gov.
This Joint Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of Premier (including any exhibits and amendments
thereto, the "Registration Statement") filed with the SEC under the Securities
Act of 1933, as amended (the "Securities Act"), relating to the securities
offered hereby. This Joint Proxy Statement/Prospectus does not include all of
the information in the Registration Statement, certain portions of which have
been omitted pursuant to the rules and regulations of the SEC. For further
information about Premier and Citizens and the securities offered hereby,
reference is made to the Registration Statement. The Registration Statement
may be inspected and copied, at prescribed rates, at the SEC's public
reference facilities at the addresses set forth above. Premier Common Stock is
traded on the American Stock Exchange. Reports, proxy statements, and other
information concerning Premier may be inspected at the office of the American
Stock Exchange at 86 Trinity Place, New York, New York 10006-1881.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE INCLUDED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PREMIER
OR CITIZENS. THIS JOINT PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS
UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
JOINT PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF PREMIER OR CITIZENS SINCE THE DATE HEREOF OR
THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
All information included in this Joint Proxy Statement/Prospectus with
respect to Premier was supplied by Premier, and all information included
herein with respect to Citizens was supplied by Citizens.
<PAGE>
INCORPORATION BY REFERENCE
The documents listed below are hereby incorporated by reference into this
Joint Proxy Statement/Prospectus, and all documents subsequently filed by
Premier pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 prior to the date of the Premier Meeting in connection
with its registration statement shall be deemed to be incorporated by
reference into this Joint Proxy Statement/Prospectus and to be a part hereof
from the date of filing such documents:
(i)Premier's annual report on Form 10-K filed on March 31, 1997 for the
year ending December 31, 1996, and Form 10-K/A No. 1 filed on May 13, 1997.
(ii) Premier's Joint Proxy Statement/Prospectus and amendments thereto
originally filed with the Securities and Exchange Commission on April 4,
1997, declared effective on May 20, 1997.
(iii) Premier's quarterly report on Form 10-Q for the quarter ended March
31, 1997.
(iv) Premier's quarterly report on Form 10-Q for the quarter ending June
30, 1997.
(v) Premier's current report on Form 8-K filed on June 26, 1997, and Form
8-K/A filed on August 29, 1997.
Premier will provide without charge to each person to whom this Joint Proxy
Statement/Prospectus is delivered, upon oral or written request of such
person, a copy of any and all of the information that has been incorporated by
reference in the Joint Proxy Statement/Prospectus (excluding exhibits), as
well as any other documents required by the Commission to be delivered. Please
direct such requests, as well as any requests for additional information about
Premier to Barbara Burtt, Secretary, Premier Bancshares, Inc., 2180 Atlanta
Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326, telephone number
(404) 814-3090.
2
<PAGE>
SUMMARY
The following is a summary of certain information relating to the Citizens
Meeting, the Premier Meeting, the Merger, and the shares of Premier Common
Stock to be issued upon consummation thereof. This summary does not purport to
be complete and is qualified in its entirety by the more detailed information
appearing elsewhere or incorporated by reference in this Joint Proxy
Statement/Prospectus. Shareholders are urged to read carefully the entire
Joint Proxy Statement/Prospectus, including the Appendices. As used in this
Joint Proxy Statement/Prospectus, the terms "Premier" and "Citizens" refer to
those entities, respectively, and, where the context requires, to those
entities and their respective subsidiaries.
THE PARTIES
Premier. Premier is a bank and thrift holding company headquartered in
Atlanta, Georgia, with four subsidiaries, Premier Bank ("Premier Bank"),
Premier Lending Corporation ("Premier Lending"), The Central and Southern Bank
of Georgia ("Central and Southern Bank") and The Central and Southern Bank of
North Georgia, FSB ("Central and Southern Bank of North Georgia"). As of June
30, 1997, Premier had total consolidated assets of approximately $587 million,
total consolidated deposits of approximately $472 million and total
consolidated shareholders' equity of approximately $50 million. Through its
subsidiaries, Premier offers a broad range of banking and banking-related
services.
On June 23, 1997, Premier merged with The Central and Southern Holding
Company ("Central and Southern") and Premier issued 3,663,834 shares of its
common stock in exchange for all the issued and outstanding shares of Central
and Southern.
Premier was incorporated in 1988 under the laws of the State of Georgia and
is registered as a bank holding company with the Federal Reserve Board (the
"Federal Reserve") and the Georgia Department of Banking and Finance (the
"Georgia Department") under the Federal Bank Holding Company Act of 1956, as
amended (the ABHC Act") and the Georgia Bank Holding Company Act (the "Georgia
BHC Act"). Premier is also registered as a thrift holding company under the
regulations of the Office of Thrift Supervision ("OTS"). Premier's principal
executive offices are located at 2180 Atlanta Plaza, 950 East Paces Ferry
Road, Atlanta, Georgia 30326, and its telephone number at such address is
(404) 814-3090.
Citizens. Citizens is a bank holding company headquartered in Duluth,
Georgia. Citizens operates through its subsidiary, Citizens Bank of Gwinnett
("Citizens Bank"). As of June 30, 1997, Citizens had total consolidated assets
of approximately $163 million, total consolidated deposits of approximately
$150 million and total consolidated shareholders' equity of approximately $11
million.
Citizens was incorporated in 1995 under the laws of the State of Georgia and
is a registered bank holding company under the BHC Act and the Georgia BHC
Act. Citizens' principal executive offices are located at 3209 Buford Highway,
Duluth, Georgia 30136, and its telephone number at such address is (770) 476-
3209.
SPECIAL MEETING OF CITIZENS SHAREHOLDERS
The Citizens Meeting will be held at 10:00 a.m., local time, on November 20,
1997, at Citizens' main office, 3209 Buford Highway, Duluth, Georgia 30136,
for the purpose of considering and voting on approval of the Agreement and
transacting such other business as may properly come before the meeting or any
adjournments thereof. See "The Citizens Meeting."
Only holders of record of Citizens Common Stock at the close of business on
October 1, 1997 (the "Citizens Record Date"), will be entitled to vote at the
Citizens Meeting. Approval of the Agreement and the Merger requires the
affirmative vote of a majority of the shares of Citizens Common Stock entitled
to vote at the Citizens Meeting. As of the Citizens Record Date, there were
244,200 shares of Citizens Common Stock outstanding and entitled to be voted.
3
<PAGE>
The directors and executive officers of Citizens beneficially owned, as of
the Citizens Record Date, 36,923 shares (or approximately 15% of the
outstanding shares) of Citizens Common Stock. Each member of the Board of
Directors of Citizens has agreed to vote those shares owned by such member
(except for shares held in a fiduciary capacity) in favor of the Agreement and
the Merger.
As of the Citizens Record Date, the directors and executive officers of
Premier did not beneficially own any shares of Citizens Common Stock. As of
that date, neither Citizens nor Premier held any shares of Citizens Common
Stock in a fiduciary capacity for others. See "The Citizens Meeting."
SPECIAL MEETING OF PREMIER SHAREHOLDERS
The Premier Meeting will be held at 10:00 a.m., local time, on November 20,
1997, at Premier's main office, 2180 Atlanta Plaza, 950 East Paces Ferry Road,
Atlanta, Georgia 30326, to vote on (i) approval of the Agreement and the
Merger; (ii) an amendment to the Premier Directors Plan; (iii) assumption by
Premier of the rights and obligations of the Citizens Directors Plan; and (iv)
such other business as may properly come before the Meeting or any
adjournments thereof. See "The Premier Meeting."
Only holders of record of Premier Common Stock at the close of business on
October 1, 1997 (the "Premier Record Date") will be entitled to vote at the
Premier Meeting. The affirmative vote of a majority of the Premier Common
Stock outstanding and entitled to vote at the Premier Meeting will be required
to approve the Agreement. Approval of any other matter will require the
affirmative vote of a majority of the shares present in person or by proxy and
entitled to vote at the Premier Meeting. As of the Premier Record Date, there
were 7,923,298 shares of Premier Common Stock outstanding and entitled to
vote.
The directors and executive officers of Premier beneficially owned, as of
the Premier Record Date, approximately 1,171,313 shares (or approximately 14%
of the outstanding shares) of Premier Common Stock. Each member of the Board
of Directors of Premier has agreed to vote those shares owned by such member
(except for shares held in a fiduciary capacity) in favor of the proposals to
be presented at the Premier Meeting.
As of the Premier Record Date, the directors and executive officers of
Citizens did not beneficially own any shares of Premier Common Stock. As of
that date, neither Premier nor Citizens held any shares of Premier Common
Stock in a fiduciary capacity for others. See "The Premier Meeting."
THE MERGER; EXCHANGE RATIO
The Agreement provides for the combination of Citizens with Premier pursuant
to the merger of Citizens with and into Premier. On the Effective Date, each
share of Citizens Common Stock then issued and outstanding will be converted
into eight shares of Premier Common Stock (the "Exchange Ratio"). Premier will
pay cash in lieu of any fractional shares (computed to the nearest cent) in an
amount equal to such fraction multiplied by $17.631.
DISSENTERS' RIGHTS
Holders of Citizens Common Stock who dissent from the Merger are entitled to
the rights and remedies of dissenting shareholders set forth in Article 13 of
the Georgia Business Corporation Code (the "Georgia Code"), subject to
compliance with the procedures set forth herein. A dissenting shareholder is
entitled to receive cash in an amount equal to the "fair value" of such
holder's shares. A copy of Article 13 of the Georgia Code is set forth in
Appendix D to this Joint Proxy Statement/Prospectus and a summary thereof is
included under "The Merger--Rights of Dissenting Shareholders." To perfect
dissenters' rights a shareholder must comply with Article 13 of the Georgia
Code, which requires, among other things, that a shareholder give Citizens
notice of such holder's intent to dissent from approval of the Agreement prior
to the vote of the shareholders at the Citizens Meeting and that such
shareholder not vote his or her shares in favor of the Agreement. Any
shareholder who returns a signed proxy but fails to provide instructions as to
the manner in which such holder's shares are to be voted will be deemed to
have voted in favor of the Agreement and thus will not be entitled to assert
dissenters' rights.
4
<PAGE>
REASONS FOR THE MERGER
Citizens' Board of Directors has unanimously approved the Merger and the
Agreement and has determined that the Merger is fair to, and in the best
interests of, Citizens and its shareholders. ACCORDINGLY, CITIZENS' BOARD
UNANIMOUSLY RECOMMENDS THAT CITIZENS' SHAREHOLDERS VOTE FOR APPROVAL OF THE
AGREEMENT. EACH MEMBER OF THE BOARD OF DIRECTORS OF CITIZENS HAS AGREED TO
VOTE SUCH MEMBER'S SHARES OF CITIZENS COMMON STOCK IN FAVOR OF THE AGREEMENT.
In approving the Merger, Citizens directors considered Premier's financial
condition; various alternatives to the Merger, including the merits of other
acquisition proposals; the consideration to be received by Citizens
shareholders; the anticipated synergies and enhanced resources and lending
capabilities that would result from the Merger; the competitive and regulatory
environments for financial institutions and commercial lending businesses
generally; the income tax aspects of the Merger as a tax-free exchange; the
current lack of marketability of the Citizens Common Stock, contrasted with
the ability of Citizens' shareholders to exchange their Citizens Common Stock
for Premier Common Stock in connection with the Merger and thereafter have the
ability to trade such securities on the American Stock Exchange; and the
likelihood that the Merger would be approved by applicable regulatory
authorities. See "The Merger--Background of and Reasons for the Merger."
The Premier Board of Directors has unanimously approved the Agreement and
has determined that the Merger is in the best interests of Premier and its
shareholders. ACCORDINGLY, PREMIER'S BOARD UNANIMOUSLY RECOMMENDS THAT
PREMIER'S SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT. EACH MEMBER OF THE
BOARD OF DIRECTORS OF PREMIER HAS AGREED TO VOTE SUCH MEMBER'S SHARES OF
PREMIER COMMON STOCK IN FAVOR OF THE AGREEMENT. In approving the Merger,
Premier's directors considered Citizens' financial condition, operations and
market area; Premier's overall strategic focus; the financial terms and income
tax consequences of the Merger; and the management philosophy of Citizens and
its compatibility with that of Premier. See "The Merger--Background of and
Reasons for the Merger."
FAIRNESS OPINIONS
Premier. Brown, Burke Capital Partners, Inc. ("BBCP") has rendered an
opinion to Premier that, based on and subject to the procedures, matters, and
limitations described in its opinion and such other matters as it considered
relevant, as of the date of its opinion, the terms of the Merger are fair,
from a financial point of view, to the shareholders of Premier. BBCP's opinion
is attached as Appendix B to this Joint Proxy Statement/Prospectus.
Shareholders are urged to read the opinion in its entirety for a description
of the procedures followed, matters considered, and limitations on the reviews
undertaken in connection therewith. See "The Merger--Fairness Opinions."
Citizens. The Carson Medlin Company ("Carson Medlin") has rendered an
opinion to Citizens that, based on and subject to the procedures, matters and
limitations described in its opinion and such other matters as it considered
relevant, as of the date of its opinion, the terms of the Merger are fair,
from a financial point of view, to the shareholders of Citizens. Carson
Medlin's opinion is attached as Appendix C to this Joint Proxy
Statement/Prospectus. Shareholders are urged to read the opinion in its
entirety for a description of the procedures followed, matters considered, and
limitations on the reviews undertaken in connection therewith. See "The
Merger--Fairness Opinions."
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the effective date (the "Effective Date") will occur on the date and
at the time specified in a Certificate of Merger (the "Certificate of Merger")
filed by Premier with the Georgia Secretary of State. If no effective date or
time is specified, the Merger will become effective upon the filing of the
Certificate of Merger. Unless otherwise agreed upon by Premier and Citizens,
and subject to the conditions to the obligations of the parties to effect the
Merger, the parties will use their reasonable efforts to cause the Effective
Date to occur by the last business day of the month in which the last of the
following events occurs: (i) the effective date (including the expiration of
any applicable
5
<PAGE>
waiting period) of the last federal or state regulatory approval required for
the Merger or; (ii) the date on which the Agreement is approved by the
requisite vote of Premier and Citizens shareholders. The parties expect that
all conditions to consummation of the Merger will be satisfied so that the
Merger can be consummated in the fourth quarter of 1997, although there can be
no assurance as to whether or when the Merger will occur. See "The Merger--
Effective Date of the Merger," "--Conditions to Consummation of the Merger,"
and "--Waiver, Amendment, and Termination of the Agreement."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, Premier will cause SunTrust Bank, Atlanta
acting in its capacity as exchange agent for Premier (the "Exchange Agent"),
to mail to the former shareholders of Citizens a letter of transmittal,
together with instructions for the exchange of such shareholders' certificates
representing shares of Citizens Common Stock for certificates representing
shares of Premier Common Stock. Former shareholders of Citizens will not be
entitled to receive dividends or other distributions on their shares of
Premier Common Stock until Premier has received their Citizens stock
certificates. CITIZENS SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE THE FORM LETTER OF TRANSMITTAL AND
INSTRUCTIONS. See "The Merger--Distribution of Stock Certificates After the
Merger."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Federal Reserve and the Georgia
Department. Applications for the requisite approvals have been filed with
these agencies, each of which has yet to issue its approval of the Merger.
There can be no assurance that the approvals of these agencies will be given
or as to the timing or conditions of such approvals.
Consummation of the Merger is subject to various other conditions, including
receipt of the required approval of the Premier and Citizens shareholders,
receipt of an opinion of counsel as to the tax-free nature of certain aspects
of the Merger, and certain other customary conditions. See "The Merger--
Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time prior
to the Effective Date by mutual action of the Boards of Directors of both
Citizens and Premier, or by action of the Board of Directors of either company
under certain circumstances, including if the Merger is not consummated by
December 31, 1997, unless the failure to consummate by such time is due to a
breach of the Agreement by the party seeking to terminate. If for any reason
the Merger is not consummated, Premier will continue to operate as a bank
holding company and thrift holding company under its present management and
Citizens will continue to operate as a bank holding company under its present
management. See "The Merger--Waiver, Amendment, and Termination of the
Agreement."
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
The Agreement provides that Premier will be the Surviving Corporation after
the Merger (the "Surviving Corporation") and that the directors of the
Surviving Corporation after the Merger will consist of the current directors
of Premier and Thomas J. Martin, the current President of Citizens. Following
the consummation of the Merger, Premier shall cause the persons who were
members of the Citizens Board of Directors preceding the Merger (other than
Mr. Martin) to serve as members of Premier's Marketing and Development Board
for Gwinnett County. Premier will cause each such director to be reappointed
to the Marketing and Development Board for periods extending at least through
April 1, 1999, subject to such board member's eligibility and willingness to
serve.
6
<PAGE>
The current officers of Premier will remain the same after the Merger.
Thomas J. Martin will initially serve as President of the East Metro Division
of Premier Bank following the Merger. See "The Merger -- Employment
Agreements."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers and directors of Premier and of Citizens have
interests in the Merger in addition to their respective interests as Premier
or Citizens shareholders generally. Those interests relate to, among other
things, provisions in the Agreement regarding indemnification and eligibility
for certain Premier employee benefits, and treatment of outstanding options to
acquire Citizens Common Stock. See "The Merger--Interests of Certain Persons
in the Merger."
On the Effective Date of the Merger, Premier Bank and Mr. Martin will enter
into an amendment to Mr. Martin's Employment Agreement whereby Mr. Martin will
initially serve as President of the East Metro Division of Premier Bank
following the Merger. See "The Merger--Employment Agreements."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Premier and Citizens have received an opinion of Kilpatrick Stockton LLP,
counsel to Citizens, to the effect that, among other things: (i) the Merger
will constitute a tax-free reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); (ii) the
exchange in the Merger of Citizens Common Stock for Premier Common Stock will
not give rise to gain or loss to Citizens shareholders except for the
recognition of gain as required by Section 302 of the Code with respect to
cash received by Citizens shareholders in lieu of fractional shares of Premier
stock as a result of the Merger; (iii) neither Premier nor Citizens will
recognize income, gain or loss as a consequence of the Merger; (iv) the
aggregate tax basis of Premier Common Stock received by Citizens shareholders
pursuant to the Merger will be the same as the tax basis of the shares of
Citizens Common Stock exchanged therefore, decreased by any portion of such
tax basis allocated to fractional shares of Premier Common Stock that are
treated as redeemed by Premier; (v) Citizens shareholders will have the same
holding period in the shares of Premier Common Stock received pursuant to the
Merger as the holding period of the shares of Citizens Common Stock exchanged
therefor. See "The Merger--Material Federal Income Tax Consequences of the
Merger."
DUE TO THE INDIVIDUAL NATURE OF THE INCOME TAX CONSEQUENCES OF THE MERGER,
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND FOREIGN
TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Citizens will be carried forward and
recorded on the financial statements of Premier at their previously recorded
amounts. In order for the Merger to qualify for pooling-of-interests
accounting treatment, substantially all (90% or more) of the outstanding
Citizens Common Stock must be exchanged for Premier Common Stock. There are
certain other criteria that must be satisfied in order for the Merger to
qualify as a pooling of interests, some of which criteria cannot be satisfied
until after the Effective Date.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
On the Effective Date, Citizens shareholders, whose rights are governed by
the Georgia Code and by Citizens' Articles of Incorporation and Bylaws, will
automatically become Premier shareholders, and their rights as Premier
shareholders will be determined by the Georgia Code and by Premier's Articles
of Incorporation and Bylaws. Upon consummation of the Merger, the rights of
Premier shareholders will differ from the rights of
7
<PAGE>
Citizens shareholders in certain respects. See "The Merger-Certain Differences
in Rights of Shareholders" and "The Merger-Description of Premier Common
Stock."
COMPARATIVE MARKET PRICES OF COMMON STOCK
Premier Common Stock is currently traded on the American Stock Exchange
under the symbol "PMB." Prior to January 10, 1997, Premier Common Stock was
traded on the NASDAQ SmallCap Market. Citizens Common Stock is not traded on
an established market. The following table sets forth the last sale price of
Premier Common Stock on June 23, 1997, the date of the last sale reported by
the American Stock Exchange prior to June 24, 1997 (the date of public
announcement of the proposed Merger) and the sale price of Citizens on March
25, 1997, the date of the last known sale of Citizens Common Stock prior to
June 24, 1997. It also provides the last sale price of Premier Common Stock on
October , 1997, the date of the last sale reported by the American Stock
Exchange prior to the mailing of this Joint Proxy Statement/Prospectus and the
sale price of Citizens Common Stock on March 25, 1997, the date of the most
recent known sale of Citizens Common Stock prior to the mailing of this Joint
Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
PREMIER COMMON STOCK CITIZENS COMMON STOCK
-------------------- ------------------------
<S> <C>
$16.00 at June 23, 1997 $27.00 at March 25, 1997
(prior to announcement) (prior to announcement)
$ at October , 1997 $27.00 at March 25, 1997
</TABLE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating
to net income, cash dividends, and book value on (i) an historical basis for
Premier and Citizens, (ii) a pro forma combined basis per share of Premier
Common Stock, giving effect to the Merger, and (iii) an equivalent pro forma
basis per share of Citizens Common Stock, giving effect to the Merger. The
data also retroactively reflects the effect of Premier's 1.8055-for-1 stock
split on March 6, 1997. The Premier and Citizens pro forma combined
information gives effect to the Merger on a pooling-of-interests accounting
basis and assumes the Exchange Ratio of eight shares of Premier Common Stock
for each share of Citizens Common Stock. See "The Merger--Accounting
Treatment." The unaudited pro forma data is presented for informational
purposes only and is not necessarily indicative of the results of operations
or combined financial position that would have resulted had the Merger been
consummated at the dates or during the periods indicated, nor is it
necessarily indicative of future results of operations or combined financial
position.
8
<PAGE>
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of Premier
and Citizens, including the respective notes thereto, and the pro forma
financial information included herein. See "--Selected Historical Financial
Data of Premier," "--Selected Historical Financial Data of Citizens."
<TABLE>
<CAPTION>
YEAR ENDED
SIX MONTHS DECEMBER 31,
ENDED -----------------
JUNE 30, 1997 1996 1995 1994
------------- ------ ----- ----
<S> <C> <C> <C> <C>
INCOME PER SHARE
Premier historical............................ $ .51 $ .68 $ .57 $.25
Citizens historical........................... 3.95 6.24 4.12 4.02
Premier and Citizens pro forma combined(1).... .50 .69 .56 .31
Citizens pro forma Merger equivalent(2)....... 4.00 5.52 4.48 2.48
DIVIDENDS DECLARED PER COMMON SHARE
Premier historical............................ $ .11 $ .41 $ .09 $.07
Citizens historical........................... .40 .72 .68 .60
Premier and Citizens pro forma combined(1).... .11 .41 .09 .07
Citizens pro forma Merger equivalent(3)....... .88 3.28 .72 .56
BOOK VALUE PER SHARE (PERIOD END)
Premier historical............................ $ 6.36 $ 5.97
Citizens historical........................... 46.69 42.52
Premier and Citizens pro forma combined(1).... 6.17 5.79
Citizens pro forma Merger equivalent(2)....... 49.36 46.32
</TABLE>
- --------
(1) Represents the combined results of Premier and Citizens as if the Merger
was consummated on January 1, 1996 and was accounted for as a pooling-of-
interests transaction.
(2) Represents pro forma combined information multiplied by the Exchange
Ratio.
(3) Represents historical dividends declared per share by Premier multiplied
by the Exchange Ratio.
9
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data gives effect to the
acquisition of Citizens as of the date or at the beginning of the period
indicated, assuming the acquisition is accounted for as a pooling-of-interests
transaction. The unaudited pro forma financial data is presented for
informational purposes only and is not necessarily indicative of the combined
financial position or results of operation which actually would have occurred
if the transaction had been consummated at the date and for the periods
indicated or which may be obtained in the future.
<TABLE>
<CAPTION>
AT
JUNE 30,
1997
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET
Total assets.................................................... $750,370
Loans and loans held for sale, net.............................. 519,484
Securities available for sale................................... 139,465
Federal funds sold.............................................. 20,628
Interest-bearing deposits in banks.............................. 8,970
Total deposits.................................................. 622,723
Other borrowings and securities sold under repurchase
agreements..................................................... 59,250
Stockholders' equity............................................ 61,320
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, DECEMBER 31,
--------------- ----------------------
1997 1996 1996 1995 1994
------- ------- ------ ------ ------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
OPERATING DATA
Interest income........................ 29,650 24,892 51,271 41,006 33,517
Interest expense....................... 14,056 12,046 25,343 19,873 15,087
Net interest income.................... 15,594 12,846 25,928 21,133 18,430
Provision (negative provision) for loan
losses................................ 184 (39) (115) (582) 365
Net interest income after provision
(negative provision)for loan losses... 15,410 12,885 26,043 21,715 18,065
Other income........................... 9,002 6,254 13,956 9,649 5,170
Other expenses......................... 17,365 14,467 30,788 23,610 18,763
Income taxes........................... 1,995 1,173 2,194 2,188 1,558
Net income 5,044 3,493 7,005 5,553 2,914
Net income per common and common
equivalent share...................... .50 .35 .69 .56 .31
Net income assuming full dilution...... .50 .35 .69 .56 .31
</TABLE>
- --------
ADDITIONAL PROPOSAL PRESENTED TO PREMIER SHAREHOLDERS ONLY
At the Premier Meeting, the shareholders of Premier will be asked to vote on
an additional proposal to approve an amendment to the Premier Directors Plan.
The amendment to the Premier Directors Plan permits Premier Directors to defer
receipt of retainer fees, meetings fees or both and have such amounts applied
to the grant of restricted Premier Common Stock under the Premier Directors
Plan effective June 15, 1997.
CERTAIN CONSIDERATIONS
Shareholders of Premier and Citizens should carefully consider the matters
set forth under "Certain Considerations." Factors to be considered, among
other things, include the ability of Premier to manage its growth and its
dependence on management.
10
<PAGE>
CERTAIN CONSIDERATIONS
In addition to the other information contained in this Joint Proxy
Statement/Prospectus, the following factors should be considered carefully by
shareholders of Premier and Citizens in evaluating the Merger.
MANAGEMENT OF GROWTH
Premier has experienced significant growth, principally through its mergers
with Premier Bancshares, Inc. on August 31, 1996 and with Central and Southern
on June 23, 1997. Premier intends to continue to pursue an aggressive growth
strategy for the foreseeable future, and its future operating results will
depend largely upon its ability to successfully integrate the businesses it
acquires, including Citizens. The process of integrating acquired businesses
into Premier's operations may result in unforeseen difficulties and may
require a disproportionate amount of resources and management attention. There
is no assurance that Premier will be able to successfully enter other markets
or that any such expansion will be as profitable as existing operations. If
Premier management is unable to manage growth effectively, Premier's business,
results of operations and financial condition could be materially and
adversely affected.
HIGHLY COMPETITIVE BUSINESS
The Premier business is extremely competitive. Certain of Premier's primary
competitors offer substantially similar services as Premier and some have
greater market recognition and greater financial, technical, marketing and
human resources than Premier. There can be no assurance that Premier will be
able to compete successfully against existing companies or new entrants to the
banking industry.
VOLATILITY OF STOCK PRICE
The market price of the Premier Common Stock could be subject to significant
fluctuations in response to Premier's operating results and other factors, and
there can be no assurance that the market price of the Premier Common Stock
will not decline below the current market price. In addition, the stock market
has from time to time experienced price and volume volatility. These
fluctuations may be unrelated to the operating performance of particular
companies whose shares are publicly traded and may adversely affect the market
price of the Premier Common Stock.
DEPENDENCE ON SENIOR MANAGEMENT
The success of Premier has been largely dependent on the skills, experience
and efforts of its senior management. The loss of the services of Mr. Pittard
or other members of senior management of Premier could have a material adverse
effect on Premier's business and prospects. Premier believes that its future
success will also depend upon its ability to attract, retain and motivate
qualified personnel. There can be no assurance that Premier will be successful
in attracting and retaining such personnel.
THE CITIZENS MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
Citizens Common Stock in connection with the solicitation by the Citizens
Board of Directors of proxies for use at the Citizens Meeting, at which
Citizens shareholders will be asked to vote upon a proposal to approve the
Agreement and the Merger. The Citizens Meeting will be held at 10:00 a.m.,
local time, on November 20, 1997, at the main office of Citizens, located at
3209 Buford Highway, Duluth, Georgia 30136.
Citizens shareholders are requested promptly to sign, date, and return the
accompanying proxy card to Citizens in the enclosed postage-paid envelope.
11
<PAGE>
Any Citizens shareholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or submitting to
Citizens a signed proxy bearing a later date, provided that such notice or
proxy is actually received by Citizens prior to the taking of the shareholder
vote, or by electing to vote in person at the Citizens Meeting. Any notice of
revocation should be sent to Citizens Gwinnett Bankshares, Inc., 3209 Buford
Highway, Duluth, Georgia 30136, Attention: Corporate Secretary. The shares
represented by properly executed proxies received at or prior to the Citizens
Meeting and not subsequently revoked will be voted as directed in such
proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED
WILL BE VOTED FOR APPROVAL OF THE AGREEMENT AND IN THE DISCRETION OF THE PROXY
HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME BEFORE THE CITIZENS
MEETING. As of the date of this Joint Proxy Statement/Prospectus, Citizens is
unaware of any other matter to be presented at the Citizens Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or in person by the directors, officers, and employees of Citizens,
who will receive no additional compensation for such solicitation but may be
reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
Citizens shareholders should not forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
Citizens' Board of Directors has established the close of business on
October 1, 1997, as the Record Date for determining the shareholders entitled
to notice of and to vote at the Citizens Meeting. Only record holders of
Citizens Common Stock as of the Record Date will be entitled to vote at the
Citizens Meeting. Approval of the Agreement requires the affirmative vote of a
majority of the shares of Citizens Common Stock entitled to vote at the
Citizens Meeting. Therefore, an abstention or failure to return a properly
executed proxy card will have the same effect as a vote against the Agreement.
As of the Record Date, there were approximately 383 holders of 244,200 shares
of Citizens Common Stock outstanding and entitled to vote at the Citizens
Meeting, with each share entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares
of Citizens Common Stock is necessary to constitute a quorum of the
shareholders in order to take action at the Citizens Meeting. For these
purposes, shares of Citizens Common Stock that are present, or represented by
proxy, at the Citizens Meeting will be counted for quorum purposes regardless
of whether the holder of the shares or proxy fails to vote on the Agreement.
The directors and executive officers of Citizens and their affiliates
beneficially owned, as of the Record Date, 36,923 shares (or approximately 15%
of the outstanding shares) of Citizens Common Stock.
As of the Record Date, the directors and executive officers of Premier and
their affiliates did not beneficially own any shares of Citizens Common Stock.
As of that date, neither Citizens nor Premier held any shares of Citizens
Common Stock in a fiduciary capacity for others.
THE PREMIER MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
Premier Common Stock in connection with the solicitation by the Premier Board
of Directors of proxies for use at the Premier Meeting, at which Premier
shareholders will be asked to vote upon a proposal to approve the Agreement
and the Merger and a proposal to approve an amendment to the Premier Directors
Plan. The Premier Meeting will be held at 10:00 a.m., local time, on November
20, 1997, at the main office of Premier, located at 2180 Atlanta Plaza, 950
East Paces Ferry Road, Atlanta, Georgia 30326.
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Premier shareholders are requested promptly to sign, date, and return the
accompanying proxy card to Premier in the enclosed postage-paid envelope.
Any Premier shareholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or submitting to
Premier a signed proxy bearing a later date, provided that such notice or
proxy is actually received by Premier prior to the taking of the shareholder
vote, or by electing to vote in person at the Premier Meeting. Any notice of
revocation should be sent to Premier Bancshares, Inc., 2180 Atlanta Plaza, 950
East Paces Ferry Road, Atlanta, Georgia 30326, Attention: Corporate Secretary.
The shares of Premier Common Stock represented by properly executed proxies
received at or prior to the Premier Meeting and not subsequently revoked will
be voted as directed in such proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES
REPRESENTED BY PROXIES RECEIVED WILL BE VOTED FOR APPROVAL OF THE AGREEMENT
AND FOR APPROVAL OF THE AMENDMENT TO THE PREMIER DIRECTORS PLAN AND IN THE
DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME
BEFORE THE PREMIER MEETING. As of the date of this Joint Proxy
Statement/Prospectus, Premier is unaware of any other matter to be presented
at the Premier Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or in person by the directors, officers, and employees of Premier,
who will receive no additional compensation for such solicitation but may be
reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
RECORD DATE; VOTE REQUIRED
Premier's Board of Directors has established the close of business on
October 1, 1997, as the Record Date for determining the Premier shareholders
entitled to notice of and to vote at the Premier Meeting. Only Premier
shareholders of record as of the Record Date will be entitled to vote at the
meeting. The affirmative vote of a majority of the Premier Common Stock
outstanding and entitled to vote at the Premier Meeting will be required to
approve the Agreement. Abstentions or failures to return a properly executed
proxy will have the same effect as a vote against the Agreement. The
affirmative vote of a majority of the Premier Common Stock present in person
or represented by proxy will be required to approve the amendment to the
Premier Directors Plan and any other proposals considered at the Premier
Meeting. Broker non-votes, which occur when a broker submits a proxy card
without exercising discretionary voting authority on a non-routine matter, are
not counted for purposes of determining whether a proposal has been approved.
As a result, broker non-votes will have the effect of votes against the
Agreement. As of the Record Date, there were approximately 1,450 holders of
7,923,298 shares of Premier Common Stock outstanding and entitled to vote at
the Premier Meeting, with each share entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares
of Premier Common Stock entitled to vote at the Premier Meeting is necessary
to constitute a quorum of the shareholders in order to take action at the
meeting. For these purposes, shares of Premier Common Stock that are present,
or represented by proxy, at the Premier Meeting will be counted for quorum
purposes regardless of whether the holder of the shares or proxy fails to vote
on any matter or whether a broker with discretionary authority fails to
exercise its discretionary voting authority with respect to any matter.
The directors and executive officers of Premier beneficially owned, as of
the Record Date, 1,171,313 shares (or approximately 14% of the outstanding
shares) of Premier Common Stock. As of the Record Date, the directors and
executive officers of Citizens did not beneficially own any shares of Premier
Common Stock. As of that date, neither Citizens nor Premier held any shares of
Premier Common Stock in a fiduciary capacity for others.
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THE MERGER
The following material describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety
by reference to the Appendices hereto, including the Agreement, which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and
incorporated herein by reference. All shareholders are urged to read the
Appendices in their entirety.
GENERAL
Upon consummation of the Merger, Citizens will merge with and into Premier,
Premier will survive the Merger and the separate existence of Citizens will
cease. Citizens Bank will become a wholly owned subsidiary of Premier
following consummation of the Merger. Upon closing of the Merger, or as soon
as practicable thereafter, Premier plans to cause Citizens Bank to merge with
and into Premier Bank.
At the Effective Date, each share of Citizens Common Stock issued and
outstanding will be converted into eight shares of Premier Common Stock. Each
share of Premier Common Stock outstanding immediately prior to the Effective
Date will remain outstanding and unchanged as a result of the Merger. No
fractional shares of Premier Common Stock will be issued in connection with
the Merger. Premier will pay cash in lieu of any fractional shares (computed
to the nearest cent) in an amount equal to such fraction multiplied by
$17.631.
TREATMENT OF CITIZENS OPTIONS AND ASSUMPTION OF CITIZENS DIRECTORS PLAN
The Agreement, as amended, provides that, in connection with the Merger,
Premier will assume the rights and obligations of the Citizens Directors'
Stock Option Plan (the "Citizens Directors' Plan"). The holders of options
granted pursuant to the Citizens Directors' Plan and the Citizens Employee
Stock Option Plan ("Employee Plan") will receive in exchange for their options
113,250 shares of Premier Common Stock.
The Citizens Directors Plan provides that for a term of five years
commencing April 1, 1995 each of the directors of Citizens will be eligible on
April 1st of each year to receive options for 400 shares of Citizens Common
Stock if they attend 75% of the meetings for the previous year for a term of
up to ten years. The exercise price on these options is the book value of
Citizens Common Stock on the December 31st preceding the April 1 date of
grant. At the Effective Date, shares of Premier Common Stock will be
substituted for shares remaining under the Citizens Directors Plan based on
the Exchange Ratio and the Citizens Directors Plan will be amended to provide
that options will be granted to members of the Premier Marketing and
Development Board of Gwinnett pursuant to the terms and conditions of the
amended Citizens Directors Plan.
BACKGROUND OF AND REASONS FOR THE MERGER
During the first quarter of 1997, the Chief Executive Officers of Premier
and Citizens began to explore the possibility of combining Premier and
Citizens. On February 19, 1997, at a meeting of the Board of Directors of
Premier, BBCP and Premier's management discussed with the Premier Board a
possible merger with Citizens. After a lengthy discussion between Premier's
management and the Premier Board, Premier's Chief Executive Officer was
authorized to present a preliminary proposal to Citizens for acquiring
Citizens. The proposal, which was submitted to Citizens' management on
February 28, 1997, generally outlined a structure for the acquisition. On
March 11, 1997, Citizens' management presented its Board with Premier's
proposal. On March 17, 1997, representatives of Carson Medlin met with
management of Citizens at their request to discuss Citizens' prospects and the
circumstances regarding a possible merger of Citizens with another
institution. On April 3, 1997, Citizens engaged Carson Medlin to serve as its
financial advisor in connection with a possible merger of Citizens and to
render advice to and assist Citizens in negotiating the financial aspects of a
merger with Premier or another financial institution.
In the second week of April 1997 Carson Medlin contacted Premier and a
number of other financial institutions concerning their interest in a merger
with Citizens. Shortly thereafter, Carson Medlin obtained
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executed confidentiality agreements from Premier and certain other of these
entities. In late April 1997, Carson Medlin delivered to Premier and certain
other of these entities confidential informational memoranda describing
Citizens and its operations as well as procedures for submitting an offer to
acquire Citizens. In the first week of May 1997, Carson Medlin supplied
Premier and certain other interested parties additional information describing
the operations of Citizens.
On May 13, 1997, Premier submitted to Carson Medlin in writing an expression
of interest in a merger with Citizens with a then-current total market value
of approximately $29.6 million. Subsequently, Citizens received written offers
from two other interested parties valued at $31.7 million and $32.4 million,
respectively, and a revised offer from Premier valued at $34.2 million. On May
27, Carson Medlin meet with the Board of Citizens to discuss and evaluate the
three offers. The Board instructed Carson Medlin to attempt to improve those
offers. On June 2, 1997, one party increased its offer from a value of $31.7
million to $33.6 million, and Premier increased the value of its offer to
$38.0 million.
On June 2, 1997, the Board of Citizens met with Carson Medlin to evaluate
the three offers as revised. The Board of Citizens instructed management to
have Carson Medlin and Citizens' legal counsel negotiate with Premier the
terms of a definitive merger agreement that reflected Premier's revised offer.
The Chief Executive Officer of Premier was instructed by the Premier Board to
involve BBCP in additional financial analyses of the proposed combination and
also to involve its legal counsel.
During the month of June, 1997, Premier conducted onsite, in-depth due
diligence of Citizens, and Citizens conducted onsite, in-depth due diligence
of Premier. Additional off-site due diligence and discussions with legal
counsel and financial advisors were undertaken by both companies. On June 19,
1997 at a special meeting of the Board of Directors of Premier, BBCP and
Premier's management presented to Premier's Board an analysis of the proposed
merger with Citizens. Following the presentation and subsequent discussions,
the Premier Board authorized the Chief Executive Officer to further negotiate
terms of the proposed Merger, including the Exchange Ratio and the amendment
to Thomas J. Martin's employment agreement. On June 23, 1997, the Premier
Board authorized its Chief Executive Officer to execute the Agreement subject
to customary conditions and to the condition that the transaction could be
accounted for as a pooling of interests. On June 24, 1997, the parties
executed the Agreement and Premier issued a press release announcing the
execution of the Agreement.
On July 24, 1997, the parties entered into an amendment to the Agreement
which provided for an extension of the time period in which either the
Citizens Board or the Premier Board could terminate the Agreement if it was
determined that the transaction could not be accounted for as a pooling of
interests. On September 15, 1997, the parties further amended the Agreement to
provide for the receipt of stock for certain vested and unvested stock options
granted under the Citizens Directors Plan and the Citizens Employee Stock
Option Plan and to provide that Citizens directors would be appointed to the
Premier Marketing and Development Board for Gwinnett County following the
Merger. See "--Treatment of Citizens' Options and Assumption of Citizens
Directors Plan." As of September 19, 1997, the parties entered into a third
amendment to the Agreement to fix the Exchange Ratio at eight shares of
Premier Common Stock for each share of Citizens Common Stock and to extend the
termination date of the Agreement to December 31, 1997.
Citizens' Reasons for the Merger. The Citizens Board of Directors has
unanimously approved the Agreement and has determined that the Merger is in
the best interests of Citizens and its shareholders. The terms of the Merger
were the result of arms-length negotiations between representatives of
Citizens and representatives of Premier. Without assigning any relative or
specific weights to the factors, the Board of Directors of Citizens considered
the following material factors:
(a) the information presented to the directors by Citizens' management
concerning (i) the business, operations, earnings and financial condition,
including capital levels and asset quality, of Premier, and compliance
with
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regulatory capital requirements on an historical and prospective basis, and
(ii) the results of a due diligence review of Premier by Citizens
representatives;
(b) the alternatives to the Merger, including the merits of other acquisition
proposals;
(c) the enhancement of shareholder value as a result of the value of the
consideration to be received by Citizens' shareholders relative to
Citizens' book value and earnings per share of common stock;
(d) the anticipated synergies and operating efficiencies, increased access to
capital, increased utilization of capital for lending, and the increased
managerial resources and enhanced service capabilities that would result
from the Merger;
(e) the competitive and regulatory environment for financial institutions and
commercial lending businesses generally;
(f) the income tax aspects of the Merger as a tax-free exchange of Citizens
Common Stock for Premier Common Stock;
(g) the likelihood that the Merger will be approved by applicable regulatory
authorities; and
(h) the current lack of marketability of the Citizens Common Stock, contrasted
with the ability of Citizens' shareholders to exchange their Citizens
Common Stock for Premier Common Stock in connection with the Merger and
thereafter have the ability to trade such securities on the American Stock
Exchange.
Each member of the Board of Directors of Citizens has agreed to vote such
member's shares of Citizens Common Stock in favor of the Merger.
CITIZENS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CITIZENS
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
Premier's Reasons for the Merger. The Premier Board of Directors has
unanimously approved the Agreement and has determined that the Merger is in
the best interests of Premier and its shareholders. In approving the
Agreement, the Premier Board considered a number of factors. Without assigning
any relative or specific weights to the factors, the Premier Board of
Directors considered the following material factors:
(a) Citizens' business, operations, earnings, and financial condition,
including capital levels and asset quality, on an historical, prospective,
and pro forma basis and in comparison to other financial institutions
serving the Gwinnett County market;
(b) the demographic, economic, and financial characteristics of Gwinnett
County in which Citizens operates, on an historical and prospective basis;
(c) a variety of factors affecting and relating to the overall strategic focus
of Premier, including Premier's desire to expand into Gwinnett County;
(d) the financial terms and income tax consequences of the proposed Merger;
(e) the commercial lending experience of the management of Citizens and its
subsidiaries;
(f) the management philosophy of Citizens and its compatibility with that of
Premier.
Each member of the Board of Directors of Premier has agreed to vote such
member's shares of Premier Common Stock in favor of the Merger.
PREMIER'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT PREMIER
STOCKHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
FAIRNESS OPINIONS
Premier. Premier has retained BBCP to act as its financial advisor in
connection with the Merger. Representatives of BBCP participated in a
simultaneous meeting of the Premier and Central and Southern Boards
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of Directors held on June 19, 1997 when the prospect for a merger with
Citizens was considered in depth. At the meeting, both the Premier and the
Central and Southern Boards approved the Merger, subject to satisfactory
completion of the preliminary Merger Agreement. At that meeting BBCP rendered
its oral opinion to the effect that, as of such date, an exchange ratio of
8.0876 common shares of Premier for each common share of Citizens was fair to
the Premier shareholders from a financial point of view. BBCP has also
subsequently rendered its written opinion to the Premier Board that on the
date of this Prospectus/Proxy Statement, based on the information set forth
therein, the Exchange Ratio of 8.000 was fair, from a financial point of view,
to the Premier shareholders.
THE FULL TEXT OF BBCP'S WRITTEN OPINION IS ATTACHED AS APPENDIX B TO THIS
PROSPECTUS/PROXY STATEMENT AND IS INCORPORATED HEREIN BY REFERENCE. THE
DESCRIPTION OF THE OPINION SET FORTH HEREIN IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO APPENDIX B. PREMIER STOCKHOLDERS ARE URGED TO READ THE OPINION IN
ITS ENTIRETY FOR A DESCRIPTION OF THE PROCEDURES FOLLOWED, ASSUMPTIONS MADE,
MATTERS CONSIDERED, AND QUALIFICATIONS AND LIMITATIONS ON THE REVIEW
UNDERTAKEN BY BBCP IN CONNECTION THEREWITH.
BBCP's opinion is directed to the Exchange Ratio only and does not
constitute a recommendation to any Premier shareholder regarding how such
shareholder should vote at the Special Meeting.
In arriving at its opinion, BBCP among other things: (i) analyzed certain
audited and unaudited financial statements and other information of Premier
and Citizens; (ii) reviewed and discussed with appropriate management
personnel of Premier and Citizens the past and current business activities and
financial results and the business and financial outlook of Premier and
Citizens; (iii) reviewed the historical price and trading activity of the
Common Stock of Premier and other similar banking institutions; (iv) compared
certain financial and stock market data relating to Premier with similar data
of other publicly held banking institutions; (v) performed an analysis
comparing the pro forma consequences of the Merger to both Premier and
Citizens shareholders with respect to earnings per share and tangible book
value per share represented by the Premier Common Stock that will be held
after the Merger to those same measures represented by the common stock
currently held; (vi) considered the relative contributions of Premier and
Citizens to a combined institution in terms of balance sheet, revenue,
earnings and ownership measures; (vii) reviewed the prices paid in certain
comparable acquisition transactions of community banking institutions and the
multiples of earnings and book value and the level of deposit base premium
received by the selling institutions; (viii) reviewed the Agreement and
certain related documents; (ix) considered the potential synergies and cost
savings made available to Premier and Citizens through the Merger; (x)
evaluated the financial and capital implications to Premier of the Merger;
(xi) considered stock trading/liquidity implications to Premier shareholders
of the Merger; and (xii) performed such other analyses as BBCP deemed
appropriate.
In conducting its analysis and arriving at its opinion, BBCP assumed and
relied upon, without independent verification, the accuracy and completeness
of the information it reviewed for the purposes of the opinion. BBCP also
relied upon the managements of Premier and Citizens with respect to the
reasonableness and achievability of the financial forecasts (and the
assumptions and bases underlying such forecasts) provided to it. BBCP also
assumed, with Premier's consent, that the aggregate allowances for loan losses
for each of Premier and Citizens are adequate to cover such losses. BBCP is
not an expert in the evaluation of allowances for loan losses and has not
reviewed any individual credit files. BBCP did not make, nor was it furnished
with, independent valuations or appraisals of the assets or liabilities of
either Premier or Citizens or any of their subsidiaries. BBCP did not express
any opinion about what the value of Premier Common Stock actually will be when
issued to the holders of Citizens Common Stock pursuant to the Merger or the
price at which Premier Common Stock will trade subsequent to the Merger.
Premier has informed BBCP, and BBCP has assumed, that the Merger will be
recorded utilizing pooling of interests accounting under generally accepted
accounting principles.
No limitations were imposed by Premier or the Premier Board on the scope of
BBCP's investigation or the procedures to be followed by BBCP in rendering its
opinion. The opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to BBCP as of,
the date of its analysis.
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In addressing the fairness, from a financial point of view, of the
consideration to be issued by Premier to the shareholders of Citizens, BBCP
employed a variety of generally recognized valuation methodologies and merger
analyses and performed those which it believed were most appropriate for
developing its opinion. The preparation of a fairness opinion involves various
determinations of the most appropriate and relevant methods of financial
analysis and the application of those methods to the particular circumstances,
and, therefore, such an opinion is not readily susceptible to summary
description. In arriving at its fairness opinion, BBCP did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments about the significance and relevancy of each analysis
and factor. None of the analyses performed by BBCP was assigned a greater
significance by BBCP than any other. Accordingly, BBCP believes that its
analyses must be considered as a whole and that a review of selected portions
of such analyses and the factors considered therein, without considering all
analyses and factors, could create a misleading or incomplete view of the
processes underlying its opinion and any conclusions reached therein. In its
analyses, BBCP made numerous assumptions with respect to industry performance,
general business and economic conditions, and other matters, many of which are
beyond Premier's and Citizens' control. Any estimates contained in BBCP's
analyses are not necessarily indicative of actual values or predictive of
future results or values that may be significantly more or less favorable than
such estimates. Estimates of values of companies do not purport to be
appraisals or necessarily reflect the prices at which companies or their
securities actually may be sold. In addition, as described above, BBCP's
opinion and presentation to the Premier and Central and Southern Boards was
one of many factors taken into consideration by the Premier and Central and
Southern Boards in making their determination to approve the Agreement.
The following is a brief summary of analyses performed by BBCP in connection
with its oral opinion delivered to the Premier and Central and Southern Boards
on June 19, 1997:
Summary of Proposal. BBCP reviewed the terms of the proposed transaction as
reflected in the Agreement, including the calculation of the market value of
the consideration represented by the exchange ratio. BBCP stated that based on
the price of Premier Common Stock on June 18, 1997 of $17.00, an exchange
ratio of 8.0876 shares of Premier for each share of Citizens Common Stock and
options would provide a per share purchase price of $137.49.
Per Share Premier Merger Consequences Analysis. Based upon an exchange ratio
of 8.0876 shares of Premier common stock for each share of Citizens Common
Stock and using the earnings estimates for 1997 and 1998 for Citizens prepared
by Citizens management and earnings estimates for 1997 and 1998 for Premier
developed with Premier management, BBCP compared the estimated 1997 and 1998
earnings per share of Premier Common Stock on a stand-alone basis to the
equivalent pro forma earnings per share of Premier reflecting consummation of
the Merger. BBCP concluded that the Merger would result in an equivalent
earnings per share increase of 0.7% in 1997 and 6.5% in 1998 for Premier
shareholders in the combined company.
BBCP also analyzed the impact of the Merger on the amount of fully diluted
tangible book value represented by a share of Premier Common Stock. BBCP
assumed consummation of the Merger as of December 31, 1997. BBCP concluded
that the Merger would result in a decrease of 3.4% in fully diluted tangible
book value on an equivalent per share basis, respectively, for Premier
shareholders projected as of December 31, 1997.
Relative Contribution Analysis. BBCP compared various income statement,
balance sheet and market value measures for Premier and Citizens and
calculated the relative contribution of each institution to the combined, post
Merger organization. In this comparison BBCP noted that Citizens would have
contributed 20.3% and 21.3% of the combined organization's net income
(reflecting adjustments for certain nonrecurring expenses) for the quarter
ended March 31, 1997 and projected for the year ended December 31, 1997. BBCP
also noted that Citizens would have contributed 23.1%, 23.9%, 22.1% and 17.9%
of the combined organization's net loans, total deposits, total assets and
fully diluted shareholder's equity, respectively. BBCP referenced that
Citizens shareholders and option holders would hold 20.8% of the combined
organization's common shares and options.
Analysis of Selected Other Bank Mergers Involving Southeastern Community
Banks. BBCP reviewed fifteen mergers involving Georgia community banks and
bank holding companies announced between January, 1996 and May, 1997. BBCP
noted in particular the prices paid in these mergers as a multiple of earnings
and
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book values and the transaction premiums paid in excess of tangible book value
as a percentage of core deposits. BBCP also reviewed other data in connection
with each of these mergers, including the amount of total assets and the
capital level of the acquired institutions and the return on equity and the
return on assets of the acquired institutions. BBCP then compared this data to
that of Citizens and to the value to be received by Citizens stockholders in
the Merger.
This comparison yielded a range of transaction values as multiples of the
latest twelve-months earnings per share of a low of 10.6 times and a high of
27.2 times and a median value of 15.7 times. The Citizens acquisition multiple
of trailing earnings was 20.7 times. The calculations yielded a range of
transaction values as multiples of book value per share of a low of 1.15 times
to a high of 2.54 times and a median value of 1.98 times. The Citizens
acquisition multiple of book value was 3.44 times. Citizens equity/assets
ratio was 6.78%, lower than any bank in the sample. Finally, the calculations
yielded a range of deposit base premiums paid from a low of 2.6% to a high of
21.8%, with a median value of 10.7%. The equivalent premium on Citizens
deposits represented by the Exchange Ratio was 21.4%. Market valuations of
publicly traded bank stocks have appreciated considerably over the last
eighteen months as evidenced by an increase of 76.8% of the Standard & Poor's
Major Regional Banks Index since January 1, 1996. As a result, historic merger
values may not necessarily reflect current market conditions.
No company or transaction used in the above analyses as a comparison is
identical to Premier, Citizens, or the Merger. Accordingly, an analysis of the
results of the foregoing necessarily involves complex considerations and
judgments concerning differences in financial growth, and operating
characteristics of the companies and other factors that could affect the
public trading value of the companies to which they are being compared.
Mathematical analysis (such as determining the average or median) in and of
itself, does not necessarily provide meaningful intercompany comparisons.
In connection with its written opinion dated the date of this
Prospectus/Proxy Statement, BBCP confirmed the appropriateness of the analyses
used to render its June 19, 1997 report and oral opinion by performing
procedures to update certain of such analyses and by reviewing the assumptions
on which such analyses were based and the factors considered in connection
therewith.
BBCP is continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions, private placements,
and valuations for estate, tax, corporate and other purposes. A fee of $50,000
will be payable to BBCP upon consummation of the Merger. In addition to the
above, BBCP has a continuing financial advisory relationship with Premier
under which BBCP will receive $100,000 during the remainder of 1997. No
compensation payable to BBCP is contingent on the conclusions reached in the
opinion of BBCP. Premier has also agreed to reimburse BBCP for reasonable out
of pocket-expenses and to indemnify BBCP and certain related persons against
certain liabilities relating to or arising out of its engagement.
Citizens. Pursuant to an engagement letter dated March 24, 1997, the Board
of Directors of Citizens retained Carson Medlin to serve as its financial
advisor with respect to a proposed transaction which would lead to the merger
of Citizens or the purchase of substantially all of the stock or assets of
Citizens into one of certain potential acquiring financial institutions. As
part of its engagement, Carson Medlin agreed to render its opinion as to the
fairness, from a financial point of view, of the terms of such a transaction
to Citizens' stockholders. Carson Medlin is a National Association of
Securities Dealers, Inc. member investment banking firm which specializes in
the securities of southeastern United States financial institutions. As part
of its investment banking activities, Carson Medlin is regularly engaged in
the valuation of southeastern United States financial institutions and
transactions relating to their securities, including mergers and acquisitions.
Carson Medlin is being compensated for its services, but such compensation,
while contingent upon the consummation of a transaction, is not contingent
upon the issuance of a fairness opinion.
As part of the engagement, representatives of Carson Medlin attended the
meeting of Citizens' Board held on June 17 ,1997, at which meeting the terms
of the proposed Merger were discussed and considered. At that meeting, Carson
Medlin delivered a preliminary verbal opinion to Citizens' Board that the
Exchange Ratio is fair to Citizens' shareholders, from a financial point of
view. Carson Medlin subsequently confirmed such opinion in writing as of the
date of this Proxy Statement/Prospectus. The full text of Carson Medlin's
written opinion dated the date of this Proxy Statement/Prospectus is attached
as Appendix C to this Proxy
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Statement/Prospectus and should be read in its entirety with respect to the
procedures followed, assumptions made, matters considered and qualifications
of and limitations on the review undertaken by Carson Medlin in connection
therewith. Carson Medlin's opinion is addressed to Citizens' Board of
Directors only, and the opinion does not constitute a recommendation to any
Citizens' stockholder as to how such stockholder should vote at the Citizens'
Meeting or as to any other matter. The summary of the opinion of Carson Medlin
set forth in this Proxy Statement/Prospectus is qualified in its entirety by
reference to the full text of such opinion attached as Appendix C.
Carson Medlin has relied upon, without independent verification, the
accuracy and completeness of the information reviewed by it for the purposes
of rendering its opinion. Carson Medlin did not undertake any independent
evaluation or appraisal of the assets and liabilities of Citizens or Premier,
nor was it furnished with any such appraisals. Carson Medlin assumed that the
financial forecasts reviewed by it have been reasonably prepared on a basis
reflecting the best currently available judgments and estimates of the
management of Citizens and Premier, and that such projected financial results
will be realized in the amounts and at the times contemplated thereby. Carson
Medlin is not expert in the evaluation of loan portfolios, underperforming or
nonperforming assets, net charge-offs of such assets or the adequacy of
allowances for losses with respect thereto; has not reviewed any individual
credit files; and has assumed that the loan loss allowances for each of
Citizens and Premier are in the aggregate adequate to cover such loss. Carson
Medlin assumed that the Merger will be recorded as a pooling of interests
under generally accepted accounting principles. Carson Medlin's opinion is
necessarily based on economic, market and other conditions as in effect on the
date of its analysis, and on information made available to it dated as of
various earlier dates.
In connection with rendering its opinion, Carson Medlin performed a variety
of financial analyses. The preparation of a financial fairness opinion of this
nature involves various determinations as to the most appropriate and relevant
methods of financial analysis and the application of those methods to the
particular circumstances, and, therefore, is not readily susceptible to
partial analysis or summary description. Carson Medlin believes that its
analyses must be considered together as a whole and that selecting portions of
such analyses and the facts considered therein, without considering all other
factors and analyses, could create an incomplete view of the analyses and the
process underlying Carson Medlin's opinion. In its analyses, Carson Medlin
made numerous assumptions with respect to industry performance, business and
economic conditions, and other matters, many of which are beyond the control
of Citizens and Premier and which may not be realized. Any estimates contained
in Carson Medlin's analyses are not necessarily predictive of future results
or values, which may be significantly more or less favorable than such
estimates. Estimates of values of companies do not purport to be appraisals or
necessarily reflect the prices at which such companies or their securities may
actually be sold. None of the analyses performed by Carson Medlin was assigned
a greater significance by Carson Medlin than any other.
In connection with rendering its opinion dated the date hereof, Carson
Medlin reviewed (i) the Agreement and Plan of Reorganization dated as of June
24, 1997, as amended on July 24, 1997, September 15, 1997, and September 19,
1997; (ii) the annual reports to shareholders of Citizens, including audited
financial statements for the five years ended December 31, 1996; (iii) the
Proxy Statement of Citizens dated February 21, 1997, for the annual meeting of
shareholders held on March 11, 1997; (iv) the Consolidated Report of Condition
and Income of Citizens Bank of Gwinnett as of June 30, 1997; (v) the Uniform
Bank Performance Report for Citizens Bank of Gwinnett as of March 31, 1997;
(vi) the annual report to shareholders of Premier, including audited financial
statements for the year ended December 31, 1996; (vii) the annual report on
Form 10-K of Premier for the year ended December 31, 1996; (viii) the annual
report to shareholders of First Alliance Bancorp, Inc., including audited
financial statements for the year ended December 31, 1995; (ix) the Joint
Proxy Statement/Prospectus for the meetings to consider the merger of First
Alliance Bancorp, Inc. and Premier Bancshares, Inc. held on August 15, 1996;
(x) the annual report to shareholders of Central and Southern Holding Company
for the two years ended December 31, 1995; (xi) the annual report on Form 10-K
of Central and Southern Holding Company for the year ended December 31, 1996;
(xii) the Joint Proxy Statement/Prospectus for the meetings to consider the
merger of Premier and Central and Southern Holding Company held on June 16,
1997; (xiii) the Uniform Bank Performance Report for First Alliance Bank as of
March 31, 1997; (xiv) the Uniform Bank Performance Report for The Central and
Southern Bank of Georgia as of March 31, 1997; (xv) the Uniform Thrift
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Performance Report for Premier Bank, FSB, dated as of June 21, 1997, (xvi) the
Uniform Thrift Performance Report for Central and Southern Bank of North
Georgia, dated as of June 21, 1997; (xvii) the Consolidated Report of
Condition and Income of The Central and Southern Bank of Georgia as of June
30, 1997; (xviii) the Consolidated Report of Condition and Income of First
Alliance Bank as of June 30, 1997; (xix) the Thrift Financial Report of
Premier Bank, FSB, report date June 30, 1997; (xx) the Thrift Financial Report
of Central and Southern Bank of North Georgia, report dated June 30, 1997;
(xxi) report on Form 10-Q of Premier Bancshares, Inc. for the quarter ended
June 30, 1997; (xxii) unaudited interim financial statements of Traditional
Mortgage Corporation as of July 31, 1997; (xxiii) unaudited interim financial
statements of Citizens and Premier for the six months ended June 30, 1997;
(xxiv) a preliminary copy of the Proxy Statement/Prospectus prepared for
special meetings of the shareholders of Citizens and Premier to consider the
Merger; and (xxv) certain other financial and operating information with
respect to the business, operations and prospects of Citizens and Premier.
Carson Medlin also (i) held discussions with members of the senior
management of Citizens and Premier regarding their respective historical and
current business operations, financial conditions and future prospects; (ii)
reviewed the historical market prices and trading activity for the common
stocks of Citizens, to the extent available, and Premier and compared them
with those of certain publicly traded companies which it deemed to be
relevant; (iii) compared the results of operations of Citizens and Premier
with those of certain publicly traded companies which it deemed to be
relevant; (iv) compared the proposed financial terms of the Merger with the
financial terms, to the extent publicly available, of certain other recent
business combinations of commercial banking and thrift organizations; (v)
analyzed the pro forma financial impact of the Merger on Premier; and (vi)
conducted such other studies, analyses, inquiries and examinations as Carson
Medlin deemed appropriate.
The following is a summary of the principal analyses performed by Carson
Medlin in connection with its opinion.
Summary of Transaction Consideration. Carson Medlin reviewed the terms of
the proposed transaction, including the Exchange Ratio and the aggregate
transaction value. Carson Medlin reviewed the implied value of the
Consideration offered based upon the average Closing price of Premier Common
Stock for the ten trading days prior to September 19, 1997, which showed that
the implied value of the proposed transaction was approximately $141.05 per
share of Citizens Common Stock, representing a 422% premium to the last
reported trade of Citizens Common Stock prior to the public announcement of
the Merger (June 24, 1997), or a total transaction value of approximately
$36.7 million. Carson Medlin calculated that the aggregate transaction value,
based on the average closing price of the Premier Common Stock for the ten
trading days prior to September 19, 1997, represented 323% of Citizens' book
value at June 30, 1997, adjusted pro forma for the exercise of 1,850 Citizens
Options on July 14, 1997, and 18.5 times Citizens' June 30, 1997 trailing
twelve months earnings, a 20.2% premium on Citizens' June 30, 1997 core
deposits (defined as the aggregate transaction value, minus stated book value,
as a percentage of core deposits) and 22.5% of the total assets of Citizens at
June 30, 1997.
Comparable Transaction Analysis. Carson Medlin reviewed certain information
relating to 18 selected southeastern bank and thrift mergers announced between
March 1996 and May 1997 in which the acquired institutions had total assets of
from $44 million to $1.4 billion (the "Comparable Transactions"). The
Comparable Transactions are (acquiree/acquiror): Enterprise National
Bank/Compass Bancshares; Fort Brooke Bancorporation/Colonial BancGroup; Citi-
Bancshares, Inc./Huntington Bancshares; Bank of Winter Park/Huntington
Bancshares; Rockdale Community Bank/Regions Financial Corporation; First
Bankshares/Regions Financial Corporation; SB&T Corporation/Regions Financial
Corporation; Bank Corporation of Georgia/Century South Banks; First Community
Bank/Centura Banks, Inc.; FirstSouth Bank/Centura Banks, Inc.; Salem Trust
Bank/CCB Financial Corporation; Carolina State Bank/Bank of Granite
Corporation; Old North State Bank/LSB Bancshares, Inc.; Bank of
Mecklenburg/Triangle Bancorp, Inc.; American Federal Bank/ FSB/CCB Financial
Corporation; W.B.T. Holding Co./First Commercial Corporation; Hanover
Bank/Main Street BankGroup, Inc.; and First Patriot Bankshares/United
Bankshares. Carson Medlin considered, among other factors, the earnings,
capital level, asset size and quality of assets of the acquired financial
institutions. Carson Medlin compared the transaction prices to the then
recently reported annual earnings, stated book values, total assets and core
deposits.
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Carson Medlin calculated a range of purchase prices as a percentage of
stated book value for the Comparable Transactions from a low of 195.1% to a
high of 305.7%, with a mean of 245.3%. These transactions indicated a range of
values for Citizens from $22.2 million to $34.8 million, with a mean of $27.9
million (based on Citizens' book value of $11.4 million at June 30, 1997,
adjusted pro forma for the exercise of 1,850 stock options on July 14, 1997).
The aggregate consideration implied by the terms of the Merger is
approximately $36.7 million or 323% of adjusted book value, which is above the
high end of the range for the Comparable Transactions.
Carson Medlin calculated a range of purchase prices as a multiple of
earnings for the Comparable Transactions from a low of 10.6 times to a high of
29.8 times, with a mean of 19.2 times. These transactions indicated a range of
values for Citizens from $21.1 million to $59.3 million, with a mean of $38.2
million (based on Citizens' trailing twelve months earnings at June 30, 1997
of $1,989,000). The aggregate consideration implied by the terms of the Merger
is approximately $36.7 million or 18.5 times trailing twelve months earnings,
which is slightly below the mean for the Comparable Transactions.
Carson Medlin calculated the core deposit premiums for the Comparable
Transactions and found a range of values from a low of 11.3% to a high of
28.8%, with a mean of 18.2%. The premium on Citizens' core deposits implied by
the terms of the Agreement is 20.2%, which is above the mean for the
Comparable Transactions.
Finally, Carson Medlin calculated a range of purchase prices as a percentage
of total assets for the Comparable Transactions from a low of 15.7% to a high
of 29.5%, with a mean of 21.7%. The aggregate consideration as a percentage of
total assets implied by the terms of the Merger is approximately 22.5%, which
is slightly above the mean for the Comparable Transactions.
Industry Comparative Analysis. In connection with rendering its opinion,
Carson Medlin compared selected operating results of Citizens to Premier and
those of 51 publicly-traded community commercial banks in Alabama, Florida,
Georgia, North Carolina, South Carolina, Virginia and West Virginia (the "SIBR
Banks") as contained in the Southeastern Independent Bank Review(TM), a
proprietary research publication prepared by Carson Medlin quarterly since
1991. The SIBR Banks range in asset size from approximately $100 million to
$2.3 billion and in shareholders' equity from approximately $10 million to
$235 million. Carson Medlin considers this group of financial institutions
more comparable to Citizens and Premier than larger, more widely traded
regional financial institutions. Carson Medlin compared, among other factors,
the profitability, capitalization, and asset quality of Citizens and Premier
to those of the SIBR Banks. Carson Medlin noted that for the six months ended
June 30, 1997: (i) Citizens had a return on average assets (ROA) of 1.27%
compared to 1.52% for Premier and 1.22% on average for the SIBR Banks; (ii)
Citizens had a return on average equity (ROE) of 18.8% compared to 17.4% for
Premier and 12.6% on average for the SIBR Banks; (iii) Citizens had common
equity to total assets of 6.94% compared to 8.57% for Premier and 9.54% on
average for the SIBR Banks; and (iv) Citizens' nonperforming assets ratio
(defined as loans 90 days past due, nonaccrual loans and other real estate to
total loans and other real estate) was 0.18% compared to 0.40% for Premier and
1.03% on average for the SIBR Banks. Carson Medlin also noted that for the
year ended December 31, 1996: (i) Citizens' ROA was 1.10% compared to 1.17%
for Premier and 1.23% on average for the SIBR Banks; (ii) Citizens' ROE was
16.3% compared to 11.9% for Premier and 12.6% an average for the SIBR Banks;
(iii) Citizens had common equity to total assets of 6.55% compared to 9.07%
for Premier and 9.62% on average for the SIBR Banks; (iv) Citizens'
nonperforming assets ratio was 0.36% compared to 0.70% for Premier and 1.02%
on average for the SIBR Banks. This comparison indicated that Citizens'
financial performance was superior by some measures to the performance of
Premier and the SIBR Banks and that Premier's financial performance was
superior by some measures to the performance of Citizens and the SIBR Banks.
No company or transaction used in the preceding Industry Comparative or
Comparable Transaction Analyses is identical to Citizens, Premier or the
Merger. Accordingly, evaluating the results of these analyses necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of Citizens, Premier and other factors
that could affect the value of the companies to which they are being compared.
Mathematical analysis (such as determining the average or median) is not, in
itself, a meaningful method of using comparable industry or transaction data.
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Contribution Analysis. Carson Medlin reviewed the relative contributions in
terms of various balance sheet items, net income and market capitalization to
be made by Citizens and Premier to the combined institution based on (i)
balance sheet data at June 30, 1997, and (ii) income statement data for the
six months ended June 30, 1997. The income statement and balance sheet
components analyzed included total assets, total loans, total deposits,
shareholders' equity, tangible equity, core income (defined as income before
taxes and nonrecurring gains and expenses), and net income. This analysis
showed that, while Citizens' shareholders and optionholders would own
approximately 20.9% of the aggregate outstanding shares of the combined
institution based on the Exchange Ratio, Citizens is contributing 21.7% of
total assets, 20.7% of total loans (net of unearned income), 24.1% of total
deposits, 18.4% of shareholders' equity, 19.3% of tangible equity, 25.5% of
core income, and 19.9% of net income. For some of the financial components,
Citizens is contributing a higher proportion than the percentage of ownership
that Citizens' shareholders and optionholders are receiving in the Merger; for
other components, Citizens is contributing less than its shareholders and
optionholders are receiving.
Present Value Analysis. Carson Medlin calculated the present value of the
Citizens Common Stock assuming that Citizens remains an independent bank. For
purposes of this analysis, Carson Medlin utilized certain projections of
Citizens' future earnings through the year 2001. The analysis assumes that
Citizens would continue to pay a dividend and that in 1998 and each year
thereafter the dividend would be equal to 20% of projected net income and that
Citizens would be acquired at the end of 2001 at a purchase price of 16 times
projected annual net income. The present value of the annual dividends plus
the merger consideration at the end of 2001 was then calculated using discount
rates of 13% through 15% per annum. These rates were selected to reflect the
rates that investors in securities such as the Citizens Common Stock might be
expected to require in order to be competitive with alternative investments
with similar characteristics. On the basis of these assumptions, Carson Medlin
calculated that the present value of Citizens as an independent bank ranged
from $29.9 million to $32.4 million. The aggregate consideration implied by
the terms of the Agreement is approximately $36.7 million which falls above
the high end of the range of the calculated present values were Citizens to
remain independent through 2001. Carson Medlin considered the present value
analysis because it is a widely used valuation methodology, but noted that the
results of such methodology are highly dependent upon the numerous assumptions
that must be made, including earnings growth rates, dividend payout rates,
terminal values and discount rates.
Stock Trading History. Carson Medlin reviewed and analyzed the historical
trading prices and volumes for Premier Common Stock from January 1995 to
September 1997. Carson Medlin also compared price performance of Premier's
Common Stock during this period to the SIBR Banks, the Dow Jones Southeastern
U.S. Banks Index and the Dow Jones Equity Market Index.
This analysis showed that for the two-year period ending September 17, 1997,
the total return (annualized) for Premier's Common Stock (all cash
distributions and dividends reinvested on the ex-dividend date) was %
compared to % for the Dow Jones Southeastern U.S. Banks Index and % for
the Dow Jones Equity Market Index.
At the end of the four quarters ending June 30, 1997, the ratio of stock
price to trailing 12 months earnings per share for the SIBR Banks was: a low
of 14.2 times, a high of 15.4 times, and a mean of 14.9 times. For the same
periods, Premier's price to earnings ratio ranged from a low of 14.9 times to
a high of 27.1 times with a mean of 22.6 times. Excluding nonrecurring
expenses in 1996, Premier's price to earnings ratio ranged from a low of 14.9
times to a high of 19.3 times with a mean of 16.9 times. Premier's Common
Stock has traded on average at a higher price to earnings ratio than the SIBR
Banks.
At the end of the four quarters ending June 30, 1997, the stock price as a
percentage of book value for the SIBR Banks was: a low of 175%, a high of
214%, and a mean of 192%. For the same periods, Premier's price to book ratio
ranged from a low of 172% to a high of 302% with a mean of 232%. Premier's
Common Stock has traded on average at a higher price to book value basis
compared to the SIBR Banks.
Carson Medlin also examined the recent trading volume in Premier Common
Stock, which began trading an the American Stock Exchange on January 10, 1997.
Before that time it traded on the NASDAQ National Market. Carson Medlin
considers the Premier Common Stock to be liquid and marketable.
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Carson Medlin also examined recent trading prices and volumes of the
Citizens Common Stock, to the extent available. The Citizens Common Stock is
not listed on an exchange. Citizens Common Stock trades infrequently and
actual trade prices and trading volume could not be confirmed. Carson Medlin
placed little weight on the market price of the Citizens Common Stock in its
analysis.
Shareholder Claims Analysis. Carson Medlin compared the ownership of one
share of the Citizens Common Stock to the ownership of 8.0283 shares of the
Premier Common Stock (as implied by the terms of the Agreement) from the
perspective of claims on various balance sheet and income statement variables,
Carson Medlin found that Citizens shareholders would have had a claim to $9.18
per Citizens share of estimated pro forma 1997 earnings after consummation of
the Merger versus $8.83 without the Merger and $10.47 per Citizens share of
estimated pro forma 1998 earnings versus $9.37 without. Citizens shareholders
would have had a claim to $156.7 million in June 30, 1997 total assets
compared to $163.1 million without the Merger. Citizens shareholders would
have had a claim to $49.48 in June 30, 1997 pro forma book value per Citizens
share, adjusted pro forma for the exercise of 1,850 options on July 14, 1997,
compared to $46.56 before the Merger. At an average price, for the ten trading
days prior to September 19, 1997, of $17.5688 per share for Premier's Common
Stock, the implied value of the proposed transaction is $141.05 per Citizens
share compared to a reported $27.00 before the Merger. Furthermore, Citizens'
shareholders would be expected, assuming continuation of Premier's recent
dividend rate, to receive cash dividends at the annual rate of $2.89 per
Citizens share after the Merger versus $0.80 per Citizens share prior to the
Merger. In view of this generally favorable shareholder claims comparison,
Carson Medlin concluded that 8.0283 shares of the Premier Common Stock is
likely to be worth more than one share of the Citizens Common Stock at the
date of consummation of the Merger.
Other Analyses. Carson Medlin also reviewed selected investment research
reports on and earnings estimates for Premier. In addition, Carson Medlin
performed a dilution analysis and such other analyses and comparisons that it
deemed appropriate.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and were evaluated as of the
date of the opinion. Events occurring after the date of issuance of the
opinion, including but not limited to, changes affecting the securities
markets, the results of operations or material changes in the assets or
liabilities of Citizens or Premier could materially affect the assumptions
used in preparing the opinion.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time specified in
the Certificate of Merger filed by Premier with the Georgia Secretary of
State. If no effective date or time is specified, the Merger will become
effective upon the filing of the Certificate of Merger. Unless otherwise
agreed upon by Premier and Citizens, and subject to the conditions to the
obligations of the parties to effect the Merger, the parties will use their
reasonable efforts to cause the Effective Date to occur by the last business
day of the month in which the last of the following events occurs: (i) the
effective date (including the expiration of any applicable waiting period) of
the last federal or state regulatory approval required for the Merger or (ii)
the date on which the Agreement is approved by the requisite vote of Citizens
and Premier shareholders.
No assurance can be provided that the necessary shareholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. Premier and Citizens anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated in the fourth quarter of 1997. However, delays in the consummation
of the Merger could occur.
The Board of Directors of either Premier or Citizens generally may terminate
the Agreement if the Merger is not consummated by December 31, 1997, unless
the failure to consummate by that date is the result of a breach of the
Agreement by the party seeking termination. See "--Conditions to Consummation
of the Merger" and "--Waiver, Amendment, and Termination of the Agreement."
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DISTRIBUTION OF STOCK CERTIFICATES AFTER THE MERGER
Promptly after the Effective Date, Premier will cause SunTrust Bank,
Atlanta, acting in the capacity of Exchange Agent, to mail to the former
shareholders of Citizens a letter of transmittal, together with instructions
for the exchange of such shareholders' certificates representing shares of
Citizens Common Stock for certificates representing shares of Premier Common
Stock.
CITIZENS SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender to the
Exchange Agent of certificates for Citizens Common Stock, together with a
properly completed letter of transmittal, there will be issued and mailed to
each holder of Citizens Common Stock a certificate or certificates
representing the number of shares of Premier Common Stock to which such holder
is entitled as a result of the Merger. After the Effective Date, holders of
record of Citizens Common Stock as of the Effective Date will be entitled to
vote at any meeting of Premier shareholders the number of shares of Premier
Common Stock into which their Citizens Common Stock has been converted,
regardless of whether such shareholders have surrendered their Citizens stock
certificates. NO DIVIDEND OR OTHER DISTRIBUTION PAYABLE AFTER THE EFFECTIVE
DATE WITH RESPECT TO PREMIER COMMON STOCK, HOWEVER, WILL BE PAID TO THE HOLDER
OF ANY UNSURRENDERED CITIZENS STOCK CERTIFICATE UNTIL THE HOLDER DULY
SURRENDERS SUCH CERTIFICATE. Upon such surrender, all undelivered dividends
and other distributions will be delivered to such shareholder, in each case
without interest.
After the Effective Date, there will be no transfers of shares of Citizens
Common Stock on Citizens' stock transfer books. If certificates representing
shares of Citizens Common Stock are presented for transfer after the Effective
Date, they will be canceled and exchanged for the shares of Premier Common
Stock deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve and the Georgia Department without any
conditions or restrictions that would, in the reasonable judgment of
either party, so materially adversely impact the economic benefits of the
transactions contemplated by the Agreement as to render inadvisable the
consummation of the Merger, and the expiration of applicable waiting
periods under the BHC Act;
(b) approval by the holders of a majority of the shares of Citizens Common
Stock entitled to vote on the Merger;
(c) approval by the holders of a majority of the shares of Premier Common
Stock entitled to vote on the Merger;
(d) the absence of any action by any court or governmental authority
restraining or prohibiting the Merger;
(e) the receipt of all consents by Premier and Citizens required for the
consummation of the Merger;
(f) the receipt of an opinion of counsel to the effect that, among other
things: (i) the Merger will constitute a tax-free reorganization within
the meaning of Section 368(a)(1)(A) of the Code; (ii) the exchange in the
Merger of Citizens Common Stock for Premier Common Stock will not give
rise to gain or loss to Citizens shareholders, except to the extent of any
cash received for fractional shares or upon the exercise by a shareholder
of his or her dissenters' rights; and (iii) Citizens will not recognize
gain or loss as a consequence of the Merger;
(g) approval for listing on the American Stock Exchange of the shares of
Premier Common Stock to be issued in the Merger; and
(h) receipt of letters from Mauldin & Jenkins, LLC and Porter Keadle Moore LLP
dated as of the Effective Date, confirming that the Merger will qualify
for pooling-of-interests accounting treatment.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement, including, among others:
(i) the delivery by Premier and Citizens of opinions of their respective
counsel and certificates executed by their respective Chief Executive Officers
and Chief Financial
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Officers as to compliance with the Agreement; and (ii) as of the Effective
Date, the accuracy of certain representations and warranties and the
compliance in all material respects with the agreements and covenants of each
party.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by conditions which
cause such approvals to fail to satisfy the conditions set forth in the
Agreement. Applications for the approvals described below have been submitted
to the appropriate regulatory agencies.
Premier and Citizens are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 3 of the BHC Act. In granting its approval under Section 3 of the BHC
Act, the Federal Reserve must take into consideration, among other factors,
the financial and managerial resources and future prospects of the
institutions and whether the acquisition can reasonably be expected to produce
benefits to the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased competition, conflicts of interest, or
unsound banking practices. Under the BHC Act, the Merger may not be
consummated until the 15th day following the date of Federal Reserve approval,
during which time the United States Department of Justice may challenge the
transaction on antitrust grounds. The commencement of any antitrust action
would stay the effectiveness of the Federal Reserve's approval, unless a court
specifically orders otherwise.
The Merger also is subject to the approval of the Georgia Department. In its
evaluations, the Georgia Department will take into account considerations
similar to those applied by the Federal Reserve.
RIGHTS OF DISSENTING SHAREHOLDERS
Any shareholder of record of Citizens who objects to the Merger and who
fully complies with Section 14-2-1301 et seq. of the Georgia Code will be
entitled to demand and receive payment in cash of an amount equal to the fair
value of all, but not less than all, of his or her shares of Citizens Stock if
the Merger is consummated. A shareholder of record may assert dissenters'
rights as to fewer than the shares registered in such shareholder's name only
if he or she dissents with respect to all shares beneficially owned by any one
beneficial owner and notifies Citizens in writing of the name and address of
each person on whose behalf he asserts dissenters' rights. For the purpose of
determining the amount to be received in connection with the exercise of
statutory dissenters' rights under the Georgia Code, the fair value of a
dissenting shareholder's Citizens Stock equals the value of the shares
immediately before the Effective Date of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger.
Any Citizens shareholder desiring to receive payment of the fair value of
his or her Citizens Stock in accordance with the requirements of the Georgia
Code: (a) must deliver to Citizens prior to the time the shareholder vote on
the Agreement is taken, a written notice of his or her intent to demand
payment for his shares if such Merger is consummated; (b) must not vote his or
her shares in favor of the Agreement; and (c) must demand payment and deposit
stock certificates representing Citizens Stock in accordance with the terms of
a notice which will be sent to the shareholder by Premier (as the Surviving
Corporation in the Merger) no later than 10 days after such Agreement is
consummated. A filing of the written notice of intent to dissent with respect
to the Agreement should be sent to: Citizens Gwinnett Bankshares, Inc., 3209
Buford Highway, Duluth, Georgia 30136, Attention: President. A VOTE AGAINST
THE AGREEMENT ALONE WILL NOT SATISFY THE REQUIREMENTS FOR THE SEPARATE WRITTEN
NOTICE OF INTENT TO DISSENT TO THE MERGER, THE SEPARATE WRITTEN DEMAND FOR
PAYMENT OF THE FAIR VALUE OF SHARES OF CITIZENS STOCK AND THE DEPOSIT OF THE
STOCK CERTIFICATES, WHICH ARE REFERRED TO IN CONDITIONS (A) AND (C) ABOVE.
RATHER, A DISSENTING SHAREHOLDER MUST SEPARATELY COMPLY WITH ALL OF THOSE
CONDITIONS.
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Within 10 days of the later of the Effective Date or receipt of a payment
demand by a shareholder who deposits his or her stock certificates in
accordance with the Citizens' dissenters' notice sent to those shareholders
who notified Citizens of their intent to dissent, described in (c) above,
Premier (as the Surviving Corporation in the Merger) must offer to pay to each
dissenting shareholder the amount Premier estimates to be the fair value of
the dissenting shareholder's shares, plus accrued interest. Such notice and
offer must be accompanied by: (a) Citizens' balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of making an offer,
an income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial statements,
if any; (b) an explanation of how the interest was calculated; (c) a statement
of the dissenting shareholder's right to demand payment of a different amount
under Section 14-2-1327 of the Georgia Code; and (d) a copy of the dissenters'
rights provisions of the Georgia Code.
If the dissenting shareholder accepts Premier's offer, by written notice to
such entity, within 30 days after Premier's offer or is deemed to have
accepted the offer by reason of failing to respond to such offer, Premier must
make payment for his or her shares within 60 days after the making of the
offer or the Effective Date, whichever is later. Upon payment of the agreed
value, the dissenting shareholder will cease to have any interest in his or
her shares of Citizens Stock.
If within 30 days after Premier offers payment for the shares of a
dissenting shareholder, the dissenting shareholder does not accept the
estimate of fair value of his or her shares and interest due thereon and
demands payment of his or her own estimate of the fair value of the shares and
interest due thereon, then Premier, within 60 days after receiving the payment
demand of a different amount from a dissenting shareholder, must file an
action in a court of competent jurisdiction in Gwinnett County, Georgia,
requesting that the fair value of such shares be found and determined. Premier
must make all dissenting shareholders whose demands remain unsettled parties
to the proceeding. If Premier does not commence the proceeding within such 60-
day period, it shall be required to pay each dissenting shareholder whose
demand remains unsettled the amount demanded by the dissenting shareholder.
The foregoing does not purport to be a complete statement of the provisions
of the Georgia Code relating to statutory dissenters' rights and is qualified
in its entirety by reference to the Dissenters' Rights provisions of the
Georgia Code, which are reproduced in full in Appendix D to this Proxy
Statement/Prospectus and which are incorporated herein by reference.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Closing Date, and to the extent permitted by law, any provision
of the Agreement generally may be (i) waived by the party benefitted by the
provision or (ii) amended by a written agreement between Premier and Citizens
approved by their respective Boards of Directors; provided, however, that
after approval by the Premier and Citizens shareholders, no amendment that
would require further approval by such shareholders under the Georgia Code may
be made without the approval of such shareholders.
The Agreement may be terminated, and the Merger abandoned, at any time prior
to the Effective Date, either before or after approval by the Premier and the
Citizens shareholders, upon written notice to the other party as follows:
(i) by either party upon a material adverse change in the financial or
business condition of the other party which changes would reasonably be
expected to have a material adverse effect on the market price of the
stock of that party, or if either party shall have suffered a material
loss or damage to any of its properties or assets which change, loss or
damage materially affects or impairs its ability to conduct its business;
(ii) by either party, if the shareholders of either Premier or Citizens have
not approved the Agreement in accordance with the provisions of the
Georgia Code;
(iii) by either party, in the event of the other party's failure to
substantially comply with the terms, covenants or conditions of the
Agreement or failure to disclose certain information with respect to
the business, properties, assets or earnings of the party which
materially and adversely affects such business, properties, assets or
earnings or the ownership, value or continuance thereof; or to comply
with any provision of the Agreement which meets certain standards
specified in the Agreement;
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<PAGE>
(iv) by either party, in the event any suit, action or proceeding shall have
been instituted or threatened against the other party with regard to the
Agreement or the Merger which in the good faith opinion of Citizens or
Premier makes consummation of the transactions contemplated in the
Agreement inadvisable; or
(v) by either party if it learns of any potential liability of the other party
arising from noncompliance with any federal, state, or local environmental
law by that party, or any potential liability of the other party arising
from any environmental condition of the properties or assets of that party
including any properties or assets in which that party holds a security
interest;
(vi) by mutual consent of the Board of Directors of both parties; or
(vii) by either party if the Merger shall not have been consummated by
December 31, 1997.
If the Agreement is terminated, the parties will have no further
obligations, except with respect to certain provisions, including those
providing for payment of expenses and restricting disclosure of confidential
information. See "--Expenses and Fees" for additional information concerning
the payment of expenses.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Citizens and Premier generally has agreed, unless the prior consent
of the other party is obtained, and except as otherwise contemplated by the
Agreement, to operate its business only in the ordinary course, to preserve
intact its business organization and assets and to maintain its rights and
franchises. In addition, the Agreement contains certain other restrictions
applicable to the conduct of the business of either Citizens or Premier prior
to consummation of the Merger, as described below.
Each party has agreed not to take certain actions relating to the operation
of its business pending consummation of the Merger without the prior approval
of the other party. Those actions generally include, without limitation: (i)
amending its Articles of Incorporation or Bylaws; (ii) becoming responsible
for any obligation for borrowed money in excess of an aggregate of $100,000
(except in the ordinary course of business consistent with past practices);
(iii) changing its authorized or issued capital stock or paying any dividend
or other distribution in respect of its capital stock, except that Premier is
permitted to declare and pay a quarterly cash dividend of up to $.10 per share
on the shares of Premier Common Stock and Citizens is permitted to pay a cash
dividend of $.20 per share in the third quarter of 1997 and $.20 per share for
any quarter thereafter until the Closing Date; (iv) disposing of any asset
other than in the ordinary course of business; (v) adopting any new employee
benefit plan or program, or materially changing any existing plan or program
except for any change required by law or advisable to maintain the tax
qualified status of any such plan; (vi) commencing any litigation (except in
accordance with past practice), settling any litigation involving liability of
the holding company or any subsidiary for damages in excess of $50,000 or
material restrictions upon its operations; or (vii) entering into, modifying
or terminating any material contract except in the ordinary course of
business.
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
Management. The officers and directors of Premier shall remain the same
following the Merger except that Thomas J. Martin shall be elected to the
Board of Directors of Premier. Mr. Martin shall also serve initially as
President of the East Metro Division of Premier Bank following the merger.
Thomas J. Martin, age 53, has served as President and Chief Executive
Officer of Citizens, and as Chairman and Chief Executive Officer of Citizens
Bank since 1995. Mr. Martin organized Citizens Bank in 1984 and served as
President of Citizens Bank from 1984 to 1995.
EMPLOYMENT AGREEMENTS
Effective as of the Effective Date of the Merger, Premier Bank will enter
into an amendment to Mr. Martin's employment agreement (originally entered
into on December 11, 1990 and first amended on March 11, 1997) which shall
provide that Mr. Martin shall serve on the Board of Directors of Premier and
as President of Premier Bank's East Metro Division. The term of the employment
agreement, as amended, will be six months from a "change in control" which
change in control would include the Merger. Under the employment agreement, as
amended, Mr. Martin's base salary will be $136,500.
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<PAGE>
Such salary shall be increased to $160,000 effective January 1, 1998,
subject to the approval of the Compensation Committee of Premier. The
amendment also provides certain incentives for Mr. Martin to assist in closing
the Merger within certain time periods. Depending on the Closing Date of the
Merger, Mr. Martin will receive between $25,000 and $15,000. The amendment
further provides for a growth bonus whereby Premier Bank will agree to pay Mr.
Martin a lump sum bonus of $25,000 if certain profit targets are met by
Premier and a lump sum bonus equal to 5% of the amount by which Premier Bank's
profits exceed $2.3 million for calendar year 1997. The amendment also
provides for perquisites such as an automobile, country club dues and health
care benefits. If, within six months after the Merger, Mr. Martin is
terminated or if he does not agree to enter into a new employment agreement,
Mr. Martin will be entitled to a lump sum payment of $409,500, which lump sum
payment is the same amount made payable to Mr. Martin under the March 11, 1997
amendment to his employment agreement in the event of a "change of control"
such as the Merger. The amendment also contains a six month non-compete for
Gwinnett County, Georgia, a one year client and employee nonsolicitation
covenant and a one-year confidentiality covenant.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement also provides that, after the Effective Date, Premier will
provide generally to officers and employees of Citizens and its subsidiaries
who become officers or employees of Premier or its subsidiaries, employee
benefits under employee benefit plans on terms and conditions that, taken as a
whole, are substantially similar to those currently provided by Premier and
its subsidiaries to their similarly situated officers and employees. For
purposes of participation and vesting under such employee benefit plans,
service with Citizens or its subsidiaries prior to the Effective Date will be
treated as service with Premier or its subsidiaries. The Agreement further
provides that Premier will honor all employment, severance, consulting, and
other compensation contracts previously disclosed to Premier between Citizens
or its subsidiaries and any current or former director, officer, or employee,
and all provisions for vested amounts earned or accrued through the Effective
Date under Citizens' benefit plans.
Certain terms of the amendment to Mr. Martin's employment agreement with
Premier Bank are more favorable to Mr. Martin than the terms of his current
employment agreement with Citizens. Such more favorable terms include a merger
incentive bonus if the Merger is closed within certain time periods, and a
growth bonus if certain profit and asset growth targets are met, and the
provision of additional certain perquisites not currently provided to Mr.
Martin by Citizens.
As of the Record Date, the directors and executive officers of Citizens
beneficially owned no shares of Premier Common Stock.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF MATERIAL ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-
EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, OR CORPORATIONS,
AMONG OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER
UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. SHAREHOLDERS, THEREFORE,
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL,
AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
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<PAGE>
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Kilpatrick Stockton LLP,
counsel to Citizens, has rendered an opinion to Premier and Citizens
concerning certain federal income tax consequences of the proposed Merger
under federal income tax law. It is such firm's opinion that:
(a) The Merger will be a tax-free reorganization within the meaning of Section
368(a) of the Code.
(b) The shareholders of Citizens will recognize no gain or loss upon the
exchange of their Citizens Common Stock solely for shares of Premier
Common Stock except for the recognition of gain as required by Section 302
of the Code with respect to the receipt by the shareholders (or option
holders) of Citizens Common Stock of cash in lieu of fractional shares.
(c) Citizens shareholders who dissent from the Merger will be treated as
having received such payment as a distribution in redemption of their
shares of stock as required by Section 356(a) of the Code. Citizens
shareholders electing to exercise dissenters' rights should consult their
own tax advisors as to the tax treatment in their particular
circumstances.
(d) No income, gain or loss will be recognized by Premier or Citizens as a
consequence of the Merger.
(e) The aggregate tax basis of Premier Common Stock received by Citizens
shareholders pursuant to the Merger will be the same tax basis of the
shares of Citizens Common Stock exchanged therefor decreased by any
portion of such tax basis allocated to fractional shares of Premier Common
Stock that are treated as redeemed by Premier.
(f) The holding period of the shares of Premier Common Stock received by the
Citizens shareholders will include the holding period of the shares of
Citizens Common Stock exchanged therefor, provided that the stock of
Citizens is held as a capital asset on the date of the consummation of the
Merger.
Among other things, the opinion of Kilpatrick Stockton LLP is based on
Citizens shareholders' maintaining sufficient equity ownership interest in
Premier after the Merger. The Internal Revenue Service takes the position for
purposes of issuing an advance ruling on reorganizations, that the
shareholders of an acquired corporation (i.e., Citizens) must maintain a
continuing equity ownership interest in the acquiring corporation (i.e.,
Premier) equal, in terms of value, to at least 50% of their interest in the
acquired corporation. Moreover, shares of Citizens Common Stock and Premier
Common Stock held by Citizens shareholders and otherwise sold, redeemed or
disposed of prior to or shortly after the Effective Date are taken into
account. Management of Premier has represented that it has no plan or
intention to cause Premier to redeem or otherwise reacquire the shares of
Premier Common Stock issued in the Merger. In addition to the foregoing
requirements, certain additional matters must be true with respect to the
Merger. Premier believes that the factual matters will be satisfied.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX CONSEQUENCES
OF THE MERGER. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO THEM INDIVIDUALLY,
INCLUDING TAX CONSEQUENCES UNDER STATE OR LOCAL LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Citizens will be carried forward and
recorded on the financial statements of Premier at their previously recorded
amounts. In order for the Merger to qualify for pooling-of-interests
accounting treatment, substantially all (90% or more) of the outstanding
Citizens Common Stock must be exchanged for Premier Common Stock. There are
certain other criteria that must be satisfied in order for the Merger to
qualify as a pooling of interests, some of which criteria cannot be satisfied
until after the Effective Date.
For information concerning certain conditions to be imposed on the exchange
of Citizens Common Stock for Premier Common Stock in the Merger by affiliates
of Citizens and certain restrictions to be imposed on the transferability of
the Premier Common Stock received by those affiliates in the Merger in order,
among other things, to ensure the availability of pooling-of-interests
accounting treatment, see "--Resales of Premier Common Stock."
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<PAGE>
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel.
The Agreement also provides that if it is terminated because one of the
parties breaches its representations and warranties or one of its covenants,
and the breach cannot be or has not been cured within 30 days after written
notice of the breach is given to the breaching party, then the breaching party
agrees to pay the non-breaching party (i) an amount equal to the reasonable
and documented fees and expenses incurred by the non-breaching party in
connection with the Merger and (ii) (x) $50,000 if the breach was not willful
or (y) $150,000 if the breach was willful or if the Agreement was terminated
in contemplation of a competing proposal to acquire the breaching party and a
definitive agreement is entered into within one year of the date of the
Agreement.
RESALES OF PREMIER COMMON STOCK
The shares of Premier Common Stock to be issued to Citizens shareholders in
the Merger have been registered under the Securities Act, but that
registration does not cover resales of those shares by persons who control,
are controlled by, or are under common control with, Citizens (such persons
are referred to hereinafter as "affiliates" and generally include executive
officers, directors, and 10% shareholders) at the time of the Citizens
Meeting. Affiliates may not sell shares of Premier Common Stock acquired in
connection with the Merger, except pursuant to an effective registration
statement under the Securities Act or in compliance with SEC Rule 145 or
another applicable exemption from the Securities Act registration requirements
and until such time as financial results covering at least 30 days of combined
operations of Premier and Citizens after the consummation of the Merger have
been published.
Each person who Citizens reasonably believes to be an affiliate of Citizens
has delivered to Premier a written agreement providing that such person
generally will not sell, pledge, transfer, or otherwise dispose of any Premier
Common Stock to be received by such person upon consummation of the Merger,
except in compliance with the Securities Act, the rules and regulations of the
SEC promulgated thereunder and applicable restrictions regarding pooling-of-
interests accounting treatment.
DESCRIPTION OF PREMIER COMMON STOCK
Premier is currently authorized to issue 20,000,000 shares of Premier Common
Stock, of which 7,923,298 shares were issued and outstanding at September 15,
1997. Holders of Premier Common Stock are entitled to receive such dividends
as may be declared by the Board of Directors out of funds legally available
therefor. The ability of Premier to pay dividends is affected by the ability
of its subsidiaries to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At June 30, 1997, under such
requirements and guidelines, Premier's combined subsidiaries had $2,647,000,
respectively, of undivided profits legally available for the payment of
dividends without regulatory approval. See "Certain Regulatory
Considerations--Payment of Dividends."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
General. On the Effective Date, Citizens shareholders will become
shareholders of Premier, and their rights as shareholders will be determined
by Premier's Articles of Incorporation and Bylaws. The following is a summary
of the material differences in the rights of shareholders of Premier and
Citizens. Both Premier and Citizens are Georgia corporations governed by the
Georgia Code. Accordingly, there are no material differences between the
rights of a Premier shareholder and the rights of a Citizens shareholder
solely under the Georgia Code. This summary does not purport to be a complete
discussion of, and is qualified in its entirety by reference to, the Georgia
Code and the Articles of Incorporation and Bylaws of each corporation.
Authorized Capital Stock. Premier is currently authorized to issue
20,000,000 shares of common stock, $1.00 par value, of which 7,923,298 shares
were outstanding as of the Record Date. No other class of common stock is
currently authorized.
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<PAGE>
Premier's Articles of Incorporation provide for the issuance of preferred
stock by the Board of Directors without further shareholder action in one or
more series, with such rights, preferences, privileges and restrictions,
including dividend rates, conversion rights, voting rights, terms of
redemption, redemption prices, amounts payable upon liquidation and the number
of shares constituting any series or the designation of such series, as may be
determined by the Board of Directors. If such stock is issued in the future,
it will rank senior to Premier Common Stock with respect to rights to receive
dividends and to participate in distributions or payments in the event of any
liquidation, dissolution or winding up of the corporation. The issuance of
preferred stock may have the effect of delaying, deferring, discouraging or
preventing a third party from acquiring a majority of the outstanding voting
stock of Premier or other change of control of Premier without further action
by the shareholders and may adversely affect voting and other rights of the
holders of the common stock, including the loss of voting control to others.
Citizens is authorized to issue 10,000,000 shares of Citizens Common Stock,
$10.00 par value, of which 244,200 shares of Citizens Common Stock were issued
and outstanding as of the Record Date. No other class of stock is authorized.
The payment of cash dividends is subject to authorization by the Board of
Directors.
Removal of Directors. Premier's Bylaws provide that any director may be
removed at a meeting with respect to which notice of such purpose is given:
(i) without cause, only upon the affirmative vote of the holders of at least
two-thirds of the issued and outstanding shares of Premier Common Stock; and
(ii) for cause only upon the affirmative vote of the holders of a majority of
the issued and outstanding shares of Premier Common Stock.
Under Citizens' Articles of Incorporation, any director may be removed from
office at any time, but only for cause, as defined therein, by the affirmative
vote of holders of 67% of the then outstanding shares of capital stock of
Citizens entitled to be cast, voting together as a single class, at a meeting
of shareholders called for that purpose, unless the removal has been approved
by a resolution adopted by at least 67% of the directors then in office, in
which event the removal shall be approved by vote of the holders of a majority
of the voting power of the then outstanding shares of capital stock of
Citizens entitled to be cast, voting together as a single class, at a meeting
of the shareholders called for that purpose.
Vote Required for Shareholder Approval. Premier's Bylaws provide that, if a
quorum is present, the affirmative vote of a majority of the shares of Premier
Common Stock represented at the meeting and entitled to vote on the subject
matter will represent the act of the shareholders, except as otherwise
provided by law or Premier's Articles of Incorporation or Bylaws.
Citizens' Bylaws provide that when a quorum is present at any meeting, the
affirmative vote of the holders of a majority of the shares of stock of
Citizens entitled to vote and present in person or represented by proxy,
voting together as a single class, shall decide any questions brought before
such meeting, except as otherwise required by statute or the Articles of
Incorporation.
Actions by Shareholders Without a Meeting. Premier's Bylaws provide that
action required or permitted to be taken at a shareholders' meeting may be
taken without a meeting by consent in writing setting forth the action to be
taken and signed by those persons who would be entitled to vote at a meeting
those shares having the voting power to cast not less than the minimum number
(or numbers, in the case of voting by class) of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote were present and voted.
Citizens' Articles of Incorporation provide that shareholders shall not be
entitled to take any action by written consent in lieu of taking such action
at an annual or special meeting of shareholders.
Special Meeting of Shareholders. Premier's Bylaws provide that special
meetings of the shareholders may be called at any time by the Board of
Directors or President of Premier or upon the written request of any one or
more shareholders owning an aggregate of not less than 25% of the outstanding
capital stock. Notice must be
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given in writing not less than 10 or more than 50 days before the date of the
meeting and must state the purpose for which the meeting is called.
Citizens' Bylaws provide that special meetings of shareholders may be called
at any time by the Chairman of the Board, the President, a majority of the
directors then in office, or by the written request of the holders of at least
51% of the issued and outstanding shares of capital stock entitled to vote.
Written notice of the meeting must be given not less than 10 nor more than 60
days before the date of the meeting and must state the purpose for which the
meeting is called.
Number of Directors. Premier's Bylaws state that the Board of Directors
shall consist of not less than four not more than 18 directors. The number of
directors may be fixed or changed from time to time within this range by the
shareholders or the Board of Directors. The Premier Board of Directors is
presently fixed at 15 members. There is currently one vacancy on the board of
directors.
Citizens' Articles of Incorporation state that the Board of Directors shall
consist of not less than five nor more than 25 directors. The number of
directors shall be determined from time to time by resolution of the Board of
Directors. The Board of Directors is divided into three classes according to
provisions contained in Citizens' Articles of Incorporation. The Citizens'
Board of Directors presently consists of seven members.
Certain Business Transactions. The Articles of Incorporation of Citizens
provide that the affirmative vote of holders of at least 67% of the
outstanding shares of capital stock entitled to be cast at a meeting called to
vote on any transaction submitted to the shareholders, voting together as a
single class, shall be required for the approval or authorization of (i) any
merger or consolidation of Citizens or any of its subsidiaries with or into
any other corporation, partnership, person or other entity; or (ii) any sale,
lease, exchange, transfer or disposition of all or substantially all of the
assets of Citizens or any of its subsidiaries to or with any other
corporation, partnership, person or other entity; or (iii) adoption of any
plan or proposal for the liquidation or dissolution of Citizens; provided,
however, that such 67% voting requirement shall not be applicable if the Board
of Directors shall have approved any such action or transaction described in
clauses (i), (ii) or (iii) by resolution adopted by at least 67% of the
directors then in office, in which case, the affirmative vote of holders of a
majority of the outstanding shares of capital stock entitled to be cast,
voting together as a single class, shall be required to approve such action or
transaction.
The Articles of Incorporation of Premier do not contain a similar provision
regarding approval by the shareholders of certain business transactions. Such
transactions, therefore, are governed by the provisions of the Georgia Code.
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COMPARATIVE MARKET PRICES AND DIVIDENDS
PREMIER MARKET PRICES
The Premier Common Stock has been listed on the American Stock Exchange
under the symbol "PMB" since January 10, 1997. Prior to that date and since
January 25, 1995, the Premier Common Stock was on the NASDAQ Small Cap Market
under the symbol "FABC." The following table sets forth, for the indicated
periods, the high and low closing sales prices for Premier Common Stock as
reported by the American Stock Exchange and on the NASDAQ Small Cap Market
respectively.
<TABLE>
<CAPTION>
CALENDAR PERIOD SALES PRICE
- --------------- -------------
HIGH LOW
------ ------
<S> <C> <C>
First Quarter.................................................... $ 7.66 6.86
Second Quarter................................................... 8.31 6.98
Third Quarter.................................................... 8.72 7.75
Fourth Quarter................................................... 9.28 8.72
<CAPTION>
1996
<S> <C> <C>
First Quarter.................................................... $ 9.83 $ 8.86
Second Quarter................................................... 10.80 9.28
Third Quarter.................................................... 11.63 10.39
Fourth Quarter................................................... 11.77 10.39
<CAPTION>
1997
<S> <C> <C>
First Quarter.................................................... $14.19 $11.77
Second Quarter................................................... 17.50 13.88
Third Quarter (through September 23, 1997)....................... 20.13 15.13
</TABLE>
CITIZENS MARKET PRICES
Citizens Common Stock is not listed for quotation on NASDAQ or any other
stock exchange. The price of the Citizens Common Stock in the last known
transaction, which occurred on March 25, 1997, was $27.00 per share. The price
of Citizens Common Stock in the last known transaction prior to June 24, 1997
(the date the Merger was publicly announced) was $27.00 per share and occurred
on March 25, 1997. Based on transactions of which Citizens management is
aware, sales of Citizens Common Stock from January 1, 1995 to January 1, 1996
were in a price range of $20.00 to $24.00 per share. Sales of Citizens Common
Stock from January 1, 1996 to January 1, 1997 were in a price range of $23.00
to $35.00 per share. From January 1, 1997 until September 15, 1997, the only
known sale of Citizens Common Stock was for a price of $27.00 per share. No
assurance can be given that the stated price range represents the actual
market value of Citizens Common Stock.
RECENT PRICES
On , 1997, the last day on which Premier Common Stock was traded
prior to the mailing of this Joint Proxy Statement/Prospectus, the last
reported sales price of Premier Common Stock as reported on the American Stock
Exchange was $ per share. At the close of trading on June 23, 1997, the
date of the last sale reported by the American Stock Exchange prior to June
24, 1997 (the date the proposed Merger was publicly announced), the last
reported sales price of Premier Common Stock was $16.00 per share. The last
known sales price of Citizens Common Stock was $27.00 per share.
DIVIDENDS
The holders of Premier Common Stock are entitled to receive cash dividends
when and if declared by the Board of Directors out of funds legally available
therefor. Premier paid a $.31 per share cash dividend on January 27, 1997 to
its shareholders. The decision to declare this dividend was based on Premier's
performance in 1996. Premier paid a $.08 dividend in May, 1997, based on
Premier's performance in the first quarter of 1997 and paid a $.09 dividend in
August, 1997 based on Premier's performance in the second quarter of 1997. The
future
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<PAGE>
declaration and payment of dividends will depend upon the earnings of its
subsidiaries, business conditions, operating results, capital and reserve
requirements, and the Board of Directors' consideration of other relevant
factors.
The payment of cash dividends to the holders of Citizens Common Stock is
subject to authorization by the Board of Directors of Citizens. During fiscal
1996, Citizens paid four quarterly cash dividends totaling $.72 per share.
During the first six months of fiscal 1997, Citizens paid two cash dividends
each of $.20 per share. The primary source of funds available to Citizens is
the receipt of dividends from the Citizens Bank.
Premier and Citizens are legal entities separate and distinct from their
respective subsidiaries and their revenues depend in significant part on the
payment of dividends from their subsidiaries, which subsidiaries are subject
to certain legal restrictions on the amount of dividends they are permitted to
pay. See "Certain Regulatory Considerations--Payment of Dividends."
SHAREHOLDERS OF RECORD
As of the Record Date, there were approximately 1,450 holders of record of
Premier Common Stock, and 383 holders of record of Citizens Common Stock.
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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
Good will 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 Form 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> <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
deposit accounts...... 898 366 1,264
Gain on sale of
subsidiary............ 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 3,749 830 0 4,579
expenses.............. ---------- -------- ----- -----------
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 $ $ 24,982
Interest expense................ 9 ,766 2,280 -- 12,046
--------- ------- ----- ----------
Net interest income............. 1,382,708 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 $ -- $ 43,493
========= ======= ===== ==========
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 17,613 4,102 -- 21,715
provision 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
benefits.................... 11,734 1,956 13,690
Occupancy and equipment
expense..................... 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
interest in net income of 4,561 1,005 -- 5,566
subsidiary................... ---------- -------- ----- ----------
Minority interest in net 13 -- 13
income 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 14,410 3,655 -- 18,065
provision for loan losses ...... ---------- ------- ----- ----------
Other income:
Service charges on deposit
accounts....................... 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 8 -- 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 .............. 964 594 -- 1,558
---------- ------- ----- ----------
Income before minority interest 1,909 1,005 -- 2,914
in net income of subsidiary..... ---------- ------- ----- ----------
Minority interest in net income -- 0
of subsidiary .................. ---------- ------- ----- ----------
Net income....................... $ 1,909 $ 1,005 $ -- $ 2,914
========== ======= ===== ==========
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 shares 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
<PAGE>
BUSINESS OF PREMIER
GENERAL
Premier is a bank and thrift holding company organized and existing under
the laws of the State of Georgia and headquartered in Atlanta, Georgia.
Premier has four subsidiaries: Premier Bank ("Premier Bank"), Premier Lending
Corporation ("Premier Lending"), The Central and Southern Bank of Georgia
("Central and Southern Bank") and The Central and Southern Bank of North
Georgia F.S.B. ("Central and Southern Bank of North Georgia") that offer a
broad range of banking and bank-related services. Premier was incorporated in
1988 under the laws of the State of Georgia. As of June 30, 1997, Premier had
total consolidated assets of approximately $587 million, total consolidated
deposits of approximately $472 million and total consolidated shareholders'
equity of approximately $50 million.
On June 23, 1997, Premier merged with the Central and Southern Holding
Company ("Central and Southern"). Premier issued 3,663,834 shares of its
common stock in exchange for all the issued and outstanding shares of Central
and Southern. Premier's principal executive offices are located at 2180
Atlanta Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326, and its
telephone number at such address is (404) 814-3090.
RECENT DEVELOPMENTS
On July 31, 1997, Premier Bank purchased and assumed substantially all of
the assets and liabilities, respectively, of Premier Bank, FSB (except for
Premier Bank, FSB's savings bank charter and approximately $5 million of
assets and $5 million of deposit liabilities). Immediately following
consummation of the purchase and assumption transaction, all of the
outstanding common stock of Premier Bank, FSB, then owned by Premier, was sold
to Net.B@nk, Inc. By virtue of its sale of the Premier Bank, FSB, stock to
Net.B@nk, Premier received 41,406 shares of Net.B@nk's common stock and a cash
payment of $225,000 for the purpose of reimbursing expenses incurred by
Premier in connection with the sale of the Premier Bank, FSB stock. The sale
of Premier Bank, FSB's savings bank charter will not have a material adverse
impact upon Premier's future financial position, operating results or
liquidity. Management believes that the sale of the charter could enhance
Premier's future profitability due to the reduction of duplicative operating
expenses.
In addition to the sale of the Premier Bank, FSB, savings bank charter,
Premier is in the process of reorganizing certain of its banking subsidiaries,
the result of which will be the current main office of Central and Southern
Bank of North Georgia located in Greensboro, Georgia becoming a branch of
Central and Southern Bank. Central and Southern Bank and Central and Southern
Bank of North Georgia have entered into a Purchase and Assumption Agreement
dated August 11, 1997, whereby Central and Southern Bank will purchase and
assume all of the assets and liabilities, respectively, of the Greensboro
branch of Central and Southern Bank of North Georgia. Immediately following
consummation of the purchase and assumption transaction, Central and Southern
Bank of North Georgia will merge with and into Premier Bank pursuant to an
Agreement and Plan of Merger by and between Premier, Premier Bank and Central
and Southern Bank of North Georgia dated August 11, 1997. Premier Bank will be
the resulting institution following the merger. Immediately following
consummation of the merger, Central and Southern Bank of North Georgia's
federal stock association charter shall be deemed to be canceled and will be
surrendered to the OTS.
Premier, Premier Lending and Traditional Mortgage Corporation, a corporation
organized and existing under the laws of the State of Georgia ("Traditional"),
have entered into an Agreement and Plan of Merger whereby all of the issued
and outstanding shares of Traditional will be converted into and exchanged for
the right to receive shares of Premier Common Stock. As part of the proposed
merger transaction, Premier will merge Traditional with and into Premier
Lending, with Premier Lending being the surviving corporation following the
merger. The purchase price for the stock of Traditional will consist of two
components: (i) the adjusted net worth of Traditional as of July 31, 1997 (the
"Net Worth Component"); and (ii) a payment equal to one percent (1%) of the
value of all loans closing in August, 1997 and September, 1997 (the "Pipeline
Component"). The Net Worth Component will be paid at closing through the
delivery of the number of shares
43
<PAGE>
of Premier Common Stock determined by dividing the net worth of Traditional as
of July 31, 1997 by the closing sales price of Premier on the day immediately
prior to closing as reported by the American Stock Exchange, which shares will
be delivered to the shareholders of Traditional on a pro rata basis. Also at
closing, options to acquire 40,000 shares of Premier Common Stock will
delivered to the designees of Traditional at an exercise price equal to the
closing sales price of Premier on the day immediately prior to closing as
reported by the American Stock Exchange. The Pipeline Component will be paid
fifteen (15) days after the close of the October books of Traditional through
the delivery of the number of shares of Premier Common Stock determined by
dividing the Pipeline Component by the closing sales price of Premier on the
day immediately prior to the payment of the Pipeline Component as reported by
the American Stock Exchange, which shares will be delivered to the
shareholders of Traditional on a pro rata basis. A portion of the stock
exchanged for the Net Worth Component equal to approximately $500,000 will be
escrowed by Premier and the Traditional shareholders for a period of one (1)
year as security for certain indemnity obligations of the Traditional
shareholders. Premier will file a registration statement with respect to all
common stock so delivered by no later than March 31, 1998.
In order to increase its Tier 1 capital and thereby increase its lending
capabilities, Premier intends to offer approximately $25,000,000 in
subordinated debentures to Premier Capital Trust in connection with a public
offering of Premier Capital Trust of its preferred securities. Premier Capital
Trust is a recently formed Delaware statutory business trust. Preferred
Capital Trust plans to issue approximately $25,000,000 in preferred securities
in an underwritten public offering in the fourth quarter of 1997 (the
"Offering"). Premier will acquire all of the common securities of Premier
Capital Trust which will represent an aggregate liquidation amount equal to at
least 3% of the total capital of Premier Capital Trust. Premier Capital Trust
will invest the gross proceeds of the offering in subordinated debentures
issued by Premier. Premier intends to add the proceeds from the sale of the
subordinated debentures to its general funds to be used for general corporate
purposes, including the repayment of certain short-term borrowings. For
financial reporting purposes, Premier Capital Trust will be treated as a
subsidiary of Premier and, accordingly, the accounts of Premier Capital Trust
will be included in the consolidated financial statements of Premier.
PREMIER BANK, CENTRAL AND SOUTHERN BANK AND CENTRAL AND SOUTHERN BANK OF NORTH
GEORGIA
General. Premier Bank and Central and Southern Bank are both organized under
the laws of the State of Georgia and operate a full-service commercial banking
business based in Cobb, DeKalb, Fulton and Gwinnett Counties, for Premier
Bank, and Baldwin County for Central and Southern Bank. Central and Southern
Bank of North Georgia is organized under the laws of the United States and
operates a full service savings association business based in Greene, Barrow
and Hall Counties. All three banking subsidiaries provide all customary
banking services such as checking and savings accounts, various types of time
deposits, money transfers, safe deposit facilities, credit and debit cards,
and individual retirement accounts. Premier Bank and Central and Southern Bank
also finance short- and medium-term commercial transactions, make secured and
unsecured loans, perform commercial cash management services and provide other
ancillary financial services to their customers. In addition, Premier Bank and
Central and Southern Bank provide a traditional first mortgage product to
their customers providing financing for single-family homes on a permanent
basis. Central and Southern Bank of North Georgia makes both secured and
unsecured loans to individuals, firms and corporations. Secured loans by
Central and Southern Bank of North Georgia include first and second priority
real estate mortgage loans. Central and Southern Bank of North Georgia also
makes direct installment loans to consumers on both a secured and unsecured
basis.
Offices. Premier Bank's offices are located in Atlanta, Georgia at 950 East
Paces Ferry Road; in Marietta, Georgia at 63 Barrett Parkway, 2760 Cobb
Parkway, 4210 Wade Green Road, 833 South Cobb Drive and 1269 Barclay Circle;
in Acworth, Georgia at 4900 Ross Road; in Dunwoody, Georgia at 2390 Mt. Vernon
Road, Suite 100; and in Lawrenceville, Georgia at 875 Oak Road, Suite 101.
Central and Southern Bank's offices are located in Milledgeville, Georgia at
150 West Greene Street, 2345 North Columbia Street and 2955 North Columbia
Street. Central and Southern Bank of North Georgia's offices are located in
Greensboro, Georgia at 201 South Main Street; in Gainesville, Georgia at 311
Green Street; and in Winder, Georgia at 18 West May Street.
44
<PAGE>
PREMIER LENDING CORPORATION
General. Premier Lending, a corporation organized and existing under the
laws of the State of Georgia, is primarily a mortgage banker and acts as an
intermediary between purchasers of residential real estate or homeowners
refinancing their residences and correspondent or institutional investors
seeking to purchase mortgage loan investments. Premier Lending is a retail
originator of residential mortgage loans, which loans are then sold to
correspondent mortgage investors.
Premier Lending is an approved Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") seller-servicer
of mortgage loans. Premier Lending is also an approved Department of Housing
and Urban Development ("HUD") and Veterans Administration ("VA") mortgage
originator. The approval process under these federal programs requires, among
other matters, evidence of industry experience, character references and
credit reports of principals, financial statements, corporate net worth or
bonding capacity, and a business plan.
Offices. Premier Lending's administrative offices are located at 2759 Delk
Road, Suite 201, Marietta, Georgia 30067. Premier Lending leases its
administrative and loan production offices and does not own any real estate.
The following is a summary of the offices leased by Premier Lending:
<TABLE>
<CAPTION>
LOCATION PRIMARY USE LEASE EXPIRATION DATE
-------- ------------------- ---------------------
<S> <C> <C>
17 Executive Park Drive Loan production May 2001
Suite 290 --DeKalb County
Atlanta, Georgia 30329
1987 Scenic Highway Loan production May 2001
Suite 207 --Gwinnett County
Snellville, Georgia 30278
205 Market Place Loan production September 1999
Suite 102 --Fulton County
Roswell, Georgia 30075
1235 Eagle's Landing Pkwy. Loan production May 1998
Suite A --Henry County
Stockbridge, Georgia 30136
3075 Breckenridge Blvd. Loan production January 1999
Suite 425 --Gwinnett County
Duluth, Georgia 30136
2759 Delk Road Mortgage Division December 1999
Suite 201 and Loan production
Marietta, Georgia 30067 --Cobb County
</TABLE>
EMPLOYEES
As of September 1, 1997, Premier Bank had 126 full-time equivalent
employees; Central and Southern Bank had 71 full-time equivalent employees,
Premier Lending had 120 full-time equivalent employees and Central and
Southern Bank of North Georgia had 33 full-time equivalent employees. Neither
Premier nor any of its subsidiaries is a party to any collective bargaining
agreement. In the opinion of management, Premier and its subsidiaries enjoy
good relations with their respective employees. Premier does not have any
employees who are not also employees of its subsidiaries.
45
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF PREMIER
The following selected financial data is derived from the consolidated
financial statements of Premier. The financial highlights have been restated
to reflect the business combinations of First Alliance Bancorp, Inc. and
Premier Bancshares, Inc. which was consummated on August 31, 1996 and Premier
and Central and Southern Holding Company which was consummated on June 23,
1997. The financial statements for the years ended December 31, 1992 through
1996 and the six months ended June 30, 1997, and the operating data for the
years ended December 31, 1992 through 1996 and the six months ended June 30,
1997 are derived from financial statements which reflect, in the opinion of
Premier's management, all normal recurring adjustments necessary to present
fairly such information for such periods. Net income per share has been
adjusted for the business combinations and Premier's 1.8055-for-one stock
split on March 6, 1997. The following data should be read in conjunction with
Premier's consolidated financial statements and the related notes contained
elsewhere in this Joint Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS YEARS ENDED DECEMBER 31,
ENDED -----------------------------------------------
JUNE 30, 1997 1996 1995 1994 1993 1992
------------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET:
Total assets............ $587,424 $519,944 $445,374 $355,523 $385,483 $413,484
Loans held for sale..... 40,333 24,408 25,912 26,047 4,446 --
Loans, net.............. 371,369 306,721 240,953 184,514 201,909 250,173
Securities available for
sale................... 99,706 99,732 110,311 103,768 122,937 118,382
Federal funds sold...... 20,138 42,896 19,217 34,179 23,065 11,327
Interest-bearing depos-
its.................... 8,870 2,697 12,348 -- 803 794
Deposits................ 472,356 431,898 358,927 294,848 341,850 376,482
Borrowings.............. 59,088 35,242 34,462 21,144 4,399 300
Shareholders' equity.... 50,355 47,180 46,090 37,038 37,234 31,981
OPERATING DATA:
Interest income......... 23,045 40,252 33,575 27,723 31,234 39,345
Interest expense........ 11,379 20,238 16,662 13,028 15,204 21,694
Net interest income..... 11,666 20,014 16,913 14,695 16,030 17,651
Provision for losses on
loans.................. (130) (418) (700) 285 3,732 12,283
Net interest income
after provision for
losses on loans........ 11,796 20,432 17,613 14,410 12,298 5,368
Other income............ 8,520 13,118 9,087 4,622 4,025 3,683
Other expenses.......... 14,649 26,346 20,379 16,159 16,607 13,073
Income tax expense (ben-
efit).................. 1,571 1,698 1,761 965 (482) (1,193)
Net income (loss)....... 4,088 5,494 4,548 1,908 198 (2,829)
Net income per share.... .51 .68 .57 .25 .03 (0.47)
Cash dividends declared
per share.............. .11 .41 .09 .07 -- 0.04
</TABLE>
46
<PAGE>
MANAGEMENT OF PREMIER
The members of the Board of Directors of Premier Bank, Premier Lending,
Central and Southern Bank and North Georgia are elected annually by Premier,
acting as the sole shareholder of each subsidiary.
The table below sets forth for each executive officer of Premier (i) the
person's name, (ii) his age at September 1, 1997, (iii) the year he was first
elected as an officer of Premier, and (iv) his positions with Premier.
<TABLE>
<CAPTION>
YEAR
FIRST
NAME AGE ELECTED POSITION WITH PREMIER
- ---- --- ------- ---------------------
<S> <C> <C> <C>
Michael W. Lane 47 1996 Executive Vice President
Robert C. Oliver 49 1997 President, Director and Chief Operating Officer
George S. Phelps 45 1996 Executive Vice President
Darrell D. Pittard 49 1993 Chairman of the Board and Chief Executive Officer of Premier
Michael E. Ricketson 47 1997 Executive Vice President and Chief Financial Officer
Frank H. Roach 45 1992 Executive Vice President and Treasurer of Premier
</TABLE>
Biographies of Directors and Executive Officers of Premier
N. Michael Anderson has served on the Board of Premier since 1993. Mr.
Anderson has served as President of Michael Anderson, Inc., a secondary
marketing whole loan brokerage company since 1985.
George S. Carpenter, Jr. has been a Director of Premier since Premier's
merger with Central and Southern on June 23, 1997. Prior to Premier's merger
with Central and Southern, Mr. Carpenter served as a Director of Central and
Southern since 1980. Mr. Carpenter is an attorney.
Donald N. Ellis has been a director of Premier since Premier's merger with
Central and Southern on June 23, 1997. Prior to Premier's merger with Central
and Southern, Mr. Ellis served as a director of Central and Southern since
1993. From 1970 until his retirement in 1996, Mr. Ellis was a plant manager
for Universal Rundle Corporation.
William M. Evans, Jr. has been a member of the Board of Directors of Premier
since 1993. Mr. Evans has served as President of William Evans and Associates,
Inc., a real estate developer since 1978.
John H. Ferguson has been a Director of Premier since Premier's merger with
Central and Southern on June 23, 1997. Prior to Premier's merger with Central
and Southern, Dr. Ferguson served as a director of Central and Southern since
1980. Dr. Ferguson is an orthodontist.
James E. Freeman has served on the Board of Directors of Premier since 1988.
Mr. Freeman has been President of Kenworth of Atlanta, a truck dealership
since 1992.
Albert F. Gandy has been a Director of Premier since Premier's merger with
Central and Southern on June 23, 1997. Prior to Premier's merger with Central
and Southern, Mr. Gandy served as Chairman of the Board of Central and
Southern since January 1993 and a Director of the Company since 1980. From
1984 until his retirement in September 1993, Mr. Gandy served as General
Manager of the Meadows Division of William Barnet & Son, Inc., a manufacturer
of carpet yarns, and from 1993 through 1995, he was a consultant to William
Barnet & Son, Inc.
Robin R. Howell has been a member of the Board of Directors of Premier since
1992. Ms. Howell has served as Vice President of Delta Life Insurance Company
since 1993.
Michael W. Lane has served as Executive Vice President of Premier since June
1996 and Executive Vice President of Premier Lending since February 1994. From
1993 to February 1994, Mr. Lane served as Manager, Vice President--Financing
Health Care Claims of Millennium Healthcare Funding, Inc. From 1992 to March
1993, he was employed by Prime Bank, FSB as Manager, Vice President,
Commercial Banking Group--Commercial Lending, Asset-Based Lending and Private
Banking. Mr. Lane was employed from May 1983 to March 1992 by First American
Bank as Manager, Group Vice President of Asset-Based Lending and Account
Officer, and Vice President of Asset-Based Lending.
47
<PAGE>
Billy H. Martin has served on the Board of Directors of Premier since 1993.
From August through December 1996, Mr. Martin did not serve on the Board of
Directors. Since 1987, Mr. Martin has been engaged in the real estate
investment and development business both individually and through limited
partnerships.
C. Steve McQuaig has been a Director of Premier since Premier's merger with
Central and Southern on June 23, 1997. Prior to the merger, Mr. McQuaig served
as Director of Central and Southern since 1984. Dr. McQuaig is a physician and
President of Milledgeville Ophthalmology Associates, P.C.
Robert C. Oliver has served as President and Chief Operating Officer of
Premier since Premier's merger with Central and Southern on June 23, 1997.
Prior to Premier's merger with Central and Southern, Mr. Oliver was President,
Chief Executive Officer and a Director of Central and Southern since January
1993. From October 1992 to January 1993, Mr. Oliver served as President of the
Central and Southern Bank of Georgia. Prior to September 1992, Mr. Oliver was
Senior Vice President and Regional Executive of Wachovia Bank of Georgia.
Thomas E. Owen, Jr. has been a Director of Premier since Premier's merger
with Central and Southern on June 23, 1997. Prior to Premier's merger with
Central and Southern, Mr. Owen served as a Director of Central and Southern
since 1986. Mr. Owen is President and Chief Operating Officer of Protective
Laundry and Cleaners, Inc.
George S. Phelps has served as President of Premier Lending since April 1995
when Premier Bancshares, Inc. acquired Allatoona Federal Savings Bank and as
Executive Vice President of Premier since June 1997. Mr. Phelps was Senior
Vice President at Allatoona Federal Savings Bank and was responsible for
mortgage lending from 1991 to April 1995.
Darrell D. Pittard serves as the Chairman and Chief Executive Officer of
Premier. Mr. Pittard co-founded Premier Bancshares, Inc. in March of 1993
before Premier Bancshares, Inc. was merged with and into First Alliance
Bancorp., Inc. (Premier's predecessor) in August 1996. In August 1996, Mr.
Pittard was elected Chairman of the Board and Chief Executive Officer of
Premier. From August 1988 to February 1993, Mr. Pittard was employed by Prime
Bank, and its holding company, Prime Bancshares, Inc., as President and Chief
Executive Officer (March 1990 to February 1993) and as Chief Operating Officer
(August 1988 to March 1990). Prime Bancshares, Inc. was acquired in February
1993 by SouthTrust Corporation, Birmingham, Alabama.
Michael E. Ricketson has served as Executive Vice President and Chief
Financial Officer of Premier since Premier's merger with Central and Southern
on June 23, 1997. Prior to Premier's merger with Central and Southern, Mr.
Ricketson was Executive Vice President and a Director of Central and Southern
since 1996 and Chief Financial Officer of Central and Southern Bank since
October 1993. Mr. Ricketson served as First Vice President and Financial
Officer of First National Bancorp from 1990 through April 1993. Prior to 1990,
he was controller of the First National Bank of Gainesville.
Frank H. Roach currently serves as Executive Vice President and Treasurer of
Premier and has served as an officer of Premier and First Alliance Bank since
1992. From 1974 until 1992, Mr. Roach served in various capacities including
Group Vice President and Controller of First American Bank, Atlanta, Georgia.
48
<PAGE>
SECURITY OWNERSHIP OF PREMIER
The following table sets forth certain information regarding the Premier
Common Stock owned, as of the Record Date and on a pro forma basis giving
effect to the Merger, (i) by each person who beneficially owned more than 5%
of the shares of Premier Common Stock outstanding, (ii) by each Premier
director, (iii) by the Chief Executive Officer of Premier and (iv) by all
Premier directors and executive officers as a group.
<TABLE>
<CAPTION>
PERCENT OF
COMMON STOCK PERCENT OF
NUMBER OF PRIOR TO COMMON STOCK
NAME OF BENEFICIAL OWNER SHARES(1) MERGER FOLLOWING MERGER
- ------------------------ --------- ------------ ----------------
<S> <C> <C> <C>
N. Michael Anderson (2)................ 83,057 1.0% *
George S. Carpenter, Jr. (3)........... 20,484 * *
James L. Coxwell, Sr................... 96,978 1.2% *
Donald N. Ellis........................ 7,008 * *
William M. Evans, Jr. (4).............. 37,527 * *
John H. Ferguson (5)................... 94,695 1.1% *
James E. Freeman....................... 254,674 3.1% 2.6%
Albert F. Gandy........................ 70,301 * *
Robin R. Howell (6).................... 92,011 1.1% *
Michael W. Lane (7).................... 33,353 * *
Billy H. Martin........................ 41,983 * *
C. Steve McQuaig (8)................... 33,166 * *
Robert C. Oliver (9)................... 78,836 * *
Thomas E. Owen, Jr. (10)............... 26,840 * *
George S. Phelps (11).................. 30,262 * *
Darrell D. Pittard (12)................ 271,512 3.4% 2.7%
Michael E. Ricketson (13).............. 59,250 * *
Frank H. Roach (14).................... 16,326 * *
J. Mack Robinson (15).................. 473,237 5.9% 4.7%
All directors and executive officers as
a group (19 persons).................. 1,350,263 16.75% 13.39%
</TABLE>
- --------
* Represents less than one percent of the shares outstanding.
(1) On a fully-diluted basis, except as otherwise indicated, the persons
named in the table have sole voting and investment power with respect to
all shares shown as beneficially owned by them. The information shown
above is based upon information furnished by the named persons and based
upon "beneficial ownership" concepts set forth in rules promulgated under
the Exchange Act. Under such rules, a person is deemed to be a
"beneficial owner" of a security if that person has or shares "voting
power," which includes the power to vote or to direct the voting of such
security, or "investment power," which includes the power to dispose or
to direct the disposition of such security. A person is also deemed to be
a beneficial owner of any security of which that person has the right to
acquire beneficial ownership within 60 days. More than one person may be
deemed to be a beneficial owner of the same securities.
(2) Includes 7,220 shares subject to currently exercisable options.
(3) Includes 6,062 shares held in a self-directed Individual Retirement
Account ("IRA").
(4) Includes 7,222 shares subject to currently exercisable stock options.
(5) Includes 62,470 shares held in pension and profit sharing plans and 2,872
shares owned by Mr. Ferguson's wife.
(6) Consists of 92,011 shares held in trust for the benefit of Robin Robinson
Howell, as to which beneficial ownership is shared. J. Mack Robinson and
Ms. Howell are father and daughter, and the 92,011 shares beneficially
owned by Ms. Howell are also listed as beneficially owned by Mr.
Robinson.
(7) Includes 19,861 shares subject to currently exercisable stock options.
(8) Includes 9,000 shares owned by companies that Mr. McQuaig controls and
24,166 held by Mr. McQuaig and family members.
49
<PAGE>
(9) Includes 22,106 shares held in an IRA, 1,324 shares held in the
Company's 401(k) Plan and 2,251 shares as custodian for minor children
and 42,400 shares subject to currently exercisable stock options.
(10) Includes 3,160 shares owned by Mr. Owen's wife.
(11) Includes 16,250 shares subject to currently exercisable stock options.
(12) Includes 7,800 shares held in a self-directed Individual Retirement
Account ("IRA") and 45,138 shares subject to currently exercisable stock
options.
(13) Includes 9,132 shares subject to currently exercisable stock options.
(14) Includes 14,444 shares subject to currently exercisable stock options.
(15) Consists of (a) 99,320 shares owned directly by Mr. Robinson; (b) 36,234
shares owned by Mr. Robinson's spouse as to which beneficial ownership
is shared; (c) 151,036 shares owned by Mr. Robinson's spouse for the
benefit of their two daughters, as to which beneficial ownership is
shared; (d) 947 shares owned by one of Mr. Robinson's daughters as to
which beneficial ownership is shared; (e) 159,290 shares owned by Delta
Life Insurance Co. and (f) 26,410 shares owned by Delta Fire & Casualty.
Mr. Robinson is not a director or an executive officer of Premier. Mr.
Robinson and Robin R. Howell are father and daughter, and the 92,011
shares beneficially owned by Ms. Howell are also listed as beneficially
owned by Mr. Robinson.
50
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Premier's directors and executive officers, their immediate family members
and certain companies and other entities associated with them, have been
customers of and have had banking transactions with Premier Bank, Premier
Lending, Central and Southern Bank and Central and Southern Bank of North
Georgia and are expected to continue such relationships in the future. As of
August 31, 1997, the aggregate outstanding balance of all such loans was
$2,802,960, or 5.44% of shareholders' equity. In the opinion of Premier's
management, the extensions of credit made by Premier Bank, Premier Lending,
Central and Southern Bank and Central and Southern Bank of North Georgia to
such individuals, companies and entities since January 1, 1996 (i) were made
in the ordinary course of business, (ii) were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with other persons and (iii) did not involve
more than a normal risk of collectibility or present other unfavorable
features.
51
<PAGE>
BUSINESS OF CITIZENS
Citizens was organized under the laws of Georgia on March 31, 1995, and is a
registered bank holding company. All of Citizens' activities are conducted by
its wholly-owned subsidiary, Citizens Bank, which was organized as a Georgia
banking corporation in 1984.
Citizens Bank is a community-oriented commercial bank that serves Gwinnett,
Hall, Fulton and Forsyth counties, with particular emphasis on retail banking,
and offers such customary banking services as consumer and commercial checking
accounts, NOW accounts, savings accounts, certificates of deposit, lines of
credit and money transfers. Citizens Bank finances commercial and consumer
transactions, makes secured and unsecured loans, and provides a variety of
other banking services.
At June 30, 1997, Citizens had total consolidated assets of approximately
$163 million, total consolidated deposits of approximately $150 million and
total consolidated shareholders' equity of approximately $11 million.
Citizens' principal executive offices are located at 3209 Buford Highway,
Duluth, Georgia 30136, and its telephone number at that address is (770) 476-
3209.
MARKETS
Citizens conducts general banking activities through the Citizens Bank
primarily in Gwinnett County, Georgia and to a lesser extent in Fulton,
Forsyth and Hall counties. Customers of the Citizens Bank are primarily
consumers and small businesses.
DEPOSITS
Citizens Bank offers a full range of depository accounts and services to
both consumers and businesses. At June 30, 1997, Citizens Bank's deposits,
totaling an aggregate of approximately $150 million, consisted of
approximately $29 million in non-interest-bearing demand deposits (19% of
total deposits); approximately $22 million in interest-bearing demand deposits
(15% of total deposits); approximately $31 million in savings deposits (21% of
total deposits); approximately $43 million in time deposits in amounts less
than $100,000 (21% of total deposits); and approximately $25 million in time
deposits of $100,000 or more (16% of total deposits).
LOANS
Citizens Bank makes both secured and unsecured loans to individuals, firms
and corporations, and both consumer and commercial lending operations include
various types of credit for its customers. Secured loans include first and
second real estate mortgage loans. Citizens Bank also makes direct installment
loans to consumers on both a secured and unsecured basis.
LENDING POLICY
The current lending strategy of Citizens Bank is to make loans only to local
customers or to national or international firms doing business locally.
Unsecured loans normally will not be made to persons who do not reside or work
in Citizens Bank's primary trade areas. Secured loans can be made to customers
outside Citizens Bank's trade areas who are well established and have net
worth and collateral to support the loan. Real estate loans usually are made
only when such loans are secured by real property located in Gwinnett County,
and to a lesser extent by real property located in Fulton, Forsyth and Hall
Counties.
Citizens Bank provides each lending officer with written guidelines for
lending activities. Lending authority is delegated by the Board of Directors
of Citizens Bank to loan officers, each of whom is limited in the amount of
secured and unsecured loans which he or she can make to a borrower.
52
<PAGE>
EMPLOYEES
As of September 1, 1997, Citizens Bank had 64 full-time employees and 15
part-time employees. Citizens has no salaried employees. Citizens Bank is not
a party to any collective bargaining agreement, and management of Citizens
Bank believes that the employee relations at Citizens Bank are good.
COMPETITION
The banking business is highly competitive. Citizens Bank competes with
other banks, many of which are substantially larger and have greater financial
resources than Citizens Bank. In particular, Citizens Bank competes with 20
other banks in Gwinnett County. Citizens Bank also competes with other
financial service organizations, including savings and loan associations and
finance companies, insurance companies, credit unions and certain governmental
agencies. To the extent that Citizens Bank must maintain non-interest-earning
reserves against deposits, it may be at a competitive disadvantage when
compared with other financial institutions and the organizations that are not
required to maintain reserves against substantially similar sources of funds.
Further, the deregulation of banks, savings and loan associations and other
financial institutions and the increased competition from investment bankers
and brokers and other financial service organizations has had a significant
impact on the competitive environment in which Citizens Bank operates.
PROPERTIES
The executive offices of Citizens and the main banking office of Citizens
Bank are located in a 24,000 square-foot facility at 3209 Buford Highway,
Duluth, Georgia. Citizens Bank has three other offices located in Suwannee,
Lawrenceville and Buford.
LEGAL PROCEEDINGS
There are no material pending proceedings to which Citizens is a party or of
which any of its properties are subject; nor are there material proceedings
known to Citizens to be contemplated by any governmental authority; nor are
there material proceedings known to Citizens, pending or contemplated, in
which any director, officer or affiliate or any principal security holder of
Citizens, or any associate of any of the foregoing, is a party or has an
interest adverse to Citizens.
53
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CITIZENS
The following selected financial data is derived from the financial
statements of Citizens. The financial data for the years ended December 31,
1996, 1995, 1994, 1993 and 1992 and the six months ended June 30, 1997 is
derived from the consolidated financial statements. The following data should
be read in conjunction with Citizens' consolidated financial statements and
the related notes contained elsewhere in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, -----------------------------------------
1997 1996 1995 1994 1993 1992
---------------- -------- -------- ------- ------- -------
(DOLLARS INTHOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET:
Total assets.......... $162,946 $157,329 $108,210 $74,852 $75,728 $72,657
Loans, net............ 107,782 86,310 63,134 47,837 44,640 44,777
Securities............ 39,759 51,323 36,297 20,008 17,736 13,020
Federal funds sold.... 490 8,501 65 955 4,709 6,114
Interest-bearing de-
posits............... 121,125 119,933 78,941 52,315 55,838 54,634
Deposits.............. 150,367 145,314 97,084 65,756 66,821 64,209
Borrowings............ 163 230 1,004 455 591 727
Stockholders' equity.. 11,315 10,304 9,068 7,883 7,571 6,899
OPERATING DATA:
Interest income....... 6,605 11,019 7,431 5,794 5,451 5,574
Interest expense...... 2,677 5,105 3,211 2,059 2,167 2,583
Net interest income... 3,928 5,914 4,220 3,735 3,284 2,991
Provisions for losses
on loans............. 314 303 118 80 170 385
Net interest income
after
provision for losses
on loans............. 3,614 5,611 4,102 3,655 3,114 2,606
Other income.......... 482 838 562 549 6897 609
Other expenses........ 2,716 4,442 3,232 2,604 2,660 2,617
Income tax expense.... 424 496 427 594 401 186
Net income............ 956 1,511 1,005 1,005 770 412
Net income per share.. $ 3.95 $ 6.24 $ 4.12 $ 4.02 $ 3.08 $ 1.64
Cash dividends de-
clared per
share................ .40 .72 .68 .60 .40 .15
</TABLE>
54
<PAGE>
CITIZENS' MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
Citizens is a one bank holding company for Citizens Bank located in Duluth,
Georgia, a community approximately 30 miles north of downtown Atlanta.
Citizens expanded its presence in its primary service area of Gwinnett
County, Georgia by opening two full service branch banking facilities in 1995
located in Lawrenceville, Georgia and Suwanee, Georgia. A third full service
branch was opened in March 1996 in Buford, Georgia. All three locations are in
Gwinnett County municipalities. The branch additions have contributed
significant loan and deposit growth during 1995 and 1996.
Citizens Bank is community-oriented, with an emphasis on retail banking, and
offers such customary banking services as consumer and commercial checking
accounts, NOW accounts, savings accounts, certificates of deposit, lines of
credit, MasterCard and VISA accounts, and money transfers. In addition,
Citizens Bank finances commercial and consumer transactions, makes secured and
unsecured loans, including residential mortgage loans, and provides a variety
of other banking services.
Citizens Bank's primary service area is Gwinnett County, Georgia and
surrounding counties including portions of Northeast Fulton, South Hall and
South Forsyth. The service area has experienced significant growth for the
past several years and provides opportunity for continued growth. The area's
economic base is well diversified with no major cyclical factors, although
real estate activities account for substantial economic effects.
The following discussion focuses on significant changes in the financial
condition and results of operations of Citizens during the past three years.
The discussion and analysis is intended to supplement and highlight
information contained in the accompanying consolidated financial statements
and the selected financial data presented elsewhere in this report.
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
Financial Condition
Total assets of Citizens at June 30, 1997 were approximately $162.9 million,
representing a 4% increase from December 31, 1996. Deposits increased
approximately $5 million, or 3% from December 31, 1996, while net loans
increased approximately $21.5 million, or 25%. The allowance for loan losses
at June 30, 1997 totaled $1.3 million, representing 1.2% of total loans
compared to the December 31, 1996 total of $1 million, also representing 1.2%
of total loans. Securities available for sale decreased 23% from December 31,
1996. The increases in assets, loans and deposits are primarily due to
Citizens Bank's new branch operations in the Georgia cities of Buford and
Suwanee, which added to its expanded service area.
The total of nonperforming assets, which includes nonaccruing loans,
repossessed collateral and loans for which payments are more than 90 days past
due, decreased from $392,000 at December 31, 1996 to $220,000 at June 30,
1997. There were no related party loans which were considered nonperforming at
June 30, 1997.
Citizens Bank was most recently examined by its primary regulatory authority
in January 1997. There were no recommendations by the regulatory authority
that in management's opinion will have material effects on the company's
liquidity, capital resources or operations.
Results of Operations
Net interest income increased $1.2 million, or 45%, in the first six months
of 1997 compared to the same period for 1996. Interest income for the first
six months of 1997 was $6.6 million, representing an increase of $1.6 million,
or 33%, over the same period in 1996. Interest expense for the first six
months of 1997 increased approximately $395,000, or 17%, compared to the same
period in 1996. This increase in interest income and
55
<PAGE>
interest expense during the first six months of 1997 compared to the same
period in 1996 is primarily attributable to the increase in the volume of both
loans and deposits.
The provision for loan losses for the first six months of 1997 increased
$124,000 compared to the same period for 1996. The increase is primarily
attributable to the significant increase in loans during the first six months
of 1997 compared to the same period in 1996. It is management's belief that
the allowance for loan losses is adequate to absorb probable losses in the
loan portfolio.
Noninterest income increased 30% to approximately $483,000 for the six month
period ended June 30, 1997, as compared to the same period in 1996. This
increase is primarily attributable to the operations at the Bank's new branch
locations.
Noninterest expenses for the first six months of 1997 increased
approximately $526,000, or 24%, compared to the first six months of 1996. The
net increase is primarily attributable to employee additions required to
maintain growth and staff the new branch facilities.
Capital Resources
Citizens and Citizens Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. Failure to meet
minimum capital requirements can initiate certain mandatory, and possibly
additional discretionary, actions by regulators that, if undertaken, could
have a direct material effect on the financial statements. Under capital
adequacy guidelines, Citizens and Citizens Bank must meet specific capital
guidelines that involve quantitative measures of assets, liabilities, and
certain off-balance-sheet items as calculated under regulatory accounting
practices. Citizens Bank's 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 Citizens Bank to maintain minimum amounts and ratios of total and Tier
1 capital (as defined) to risk-weighted assets and of Tier 1 capital (as
defined) to average assets. As of June 30, 1997, Citizens Bank met all capital
adequacy requirements to which it is subject.
The following tables present Citizens' consolidated regulatory capital
position at June 30, 1997:
<TABLE>
<CAPTION>
RISK-BASED CAPITAL RATIOS
-------------------------
<S> <C>
Tier 1 Capital..................................................... 9.05%
Tier 1 Capital minimum requirement................................. 4.00%
-----
Excess............................................................. 5.05%
=====
Total Capital...................................................... 10.12%
Total Capital minimum requirement.................................. 8.00%
-----
Excess............................................................. 2.12%
=====
</TABLE>
<TABLE>
<CAPTION>
LEVERAGE RATIO
--------------
<S> <C>
Tier 1 Capital to adjusted total assets............................ 7.11%
Minimum leverage requirement....................................... 3.00%
-----
Excess............................................................. 4.11%
=====
</TABLE>
FISCAL YEARS 1994, 1995, 1996
Financial Highlights
Net earnings grew 50% during 1996 as compared to 1995 totaling just over
$1.5 million. Net earnings for 1995 were consistent with 1994 earnings of $1
million. The related increases in net earnings per common share
56
<PAGE>
for 1996 and 1995 were 51% and 2%, respectively. Pretax earnings for 1996
increased by approximately $575,000 or 40% due to an increase in Citizens
Bank's net interest income resulting from a 53% increase in earning assets.
The returns on average assets and on average stockholders' equity were 1.11%
and 15.60%, respectively, in 1996 compared to 1.13% and 11.94%, respectively,
in 1995. The return on average assets remained steady even in light of the
significant growth (50%) in average assets during 1996.
Total assets at December 31, 1996 were $157 million compared to $108 million
at the end of 1995, an increase of approximately 45%. Total loans were
approximately $87 million at December 31, 1996, an increase of over 35% from
the 1995 balance, and total deposits at December 31, 1996, were $145 million
as compared to $97 million in 1995, an increase of 49%. Citizens Bank
continues to fund the majority of its assets with deposits acquired in its
local marketplace. Core deposits, which exclude certificates of deposit of
$100,000 or more, increased by 57% during the past twelve months.
Net Interest Income
Net interest income (the difference between interest earned on assets and
interest paid on deposits and liabilities) is the largest component and most
important source of Citizens' earnings. Citizens actively manages this income
source to provide the largest possible amount of income while balancing
interest rate, credit and liquidity risks. Net interest income for 1996
increased by 40% from 1995 and by 13% in 1995 compared to 1994. The increased
volume of earning assets was the primary reason for the increase in 1996.
Interest income increased 48% in 1996 and 28% in 1995. The increase in 1996
and 1995 was primarily a result of an increase in interest and fees on loans
of approximately $2.4 million or 43%, and an increase in interest on
investment securities of approximately $1.0 million or 65%.
Average earning assets in 1996 increased 53% when compared to 1995 due to
increases in average loans of over $22.8 million and average investment
securities of $15.8 million. Increases in average earning assets of 17% were
also experienced between 1995 and 1994 due to increases in average loans of
$4.9 million and a $5.8 million increase in average investment securities. The
average earning asset mix continued to change during 1996 with loans at 59%,
investment securities at 33% and other earning assets at 8% of the total. In
1995, loans accounted for 63%, investment securities 31% and other earning
assets 6%. The mix of earning assets is monitored on a continuing basis in
order to react to favorable interest rate movements and to maximize the return
on earning assets.
57
<PAGE>
CONSOLIDATED AVERAGE BALANCES, INTEREST AND RATES
TAXABLE EQUIVALENT BASIS (DOLLARS IN THOUSANDS)
The following table presents net interest income, yields and rates on a
taxable-equivalent basis and average balances for 1996, 1995 and 1994.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1996 1995 1994
------------------------- ------------------------ ------------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------ ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Interest earning assets:
Federal funds sold..... $ 9,934 528 5.32% $ 4,974 317 6.37% $ 2,483 100 4.03%
Interest bearing
deposits.............. 223 11 4.93% 245 12 4.90% 1,487 59 3.97%
Investment Securities:
Taxable.............. 29,276 1,912 6.53% 20,092 1,272 6.33% 17,980 961 5.34%
Tax-exempt........... 11,676 976 8.36% 5,093 421 8.27% 1,405 118 8.40%
Total investment
securities.......... 40,952 2,888 7.05% 25,185 1,693 6.72% 19,385 1,079 5.57%
Loans (including loan
fees)............... 74,838 7,924 10.59% 52,024 5,552 10.67% 47,072 4,596 9.76%
Total interest
earning assets...... 125,947 11,351 9.01% 82,428 7,574 9.19% 70,427 5,834 8.28%
Allowance for loan
losses.............. (920) (825) (769)
Cash and due from
banks............... 4,813 3,039 2,354
Premises and
equipment........... 4,293 3,243 2,795
Other assets......... 1,871 1,121 952
Total Assets......... $136,004 $89,006 $75,759
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest bearing
liabilities:
Deposits:
Demand............... $ 16,964 467 2.75% $12,810 382 2.98% $11,993 301 2.51%
Savings.............. 30,345 1,339 4.41% 15,891 667 4.20% 16,134 453 2.81%
Time................. 56,154 3,279 5.84% 35,408 2,120 5.99% 26,311 1,274 4.84%
Other borrowings..... 252 20 7.94% 465 42 9.03% 522 31 5.94%
-------- ------ ------- ----- ------- -----
Total interest bearing
liabilities............ 103,715 5,105 4.92% 64,574 3,211 4.97% 54,960 2,059 3.75%
Noninterest bearing
demand deposits........ 22,016 15,256 12,252
Other liabilities....... 587 762 849
Stockholders' equity.... 9,686 8,414 7,698
-------- ------- -------
Total liabilities and $136,004 $89,006 $75,759
stockholders' equity... ======== ======= =======
Net interest income..... 6,246 4,363 3,775
------ ----- -----
Net interest spread..... 4.09% 4.22% 4.53%
===== ===== ====
Net interest margin on
interest earnings 4.96% 5.29% 4.36%
assets................. ===== ===== ====
Taxable equivalent
adjustments:
Investment securities.. (332) (143) (40)
------ ----- -----
Net interest income..... 5,914 4,220 3,735
====== ===== =====
</TABLE>
Consolidated Average Balances, Interest and Rates
The net cost of funds, defined as interest expense divided by average
earning assets, increased 15 basis points in 1996, while the yield on total
earning assets decreased 18 basis points and earning assets to total assets
increased. The rate paid on interest bearing liabilities decreased 5 basis
points from 1995 levels. During 1995, the yield on total earning assets
increased 91 basis points while the rate paid on interest bearing liabilities
increased 122 basis points and the net cost of funds increased 98 basis
points.
58
<PAGE>
The banking industry uses two key ratios to measure relative profitability
of net interest income. The net interest rate spread measures the difference
between the average yield on earning assets and the average rate paid on
interest bearing sources of funds. The interest rate spread eliminates the
impact of noninterest bearing deposits and gives a direct perspective on the
effect of market interest rate movements. The net interest margin is defined
as net interest income as a percentage of average total earning assets and
takes into account the positive impact of investing noninterest bearing
funding sources.
The net interest spread decreased 13 basis points to 4.09% from the 1995
spread of 4.22% as the yield on interest earning assets decreased at a faster
pace than the rates paid on interest bearing liabilities and the earning asset
mix reflected a decrease in the loan component from 63% in 1995 to 59% in
1996. The decrease in 1995 was 31 basis points from the 4.53% reflected in
1994. The net interest margin also showed a decline as reflected by the 4.96%
for 1996, a 33 basis point decrease from 1995. The net interest margin for
1995 decreased 7 basis points from the 5.36% shown in 1994. The following
table shows the change in net interest income for the past two years due to
changes in volumes and rates.
ANALYSIS OF THE CHANGES IN NET INTEREST INCOME
TAXABLE EQUIVALENT BASIS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 COMPARED TO 1995 1995 COMPARED TO 1994
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGES IN DUE TO CHANGES IN
-------------------------- --------------------------
YIELD/ NET YIELD/ NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Federal funds sold....... $ 271 (60) 211 137 80 217
Interest bearing deposits
with other banks........ (1) -- (1) (58) 11 (47)
Investment securities:
Taxable.................. 599 41 640 121 190 311
Tax-exempt............... 550 5 555 305 (2) 303
Loans (including loans 2,414 (42) 2,372 507 449 956
fees).................... -------- ----- ------- ------- ----- -------
Total interest income.... 3,833 (56) 3,777 1,012 728 1,740
-------- ----- ------- ------- ----- -------
Interest paid on:
Deposits:
Demand.................. 116 (31) 85 22 59 81
Savings................. 637 35 672 (7) 221 214
Time.................... 1,214 (55) 1,159 502 344 846
Other borrowings......... (17) (5) (22) (4) 15 11
-------- ----- ------- ------- ----- -------
Total interest expense.. 1,950 (56) 1,894 513 639 1,152
-------- ----- ------- ------- ----- -------
Net interest income..... $ 1,883 -- 1,883 499 89 588
======== ===== ======= ======= ===== =======
</TABLE>
Loans
Average loans increased by approximately 44% in 1996 with much of the
increase concentrated in the commercial loan and real estate construction
categories. These categories accounted for 61% and 26%, respectively, of the
total loan portfolio. Total gross loans outstanding at year end increased 37%
over the previous year end levels. The growth in the portfolio resulted from
Citizens Bank's ongoing efforts to increase the loan portfolio through the
origination of quality loans particularly in its new branch locations in
Lawrenceville, Suwanee and Buford. Consumer installment loans also increased
38% in 1996 from year end 1995.
Citizens Bank makes construction loans to individuals for the construction
of their residences and to developers for the construction of one-to-four
family and multi-family residences. Construction lending is
59
<PAGE>
generally limited to Citizens Bank's primary market area, consisting of the
Georgia counties of Gwinnett, Fulton, Hall and Forsyth. At December 31, 1996,
construction loans amounted to $22.4 million, or 26% of the Bank's total loan
portfolio, an increase of 88% as compared to the $11.9 million of construction
loans outstanding at December 31, 1995. Construction financing is generally
considered to involve a higher degree of risk of loss than long-term financing
on improved, owner-occupied real estate because of the uncertainties of
construction, including possible delays in completing the structure, the
possibility of costs exceeding the initial estimates and the need to obtain a
tenant or purchaser if the property will not be owner occupied. In the event
of a delay in the completion of the construction, Citizens Bank may grant an
extension, but such extensions are generally conditioned upon the payment of
interest in full for the initial term.
Construction loans to individuals are separate from the permanent financing
on the structure. However, a borrower only qualifies for a construction loan
if he or she has obtained a commitment for a permanent loan at the end of the
construction phase. The term of a construction loan to an individual generally
does not exceed the greater of 180 days or the term of the permanent loan
commitment. Interest rates on construction loans to individuals are based on
current local economic conditions. The loan-to-value ratio on such loans is
generally 80% or less of the appraised value of the completed structure.
The majority of construction loans to developers are to selected local
developers with whom Citizens Bank is familiar and are for the construction of
single-family dwellings on a pre-sold or on a speculative basis. Citizens Bank
limits the number of unsold houses which a developer may have under
construction in a project. Construction loans to developers are usually made
for a six-month term depending on the size and scope of the project.
Generally, payment of interest is required on at least a monthly basis, and
the amount of a loan is based on the builder's equity in the property but may
not exceed 80% of appraised value or contract price. Loan proceeds are
disbursed in stages after inspection of the project indicates that such
disbursements are for expenses which have already been incurred and which have
added to the value of the project.
The following table breaks down the composition of the loan portfolio for
each of the past five years while the Loan Portfolio Maturity table shows the
amount of loans outstanding for selected categories as of December 31, 1996,
with maturities based on the remaining scheduled repayments of principal.
LOAN PORTFOLIO COMPOSITION
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
1996 1995 1994 1993 1992
--------------- --------------- --------------- --------------- ---------------
PERCENT PERCENT PERCENT PERCENT PERCENT
OF OF OF OF OF
AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL AMOUNT TOTAL
------- ------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial.............. $53,371 61% $43,680 68% $32,999 68% $35,904 79% $34,448 76%
Real estate--
construction........... 22,480 26% 11,939 19% 8,061 17% 5,604 12% 6,515 14%
Installment loans to 11,493 8,299 7,551 3,823 4,460
individuals............ ------- 13% ------- 13% ------- 15% ------- 9% ------- 10%
Total loans............. 87,344 100% 63,918 100% 48,611 100% 45,331 100% 45,423 100%
Less: Allowance for loan 1,035 784 774 691 646
losses................. ------- ------- ------- ------- -------
$86,309 63,134 47,837 44,640 44,777
======= ======= ======= ======= =======
</TABLE>
60
<PAGE>
LOAN PORTFOLIO MATURITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MATURITY RATE STRUCTURE
------------------------------- --------------------------------
OVER ONE DUE AFTER FLOATING OR
ONE YEAR YEAR THROUGH FIVE PREDETERMINED ADJUSTABLE
OR LESS FIVE YEARS YEARS TOTAL INTEREST RATE RATE
-------- ------------ --------- ------ ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Commercial.............. $25,992 23,508 3,871 53,371 33,748 19,623
Real estate--construc- 20,126 2,354 -- 22,480 5,901 16,579
tion................... ------- ------ ----- ------ ------ ------
$46,118 25,862 3,871 75,851 39,649 36,202
======= ====== ===== ====== ====== ======
</TABLE>
Investment Securities
The composition of Citizens' investment securities portfolio reflects
Citizens' investment strategy of maximizing portfolio yields commensurate with
risk and liquidity considerations. The primary objectives of Citizens'
investment strategy are to maintain an appropriate level of liquidity and
provide a tool to assist in controlling Citizens' interest rate position while
at the same time producing adequate levels of interest income. Management of
the maturity of the portfolio is necessary to provide liquidity and to control
interest rate risk. During 1995, Citizens transferred its entire held to
maturity portfolio to the available for sale classification. The transfer
reflects Citizens' desire to maintain a high level of liquidity and provides
more flexibility in meeting liquidity needs. During 1996 and 1995, gross
investment securities sales were $7.8 million and $3.5 million, respectively.
Maturities and paydowns were $13.5 million and $4.3 million during 1996 and
1995, representing 33% and 17% respectively, of the average total portfolio
for each year. Net realized losses associated with the sales were minimal,
accounting for less than 1% of noninterest expense. Gross unrealized gains in
the total portfolio amounted to approximately $287,000 at year end 1996 and
gross unrealized losses amounted to approximately $373,000.
Total average investment securities increased 63% during 1996. Average
investment securities during 1995 increased 30% from the 1994 average levels.
Total investment securities increased $15.1 million or approximately 41%
during 1996.
The following table reflects the carrying amount of the investment
securities portfolio for the past three years.
CARRYING VALUE OF INVESTMENTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
<S> <C> <C> <C>
Securities held to maturity:
U.S. Government agencies............................. $ -- -- 300
State, county and municipal.......................... -- -- 3,066
Mortgage backed securities........................... -- -- 242
------- ------ ------
-- -- 3,608
------- ------ ------
Securities available for sale:
U.S. Treasury........................................ 4,293 2,538 1,983
U.S. Government agencies............................. 26,417 15,807 4,708
State, county and municipal.......................... 13,148 8,960 --
Mortgage backed securities........................... 7,465 8,992 9,709
------- ------ ------
51,323 36,297 16,400
------- ------ ------
Total............................................... $51,323 36,297 20,008
======= ====== ======
</TABLE>
61
<PAGE>
The following table presents the expected maturity of the total investment
securities portfolio (using amortized cost) by maturity date and average
yields (for all obligations on a fully taxable basis assuming a 34% tax rate)
at December 31, 1996. The composition and maturity/repricing distribution of
investment securities available for sale is subject to change depending on
rate sensitivity, capital needs, and liquidity needs.
EXPECTED MATURITY OF INVESTMENT SECURITIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
WITHIN BUT WITHIN BUT WITHIN AFTER
ONE YEAR FIVE YEARS TEN YEARS AFTER TEN YEARS
------------ ------------ ------------ ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD TOTALS
------ ----- ------ ----- ------ ----- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Securities available for
sale:
U.S. Treasury securi-
ties................... $1,981 5.66% 2,306 6.09% -- -- -- -- 4,287
U.S. Government agen-
cies................... 5,474 5.50% 8,792 6.35% 5,495 7.32% 6,805 6.96% 26,566
State, county and munic-
ipal................... 625 7.43% 859 8.78% 767 8.19% 10,728 8.47% 12,979
Mortgage backed securi- -- 180 141 7,255 7,576
ties................... ------ -- ------ 6.06% ----- 7.72% -------- 6.36% ------
Total................. $8,080 12,137 6,403 24,788 51,408
====== ====== ===== ======== ======
</TABLE>
Deposits
As reflected in the Consolidated Average Balances, Interest and Rates table,
total average interest bearing liabilities increased 61% during 1996. The
largest dollar increase in average interest bearing deposits was in the time
deposit category, rising almost $20.7 million or 59% from 1995. Average
interest bearing demand deposits increased by $4.2 million or 32%. Average
noninterest bearing demand deposits increased over $6.8 million, or 44%, after
increasing 25% during 1995. The increases were primarily a result of deposits
at new branch locations. Savings deposits, interest bearing demand deposits
and noninterest bearing demand deposits accounted for 55% of total average
deposits during 1996 and 1995. The maturities of time deposits of $100,000 or
more issued by Citizens Bank at December 31, 1996, are summarized in the table
below. Management believes that its time deposits of $100,000 or more are
customer-relationship oriented and represent a reasonably stable source of
funds.
MATURITIES OF TIME DEPOSITS OVER $100,000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Within 3 months............................. $ 4,960
After 3 through 6 months.................... 6,538
After 6 through 12 months................... 5,580
After 12 months............................. 3,941
--------
Total..................................... $ 21,019
========
</TABLE>
Liquidity Management
The objective of liquidity management is to ensure that sufficient funding
is available, at reasonable cost, to meet the ongoing operational cash needs
of Citizens and to take advantage of income producing opportunities as they
arise. While the desired level of liquidity will vary depending upon a variety
of factors, it is the primary
62
<PAGE>
goal of Citizens to maintain a high level of liquidity in all economic
environments. Liquidity is defined as the ability of a company to convert
assets into cash or cash equivalents without significant loss and to raise
additional funds by increasing liabilities. Liquidity management involves
maintaining Citizens' ability to meet the day to day cash flow requirements of
its customers, whether they are depositors wishing to withdraw funds or
borrowers requiring funds to meet their credit needs. Without proper liquidity
management, Citizens would not be able to perform the primary function of a
financial intermediary and would, therefore, not be able to meet the needs of
the communities it serves. Daily monitoring of the sources and uses of funds
is necessary to maintain an acceptable cash position that meets both
requirements. In a banking environment, both assets and liabilities are
considered sources of liquidity funding and both are monitored on a daily
basis.
The asset portion of the balance sheet provides liquidity primarily through
loan principal repayments, maturities of securities and, to a lesser extent,
sales of securities available for sale. Commercial and real estate-
construction loans that mature in one year or less amounted to $44.9 million
or 51% of the total loan portfolio at December 31, 1996. Securities available
for sale maturing in the same time frame totaled almost $8.1 million or 16% of
the total investment securities portfolio at year end 1996 (including
estimated maturities of mortgage backed securities). Other short-term
investments such as federal funds sold and maturing interest bearing deposits
with other banks are additional sources of liquidity funding.
The liability portion of the balance sheet provides liquidity through
various customers' interest bearing and noninterest bearing deposit accounts.
Federal funds purchased are additional sources of liquidity and basically
represent Citizens' incremental borrowing capacity. This source of liquidity
is short-term in nature and is used as necessary to fund asset growth and meet
short-term liquidity needs.
As disclosed in Citizens' Consolidated Statement of Cash Flows included
elsewhere herein, net cash provided by operating activities increased by
approximately $614,000 primarily due to the increase in net earnings. Net cash
used in investing activities of $40.3 million consisted primarily of net loans
originated of $23.5 million and securities purchased of $36.4 million. This
resulted from management's continued efforts to invest new funds from deposits
obtained from the new markets that have been recently entered in loans and
investment securities. The $47.3 million of net cash provided by financing
activities consisted primarily of the $48.2 million in demand, savings and
time deposits.
Management considers Citizens' liquidity position at the end of 1996 to be
sufficient to meet its foreseeable cash flow requirements. Reference is made
to the Consolidated Statements of Cash Flows appearing in the Consolidated
Financial Statements for a three year analysis of the changes in cash and cash
equivalents resulting from operating, investing and financing activities.
Interest Rate Sensitivity Management
The absolute level and volatility of interest rates can have a significant
impact on Citizens' profitability. The objective of interest rate risk
management is to identify and manage the sensitivity of net interest income to
changing interest rates, in order to achieve Citizens' overall financial
goals. Based on economic conditions, asset quality and various other
considerations, management establishes tolerance ranges for interest rate
sensitivity and manages within these ranges.
Citizens uses income simulation modeling as a primary tool in measuring
interest rate risk and managing interest rate sensitivity. Simulation modeling
considers not only the impact of changing market rates of interest on future
net interest income, but also such other potential causes of variability as
earning asset volume, mix, and general market conditions.
Interest rate sensitivity is a function of the repricing characteristics of
Citizens' portfolio of assets and liabilities. These repricing characteristics
are the time frames within which the interest bearing assets and liabilities
are subject to change in interest rates either at replacement, repricing or
maturity during the life of the instruments. Interest rate sensitivity
management focuses on the maturity structure of assets and liabilities and
63
<PAGE>
their repricing characteristics during periods of changes in market interest
rates. Effective interest rate sensitivity management seeks to ensure that
both assets and liabilities respond to changes in interest rates within an
acceptable time frame, thereby minimizing the effect of interest rate
movements on net interest income. Interest rate sensitivity is measured as the
difference between the volumes of assets and liabilities in Citizens' current
portfolio that are subject to repricing at various time horizons: immediate,
one to three months, four to twelve months, one to five years and on a
cumulative basis. The differences are known as interest sensitivity gaps. The
following table shows interest sensitivity gaps for these different intervals
as of December 31, 1996.
INTEREST RATE SENSITIVITY ANALYSIS (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
OVER
THREE OVER
IMMEDIATE MONTHS ONE OVER FIVE
THROUGH THROUGH THROUGH YEARS AND
THREE ONE FIVE NON-RATE
MONTHS YEAR YEARS SENSITIVE TOTAL
--------- ------- ------- --------- -------
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Federal Funds sold................ $ 8,501 -- -- -- 8,501
Interest bearing deposits......... -- -- 100 -- 100
Investment securities:
Taxable.......................... 5,475 1,982 11,276 19,442 38,175
Tax Exempt....................... -- 628 884 11,636 13,148
Loans............................. 46,675 8,797 27,633 4,239 87,344
-------- ------- ------ ------ -------
Total interest earning assets.... 60,651 11,407 39,893 35,317 147,268
Interest bearing liabilities:
Deposits:
Interest bearing demand......... 20,138 -- -- -- 20,138
Savings......................... 39,014 -- -- -- 39,014
Time............................ 13,152 34,609 13,020 -- 60,781
Long-term debt.................. 34 102 95 -- 231
-------- ------- ------ ------ -------
Total interest bearing liabili-
ties............................. 72,338 34,711 13,115 -- 120,164
Noninterest bearing funding sourc- -- -- -- 25,381 25,381
es, net.......................... -------- ------- ------ ------ -------
Interest sensitivity gap.......... (11,687) (23,304) 26,778 9,936 1,723
-------- ------- ------ ------ =======
Cumulative interest sensitivity $(11,687) (34,991) (8,213) 1,723
gap.............................. ======== ======= ====== ======
</TABLE>
As illustrated in the table above, 89% of earning asset funding sources will
reprice within one year compared to 49% of all interest earning assets.
Changes in the mix of earning assets or supporting liabilities can either
increase or decrease the net interest margin without affecting interest rate
sensitivity. In addition, the interest rate spread between an asset and its
supporting liability can vary significantly while the timing of repricing for
both the asset and the liability remains the same, thus impacting net interest
income. This characteristic is referred to as basis risk and generally relates
to the possibility that the repricing characteristics of short-term assets
tied to Citizens' prime lending rate are different from those of short-term
funding sources such as certificates of deposit.
Varying interest rate environments can create changes in prepayment levels
of assets and liabilities which are not reflected in the interest rate
sensitivity analysis report. These prepayments may have significant effects on
Citizens' net interest margin. Because of these factors an interest
sensitivity gap report may not provide a complete assessment of Citizens'
exposure to changes in interest rates.
64
<PAGE>
The table above indicates that Citizens is in a liability sensitive or
negative gap position after twelve months. This liability sensitive position
would generally indicate that Citizens's net interest income would decrease
should interest rates rise and would increase should interest rates fall. Due
to the factors cited previously, current simulation results indicate only
minimal sensitivity to parallel shifts in interest rates. Management also
evaluates the condition of the economy, the pattern of market interest rates
and other economic data to determine the appropriate mix and repricing
characteristics of assets and liabilities required to produce an optimal net
interest margin.
Fair Value of Financial Instruments
As indicated in Note 15 to Citizens's Consolidated Financial Statements, the
fair value of Citizens' financial instruments was exceeded by the net book
value of such assets and liabilities by approximately $1.5 million at December
31, 1996. These disclosures should not be considered a surrogate of the
liquidation value of Citizens or Citizens Bank, but rather represent a good
faith estimate of the increase or decrease in value of financial instruments
held by Citizens since purchase, origination, or issuance.
Capital Resources
Stockholders' equity at December 31, 1996 increased 14% from December 31,
1995. Net earnings after dividends for 1996 and the change in the tax affected
unrealized gain/(loss) on the securities available for sale portfolio, net of
tax, accounted for the majority of the increase in stockholders' equity.
Dividends of $174,492 were declared on Citizens' common stock in 1996, which
represented a 6% increase in dividends per share from 1995. Citizens has
strived to retain earnings in order to keep pace with the rate of asset
growth.
Average stockholders' equity as a percentage of total average assets is one
measure used to determine capital strength. The ratio of average stockholders'
equity to average assets for 1996 was 7.12% compared to 9.45% in 1995. The
decrease in the ratio is the result of significant asset growth in 1996. The
following table summarizes these and other key ratios of Citizens for each of
the last three years.
RETURN ON EQUITY AND ASSETS
<TABLE>
<CAPTION>
1996 1995 1994
----- ----- -----
<S> <C> <C> <C>
Return on average assets............................. 1.11% 1.13% 1.33%
Return on average equity............................. 15.60% 11.94% 13.06%
Dividend payout ratio................................ 11.54% 16.52% 14.93%
Average equity to average assets..................... 7.12% 9.45% 10.16%
</TABLE>
The Federal Reserve has issued guidelines for the implementation of risk-
based capital requirements by U.S. banks and bank holding companies. These
risk-based capital guidelines take into consideration risk factors, as defined
by regulators, associated with various categories of assets, both on and off
balance sheet. Under the guidelines, capital strength is measured in two tiers
which are used in conjunction with risk adjusted assets to determine the risk
based capital ratios. The guidelines require an 8% total risk-based capital
ratio, of which 4% must be Tier I capital.
Citizens' Tier I capital, which consists of stockholders' equity net of
unrealized gains and losses on securities available for sale and intangible
assets, amounted to $10.3 million at December 31, 1996. Tier II capital
includes supplemental capital components such as qualifying allowance for loan
losses. Tier I capital plus Tier II capital components are referred to as
Total Risk-based Capital which was $11.3 million at December 31, 1996. The
percentage ratios, as calculated under the guidelines, were 10.9% and 9.9% for
Tier I and Total Risk-based Capital, respectively, at December 31, 1996.
65
<PAGE>
A minimum leverage ratio is required in addition to the risk-based capital
standards and is defined as Tier I capital divided by average assets adjusted
for the unrealized gain/loss on the investment securities investment portfolio
and intangible assets. Although a minimum leverage ratio of 3% has been
established, the Federal Reserve will require bank holding companies to
maintain a leverage ratio greater than 3% if it is experiencing or
anticipating significant growth or is operating with less than well-
diversified risks in the opinion of the Federal Reserve. The Federal Reserve
uses the leverage ratio in tandem with the risk-based capital ratios to assess
capital adequacy of banks and bank holding companies. Citizens' leverage
ratios at December 31, 1996 and 1995 were 6.7% and 8.4%, respectively. Risk-
based and leverage capital positions as of December 31, 1996 and 1995 are
presented in the table below.
ANALYSIS OF CAPITAL ADEQUACY (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1995
-------- ------
<S> <C> <C>
Risk-based capital ratios:
Tier I capital to risk-adjusted assets...................... 9.9% 11.0%
Tier II capital to risk-adjusted assets..................... 1.0% 1.0%
-------- ------
Total capital to risk-adjusted assets..................... 10.9% 12.0%
======== ======
Leverage ratio:............................................... 6.7% 8.4%
Tier I Capital.............................................. $ 10,303 8,968
Tier II Capital............................................. 1,035 784
-------- ------
Total Tier I Capital...................................... $ 11,338 9,752
======== ======
Total risk-adjusted assets.................................... $103,940 81,237
======== ======
</TABLE>
All three of the capital ratios of Citizens Bank currently exceed the
minimum ratios required in 1996 as defined by federal regulators and are
deemed to be well capitalized. Citizens monitors these ratios to ensure that
Citizens Bank remains within regulatory guidelines. Increased regulatory
activity in the financial industry as a whole will continue to impact the
structure of the industry, however, management does not anticipate any
negative impact on the capital resources or operations of Citizens.
Provision and Allowance for Loan Losses
Citizens manages asset quality and controls risk through diversification of
the loan portfolio and the application of policies designed to foster sound
underwriting and loan monitoring practices. Citizens' loan administration
function is charged with monitoring asset quality, establishing credit
policies and procedures, and enforcing the consistent application of these
policies and procedures.
The provision for loan losses is the annual cost of providing an adequate
allowance for anticipated potential future losses on loans. The amount each
year is dependent upon many factors including loan growth, net charge-offs,
changes in the composition of the loan portfolio, delinquencies, management's
assessment of loan portfolio quality, the value of collateral and economic
factors and trends.
During recent years, Citizens has strengthened its review process of the
larger loans in its portfolio and has imposed stricter underwriting standards
in order to minimize the impact an economic downturn might have on credit
quality. Loan review procedures, including such techniques as loan grading and
on-site reviews, are continually utilized in order to ensure that potential
problem loans are identified early in order to lessen any potentially negative
impact such problem loans may have on Citizens' earnings. Management's
involvement continues throughout the process and includes participation in the
workout process and recovery activity. These formalized procedures are
monitored internally by the loan review committee. Such review procedures are
quantified in quarterly reports to senior management and are used in
determining whether such loans represent
66
<PAGE>
potential loss to Citizens. Management monitors the entire loan portfolio in
an attempt to identify problem loans so that risks in the portfolio can be
identified on a timely basis and an appropriate allowance maintained.
The provision for loan losses increased 156% in 1996 compared to a 48%
increase in 1995. The increased provision for 1996 and 1995 is a direct result
of management's efforts to maintain an adequate allowance given the 37% and
31% increase in loans outstanding for 1996 and 1995, respectively. The
allowance for loan losses as a percentage of gross loans outstanding at year
end totaled 1.2% for 1996 and 1995.
Citizens does not allocate the allowance for loan losses to the various loan
categories. The entire allowance is available to absorb losses from any and
all loans. The following table sets forth information with respect to
Citizens's allowance for loan losses for each of the last five years.
ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1996 1995 1994 1993 1992
------ ---- ----- ---- ----
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at beginning at
year........................................ $ 784 774 691 646 476
Charge-offs:
Commercial.................................. 9 88 94 153 183
Real estate--construction................... -- 34 1 -- --
Installment loans to individuals............ 79 9 23 22 50
------ ---- ----- ---- ----
Total charge-offs.......................... 88 131 118 175 233
------ ---- ----- ---- ----
Recoveries:
Commercial.................................. 10 6 116 38 8
Real estate--construction................... 1 -- -- -- 1
Installment loans to individuals............ 25 17 5 12 9
------ ---- ----- ---- ----
Total recoveries........................... 36 23 121 50 18
------ ---- ----- ---- ----
Net charge-offs (recoveries)................. 52 108 (3) 125 215
Provisions charged to earnings............... 303 118 80 170 385
------ ---- ----- ---- ----
Balance at end of year....................... $1,035 784 774 691 646
====== ==== ===== ==== ====
Ratio of net charge-offs to average loans
outstanding 0.07% 0.21% (0.01)% 0.27% 0.50%
during the period........................... ====== ==== ===== ==== ====
</TABLE>
Asset Quality
Nonperforming assets, comprised of nonaccrual loans, loans 90 days or more
past due and other real estate owned totaled $392,000 at December 31, 1996. At
December 31, 1995, nonperforming assets amounted to $306,000. There were no
related party loans which were considered nonperforming at December 31, 1996
or 1995. Accrual of interest is discontinued on a loan when management
believes, after considering economic and business conditions and collection
efforts, that the borrower's financial condition is such that collection of
interest is doubtful. When a loan is placed on nonaccrual status, previously
accrued and uncollected interest is charged to interest income on loans.
Generally, payments on nonaccrual loans are applied to principal. Loans made
by Citizens to facilitate the sale of other real estate are made on terms
comparable to loans of similar risk. An adequate investment by the buyer is
required prior to the removal of other real estate from nonperforming assets.
There were no commitments to lend additional funds on nonaccrual loans at
December 31, 1996. There were no other foreclosed or repossessed assets at
December 31, 1996. The following table summarizes Citizens' risk elements for
each of the last five years.
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RISK ELEMENTS (DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C>
Loans 90 days past due.......................... $ 83 50 2 -- 41
Loans on nonaccrual............................. 107 54 3 640 1,009
Other real estate............................... 202 202 156 107 585
---- ---- ---- ---- -----
Total nonperforming assets.................... $392 306 161 747 1,635
==== ==== ==== ==== =====
Total nonperforming loans as a percentage of 0.25% 0.19% 0.01% 1.41% 2.31%
loans.......................................... ==== ==== ==== ==== =====
</TABLE>
There may be additional loans within Citizens' portfolio that become
classified as conditions dictate; however, management was not aware of any
such loans that are material in amount at December 31, 1996. At December 31,
1996, management was unaware of any known trends, events or uncertainties that
will have or that are reasonably likely to have a material effect on Citizens'
liquidity, capital resources or operations.
Noninterest Income
Noninterest income consists primarily of revenues generated from service
charges and fees on deposit accounts. Noninterest income increased 49% during
1996 as compared to 1995 primarily due to the number of new accounts obtained
in the new market expansion areas. Total noninterest income for 1995 showed a
modest increase of 3% compared to 1994.
Noninterest Expense
Noninterest expense for 1996 increased 37% following an increase of 24% in
1995. Total salaries and employee benefits increased 28% during 1996 and 31%
in 1995 due largely to employee additions required to support Citizens' branch
growth.
Net occupancy expense increased 61% in 1996 following an increase of 23% in
1995. The 1996 increase in occupancy expense was due to expenses related to
new branch banking facilities, including depreciation and maintenance
expenses.
Other noninterest expenses increased by approximately $433,000 or 48%
compared to a 11% increase in 1995. The largest components of other
noninterest expenses, which include data processing and stationary and
supplies, increased 23% in 1996. Management continues to evaluate other
noninterest expense details in efforts to further decrease the cost of
providing expanded banking services to a growing market base.
Income Taxes
Income tax expense increased 16% during 1996, while it decreased by 28% in
1995. The effective tax rate as a percentage of pretax income was 25% in 1996
and 30% in 1995. These tax rates differ from the statutory Federal tax rate of
34 percent primarily due to state taxes and tax exempt interest income on
certain investment securities. In 1996, tax exempt investment securities
interest expressed as a percentage of pretax earnings increased to 32% from
19% in 1995. See Note 8 to Citizens' Consolidated Financial Statements for an
analysis of income taxes.
Impact of Inflation and Changing Prices
A bank's asset and liability structure is substantially different from that
of an industrial company in that primarily all assets and liabilities of a
bank are monetary in nature. Management believes the impact of inflation on
financial results depends on Citizens' ability to react to changes in interest
rates and, by such reaction, reduce the inflationary impact on performance.
Interest rates do not necessarily move in the same direction, or at the same
magnitude, as the prices of other goods and services. As discussed previously,
management seeks to manage the relationship between interest-sensitive assets
and liabilities in order to protect against wide interest rate fluctuations,
including those resulting from inflation.
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CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth the material elements of the regulatory
framework applicable to banks, thrifts, and bank and thrift holding companies
and provides certain specific information related to Premier and Citizens.
GENERAL
Premier is a bank holding company registered with the Federal Reserve and
the Georgia Department under the BHC Act and the Georgia BHC Act. As such,
Premier is subject to the supervision, examination and reporting requirements
of the BHC Act and the regulations of the Federal Reserve and the Georgia BHC
Act. Premier is also a thrift holding company registered with the Office of
Thrift Supervision (the "OTS") under the Federal Home Owners' Loan Act and the
Georgia BHC Act. As a thrift holding company, Premier is subject to the
regulation, supervision, examination and reporting requirements of the OTS and
the Georgia Department. Citizens is a bank holding company registered with the
Federal Reserve and the Georgia Department under the BHC Act and the Georgia
BHC Act. As such, Citizens is subject to the supervision, examination and
reporting requirements of the BHC Act, the regulations of the Federal Reserve
and the Georgia BHC Act.
The BHC Act requires every bank holding company to obtain the prior approval
of the Federal Reserve before: (i) it may acquire direct or indirect ownership
or control of any voting shares of any bank if, after such acquisition, the
bank holding company will directly or indirectly own or control more than 5%
of the voting shares of the bank; (ii) it or any of its subsidiaries, other
than a bank, may acquire all or substantially all of the assets of any bank;
or (iii) it may merge or consolidate with any other bank holding company.
Similar federal statutes require thrift holding companies and other companies
to obtain prior approval of the OTS before acquiring direct or indirect
ownership or control of a savings bank or savings association.
The BHC Act further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the communities to be served. The Federal Reserve is also required to
consider the financial and managerial resources and future prospects of the
bank holding companies and banks concerned and the convenience and needs of
the community to be served. Consideration of financial resources generally
focuses on capital adequacy, which is discussed below.
The BHC Act, as amended by the interstate banking provisions of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Banking Act"), which became effective on September 29, 1995, repealed the
prior statutory restrictions on interstate acquisitions of banks by bank
holding companies, such that Premier, Citizens, and any other bank holding
company located in Georgia may now acquire a bank located in any other state,
and any bank holding company located outside Georgia may lawfully acquire any
Georgia-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states.
In response to the Interstate Banking Act, the Georgia General Assembly
adopted the Georgia Interstate Banking Act which was effective on July 1,
1995. The Georgia Interstate Banking Act provides that (i) interstate
acquisitions by institutions located in Georgia will be permitted in states
which also allow national interstate acquisitions, and (ii) interstate
acquisitions of institutions located in Georgia will be permitted by
institutions located in states which allow national interstate acquisitions.
Additionally, on January 26, 1996, the Georgia General Assembly adopted the
Georgia Interstate Branching Act which permits Georgia-based banks and bank
holding companies owning or acquiring banks outside of Georgia and all non-
Georgia banks and bank holding companies owning or acquiring banks in Georgia
the right to merge any lawfully acquired bank into an interstate branch
network. The Georgia Interstate Branching Act also allows banks to establish
de novo branches on a limited basis beginning July 1, 1996. Beginning July 1,
1998, the number of de novo branches which may be established will no longer
be limited.
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The BHC Act generally prohibits a bank holding company from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. For example,
factoring accounts receivable, acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling credit
life insurance and certain other types of insurance in connection with credit
transactions, and performing certain insurance underwriting activities all
have been determined by the Federal Reserve to be permissible activities of
bank holding companies. The BHC Act does not place territorial limitations on
permissible non-banking activities of bank holding companies. Despite prior
approval, the Federal Reserve has the power to order a bank holding company or
its subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or such ownership or control constitutes a
serious risk to the financial safety, soundness, or stability of any bank
subsidiary of that bank holding company.
Similarly, a thrift holding company is required by the Federal Home Owner's
Loan Act to obtain approval from the OTS prior to acquiring, directly or
indirectly, ownership of more than 5% of the voting stock or control of any
savings association or savings bank.
Each bank and thrift subsidiary of Premier and the bank subsidiary of
Citizens is a member of the Federal Deposit Insurance Corporation (the
"FDIC"), and as such, its deposits are insured by the FDIC to the maximum
extent provided by law. Each such subsidiary is also subject to numerous state
and federal statutes and regulations that affect its business, activities, and
operations, and each is supervised and examined by one or more state or
federal bank regulatory agencies.
Premier Bank, Central and Southern Bank of Georgia and Citizens Bank are
subject to regulation, supervision, and examination by the FDIC and the
Georgia Department. Central and Southern Bank of North Georgia is subject to
regulation, supervision, and examination by the OTS and the FDIC. The banking
regulator for each of the subsidiaries of Premier and Citizens, as well as the
Georgia Department in the case of Premier Bank, Central and Southern Bank of
Georgia and Citizens Bank, regularly examine the operations of Premier Bank,
Citizens Bank, Central and Southern Bank of North Georgia and Central and
Southern Bank of Georgia and are given authority to approve or disapprove
mergers, consolidations, the establishment of branches, and similar corporate
actions. The federal banking regulators and the Georgia Department also have
the power to prevent the continuance or development of unsafe or unsound
banking practices or other violations of law.
PAYMENT OF DIVIDENDS
Premier and Citizens are legal entities separate and distinct from their
banking and other subsidiaries. The principal sources of cash flow of Premier,
including cash flow to pay dividends to its shareholders, are dividends from
Premier Bank, Premier Lending Corporation, Central and Southern Bank of
Georgia and Central and Southern Bank of North Georgia. The principal source
of cash flow to Citizens, including cash flow to pay dividends to its
shareholders, is dividends from Citizens Bank. There are statutory and
regulatory limitations on the payment of dividends by Premier Bank, Central
and Southern Bank of Georgia and Central and Southern Bank of North Georgia to
Premier and Citizens Bank to Citizens, respectively, as well as by Premier and
Citizens to their shareholders.
If, in the opinion of the federal banking regulators, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such
authority may require, after notice and hearing, that such institution cease
and desist from such practice. The federal banking agencies have indicated
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<PAGE>
that paying dividends that deplete a depository institution's capital base to
an inadequate level would be an unsafe and unsound banking practice. Under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a
depository institution may not pay any dividend if payment would cause it to
become undercapitalized or if it already is undercapitalized. See "--Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At June 30, 1997, under dividend restrictions imposed under federal and
state laws, Premier Bank, Central and Southern Bank of Georgia, Central and
Southern Bank of North Georgia and Premier Lending, without obtaining
governmental approvals, could declare aggregate dividends to Premier of
approximately $2,647,000. At June 30, 1997, retained earnings available from
Citizens Bank to pay dividends totaled approximately $2 million.
The payment of dividends by Premier and Citizens and their respective
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
Premier and Citizens and their respective bank and thrift subsidiaries are
required to comply with the capital adequacy standards established by the
Federal Reserve and the OTS, and the appropriate federal banking regulator in
the case of their banking and thrift subsidiaries. There are two basic
measures of capital adequacy for bank holding companies that have been
promulgated by the Federal Reserve: a risk-based measure and a leverage
measure. All applicable capital standards must be satisfied for a bank holding
company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and
bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of total risk-
weighted assets and off-balance-sheet items.
The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio")
of total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. At least
half of Total Capital must be comprised of common stock, minority interests in
the equity accounts of consolidated subsidiaries and noncumulative perpetual
preferred stock, less goodwill and certain other intangible assets ("Tier 1
Capital"). The remainder may consist of subordinated debt, other preferred
stock, and a limited amount of loan loss reserves ("Tier 2 Capital"). At June
30, 1997, Premier's consolidated Total Risk-Based Capital Ratio and its Tier 1
Risk-Based Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-weighted
assets) were 12.58% and 11.33%, respectively. At June 30, 1997, Citizens'
unconsolidated Total Risk-Based Capital Ratio and its Tier 1 Risk-Based
Capital Ratio (i.e., the ratio of Tier 1 Capital to risk weighted assets) were
9.92% and 8.88%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for bank holding companies
that meet certain specified criteria, including those having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3%, plus an additional cushion of 100 to
200 basis points. Premier's Leverage Ratio at June 30, 1997 was 8.54%.
Citizens' Leverage Ratio at June 30, 1997 was 7.13%. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the Federal Reserve has indicated
that it will consider a "tangible Tier 1 Capital Leverage Ratio" (deducting
all intangibles) and other indicia of capital strength in evaluating proposals
for expansion or new activities.
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<PAGE>
Premier Bank and Citizens Bank are subject to risk-based and leverage
capital requirements adopted by their respective federal banking regulators,
which are substantially similar to those adopted by the Federal Reserve for
bank holding companies.
Similarly, the OTS' regulatory capital regulations specify capital standards
for thrifts and thrift holding companies consisting of three components: a
"core capital" requirement, a "tangible capital" requirement, and a "risk-
based capital" requirement. These regulations require thrifts to maintain core
capital in an amount not less than 3% of adjusted total assets and to maintain
tangible capital in an amount not less than 1.5% of adjusted total assets.
Under the OTS' regulatory capital regulations, thrifts are required to
maintain capital equal to 8% of risk-weighted assets. The OTS requires assets
to be weighed on the basis of risk and assigns a weighing factor of between 0%
and 100%. Approximately one-half of risk-based capital must consist of core
capital and one-half may consist of other preferred stock, a portion of
general loan loss reserves and other hybrid capital instruments such as
convertible and subordinated debentures.
Each of the subsidiary depository institutions of Premier and Citizens was
in compliance with applicable minimum capital requirements as of June 30,
1997. Neither Premier nor Citizens has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it or
its subsidiary depository institutions.
Failure to meet capital guidelines could subject a bank or thrift to a variety
of enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon FDIC-
insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve and the FDIC have, pursuant to
FDICIA, amended the risk-based capital standards so as to calculate the change
in an institution's net economic value attributable to increases and decreases
in market interest rates and to require banks with excessive interest rate
risk exposure to hold additional amounts of capital against such exposures.
The OTS has already included an interest-rate risk component in its risk-based
capital guidelines for savings associations that it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Premier and Citizens are expected to act as a
source of financial strength for, and to commit resources to support, each of
their banking subsidiaries. This support may be required at times when, absent
such Federal Reserve policy, Premier and Citizens may not be inclined to
provide it. In addition, any capital loans by a bank holding company to any of
its banking subsidiaries are subordinate in right of payment to deposits and
to certain other indebtedness of such banks. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution
or (ii) any assistance provided by the FDIC to any commonly controlled FDIC-
insured depository institution "in danger of default." "Default" is defined
generally as the appointment of a conservator or receiver, and "in danger of
default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is
subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. As a result, any loss suffered by the FDIC in respect
of any of the subsidiaries of Premier would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against
the depository institution's banking or thrift affiliates, and a potential
loss of Premier's investment in such other subsidiary depository institutions.
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PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions
in the three undercapitalized categories, the severity of which will depend
upon the capital category in which the institution is placed. Generally,
subject to a narrow exception, FDICIA requires the banking regulator to
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation
the relevant capital level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of
10% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage
Ratio of 4.0% or greater is considered to be adequately capitalized. A
depository institution that has a Total Risk-Based Capital Ratio of less than
8.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, or a Leverage Ratio
of less than 4.0% is considered to be undercapitalized. A depository
institution that has a Total Risk-Based Capital Ratio of less than 6.0%, a
Tier 1 Risk-Based Capital Ratio of less than 3.0%, or a Leverage Ratio of less
than 3.0% is considered to be significantly undercapitalized, and an
institution that has a tangible equity capital to assets ratio equal to or
less than 2.0% is deemed to be critically undercapitalized. For purposes of
the regulation, the term "tangible equity" includes core capital elements
counted as Tier 1 Capital for purposes of the risk-based capital standards,
plus the amount of outstanding cumulative perpetual preferred stock (including
related surplus), minus intangible assets with certain exceptions. A
depository institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meets its capital restoration plan, subject to certain
limitations. The obligation of a controlling holding company under FDICIA to
fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of
the FDIC. In addition, the appropriate federal banking regulator is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the
appropriate federal banking agency must require the institution to take one or
more of the following actions: (i) sell enough shares, including voting
shares, to become adequately capitalized; (ii) merge with (or be sold to)
another institution (or holding company), but only if grounds exist for
appointing a conservator or receiver; (iii) restrict certain transactions with
banking affiliates as if the "sister bank" exception to the requirements of
Section 23A of the Federal Reserve Act did not exist; (iv) otherwise restrict
transactions with bank or non-bank affiliates; (v) restrict interest rates
that the institution pays on deposits to "prevailing rates" in the
institution's "region;" (vi) restrict asset growth or reduce total assets;
(vii) alter, reduce, or terminate activities; (viii) hold a new election of
directors; (ix) dismiss any director or senior executive officer who held
office for more than 180 days immediately before the institution became
undercapitalized, provided that in requiring dismissal of a director or
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senior executive officer, the regulator must comply with certain procedural
requirements, including the opportunity for an appeal in which the director or
officer will have the burden of proving his or her value to the institution;
(x) employ "qualified" senior executive officers; (xi) cease accepting
deposits from correspondent depository institutions; (xii) divest certain
nondepository affiliates which pose a danger to the institution; or (xiii) be
divested by a parent holding company. In addition, without the prior approval
of the appropriate federal banking regulator, a significantly undercapitalized
institution may not pay any bonus to any senior executive officer or increase
the rate of compensation for such an officer.
At June 30, 1997, Premier Bank, Central and Southern Bank of Georgia,
Central and Southern Bank of North Georgia, and Citizens Bank had the
requisite capital levels to qualify as "well capitalized."
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, assigns an institution to
one of three capital categories: (i) well capitalized; (ii) adequately
capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based
on a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to
which it is assigned. Under the final risk-based assessment system, as well as
the prior transitional system, there are nine assessment risk classifications
(i.e., combinations of capital groups and supervisory subgroups) to which
different assessment rates are applied. Assessment rates for members of both
the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund
("SAIF") for the first half of 1995, as they had during 1994, ranged from 23
basis points (0.23% of deposits) for an institution in the highest category
(i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of
deposits) for an institution in the lowest category (i.e., "undercapitalized"
and "substantial supervisory concern"). These rates were established for both
funds to achieve a designated ratio of reserves to insured deposits (i.e.,
1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC was
authorized to reduce the minimum assessment rate below the 23 basis points and
to set future assessment rates at such levels that would maintain the fund's
reserve ratio at the designated level. In August 1995, the FDIC adopted
regulations reducing the assessment rates for BIF-member banks. Under the
revised schedule, BIF-member banks, starting with the second half of 1995,
were to pay assessments ranging from 4 basis points to 31 basis points, with
an average assessment rate of 4.5 basis points. Refunds with interest were
paid for assessments for the month(s) after the month in which the designated
reserve ratio for the BIF was reached. Subsequently, on November 14, 1995, the
FDIC announced that, beginning in 1997, it would further reduce the deposit
insurance premiums for 92% of all BIF members that are in the highest capital
and supervisory categories to $2,000 per year, regardless of deposit size. At
the same time, the FDIC elected to retain the existing assessment rate range
of 23 to 31 basis points for SAIF members for the foreseeable future given the
undercapitalized nature of that insurance fund.
On September 30, 1996, the President signed the Deposit Insurance Fund Act of
1996 ("DIFA") which was part of the omnibus spending bill enacted by Congress
at the end of its 1996 session. DIFA mandated that the FDIC impose a one-time
special assessment on the SAIF-assessable deposits of each insured depository
institution at a rate applicable to all such institutions that the FDIC
determined would cause the SAIF to achieve its designated reserve ratio of
1.25% as of October 1, 1996. The assessment was based on the amount of SAIF-
insured deposits owned by each institution as of March 31, 1995. DIFA allowed
the FDIC to exempt any insured institution that it determined to be weak from
paying the special assessment if the FDIC determined that the exemption would
reduce the risk to the SAIF.
74
<PAGE>
DIFA provides that the FDIC may not set semi-annual assessments with respect
to SAIF or BIF in excess of the amount needed to maintain the 1.25% designated
reserve ratio or, if the reserve ratio is less than the designated reserve
ratio, to increase the reserve ratio to the designated reserve ratio.
On October 10, 1996, the FDIC adopted a final rule governing the payment of
the SAIF special assessment. The FDIC imposed a special assessment in the
amount of 65.7 basis points.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is
in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
The FDIA, as amended by the FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation and fees and benefits. In general, the guidelines require,
among other things, appropriate systems and practices to identify and manage
the risks and exposures specified in the guidelines. The guidelines prohibit
excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director, or principal shareholder. In addition, the agencies adopted
regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable
compliance plan or fails in any material respect to implement an acceptable
compliance plan, the agency must issue an order directing action to correct
the deficiency and may issue an order directing other actions of the types to
which an undercapitalized institution is subject under the "prompt corrective
action" provisions of FDICIA. See "--Prompt Corrective Action." If an
institution fails to comply with such an order, the agency may seek to enforce
such order in judicial proceedings and to impose civil money penalties. The
federal regulatory agencies also proposed guidelines for asset quality and
earnings standards.
CERTAIN APPLICABLE THRIFT REGULATIONS
Central and Southern Bank of North Georgia, as a thrift institution, is
subject to extensive regulation by the OTS. The lending activities and other
investments of thrift institutions must comply with various regulatory
requirements.
Qualified Thrift Lender Test. One such set of requirements relates to an
institution's status as a "Qualified Thrift Lender." Unless an institution so
qualifies, its borrowing privileges from a Federal Home Loan Bank may be
restricted, and it may be subject to other operating limitations. To meet the
Qualified Thrift Lender Test ("QTL Test"), an institution must maintain at
least 65% of its assets in "Qualified Thrift Investments," which under the
regulations consist of (i) loans made to purchase, refinance, construct,
improve or repair domestic residential or manufactured housing, (ii) home
equity loans, (iii) securities backed by or representing an interest in
mortgages on domestic, residential, or manufactured housing, and (iv)
obligations issued by federal deposit insurance agencies. Subject to a 15%-of-
assets limitation, "Qualified Thrift Investments" may also include consumer
loans, investments in certain subsidiaries, loans for construction of schools,
churches, nursing homes and hospitals, and 200% of investments in loans for
low-to-moderate-income housing and certain other community oriented
investments.
75
<PAGE>
In September, 1996, the Economic Growth and Regulatory Paperwork Reduction
Act of 1996 (the "Economic Growth Act of 1996") was signed into law and
contained provisions which significantly affected the QTL Test.
The Economic Growth Act of 1996 liberalized the QTL Test for savings
associations by permitting them to satisfy a similar, but different, 60% asset
test under the Internal Revenue Code. Alternatively, savings associations may
meet the QTL Test by satisfying a more liberal 65% asset test that allows an
institution to include small business, credit card and education loans as
qualified investments for purposes of the test. Furthermore, consumer loans
now count as qualified thrift investments up to 20% of portfolio assets. On
November 27, 1996, the OTS issued an Interim Final Rule that implements
provisions of the Economic Growth Act of 1996, including the amended QTL Test.
At June 30, 1997, approximately 95.57% of Central and Southern Bank of North
Georgia's assets were invested in Qualified Thrift Investments as currently
defined.
Liquidity Requirements. Thrift institutions, including Central and Southern
Bank of North Georgia, are required to maintain average daily balances of
liquid assets sufficient to meet the institution's foreseeable cash needs.
Specifically, the Central and Southern Bank of North Georgia must maintain
liquid assets (consisting of cash, certain time deposits, bankers acceptance,
highly rated corporate debt and commercial paper, securities of certain mutual
funds, and specific U.S. government, state or federal agency obligations) of
not less than 5% of the total amount of the institution's net withdrawable
savings deposits plus short-term borrowings, and to maintain average daily
balances of short-term liquid assets of not less than 1% of such total amount.
The liquidity ratio of the Central and Southern Bank of North Georgia at June
30, 1997, was 8.54%.
76
<PAGE>
REPORT ON FORM 10-K
Premier's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, as filed with the SEC, is available to shareholders who make written
request therefore to Premier at 2180 Atlanta Plaza, 950 East Paces Ferry Road,
Atlanta, Georgia 30326. Copies of exhibits and basic documents filed with that
report or referenced therein will be furnished to shareholders of record upon
request.
EXPERTS
The consolidated financial statements of Premier appearing in this Joint
Proxy Statement/Prospectus have been audited by Mauldin & Jenkins, L.L.C.,
independent accountants, to the extent and for the years indicated in their
report appearing elsewhere herein, and are included in reliance upon such
report and upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Citizens appearing in this Joint Proxy
Statement/Prospectus have been audited by Porter Keadle Moore L.L.P. to the
extent and for the years indicated in their report appearing elsewhere herein,
and are included in reliance upon such report and upon the authority of said
firm as experts in accounting and auditing.
OPINIONS
The legality of the shares of the Premier Common Stock to be issued in the
Merger will be passed upon by Womble Carlyle Sandridge & Rice, PLLC, Atlanta,
Georgia. Certain income tax consequences of the Merger will be passed upon by
Kilpatrick Stockton LLP, Atlanta, Georgia.
ADDITIONAL PROPOSAL FOR PREMIER SHAREHOLDERS
BACKGROUND; CURRENT PLAN TERMS
Effective June 15, 1997, Premier established the Premier Directors Plan,
following shareholder approval of the Premier Directors Plan at the Premier
1997 Annual Meeting of Shareholders. As adopted, the Premier Directors Plan
permits eligible persons to defer receipt of retainer fees, meeting fees, or
both (herein, "Directors' Fees") and to have such amounts applied toward the
grant of options to purchase shares of Premier Common Stock. Members of the
Board of Directors of Premier and members of the boards of directors of
subsidiaries of Premier (herein, "Directors") are eligible to participate in
the Premier Directors Plan. A total of 150,000 shares of Premier Common Stock
is issuable pursuant to the Premier Directors Plan.
TERMS OF THE PREMIER DIRECTORS PLAN AS PROPOSED TO BE AMENDED
The Board of Directors of Premier has determined that it would be in the
best interests of Premier to amend the Premier Directors Plan. The Plan,
proposed to be amended and restated as the "Premier Bancshares, Inc.
Directors' Deferred Stock Unit Plan," would permit each Director to elect in
advance to defer some or all of his or her Directors' Fees and to apply such
amounts toward the grant of deferred stock units. Upon settlement, the
deferred stock units would be payable in cash or shares of Premier Common
Stock, as elected by the Director. The number of shares issuable pursuant to
the Premier Directors Plan is not proposed to be increased. A copy of the form
of the Premier Directors Plan, as proposed to be amended and restated, is
attached to this Joint Proxy Statement/Prospectus as Exhibit E.
Under the terms of the Premier Directors Plan as proposed to be amended,
each Director who makes a deferral election would receive, in lieu of
Directors' fees, an award of deferred stock units on the grant date that would
equal such number of shares of Premier Common Stock as could be purchased for
the amount of deferred Directors' Fees on that date, based on a price equal to
85% of the fair market value of the shares as of such grant date. Awards would
be granted on a quarterly basis.
77
<PAGE>
The Plan would also enable Directors who have elected to defer some or all
of their Directors' Fees to receive dividend equivalent grants on the
quarterly award date coincident with or next following the dividend payment
date to which the dividend equivalent award relates. The amount of each
dividend equivalent award would be based on the number of deferred stock units
credited to the Director as of the record date for the dividend, divided by
the fair market value of the Premier Common Stock on such date.
The award of units to a Director under the Premier Directors Plan would be
nontransferable and fully vested at all times. Upon termination of service as
Director for any reason, or upon a change in control of Premier, the Director
(or his or her beneficiary in the event of his or her death) would be entitled
to receive, based on an election made in advance of termination, a payment in
cash or shares of Premier Common Stock equal to the number (or value) of units
credited to his or her account.
The Plan would continue to be administered by the Compensation Committee of
the Premier Board of Directors. Approximately 29 Directors are eligible to
participate in the Premier Directors Plan at this time, although that number
is subject to change in the future. Currently, a member of the Premier Board
of Directors earns $1,000 for each Board meeting (quarterly or special)
attended and $100 for each committee meeting attended, which amount, if so
elected by the Director, could be applied toward the grant of deferred stock
units under the Premier Directors Plan.
The Board of Directors has determined that it is in the best interests of
Premier to amend the Premier Directors Plan in order to continue to encourage
Directors to increase their proprietary interest in Premier in a manner tied
to the value of the Premier Common Stock, while at the same time permitting
Directors to defer recognition of income on Directors' Fees for federal tax
purposes and to elect to receive settlement of such deferred amounts in cash
or shares of Premier Common Stock. As noted above, the number of shares of
Premier Common Stock issuable under the Premier Directors Plan is not proposed
to be increased.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Under current interpretations of Treasury Regulations, the timely election
by a Director to defer cash compensation under the Premier Directors Plan
should not result in the receipt of taxable income by the individual at that
time or the allowance of a deduction by Premier for federal income tax
purposes. A Director who defers compensation under the Premier Directors Plan
will realize ordinary income, however, at the time such compensation is
actually or constructively received by the individual. The amount of income
will equal either the amount of the cash payment or the aggregate fair market
value of the shares of Premier Common Stock distributed to the Director. To
the extent that any participant realizes such ordinary income, Premier will be
entitled to a corresponding deduction for federal income tax purposes.
The affirmative vote of a majority of the shares of Premier Common Stock
outstanding and entitled to vote at the Premier Meeting is required to approve
the Premier Directors Plan, as proposed to be amended and restated. The Board
of Directors of Premier recommends that the shareholders vote FOR the proposal
to amend the Premier Directors Plan. For these purposes, shares of Premier
Common Stock that are present, or represented by proxy, at the Premier Meeting
will be counted for quorum purposes regardless of whether the holder of the
shares or proxy fails to vote on any matter or whether a broker with
discretionary authority fails to exercise its discretionary authority with
respect to any matter.
78
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
PREMIER BANCSHARES, INC.
Independent Auditor's Report.............................................. F-1
Consolidated Balance Sheets............................................... F-2
Consolidated Statements of Income......................................... F-3
Consolidated Statements of Stockholders' Equity........................... F-4
Consolidated Statements of Cash Flows..................................... F-5
Notes to Consolidated Financial Statements................................ F-7
CITIZENS GWINNETT BANKSHARES, INC.
Report of Independent Certified Public Accountants........................ F-33
Consolidated Balance Sheets............................................... F-34
Consolidated Statements of Earnings....................................... F-35
Consolidated Statements of Changes in Stockholders' Equity................ F-36
Consolidated Statements of Cash Flows..................................... F-37
Notes to Consolidated Financial Statements................................ F-39
</TABLE>
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INDEPENDENT AUDITOR'S REPORT............................................... F-1
FINANCIAL STATEMENTS
Consolidated balance sheets............................................... F-2
Consolidated statements of income......................................... F-3
Consolidated statements of stockholders' equity........................... F-4
Consolidated statements of cash flows..................................... F-5
Notes to consolidated financial statements................................ F-7
</TABLE>
<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.
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,
1999with 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
Interestpayable 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, 1996 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, 1996 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> <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
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 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):
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> <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>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Citizens Gwinnett Bankshares, Inc.
We have audited the accompanying consolidated balance sheets of Citizens
Gwinnett Bankshares, Inc. and subsidiary as of December 31, 1996 and 1995, and
the related consolidated statements of earnings, changes in 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Citizens
Gwinnett Bankshares, Inc. and subsidiary 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.
PORTER KEADLE MOORE, LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
February 4, 1997
F-33
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash and due from banks, including reserve
requirements of $879,000
and $601,000........................................ $ 3,878,453 3,507,107
Federal funds sold................................... 8,501,000 65,000
------------ -----------
Cash and cash equivalents.......................... 12,379,453 3,572,107
------------ -----------
Interest-bearing deposits with other banks........... 100,000 100,000
Securities available for sale........................ 51,323,057 36,296,553
Loans................................................ 87,344,185 63,918,288
Less: Allowance for loan losses..................... 1,034,519 784,004
------------ -----------
Loans, net......................................... 86,309,666 63,134,284
Premises and equipment............................... 5,163,898 3,675,174
Other assets......................................... 2,052,770 1,432,102
------------ -----------
$157,328,844 108,210,220
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand.............................................. $ 25,380,814 18,143,840
Interest-bearing demand............................. 20,138,302 14,081,478
Savings............................................. 39,014,061 18,826,249
Time................................................ 60,781,042 46,032,782
------------ -----------
Total deposits..................................... 145,314,219 97,084,349
Federal funds purchased.............................. -- 680,000
Notes payable........................................ 230,845 324,213
Accounts payable and accrued liabilities............. 1,479,347 1,053,573
------------ -----------
Total liabilities.................................. 147,024,411 99,142,135
Commitments
Stockholders' equity:
Common stock, par value $10, authorized 10,000,000
shares; issued and outstanding 242,350 shares...... 2,423,500 2,423,500
Additional paid-in capital.......................... 3,708,439 3,708,439
Retained earnings................................... 4,223,706 2,886,786
Unrealized gain (loss) on securities available for
sale, net of tax................................... (51,212) 49,360
------------ -----------
Total stockholders' equity......................... 10,304,433 9,068,085
------------ -----------
$157,328,844 108,210,220
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-34
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Interest income:
Interest and fees on loans................... $ 7,924,324 5,551,613 4,596,384
Interest on federal funds sold............... 528,297 317,251 100,208
Interest on interest-bearing deposits with
other banks................................. 10,496 12,020 58,945
Interest on investment securities:
U.S. Treasuries............................. 188,673 71,498 119,754
U.S. Government agencies and mortgage-
backed..................................... 1,723,024 1,200,741 840,914
State, county and municipal................. 644,092 277,795 77,662
----------- --------- ---------
Total interest income...................... 11,018,906 7,430,918 5,793,867
----------- --------- ---------
Interest expense:
Interest on deposits:
Demand...................................... 467,861 381,877 300,591
Savings..................................... 1,338,648 667,368 452,757
Time........................................ 3,278,995 2,119,513 1,273,865
----------- --------- ---------
5,085,504 3,168,758 2,027,213
Other interest expense........................ 19,687 42,548 31,670
----------- --------- ---------
Total interest expense..................... 5,105,191 3,211,306 2,058,883
----------- --------- ---------
Net interest income........................ 5,913,715 4,219,612 3,734,984
Provision for loan losses..................... 302,608 118,400 80,000
----------- --------- ---------
Net interest income after provision for
loan losses............................... 5,611,107 4,101,212 3,654,984
----------- --------- ---------
Other income:
Service charges on deposit accounts.......... 614,892 473,080 443,951
Gain (loss) on sale of investment securities. 12,037 (29,605) --
Other........................................ 210,823 119,274 104,687
----------- --------- ---------
Total other income......................... 837,752 562,749 548,638
----------- --------- ---------
Other expenses:
Salaries and employee benefits............... 2,501,015 1,955,646 1,489,169
Occupancy.................................... 611,602 380,059 308,799
Other........................................ 1,329,136 896,060 806,410
----------- --------- ---------
Total other expenses....................... 4,441,753 3,231,765 2,604,378
----------- --------- ---------
Earnings before income taxes............... 2,007,106 1,432,196 1,599,244
Income taxes.................................. 495,694 427,064 594,499
----------- --------- ---------
Net earnings............................... $ 1,511,412 1,005,132 1,004,745
=========== ========= =========
Net earnings per share........................ $ 6.24 4.12 4.02
=========== ========= =========
Weighted average number of shares outstanding. 242,350 244,236 250,000
=========== ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-35
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS)
ON
SECURITIES
ADDITIONAL GUARANTEE OF AVAILABLE
COMMON PAID-IN RETAINED INDEBTEDNESS FOR SALE,
STOCK CAPITAL EARNINGS OF ESOP NET OF TAX TOTAL
---------- ---------- --------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993................... $2,500,000 3,900,000 1,193,008 (22,500) -- 7,570,508
Unrealized gain on
securities available
for sale upon change in
accounting principle,
net of tax of $16,473.. -- -- -- -- 24,710 24,710
Principal reduction on
ESOP indebtedness...... -- -- -- 22,500 -- 22,500
Cash dividend ($.60 per
share)................. -- -- (150,000) -- -- (150,000)
Net earnings............ -- -- 1,004,745 -- -- 1,004,745
Change in unrealized
gain (loss) on
securities available
for sale, net of tax... -- -- -- -- (589,884) (589,884)
---------- --------- --------- ------- -------- ----------
Balance, December 31,
1994................... 2,500,000 3,900,000 2,047,753 -- (565,174) 7,882,579
Distributions to
dissenting
stockholders........... (76,500) (191,561) -- -- -- (268,061)
Cash dividend ($.68 per
share)................. -- -- (166,099) -- -- (166,099)
Net earnings............ -- -- 1,005,132 -- -- 1,005,132
Change in unrealized
gain (loss) on
securities available
for sale, net of tax... -- -- -- -- 614,534 614,534
---------- --------- --------- ------- -------- ----------
Balance, December 31,
1995................... 2,423,500 3,708,439 2,886,786 -- 49,360 9,068,085
Cash dividend ($.72 per
share)................. -- -- (174,492) -- -- (174,492)
Net earnings............ -- -- 1,511,412 -- -- 1,511,412
Change in unrealized
gain (loss) on
securities available
for sale, net of tax... -- -- -- -- (100,572) (100,572)
---------- --------- --------- ------- -------- ----------
Balance, December 31,
1996................... $2,423,500 3,708,439 4,223,706 -- (51,212) 10,304,433
========== ========= ========= ======= ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-36
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ----------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings............................ $ 1,511,412 1,005,132 1,004,745
Adjustments to reconcile net earnings to
net cash provided by operating
activities:
Depreciation, amortization and accre-
tion................................... 163,782 186,121 218,292
Provision for loan losses............... 302,608 118,400 80,000
Loss (gain) on sales of investment secu-
rities................................. (12,037) 29,605 --
Losses (gains) and provision for losses
on other real estate, net.............. (35,373) (114,638) 25,175
Provision for deferred tax expense (ben-
efit).................................. (85,640) 3,720 (32,301)
Change in:
Interest receivable.................... (345,766) (328,083) (116,872)
Interest payable....................... 333,325 480,509 (29,074)
Other assets........................... (132,567) (17,431) (29,427)
Accounts payable and accrued liabili-
ties.................................. 92,449 (185,348) 64,160
----------- ----------- ----------
Net cash provided by operating activi-
ties................................. 1,792,193 1,177,987 1,184,698
----------- ----------- ----------
Cash flows from investing activities:
Net change in interest-bearing deposits
with other banks....................... -- 297,000 2,477,000
Proceeds from maturities of investment
securities held to maturity............ -- 50,000 125,531
Proceeds from sales of securities avail-
able for sale.......................... 7,786,368 3,466,600 --
Proceeds from calls and maturities of
securities available for sale.......... 13,539,143 4,284,756 2,735,904
Purchase of securities held to maturity. -- (858,065) (3,110,513)
Purchase of securities available for
sale................................... (36,359,514) (22,232,145) (3,014,006)
Net change in loans..................... (23,477,990) (15,347,641) (3,445,872)
Purchase of premises and equipment...... (1,790,239) (1,233,765) (163,300)
Proceeds from sales of other real es-
tate................................... 35,375 1,279 93,956
Organization costs...................... -- (51,723) --
----------- ----------- ----------
Net cash used in investing activities. (40,266,857) (31,623,704) (4,301,300)
----------- ----------- ----------
Cash flows from financing activities:
Net change in demand and savings depos-
its.................................... 33,481,610 10,630,109 839,889
Net change in time deposits............. 14,748,260 20,697,865 (1,904,564)
Change in federal funds purchased....... (680,000) 680,000 --
Net change in notes payable............. (93,368) (130,299) (136,368)
Dividends paid.......................... (174,492) (166,099) (150,000)
Payments to dissenting stockholders..... -- (268,061) --
----------- ----------- ----------
Net cash provided (used) by financing
activities........................... 47,282,010 31,443,515 (1,351,043)
----------- ----------- ----------
Net change in cash and cash equivalents.. 8,807,346 997,798 (4,467,645)
Cash and cash equivalents at beginning of
year.................................... 3,572,107 2,574,309 7,041,954
----------- ----------- ----------
Cash and cash equivalents at end of year. $12,379,453 3,572,107 2,574,309
=========== =========== ==========
</TABLE>
F-37
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ----------
<S> <C> <C> <C>
Supplemental disclosures of cash flow infor-
mation:
Cash paid during the year for:
Interest................................... $4,771,866 2,730,797 2,087,957
Income taxes............................... $ 455,750 662,500 449,311
Noncash investing activities:
Transfer of loans to other real estate..... $ -- 189,270 268,874
Financed sales of other real estate........ $ -- 235,000 100,000
Transfer of securities held to maturity to
securities available
for sale.................................. $ -- 4,426,143 17,110,926
Change in unrealized gain (loss) on securi-
ties available for sale,
net of tax................................ $ (100,572) (614,534) 565,174
Noncash financing activities:
Reduction of note payable and guarantee of
ESOP indebtedness......................... $ -- -- 22,500
</TABLE>
See accompanying notes to consolidated financial statements.
F-38
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Citizens Gwinnett Bankshares, Inc. (the "Company") is a one bank holding
Company whose business is conducted by its wholly-owned bank subsidiary,
Citizens Bank of Gwinnett (the "Bank"). The Company is subject to regulation
under the Bank Holding Company Act of 1956.
The Bank is a commercial bank that serves Gwinnett, Fulton and Forsyth
counties. The Bank is chartered and regulated by the Georgia Department of
Banking and Finance, is insured and subject to regulation by the Federal
Deposit Insurance Corporation, and is a member of the Federal Reserve System.
The Bank provides a full range of customary banking services.
Basis of Presentation and Reclassification
The consolidated financial statements include the accounts of the Company
and the Bank. All intercompany accounts and transactions have been eliminated
in consolidation. Certain prior year amounts have been reclassified to conform
to the current year presentation.
The accounting principles followed by the Company and the Bank, and the
methods of applying these principles, conform with generally accepted
accounting principles ("GAAP") and with general practices within the banking
industry. In preparing financial statements in conformity with GAAP,
management is required to make estimates and assumptions that affect the
reported amounts in the consolidated financial statements. Actual results
could differ significantly from those estimates. Material estimates common to
the banking industry that are particularly susceptible to significant change
in the near term include, but are not limited to, the determination of the
allowance for loan losses, the valuation of real estate acquired in connection
with or in lieu of foreclosure on loans, and valuation allowances associated
with the realization of deferred tax assets which are based on future taxable
income.
Cash and Cash Equivalents
For presentation purposes in the consolidated statements of cash flows, cash
and cash equivalents include cash on hand, amounts due from banks and federal
funds sold.
Investment Securities
The Bank classifies its securities in one of three categories: trading,
available for sale, or held to maturity. Trading securities are bought and
held principally for the purpose of selling them in the near term. Held to
maturity securities are those securities for which the Bank has the ability
and intent to hold the security until maturity. All other securities not
included in trading or held to maturity are classified as available for sale.
At December 31, 1996 and 1995 there were no trading securities or securities
held to maturity.
Available for sale securities consist of investment securities not
classified as trading securities or held to maturity securities and are
recorded at fair value. Held to maturity securities are recorded at cost,
adjusted for the amortization or accretion of premiums or discounts.
Unrealized holding gains and losses, net of the related tax effect, on
securities available for sale are excluded from earnings and are reported as a
separate component of stockholders' equity until realized. Transfers of
securities between categories are recorded at fair value at the date of
transfer. Unrealized holding gains or losses associated with transfers of
securities from held to maturity to available for sale are recorded as a
separate component of stockholders' equity.
A decline in the market value of any available for sale or held to maturity
investment below cost that is deemed other than temporary is charged to
earnings and establishes a new cost basis for the security.
F-39
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to the yield. Realized gains and losses for
securities classified as available for sale and held to maturity are included
in earnings and are derived using the specific identification method for
determining the cost of securities sold.
Loans and Allowance for Loan Losses
Loans are stated at principal amount outstanding, net of the allowance for
loan losses. Interest on loans is calculated by using the simple interest
method on daily balances of the principal amount outstanding.
The allowance for loan losses is established through a provision for loan
losses charged to expense. Loans are charged against the allowance for loan
losses when management believes that the collectibility of the principal is
unlikely. The allowance represents an amount which, in management's judgement,
will be adequate to absorb probable losses on existing loans that may become
uncollectible.
Management's judgement in determining the adequacy of the allowance is based
on evaluations of the collectibility of loans. These evaluations take into
consideration such factors as changes in the nature and volume of the loan
portfolio, current economic conditions that may affect the borrower's ability
to pay, overall portfolio quality, and review of specific problem loans.
Management believes that the allowance for possible loan losses is adequate.
While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's allowance
for possible loan losses. Such agencies may require the Bank to recognize
additions to the allowance based on their judgments of information available
to them at the time of their examination.
Effective January 1, 1995, the Bank adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" as amended for SFAS No. 118, "Accounting
by Creditors for Impairment of a Loan--Income Recognition and Disclosure." A
loan is impaired when, based on current information and events, it is probable
that all amounts due according to the contractual terms of the loan agreement
will not be collected. Impaired loans are measured based on the present value
of expected future cash flows, discounted at the loan's effective interest
rate, or at the loan's observable market price, or at the fair value of the
collateral of the loan if the loan is collateral dependent. Interest income is
recognized using the cash-basis method of accounting during the period in
which the loans were impaired.
Premises and Equipment
Premises and equipment are carried at cost. When assets are retired or
otherwise disposed of, the cost and related accumulated depreciation are
removed from the accounts, and any resulting gain or loss is reflected in
earnings for the period. The cost of maintenance and repairs is charged to
expense as incurred, whereas significant renewals and betterments are
capitalized.
Depreciation expense is computed using the straight-line method over the
following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements 15-40 years
Furniture, fixtures and equipment 5-10 years
</TABLE>
F-40
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
Other Real Estate
Properties acquired through foreclosure are carried at the lower of cost
(defined as fair value at foreclosure) or fair value less estimated costs to
dispose. Accounting literature defines fair value as the amount that is
expected to be received in a current sale between a willing buyer and seller
other than a forced or liquidation sale. Fair values at foreclosure are based
on appraisals. Losses arising from the acquisition of foreclosed properties
are charged against the allowance for loan losses. Subsequent writedowns are
provided by a charge to income through an allowance for losses on other real
estate in the period in which the need arises.
Income Taxes
Deferred tax assets and liabilities are recorded for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Future tax benefits, such as net operating loss carryforwards are
recognized to the extent that realization of such benefits is more likely than
not. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which the assets and
liabilities are expected to be recovered or settled. The effect on deferred
tax assets and liabilities of a change in tax rates is recognized in income
tax expense in the period that includes the enactment date.
In the event the future tax consequences of differences between the
financial reporting bases and the tax bases of the Company's assets and
liabilities results in deferred tax assets, an evaluation of the probability
of being able to realize the future benefits indicated by such asset is
required. A valuation allowance is provided for the portion of the deferred
tax asset when it is more likely than not that some portion or all of the
deferred tax asset will not be realized. In assessing the realizability of the
deferred tax assets, management considers the scheduled reversals of deferred
tax liabilities, projected future taxable income, and tax planning strategies.
Net Earnings Per Share
Net earnings per common share is calculated based on the weighted average
number of shares outstanding during the period, which includes the shares
owned by the Company's Employee Stock Ownership Plan ("ESOP"). Stock options
granted, as described in note 12, are considered common stock equivalents.
These options are not included in the computation of net earnings per share as
the effect of their inclusion does not result in material dilution.
(2) FORMATION OF CITIZENS GWINNETT BANKSHARES, INC.
On February 21, 1995, stockholders of Citizens Bank of Gwinnett approved a
plan of merger and reorganization for the purpose of becoming and operating
the bank holding company, Citizens Gwinnett Bankshares, Inc. Pursuant to the
reorganization plan, consummated on March 31, 1995, stockholders of the Bank
exchanged their shares of Citizens Bank of Gwinnett $10 par value common stock
for $10 par value common stock of the Company (a 1:1 exchange). A total of
242,350 shares of the Bank's total 250,000 shares outstanding were exchanged
for stock of the Company. Four stockholders, representing 7,650 shares of Bank
common stock, exercised dissenter's rights in connection with the
reorganization and thereby received remuneration for those shares in lieu of
stock of the Company. The transaction was accounted for similar to a pooling
of interests.
F-41
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) SECURITIES AVAILABLE FOR SALE
Securities available for sale at December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasuries.................... $ 4,287,631 6,256 1,037 4,292,850
U.S. Government agencies........... 26,566,225 22,754 171,311 26,417,668
State, county and municipal........ 12,979,005 218,297 49,392 13,147,910
Mortgage-backed securities......... 7,575,549 39,859 150,779 7,464,629
----------- ------- ------- ----------
Total............................. $51,408,410 287,166 372,519 51,323,057
=========== ======= ======= ==========
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasuries.................... $ 2,492,333 45,515 -- 2,537,848
U.S. Government agencies........... 15,789,725 115,231 98,621 15,806,335
State, county and municipal........ 8,781,255 187,930 9,012 8,960,173
Mortgage-backed securities......... 9,150,973 3,194 161,970 8,992,197
----------- ------- ------- ----------
Total............................. $36,214,286 351,870 269,603 36,296,553
=========== ======= ======= ==========
</TABLE>
F-42
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) SECURITIES AVAILABLE FOR SALE, CONTINUED
The amortized cost and fair value of securities available for sale at
December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers have the
right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
----------- ----------
<S> <C> <C>
U.S. Treasuries
Within 1 year.......................................... $ 1,981,361 1,982,490
1 to 5 years........................................... 2,306,270 2,310,360
----------- ----------
4,287,631 4,292,850
=========== ==========
U.S. Government agencies:
Within 1 year.......................................... 5,473,944 5,474,255
1 to 5 years........................................... 8,792,545 8,787,935
5 to 10 years.......................................... 5,494,565 5,477,304
More than 10 years..................................... 6,805,171 6,678,174
----------- ----------
26,566,225 26,417,668
=========== ==========
State, county and municipal:
Within 1 year.......................................... 625,131 627,563
1 to 5 years........................................... 858,875 883,875
5 to 10 years.......................................... 767,148 794,205
More than 10 years..................................... 10,727,851 10,842,267
----------- ----------
12,979,005 13,147,910
=========== ==========
Total securities other than mortgage-backed securities:
Within 1 year.......................................... 8,080,436 8,084,308
1 to 5 years........................................... 11,957,690 11,982,170
5 to 10 years.......................................... 6,261,713 6,271,509
More than 10 years..................................... 17,533,022 17,520,441
Mortgage-backed securities............................. 7,575,549 7,464,629
----------- ----------
$51,408,410 51,323,057
=========== ==========
</TABLE>
Proceeds from sales of securities available for sale totaled $7,786,368 and
$3,466,600 during 1996 and 1995, respectively. Gross gains of $47,360 and
$3,237 and gross losses of $35,323 and $32,842 were realized on those sales.
There were no securities sold during 1994.
During 1995, the Bank used the one-time reassessment provisions of the
"Special Report--A Guide to Implementation of SFAS No. 115 on Accounting for
Certain Investments in Debt and Equity Securities" to transfer all of its held
to maturity securities which had an amortized cost of $4,426,143 and a net
unrealized gain of $138,098 to the available for sale category. The special
report allowed the Company to reassess the appropriateness of its
classifications of all investment securities prior to December 31, 1995
without calling into question the Company's intent to hold investment
securities to maturity in the future.
F-43
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) SECURITIES AVAILABLE FOR SALE, CONTINUED
Securities with a carrying value of $4,283,000 and $4,134,000 at December
31, 1996 and 1995, respectively, were pledged to secure public deposits.
(4) LOANS
Major classifications of loans are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Commercial............................................... $53,370,705 43,680,243
Real estate--construction................................ 22,480,203 11,938,723
Consumer................................................. 11,493,277 8,299,322
----------- ----------
Total loans.......................................... 87,344,185 63,918,288
Less: Allowance for loan losses.......................... 1,034,519 784,004
----------- ----------
Total net loans...................................... $86,309,666 63,134,284
=========== ==========
</TABLE>
The Bank grants loans and extensions of credit to individuals and a variety
of firms and corporations located in certain Georgia counties including
Gwinnett and portions of Fulton and Forsyth. Although the Bank has a
diversified loan portfolio, a substantial portion of the loan portfolio is
collateralized by improved and unimproved real estate and is affected by the
real estate market.
Changes in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- -------- --------
<S> <C> <C> <C>
Balance at beginning of year.................... $ 784,004 774,122 691,090
Amounts charged off............................. (88,165) (131,541) (118,152)
Recoveries on amounts previously charged off.... 36,072 23,023 121,184
Provision charged to operating expenses......... 302,608 118,400 80,000
---------- -------- --------
Balance at end of year.......................... $1,034,519 784,004 774,122
========== ======== ========
</TABLE>
(5) PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Land....................................................... $ 691,062 691,062
Buildings and improvements................................. 2,913,756 2,705,294
Furniture and equipment.................................... 2,093,365 1,686,170
Construction in progress................................... 1,188,149 14,982
---------- ---------
6,886,332 5,097,508
Less: Accumulated depreciation............................. 1,722,434 1,422,334
---------- ---------
$5,163,898 3,675,174
========== =========
</TABLE>
Depreciation expense was $301,515, $183,295 and $169,407 for 1996, 1995 and
1994, respectively.
F-44
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) DEPOSITS
At December 31, 1996, maturities of time deposits are as follows:
<TABLE>
<S> <C>
Maturing In:
1997................................................................ $47,760,446
1998................................................................ 7,235,537
1999................................................................ 2,251,403
2000................................................................ 1,877,526
2001 and thereafter................................................. 1,656,130
-----------
Total........................................................... $60,781,042
===========
</TABLE>
Time deposits of $100,000 or more were approximately $21,019,000 and
$17,666,000 at December 31, 1996 and 1995, respectively. Deposits from related
parties totaled approximately $1,856,000 and $1,511,000 at December 31, 1996
and 1995, respectively.
(7) NOTES PAYABLE
The Bank's note payable represents the liability for the repayment of
industrial revenue bonds issued by the City of Duluth Downtown Development
Authority, the proceeds of which were used to finance the construction of
banking facilities. The note bears interest at eighty-five percent (85%) of
the prime interest rate, payable monthly. Monthly principal payments of
$11,364 began in May of 1987 and will continue through March of 1998. The note
is secured by all the property financed by the bond issuance.
During 1995, the Company entered into a $100,000 line of credit note payable
with another Bank. The note bears interest at the prime interest rate.
Principal and interest are due at maturity in December 1997.
(8) INCOME TAXES
The components of income tax expense for the years ended December 31, 1996,
1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Current.............................................. $581,334 423,344 626,800
Deferred (reduction)................................. (85,640) 3,720 (32,301)
-------- ------- -------
Total income tax expense............................. $495,694 427,064 594,499
======== ======= =======
</TABLE>
Income tax expense differs from the "expected" tax amount (computed by
applying the Federal corporate statutory rate to earnings before income taxes)
principally due to tax exempt interest income.
F-45
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) INCOME TAXES, CONTINUED
The following summarizes the sources and expected tax consequences of future
taxable deductions (income) which comprise the net deferred tax asset. The net
deferred tax asset is included as a component of other assets at December 31,
1996 and 1995.
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Writedowns on other real estate and repossessions.......... $ 45,170 90,452
Allowance for loan losses.................................. 267,706 152,836
Unrealized loss on securities available for sale........... 34,141 --
State tax credits.......................................... 28,332 --
-------- --------
Gross deferred tax asset................................... 375,349 243,288
-------- --------
Deferred tax liabilities:
Accumulated depreciation................................... (80,150) (73,673)
Other, net................................................. (6,142) (339)
Unrealized gain on securities available for sale........... -- (32,906)
-------- --------
Gross deferred tax liability............................... (86,292) (106,918)
-------- --------
Net deferred tax asset.................................... $289,057 136,370
======== ========
</TABLE>
(9) RELATED PARTY TRANSACTIONS
The Bank conducts transactions with directors and executive officers,
including companies in which they have beneficial interest, in the normal
course of business. It is the policy of the Bank that loan transactions with
directors and executive officers be made on substantially the same terms as
those prevailing at the time made for comparable loans to other persons. The
following is a summary of activity for related party loans for 1996:
<TABLE>
<S> <C>
Beginning balance................................................... $2,412,000
New loans.......................................................... 718,000
Repayments......................................................... (640,000)
----------
Ending balance...................................................... $2,490,000
==========
</TABLE>
(10) COMMITMENTS
The Bank is a party to financial instruments with off-balance-sheet risk in
the normal course of business to meet the financing needs of its customers.
These financial instruments include commitments to extend credit, standby
letters of credit and financial guarantees. Those instruments involve, to
varying degrees, elements of credit risk in excess of the amount recognized in
the balance sheet. The contract amounts of those instruments reflect the
extent of involvement the Bank has in particular classes of financial
instruments.
The exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit and standby
letters of credit and financial guarantees written is represented by the
contractual amount of those instruments. The Bank uses the same credit
policies in making commitments and conditional obligations as it does for on-
balance-sheet instruments.
F-46
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) COMMITMENTS, CONTINUED
In most cases, the Bank does require collateral or other security to support
financial instruments with credit risk.
<TABLE>
<CAPTION>
APPROXIMATE CONTRACT
AMOUNT
----------------------
1996 1995
----------- ----------
<S> <C> <C>
Financial instruments whose contract amounts represent
credit risk:
Commitments to extend credit.......................... $18,604,000 13,286,000
Standby letters of credit and financial guarantees
written.............................................. $ 523,000 606,000
</TABLE>
Commitments to extend credit are agreements to lend to a customer as long as
there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments may expire
without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral obtained,
if deemed necessary by the Bank, upon extension of credit is based on
management's credit evaluation. Collateral held varies but may include
unimproved and improved real estate, certificates of deposit, personal
property, or other acceptable collateral.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the Bank to guarantee the performance of a customer to a
third party. Those guarantees are primarily issued to businesses in the Bank's
delineated trade area. The credit risk involved in issuing letters of credit
is essentially the same as that involved in extending loan facilities to
customers. The Bank holds real estate, equipment, automobiles and customer
deposits as collateral supporting those commitments for which collateral is
deemed necessary. All standby letters of credit and financial guarantees at
December 31, 1996 and 1995 are fully collateralized.
(11) REGULATORY MATTERS
The Bank is 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
Bank's financial statements. Under captial adequacy guidelines and the
regulatory framework for prompt corrective action, the Bank must meet specific
capital guidelines that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated under
regulatory accounting practices. The Bank's 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 Bank to maintain minimum amounts and ratios of total and Tier 1
capital (as defined) to risk-weighted assets and of Tier 1 capital (as
defined) to average assets. Management believes, as of December 31, 1996 and
1995, that the Bank meets all capital adequacy requirements to which it is
subject.
F-47
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) REGULATORY MATTERS, CONTINUED
As of December 31, 1996 the most recent notification from the Federal
Deposit Insurance Corporation categorized the Bank as well capitalized under
the regulatory framework for prompt corrective action. To be categorized as
well capitalized, the Bank must maintain minimum total risk-based, Tier 1
risk-based and Tier 1 leverage ratios as set forth in the table. There are no
conditions or events since that notification that management believes have
changed the institution's category. The Bank's actual capital amounts and
ratios are also presented below. Consolidated amounts do not materially differ
from Bank-only capital amounts and ratios.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
----------------- ---------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
----------- ----- ---------- ----- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
DECEMBER 31, 1996:
Total Capital (to Risk
Weighted Assets)....... $11,337,940 10.9% $8,315,187 8.0% $10,393,984 10.0%
Tier 1 Capital (to Risk
Weighted Assets)....... $10,303,421 9.9% $4,157,594 4.0% $ 6,236,391 6.0%
Tier 1 Capital (to
Average Assets)........ $10,303,421 6.7% $6,161,280 4.0% $ 7,701,600 5.0%
DecEMBER 31, 1995:
Total Capital (to Risk
Weighted Assets)....... $ 9,751,835 12.0% $6,498,964 8.0% $ 8,123,706 10.0%
Tier 1 Capital (to Risk
Weighted Assets)....... $ 8,967,831 11.0% $3,249,482 4.0% $ 4,874,223 6.0%
Tier 1 Capital (to
Average Assets)........ $ 8,967,831 8.4% $4,283,360 4.0% $ 5,354,200 5.0%
</TABLE>
Dividends paid by the Bank are the primary source of funds available to the
Company. Banking regulations limit the amount of dividends that may be paid
without prior approval of the regulatory authorities. These restrictions are
based on the level of regulatory classified assets, the prior year's net
earnings, and the ratio of equity capital to total assets. At December 31,
1996, the Bank could declare dividends up to approximately $760,000 without
prior regulatory consent.
(12) EMPLOYEE AND DIRECTOR BENEFIT PLANS
The Bank provides benefits to its employees through a combined 401(k) Tax
Deferred Savings plan and ESOP (KSOP). The KSOP is available to substantially
all employees subject to certain minimum age and service requirements.
Contributions to the Plan are determined separately for the two portions of
the Plan. Contributions to the Plan are determined annually by the Board of
Directors. Contributions for the years ended December 31, 1996, 1995 and 1994
were approximately $116,000, $107,000 and $103,000, respectively. At December
31, 1996, the ESOP portion of the plan held 11,463 shares which were allocated
to participant accounts.
The Company has an Employee Incentive Stock Option Plan and a Director Stock
Option Plan. The Employee Plan offers stock options to officers and other
employees to encourage continued employment of key personnel by facilitating
their purchase of an equity interest in the Company. These options are granted
at the discretion of the Board of Directors at an exercise price determined by
the Board at the grant date. The options have a term of ten years from the
date of grant. A total of 25,000 shares have been reserved under this plan.
During 1996, 12,200 shares were granted under this plan at an exercise price
of $25.30 per share. No options were granted under this plan during 1995. No
options were exercised during 1996.
F-48
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(12) EMPLOYEE AND DIRECTOR BENEFIT PLANS, CONTINUED
The Director Plan allows for options to be granted to Directors upon
attainment of certain attendance requirements for Board and committee meetings
during the previous calendar year. Each Board member meeting such requirements
shall be granted an option to purchase 400 shares of common stock for their
service. The option price for each option granted under the Director Plan
shall be the book value per share at December 31 of the year for which the
option was granted. These options expire ten years after the date of grant. A
total of 14,000 shares have been reserved under the Directors Plan. During
1996 and 1995, 2,800 shares were granted each year under this plan at an
exercise price of $37.42 and $31.53 per share, respectively. No shares were
exercised during 1996 or 1995.
SFAS No. 123, "Accounting for Stock-Based Compensation," became effective
for the Company January 1, 1996. This statement encourages, but does not
require, entities to compute the fair value of options at the date of grant
and to recognize such costs as compensation expense immediately if there is no
vesting period or ratably over the vesting period of the options. The Company
has chosen not to adopt the cost recognition principles of this statement. No
compensation expense has been recognized in 1996 or 1995 related to the stock
option plans. Had compensation cost been determined based upon the fair value
of the options at the grant dates consistent with the method of the new
statement, the Company's net earnings and net earnings per share would have
been reduced to the proforma amounts indicated below.
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C> <C>
Net earnings As reported $1,511,412 1,005,132
Proforma $1,462,794 1,003,830
Net earnings per share As reported $ 6.24 4.12
Proforma $ 6.04 4.12
</TABLE>
The fair value of each option is estimated on the date of grant using the
minimum value method with the following weighted average assumptions used for
grants in 1996 and 1995, respectively: dividend yield of 2%, risk free
interest rates of 5.11% and 5.03%, and an expected life of 10 years.
A summary status of the Company's Director Stock Option Plan as of December
31, 1996 and 1995, and changes during the years ending on those dates are
presented below:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION OPTION PRICE
SHARES PER SHARE
------ ------------
<S> <C> <C>
Options outstanding at December 31, 1994................. -- --
Options granted in 1995.................................. 2,800 $31.53
-----
Options outstanding at December 31, 1995................. 2,800 $31.53
Options granted in 1996.................................. 2,800 $37.42
-----
Options outstanding at December 31, 1996................. 5,600 $34.48
===== ======
</TABLE>
Options on 12,920 and 2,800 shares were exercisable at December 31, 1996 and
1995, respectively. The weighted average grant-date fair value of options
granted in 1996 and 1995 was $2.36 and $0.75, respectively, for the Director
options and $9.81 in 1996 for the Employee options. Such options have a
weighted average remaining contractual life of approximately 10 years.
F-49
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(13) MISCELLANEOUS OPERATING EXPENSES
Components of other operating expenses which are greater than 1% of interest
income and other operating income are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Deposit insurance premiums............................. $ 2,000 76,541 158,579
Stationery and supplies................................ $133,189 90,681 54,200
Directors fees......................................... $ 88,475 87,650 42,050
Data processing........................................ $142,505 107,654 104,586
</TABLE>
(14) CITIZENS GWINNETT BANKSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION
Balance Sheets
December 31, 1996 and 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Cash..................................................... $ 10,005 9,143
Investment in bank subsidiary............................ 10,252,209 9,017,191
Other assets............................................. 91,288 47,820
----------- ---------
$10,353,502 9,074,154
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable............................................. $ 49,069 6,069
Stockholders' equity..................................... 10,304,433 9,068,085
----------- ---------
$10,353,502 9,074,154
=========== =========
Statements of Earnings
For the Years Ended December 31, 1996 and 1995
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Dividends from subsidiary................................ $ 184,492 492,272
Interest expense......................................... 1,158 3,421
Operating expenses....................................... 11,351 8,214
----------- ---------
Total expenses......................................... 12,509 11,635
----------- ---------
Earnings before income tax benefit and equity in undis-
tributed earnings
of bank subsidiary...................................... 171,983 480,637
Income tax benefit....................................... 3,839 4,417
----------- ---------
Earnings before equity in undistributed earnings of bank
subsidiary.............................................. 175,822 485,054
Equity in undistributed earnings of bank subsidiary...... 1,335,590 520,078
----------- ---------
Net earnings........................................... $ 1,511,412 1,005,132
=========== =========
</TABLE>
F-50
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(14) CITIZENS GWINNETT BANKSHARES, INC. (PARENT COMPANY ONLY) FINANCIAL
INFORMATION, CONTINUED
Statements of Cash Flows
For the Years Ended December 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings.......................................... $ 1,511,412 1,005,132
Adjustments to reconcile net earnings to net cash pro-
vided by operating activities:
Equity in undistributed earnings of bank subsidiary.. (1,335,590) (520,078)
Amortization......................................... 10,350 7,758
Change in other assets............................... (53,818) (3,855)
----------- ---------
Net cash provided by operating activities............ 132,354 488,957
----------- ---------
Cash flows used in investing activities, consisting of
organization costs.................................... -- (51,723)
----------- ---------
Cash flows from financing activities:
Net change in note payable............................ 43,000 6,069
Dividends paid........................................ (174,492) (166,099)
Payments to dissenting stockholders................... -- (268,061)
----------- ---------
Net cash used in financing activities................ (131,492) (428,091)
----------- ---------
Net increase in cash................................... 862 9,143
Cash at beginning of the period........................ 9,143 --
----------- ---------
Cash at end of the period.............................. $ 10,005 9,143
=========== =========
Noncash investing activities:
Change in unrealized loss of subsidiary's securities
available for sale, net of tax....................... $ 100,572 614,534
Exchange of Bank common stock for Company common
stock................................................ $ -- 7,882,579
</TABLE>
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 107, Disclosures about Fair Value of Financial Instruments,
requires disclosure of fair value information about financial instruments,
whether or not recognized on the face of the balance sheet, for which it is
practicable to estimate that value. The assumptions used in the estimation of
the fair value of the Company's financial instruments are detailed below.
Where quoted prices are not available, fair values are based on estimates
using discounted cash flows and other valuation techniques. The use of
discounted cash flows can be significantly affected by the assumptions used,
including the discount rate and estimates of future cash flows. The following
disclosures should not be considered a surrogate of the liquidation value of
the Company, but rather a good-faith estimate of the increase or decrease in
value of financial instruments held by the Company since purchase,
origination, or issuance.
CASH, CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS
For cash, due from banks, federal funds sold and interest-bearing deposits
with other banks, the carrying amount is a reasonable estimate of fair value.
SECURITIES AVAILABLE FOR SALE
Fair values of securities available for sale are based on quoted market
prices.
F-51
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(15) FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED
LOANS
The fair value of fixed rate loans is estimated by discounting the future
cash flows using the current rates at which similar loans would be made to
borrowers with similar credit ratings. For variable rate loans, the carrying
amount is a reasonable estimate of fair value.
DEPOSITS
The fair value of demand deposits, savings accounts and certain money market
deposits is the amount payable on demand at the reporting date. The fair value
of fixed maturity certificates of deposit is estimated by discounting the
future cash flows using the rates currently offered for deposits of similar
remaining maturities.
FEDERAL FUNDS PURCHASED
The carrying value of federal funds purchased is a reasonable estimate of
fair value.
NOTES PAYABLE
Since notes payable bear variable interest rates, the carrying value is a
reasonable estimate of fair value.
COMMITMENTS TO EXTEND CREDIT AND STANDBY LETTERS OF CREDIT
Because commitments to extend credit and standby letters of credit are made
using variable rates, the contract value is a reasonable estimate of fair
value.
LIMITATIONS
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the Company's entire holdings of a particular
financial instrument. Because no market exists for a significant portion of
the Company's financial instruments, fair value estimates are based on many
judgments. These estimates are subjective in nature and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on existing on and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not
considered financial instruments. Significant assets and liabilities that are
not considered financial instruments include deferred income taxes and
premises and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses can have a significant effect
on fair value estimates and have not been considered in the estimates.
F-52
<PAGE>
CITIZENS GWINNETT BANKSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(15) FAIR VALUE OF FINANCIAL INSTRUCTIONS, CONTINUED
The carrying amount and estimated fair values of the Company's financial
instruments at December 31, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Assets:
Cash, cash equivalents and short
term investments............... $12,479,453 12,479,453 3,672,107 3,672,107
Securities available for sale... 51,323,057 51,323,057 36,296,553 36,296,553
Loans, net...................... 86,309,666 85,358,178 63,134,284 62,371,536
Liabilities:
Deposits........................ 145,314,219 145,836,945 97,084,349 97,531,472
Federal funds purchased......... -- -- 680,000 680,000
Notes payable................... 230,845 230,845 324,213 324,213
Unrecognized financial instru-
ments:
Commitments to extend credit.... 18,604,000 18,604,000 13,286,000 13,286,000
Standby letters of credit....... 523,000 523,000 606,000 606,000
</TABLE>
F-53
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made and
entered into as of this 24th day of June, 1997, by and between CITIZENS GWINNETT
BANKSHARES, INC., a Georgia business corporation (hereinafter "Citizens," and
unless the context otherwise requires, the term "Citizens" shall include both
Citizens Gwinnett Bankshares, Inc. and its subsidiary Citizens Bank of Gwinnett
("Citizens Bank")), and PREMIER BANCSHARES, INC., a Georgia business corporation
(hereinafter "Premier," and unless the context otherwise requires, the term
"Premier" shall include Premier Bancshares, Inc. and its subsidiaries, Premier
Bank, Premier Bank FSB, Premier Lending Corporation, Alliance Finance, Inc.,
Central and Southern Bank of Georgia, and Central and Southern Bank of North
Georgia, FSB).
R E C I T A L S :
WHEREAS, the respective boards of directors of Citizens and Premier deem it
advisable and in the best interests of each such entity and their respective
shareholders that Citizens merge with and into Premier (the "Merger"), with
Premier being the surviving corporation and with all of the issued and
outstanding shares of common stock, $10.00 par value per share, of Citizens
("Citizens Stock") (other than shares as to which dissenters' rights have been
perfected) being converted into the right to receive shares of the authorized
common stock, $1.00 par value per share, of Premier ("Premier Stock"), all upon
the terms and conditions hereinafter set forth and as set forth in the Agreement
and Plan of Merger attached hereto as Exhibit "A" and incorporated herein by
----------
reference (the "Merger Agreement"); and
WHEREAS, the boards of directors of the respective entities believe that
the merger of Citizens and Premier and the synergies produced thereby will
greatly enhance and strengthen the franchises and future prospects of both
companies;
NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements herein contained, and other good and valuable
consideration, the receipt and adequacy of which as legally sufficient
consideration are hereby acknowledged, the parties hereto agree as follows:
ARTICLE I
---------
CLOSING
-------
The transactions contemplated herein shall be consummated (the "Closing")
at the offices of Womble Carlyle Sandridge & Rice, PLLC, 1275 Peachtree Street,
N.E., Suite 700, Atlanta, Georgia 30309, on the first business day following
receipt of all approvals from any governmental
<PAGE>
authorities having jurisdiction over the transactions contemplated by this
Agreement and the Merger Agreement, the expiration of any waiting or similar
period required by applicable law, any approval by shareholders of Premier and
Citizens of the Merger, or at such other time and place as may be mutually
satisfactory to the parties hereto (the "Closing Date").
ARTICLE II
----------
MERGER
------
Pursuant to the terms and conditions provided herein, on the Closing Date
Citizens and Premier shall be merged in accordance with and in the manner set
forth in the Merger Agreement. The surviving corporation following the Merger
will be Premier (the "Surviving Corporation") and will operate under the
Articles of Incorporation of Premier and will be the parent holding company of
Citizens Bank of Gwinnett, a Georgia banking corporation, Premier Bank, a
Georgia banking corporation, Central and Southern Bank of Georgia, a Georgia
banking corporation, Premier Bank FSB, a federally chartered savings bank,
Central and Southern Bank of North Georgia, FSB, a federally chartered savings
bank, Premier Lending Corporation, a Georgia business corporation, and Alliance
Finance, Inc., a Georgia business corporation, the latter six of which are
currently wholly-owned subsidiaries of Premier. Upon the terms and conditions
of this Agreement and the Merger Agreement, Premier shall make available on or
before the Effective Date (as defined in the Merger Agreement) for delivery to
the holders of Citizens Stock (i) the number of shares of Premier Stock to be
issued upon conversion of the shares of Citizens Stock and (ii) sufficient funds
to provide for cash payments in lieu of the issuance of fractional shares as
provided in the Merger Agreement, provided, however, that unless and until a
holder of Citizens Stock entitled to receive Premier Stock pursuant to the
Merger shall have surrendered his Citizens Stock certificate(s) or unless
otherwise required by law, the holder of such certificate(s) shall not have any
right to receive payment of any dividends or other distributions on the shares
of Premier Stock or receive any notices sent by Premier to its shareholders or
to vote such shares.
ARTICLE III
-----------
OTHER AGREEMENTS
----------------
3.1 REGISTRATION OF PREMIER STOCK. Premier agrees to file with the
-----------------------------
Securities and Exchange Commission (the "SEC") as soon as reasonably possible a
registration statement (the "Premier Registration Statement") under the
Securities Act of 1933, as amended (the "1933 Act"), on Form S-4 or some other
appropriate form covering the issuance of the shares of Premier Stock to the
shareholders of Citizens pursuant to this Agreement and the Merger Agreement and
to use its best efforts to cause the Premier Registration Statement to become
effective and to remain effective through the Closing Date. Premier agrees to
take any action required to be taken under applicable state securities laws in
connection with the issuance of shares of Premier Stock upon consummation of the
Merger. Citizens agrees to provide Premier reasonable assistance as necessary
2
<PAGE>
in the preparation of the Premier Registration Statement, including, without
limitation, providing Premier with all material facts regarding the operations,
business, assets, liabilities and personnel of Citizens, together with the
audited financial statements of Citizens, all as required by the 1933 Act and
the rules, regulations and practices of the SEC, for inclusion in the Premier
Registration Statement. The Premier Registration Statement shall not cover
resales of Premier Stock by any of the shareholders of Citizens, and Premier
shall have no obligation to cause the Premier Registration Statement to continue
to be effective after the Closing or to prepare or file any post-effective
amendments to the Premier Registration Statement after the Closing.
3.2 MEETING OF SHAREHOLDERS OF CITIZENS AND PREMIER. Citizens and Premier
-----------------------------------------------
shall call a special meeting of their respective shareholders (the "Special
Meetings") to be held not more than forty-five (45) days after the Premier
Registration Statement becomes effective under the 1933 Act for the purpose of
submitting the Merger Agreement to such shareholders for their approval. In
connection with the Special Meetings, Premier and Citizens shall prepare and
submit to their respective shareholders a notice of meeting, proxy statement and
proxy (the "Proxy Materials"), which shall include the final prospectus from the
Premier Registration Statement in the form filed with the SEC.
3.3 ACCESS TO PROPERTIES, BOOKS, ETC. Each party hereto shall allow the
--------------------------------
other party and its authorized representatives full access during normal
business hours from and after the date hereof and prior to the Closing Date to
all of the respective properties, books, contracts, commitments and records of
such party and its subsidiaries and shall furnish the other party and its
authorized representatives such information concerning its affairs and the
affairs of its subsidiaries as the other party may reasonably request provided
that such request shall be reasonably related to the transactions contemplated
by this Agreement and shall not interfere unreasonably with normal operations.
Each party shall cause its and its subsidiaries' personnel, employees and other
representatives to assist the other party in making any such investigation.
During such investigation, the investigating party and its authorized
representatives shall have the right to make copies of such records, files, tax
returns and other materials as it may deem advisable and shall advise the other
party of those items of which copies are made. No investigation made heretofore
or hereafter by either party and its authorized representatives shall affect the
representations and warranties of either such party hereunder.
3.4 CONFIDENTIALITY. Prior to consummation of the Merger, the parties to
---------------
this Agreement will provide one another with information which may be deemed by
the party providing the information to be confidential. Each party agrees that
it will hold and will cause its advisors and agents to hold confidential and
protect all information provided to it by the other party to this Agreement or
such party's affiliates, except that the obligations contained in this Section
3.4 shall not in any way restrict the rights of any party or person to use
information that (i) was known to such party prior to the disclosure by the
other party; (ii) is or becomes generally available to the public other than by
breach of this Agreement; (iii) is provided by one party for disclosure
concerning such party in the Premier Registration Statement; or (iv) otherwise
becomes lawfully available to a party
3
<PAGE>
to this Agreement on a nonconfidential basis from a third party who is not under
an obligation of confidence to the other party to this Agreement. If this
Agreement is terminated prior to the Closing, each party hereto agrees to return
all documents, statements and other written materials, whether or not
confidential, and all copies thereof, provided to it by or on behalf of the
other party to this Agreement. The provisions of this Section 3.4 shall survive
termination, for any reason whatsoever, of this Agreement, and, without limiting
the remedies of the parties hereto in the event of any breach of this Section
3.4, the parties hereto will be entitled to seek injunctive relief against the
other party in the event of a breach or threatened breach of this Section 3.4.
3.5 FULL COOPERATION. The parties shall cooperate fully with each other
----------------
in connection with any acts or actions required to be taken as part of their
respective obligations under this Agreement.
3.6 EXPENSES. All of the expenses incurred by Premier in connection with
--------
the authorization, preparation, execution and performance of this Agreement and
the Merger Agreement including, without limitation, all fees and expenses of its
agents, representatives, counsel and accountants and the fees and expenses
related to filing the Premier Registration Statement and all regulatory
applications with state and federal authorities in connection with the
transactions contemplated hereby and thereby, shall be paid by Premier. All
expenses incurred by Citizens in connection with the authorization, preparation,
execution and performance of this Agreement and the Merger Agreement, including,
without limitation, all fees and expenses of its agents, representatives,
counsel and accountants for Citizens and the cost of reproducing and mailing the
Proxy Materials, shall be paid by Citizens.
3.7 PRESERVATION OF GOODWILL. Each party hereto shall use its best efforts
------------------------
to preserve its business organization and the business organization of its
subsidiaries, to keep available the services of its present employees and of the
present employees of its subsidiaries, and to preserve the goodwill of customers
and others having business relations with such party or its subsidiaries.
3.8 APPROVALS AND CONSENTS. Each party hereto represents and warrants to
----------------------
and covenants with the other that it will use its best efforts, and will cause
its officers, directors, employees and agents and its subsidiaries and any
subsidiary's officers, directors, employees and agents to use their best
efforts, to obtain as soon as is reasonably practicable all approvals and
consents of state and federal departments or agencies required or deemed
necessary for consummation of the transactions contemplated by this Agreement
and the Merger Agreement.
3.9 AGREEMENT BY CITIZENS EXECUTIVE OFFICERS AND DIRECTORS.
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Contemporaneously with the execution of this Agreement, each of the directors
and executive officers of Citizens will execute and deliver to Premier an
agreement, the form of which is attached hereto as Exhibit "B," pursuant to
----------
which each of them agrees (1) to recommend to Citizens' shareholders approval of
the Merger, (ii) to vote the capital stock of Citizens owned or controlled by
them in favor of the Merger, (iii) to transfer or assign shares of Premier Stock
received by them in connection with the Merger only in compliance with the 1933
Act, applicable state securities laws and the rules and
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regulations promulgated under either and (iv) not to sell, transfer or pledge
shares of Citizens' Common Stock or sell Premier Stock received by them in
connection with the Merger until after Premier's publication of at least thirty
(30) days of post-merger combined operations.
3.10 PRESS RELEASES. Prior to the Effective Date, Citizens and Premier
--------------
shall agree with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this Section
3.10 shall be deemed to prohibit any party from making any disclosure which its
counsel deems necessary or advisable in order to satisfy such party's disclosure
obligations imposed by law.
3.11 EMPLOYEE BENEFITS AND CONTRACTS. Following the Effective Date,
-------------------------------
Premier or any affiliate of Premier (collectively, the "Premier Group") shall
provide generally to officers, employees and former employees of Citizens who
continue employment with the Premier Group employee benefits on terms and
conditions which, when taken as a whole, are substantially similar to those then
currently provided by the Premier Group to its other similarly situated
officers, employees and former employees. For purposes of eligibility to
participate and any vesting determinations in connection with the provision of
any such employee benefits, service with Citizens prior to the Effective Date
shall be counted. The Premier Group shall also honor in accordance with their
terms all employment, severance, consulting, option and other contracts of a
compensatory nature to the extent disclosed in Section 4.2.3 of the Citizens
Disclosure Memorandum between Citizens and any current or former director,
officer or employee thereof. No other contracts of a compensatory nature to the
extent disclosed in the Citizens Disclosure Memorandum between Citizens and any
current or former director, officer or employee thereof and no other contracts
of the types described that are not so disclosed shall be deemed to be assumed
by the Premier Group by reason of this Section 3.11.
3.12 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
----------------------------------------------
(a) All rights with respect to Citizens Common Stock pursuant to stock
options ("Citizens Options") granted under the Citizens Stock Plans, whether or
not exercisable, shall be converted into and become rights with respect to
Premier Common Stock, and the Surviving Corporation shall assume each Citizens
Option, in accordance with the terms of the Citizens Stock Plan and stock option
agreement by which it is evidenced. From and after the Effective Date, (i) each
Citizens Option assumed by the Surviving Corporation may be exercised solely for
shares of Premier Common Stock, (ii) the number of shares of Premier Common
Stock subject to such Citizens Option shall be equal to the number of Citizens
Common Stock multiplied by the Exchange Ratio as defined in the Merger Agreement
attached hereto as Exhibit "A", and (iii) the per share exercise price under
----------
each such Citizens Option shall be adjusted to reflect the Exchange Ratio. It
is intended that the foregoing assumption shall be undertaken in a manner that
will not constitute a "modification" as defined in Section 424 of the Internal
Revenue Code, as to any stock option which is an "incentive stock option."
Citizens and Premier agree to take all necessary steps to effect the provisions
of this Section 3.12.
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(b) All restrictions or limitations on transfer with respect to Citizens
Common Stock awarded under the Citizens Stock Plans or any other plan, program
or arrangement of Citizens to the extent that such restrictions or limitations
shall not have already lapsed, and except as otherwise expressly provided in
such plan, program or arrangement, shall remain in full force and effect with
respect to shares of Surviving Corporation Common Stock into which such
restricted stock is converted pursuant to this Agreement.
(c) Notwithstanding the foregoing provisions of this Section 3.12, Premier
may at its election substitute as of the Effective Date stock options under the
Premier Bancshares, Inc. 1997 Stock Option Plan (the "Premier Stock Option
Plan") for all or a part of the Citizens Options, subject to the following
conditions: (i) the requirements of 3.12(a) and (b) shall be met; (ii) such
substitution shall not constitute a modification, extension or renewal of any of
the Citizens Options which are incentive stock options; (iii) the substituted
options shall continue in effect on substantially the same terms and conditions
as contained in the Citizens Stock Option Plan or other document granting the
Citizens Options; and (iv) each grant of a substitute option to any individual
who shall be deemed subject to Section 16 of the Securities Exchange Act of 1934
shall have been specifically approved in advance by the full Board of Directors
of Premier or by a committee consisting solely of "non-employee" directors as
defined in Rule 16b-3. As soon as practicable following the Effective Date,
Premier shall deliver to the participants receiving substitute options under the
Premier Stock Option Plan an appropriate notice setting forth such
participant's rights pursuant thereto. Premier has reserved under the Premier
Stock Option Plan adequate shares of Premier Common Stock for delivery upon
exercise of any such substituted options.
3.13 OFFICERS AND DIRECTORS. The officers and directors of the Surviving
----------------------
Corporation from and after the Effective Date shall consist of the officers and
directors of the Surviving Corporation on the date hereof, provided however that
Thomas J. Martin shall be elected to the Board of Directors of Premier after the
Effective Date. Mr. Martin shall also be appointed President of the East Metro
Division of Premier Bank. At the Effective Date, Premier Bank shall enter into
an amendment to the employment agreement with Thomas J. Martin in substantially
the form attached hereto as Exhibit "C."
----------
3.14 MERGER OF PREMIER BANK AND CITIZENS BANK. Contemporaneously with the
----------------------------------------
Closing or as soon as practicable thereafter, Citizens Bank shall be merged with
and into Premier Bank with Premier Bank being the Surviving Bank.
3.15 ACCOUNTING AND TAX TREATMENT. Each of the parties undertakes and
----------------------------
agrees to cause the Merger to qualify, and to take no action which would cause
the Merger not to qualify, for treatment as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended for
federal income tax purposes. Subject to the termination rights of the parties
pursuant to Section 11.6, each of the parties further undertakes and agrees to
cause the Merger to be eligible, and to take no action which would cause the
Merger not to be eligible, to be accounted for as a "pooling of interests."
6
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ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF CITIZENS
------------------------------------------
As an inducement to Premier to enter into this Agreement and to consummate
the transactions contemplated hereby, Citizens represents, warrants, covenants
and agrees as follows:
4.1 CITIZENS DISCLOSURE MEMORANDUM. On or before June 27, 1997, Citizens
will deliver to Premier a final disclosure memorandum (the "Citizens Disclosure
Memorandum") containing certain information regarding Citizens as indicated at
various places in this Agreement. All information set forth in the Citizens
Disclosure Memorandum or in documents incorporated by reference in the Citizens
Disclosure Memorandum is true, correct and complete, does not omit to state any
fact necessary in order to make the statements therein not misleading, and shall
be deemed for all purposes of this Agreement to constitute part of the
representations and warranties of Citizens under this Article IV. The
information contained in the Citizens Disclosure Memorandum shall be deemed to
be part of and qualify all representations and warranties contained in this
Article IV and the covenants in Article V to the extent applicable. All
information in each of the documents and other writings furnished to Premier
pursuant to this Agreement or the Citizens Disclosure Memorandum is or will be
true, correct and complete and does not and will not omit to state any fact
necessary in order to make the statements therein not misleading. Citizens
shall promptly provide Premier with written notification of any event,
occurrence or other information necessary to maintain the Citizens Disclosure
Memorandum and all other documents and writings furnished to Premier pursuant to
this Agreement as true, correct and complete in all material respects at all
times prior to and including the Closing.
4.2 CORPORATE AND FINANCIAL.
-----------------------
4.2.1 AUTHORITY. Subject to the approval of various state and federal
---------
regulators and Citizens' shareholders, the execution, delivery and performance
of this Agreement and the other transactions contemplated or required in
connection herewith will not, with or without the giving of notice or the
passage of time, or both, (a) violate any provision of federal or state law
applicable to Citizens, the violation of which could be reasonably expected to
have a material adverse effect on the business, operations, properties, assets,
financial condition or prospects of Citizens; (b) violate any provision of the
Articles of Incorporation or bylaws of Citizens; (c) conflict with or result in
a breach of any provision of, or termination of, or constitute a default under
any instrument, license, agreement, or commitment to which Citizens is a party,
which, singly or in the aggregate, could reasonably be expected to have a
material adverse effect on the business, operations, properties, assets,
financial condition or prospects of Citizens; or (d) constitute a violation of
any order, judgment or decree to which Citizens is a party, or by which Citizens
or any of its assets or properties are bound. Assuming this Agreement
constitutes the valid and binding obligation of Premier, this Agreement
constitutes the valid and binding obligation of Citizens, and is enforceable in
accordance with its terms, except as limited by laws affecting creditors' rights
generally and by the discretion of courts to compel specific performance.
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4.2.2 CORPORATE STATUS. Citizens is a business corporation duly
----------------
organized, validly existing and in good standing under the laws of the State of
Georgia and has no direct or indirect subsidiaries other than Citizens Bank.
Citizens Bank is a banking corporation duly organized, validly existing and in
good standing under the laws of the State of Georgia. Citizens and Citizens
Bank have all of the requisite corporate power and authority and are entitled to
own or lease their respective properties and assets and to carry on their
respective businesses as and in the places where such properties or assets are
now owned, leased or operated and such businesses are now conducted.
4.2.3 CAPITAL STRUCTURE.
-----------------
(a) Citizens has an authorized capital stock consisting of 10,000,000
shares, $10.00 par value of common stock, of which 242,350 shares of common
stock are issued and outstanding as of the date hereof and up to 27,200 shares
are issuable upon the exercise of stock options. Citizens Bank has an
authorized capital stock consisting solely of 1,000,000 shares of Common Stock,
par value $10 ("Citizens Bank Stock"), of which 250,000 shares are issued and
outstanding as of the date hereof. All of the outstanding shares of Citizens
Stock and Citizens Bank Stock are duly and validly issued, fully paid and non-
assessable and were offered, issued and sold in compliance with all applicable
federal and state securities laws. No person has any right of rescission or
claim for damages under federal or state securities laws with respect to the
issuance of any shares of Citizens Stock or Citizens Bank Stock previously
issued. None of the shares of Citizens Stock or Citizens Bank Stock has been
issued in violation of any preemptive or other rights of its shareholders. All
of the issued and outstanding shares of Citizens Bank Stock are owned by
Citizens.
(b) Except as set forth in the Citizens Disclosure Memorandum, Citizens
does not have outstanding any securities which are either by their terms or by
contract convertible or exchangeable into capital stock of Citizens, or any
other securities or debt, of Citizens, or any preemptive or similar rights to
subscribe for or to purchase, or any options or warrants or agreements or
understandings for the purchase or the issuance (contingent or otherwise) of, or
any calls, commitments or claims of any character relating to, its capital stock
or securities convertible into its capital stock. Citizens is not subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire, or to register, any shares of its capital stock.
(c) There is no agreement, arrangement or understanding to which Citizens
is a party restricting or otherwise relating to the transfer of any shares of
capital stock of Citizens.
(d) All shares of common stock or other capital stock, or any other
securities or debt, of Citizens, which have been purchased or redeemed by
Citizens have been purchased or redeemed in accordance with all applicable
federal, state and local laws, rules, and regulations, including, without
limitation, all federal and state securities laws and rules and regulations of
any securities exchange or system on which such stock, securities or debt are,
or at such time were, traded, and no such purchase or redemption has resulted or
8
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will, with the giving of notice or lapse of time, or both, result in a default
or acceleration of the maturity of, or otherwise modify, any agreement, note,
mortgage, bond, security agreement, loan agreement or other contract or
commitment of Citizens.
4.2.4 CORPORATE RECORDS. The stock records and minute books of Citizens,
-----------------
whether heretofore or hereafter furnished or made available to Premier by
Citizens, (a) fully and accurately reflect all issuances, transfers and
redemptions of the Common Stock, (b) correctly show the record addresses and the
number of shares of such stock issued and outstanding on the date hereof held by
the shareholders of Citizens, (c) correctly show all corporate action taken by
the directors and shareholders of Citizens (including actions taken by consent
without a meeting) and (d) contain true and correct copies or originals of the
respective Articles of Incorporation and all amendments thereto, bylaws as
amended and currently in force, and the minutes of all meetings or consent
actions of its directors and shareholders. No resolutions, regulations or
bylaws have been passed, enacted, consented to or adopted by such directors or
shareholders except those contained in the minute books. All corporate records
have been maintained in accordance with all applicable statutory requirements
and are complete and accurate.
4.2.5 TAX RETURNS; TAXES.
------------------
(a) Citizens has duly filed or will file when due (i) all required federal
and state tax returns and reports, and (ii) all required returns and reports of
other governmental units having jurisdiction with respect to taxes imposed upon
its income, properties, revenues, franchises, operations or other assets or
taxes imposed which might create a lien or encumbrance on any of such assets or
affect adversely its business or operations. Such returns or reports are, and
when filed will be, true, complete and correct, and Citizens has paid, or will
pay with respect to returns or reports not yet filed because not yet due, to the
extent such taxes or other governmental charges have become due, all taxes and
other governmental charges set forth in such returns or reports. All federal,
state and local taxes and other governmental charges paid or payable by Citizens
have been paid, or have been accrued or reserved on its books in accordance with
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods. Adequate reserves for the payment of taxes have been
established on the books of Citizens for all periods through the date hereof,
whether or not due and payable and whether or not disputed. Until the Closing
Date, Citizens shall continue to reserve sufficient funds for the payment of
expected tax liabilities in accordance with GAAP applied on a basis consistent
with prior periods. Citizens has not received any notice of a tax deficiency or
assessment of additional taxes of any kind and, to the knowledge of the officers
of Citizens (collectively, "Citizens Management"), there is no threatened claim
against Citizens, or any basis for any such claim, for payment of any additional
federal, state, local or foreign taxes for any period prior to the date of this
Agreement in excess of the accruals or reserves with respect to any such claim
shown in the 1996 Citizens Financial Statements described in Section 4.2.6 below
or disclosed in the notes with respect thereto. There are no waivers or
agreements by Citizens for the extension of time for the assessment of any
taxes. The federal income tax returns of Citizens have not been examined by the
Internal Revenue Service for any period since January 1, 1993.
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(b) Except as set forth in the Citizens Disclosure Memorandum, proper and
accurate amounts have been withheld by Citizens from its employees for all
periods in full and complete compliance with the tax withholding provisions of
applicable federal, state and local tax laws, and proper and accurate federal,
state and local tax returns have been filed by Citizens for all periods for
which returns were due with respect to withholding, social security and
unemployment taxes, and the amounts shown thereon to be due and payable have
been paid in full.
4.2.6 FINANCIAL STATEMENTS. Citizens has delivered to Premier true,
--------------------
correct and complete copies of (i) the audited financial statements of Citizens
for the years ended December 31, 1994, 1995 and 1996, including balance sheets,
statements of income, statements of shareholders' equity, statements of cash
flows and related notes (the audited financial statements for the year ended
December 31, 1996 being referred to as the "1996 Citizens Financial Statements")
and (ii) unaudited financial statements of Citizens for the period ended March
31, 1997, including a balance sheet, statement of income and related notes. All
of such financial statements have been prepared in accordance with GAAP
consistently applied and present fairly the assets, liabilities and financial
condition of Citizens as of the dates indicated therein and the results of its
operations for the respective periods then ended.
4.2.7 REGULATORY REPORTS. Citizens has made available to Premier for
------------------
review and inspection the year-end Report of Condition and year-end Report of
Income and Dividends as filed by Citizens Bank with the Federal Deposit
Insurance Corporation (the "FDIC") for each of the three years ended December
31, 1996, 1995 and 1994, together with all such other reports filed for the same
three-year period with the FDIC, and the Department of Banking and Finance of
the State of Georgia (the "Department of Banking"), and other applicable
regulatory agencies and the Form F.R. Y-6 filed by Citizens with the Board of
Governors of the Federal Reserve System (the "Federal Reserve") for each of the
three years ended December 31, 1996, 1995 and 1994 (collectively, the "Citizens
Reports"). All of the Citizens Reports, as amended, have been prepared in
accordance with applicable rules and regulations applied on a basis consistent
with prior periods and contain in all material respects all information required
to be presented therein in accordance with such rules and regulations.
4.2.8 ACCOUNTS. Citizens has made available to Premier a list of each and
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every bank and other institution in which Citizens maintains an account or,
safety deposit box, the account numbers, and the names of all persons who are
presently authorized to draw thereon, have access thereto or give instructions
regarding distribution of funds or assets therein.
4.2.9 NOTES AND OBLIGATIONS.
---------------------
(a) Except as set forth in the Citizens Disclosure Memorandum or as
provided for in the loss reserve described in subsection (b) below, all notes
receivable or other obligations owned by Citizens or due to it shown in the 1996
Citizens Financial Statements and any such notes receivable and obligations on
the date hereof and on the Closing Date are and will be genuine, legal, valid
10
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and collectible obligations of the respective makers thereof and are not and
will not be subject to any offset or counterclaim. Except as set forth in
subsection (b) below, all such notes and obligations are evidenced by written
agreements, true and correct copies of which will be made available to Premier
for examination prior to the Closing Date. All such notes and obligations were
entered into by Citizens in the ordinary course of its business and in
compliance with all applicable laws and regulations.
(b) Citizens has established a loss reserve in the 1996 Citizens Financial
Statements and as of the date of this Agreement and will establish a loan loss
reserve as of the Closing Date which is adequate within the meaning of GAAP and
applicable regulatory requirements or guidelines to cover anticipated losses
which might result from such items as the insolvency or default of borrowers or
obligors on such loans or obligations, defects in the notes or evidences of
obligation (including losses of original notes or instruments), offsets or
counterclaims properly chargeable to such reserve, or the availability of legal
or equitable defenses which might preclude or limit the ability of Citizens to
enforce the note or obligation, and the representations set forth in subsection
(a) above are qualified in their entirety by the aggregate of such loss reserve.
Except as described in the Citizens Disclosure Memorandum, at the Closing Date,
the ratio of the loss reserve, established on such date in good faith by
Citizens, to total loans outstanding at such time shall not exceed the ratio of
the loan loss reserve to the total loans outstanding as reflected in the 1996
Citizens Financial Statements, established on or before such date in good faith
by Citizens, in accordance with GAAP.
4.2.10 LIABILITIES. Citizens has no debt, liability or obligation of any
-----------
kind required to be shown pursuant to GAAP on the consolidated balance sheet of
Citizens, whether accrued, absolute, known or unknown, contingent or otherwise,
including, but not limited to (a) liability or obligation on account of any
federal, state or local taxes or penalty, interest or fines with respect to such
taxes, (b) liability arising from or by virtue of the distribution, delivery or
other transfer or disposition of goods, personal property or services of any
type, kind or variety, (c) unfunded liabilities with respect to any pension,
profit sharing or employee stock ownership plan, whether operated by Citizens or
any other entity covering employees of Citizens, or (d) environmental
liabilities, except (i) those reflected in the 1996 Citizens Financial
Statements, and (ii) as disclosed in the Citizens Disclosure Memorandum.
4.2.11 ABSENCE OF CHANGES. Except as specifically provided for in this
------------------
Agreement or specifically set forth in the Citizens Disclosure Memorandum, since
December 31, 1996:
(a) there has been no change in the business, assets, liabilities, results
of operations or financial condition of Citizens, or in any of its relationships
with customers, employees, lessors or others, other than changes in the ordinary
course of business, none of which individually or in the aggregate has had, or
which the Citizens Management believes may have, a material adverse effect on
such businesses or properties;
11
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(b) there has been no material damage, destruction or loss to the assets,
properties or business of Citizens, whether or not covered by insurance, which
has had, or which the Citizens Management believes may have, an adverse effect
thereon;
(c) the business of Citizens has been operated in the ordinary course, and
not otherwise;
(d) the properties and assets of Citizens used in its business have been
maintained in good order, repair and condition, ordinary wear and tear excepted;
(e) the books, accounts and records of Citizens have been maintained in the
usual, regular and ordinary manner;
(f) there has been no declaration, setting aside or payment of any dividend
or other distribution on or in respect of the capital stock of Citizens;
(g) there has been no increase in the compensation or in the rate of
compensation or commissions payable or to become payable by Citizens to any
director or executive officer, or to any employee earning $35,000 or more per
annum, or any general increase in the compensation or in the rate of
compensation payable to employees of Citizens earning less than $35,000 per
annum ("general increase" for the purpose hereof meaning any increase generally
applicable to a class or group of employees, but not including increases granted
to individual employees for merit, length of service, change in position or
responsibility or other reasons applicable to specific employees and not
generally to a class or group thereof), or any director, officer, or employee
hired at a salary in excess of $35,000 per annum, or any increase in any payment
of or commitment to pay any bonus, profit sharing or other extraordinary
compensation to any employee;
(h) there has been no change in the articles of incorporation or bylaws of
Citizens;
(i) there has been no labor dispute, unfair labor practice charge or
employment discrimination charge, nor, to the knowledge of Citizens, any
organizational effort by any union, or institution or threatened institution, of
any effort, complaint or other proceeding in connection therewith, involving
Citizens, or affecting its operations;
(j) there has been no issuance, sale, repurchase, acquisition, or
redemption by Citizens of any of its capital stock, bonds, notes, debt or other
securities, and there has been no modification or amendment of the rights of the
holders of any outstanding capital stock, bonds, notes, debt or other securities
thereof,
(k) there has been no mortgage, lien or other encumbrance or security
interest (other than liens for current taxes not yet due or purchase money
security interests arising in the ordinary course of business) created on or in
(including without limitation, any deposit for security consisting of) any asset
or assets of Citizens or assumed by it with respect to any asset or assets;
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(l) there has been no indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred by Citizens which
would be required to be reflected on a balance sheet of Citizens prepared as of
the date hereof in accordance with GAAP applied on a consistent basis, except as
incurred in the ordinary course of business;
(m) no obligation or liability of Citizens has been discharged or
satisfied, other than in the ordinary course of business;
(n) there have been no sales, transfers or other dispositions of any asset
or assets of Citizens, other than sales in the ordinary course of business;
(o) there has been no amendment, termination or waiver of any right of
Citizens under any contract or agreement or governmental license, permit or
permission which has had or may have an adverse effect on its business or
properties; and
(p) Citizens has not taken any action or failed to take any action prior to
the date of this Agreement, which action or failure, if taken after the date of
this Agreement, would represent or result in a material breach or violation of
any of the covenants and agreements of Citizens provided in this Agreement.
4.2.12 LITIGATION AND PROCEEDINGS. Except as set forth on the Citizens
--------------------------
Disclosure Memorandum, there are no actions, decrees, suits, counterclaims,
claims, proceedings or governmental actions or investigations, pending or, to
the knowledge of Citizens, threatened against, by or affecting Citizens, or any
officer, director, employee or agent in such person's capacity as an officer,
director, employee or agent of Citizens or relating to the business or affairs
of Citizens, in any court or before any arbitrator or governmental agency, and
no judgment, award, order or decree of any nature has been rendered against or
with respect thereto by any agency, arbitrator, court, commission or other
authority, nor does Citizens have any unasserted contingent liabilities which
might have an adverse effect on its assets or on the operation of its businesses
or which might prevent or impede the consummation of the transactions
contemplated by this Agreement.
4.2.13 PROXY MATERIALS. Neither the Proxy Materials nor other materials
---------------
furnished by Citizens to the Citizens' shareholders in connection with the
transactions contemplated by this Agreement or the Merger Agreement, or in any
amendments thereof or supplements thereto, will, at the times such documents are
distributed to the holders of shares of Citizens Stock and through the
acquisition of shares of Citizens Stock by Premier pursuant to the Merger,
contain with respect to Citizens any untrue statement of a material fact or omit
to state any information required to be stated therein or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made with respect to Citizens, not
misleading.
4.3 BUSINESS OPERATIONS.
-------------------
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4.3.1 CUSTOMERS. Citizens has no knowledge of any presently
---------
existing facts which could reasonably be expected to result in the loss of any
material borrower or depositor or in Citizens' inability to collect amounts due
therefrom or to return funds deposited thereby, except as set forth on the
Citizens Disclosure Memorandum.
4.3.2 PERMITS; COMPLIANCE WITH LAW.
----------------------------
(a) Citizens has all permits, licenses, approvals, authorizations and
registrations under all federal, state, local and foreign laws required for
Citizens to own, lease or operate its Assets and to carry on its business as
presently conducted, and all of such permits, licenses, approvals,
authorizations and registrations are in full force and effect, and no suspension
or cancellation of any of them is pending or, to the knowledge of Citizens,
threatened.
(b) Citizens has complied with all laws, regulations, and orders
applicable to it or its business, except for any non-compliance which would not
have a material adverse effect on Citizens. The Citizens Disclosure Memorandum
contains a list of any known violations of such laws, regulations, ordinances or
rules by any present officer, director, or employee of Citizens which occurred
since December 31, 1991, and which resulted in any order, proceeding, judgment
or decree which would be required to be disclosed pursuant to Item 401(f) of
Regulation S-K promulgated by the SEC if Citizens had been subject to the
reporting requirements under the 1933 Act or the Securities Exchange Act of
1934, as amended. No past violation of any such law, regulation, ordinance or
rule has occurred which could impair the right or ability of Citizens to conduct
its business.
(c) Except as set forth in the Citizens Disclosure Memorandum, no
notice or warning from any governmental authority with respect to any failure or
alleged failure of Citizens to comply in any respect with any law, regulation or
order has been received, nor is any such notice or warning proposed or, to the
knowledge of Citizens, threatened.
4.3.3 ENVIRONMENTAL.
-------------
(a) Except as set forth in the Citizens Disclosure Memorandum,
Citizens
(i) has not caused or permitted, and has no knowledge of any
claim regarding the environmental condition of the property or the
generation, manufacture, use, or handling or the release or presence
of, any hazardous substances or hazardous wastes, including petroleum,
on, in, under or from any properties or facilities currently owned or
leased by Citizens or adjacent to any properties so owned or leased;
and
(ii) has complied in all material respects with, and has kept all
records and made all filings or reports required by, and is otherwise
in compliance with all applicable federal, state and local laws,
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regulations, orders, permits and licenses relating to the generation,
treatment, manufacture, use, handling, release or presence of any
hazardous substances or hazardous wastes, including petroleum and
asbestos, on, in, under or from any properties or facilities currently
owned or leased by Citizens.
(b) Except as set forth in the Citizens Disclosure Memorandum, neither
Citizens nor any of its officers, directors, employees or agents, in the course
of such individual's employment by Citizens, has given advice with respect to,
or participated in any respect in, the management or operation of any entity or
concern whose business relates in any way to the generation, storage, handling,
disposal, transfer, production, use or processing of hazardous substances or
hazardous wastes, including petroleum, nor to Citizens' knowledge has Citizens
foreclosed on any property on which there is a threatened release of any
hazardous substances or hazardous wastes, including petroleum, or on which there
has been such a release and full remediation has not been completed, or any
property on which contained (non-released) hazardous substances or hazardous
wastes, including petroleum, are or were located.
(c) Except as set forth in the Citizens Disclosure Memorandum, neither
Citizens, nor any of its officers, directors, employees, or agents, is aware of,
has been told of, or has observed, the presence of any hazardous substance or
hazardous wastes, including petroleum, on, in, under, or around property on
which Citizens holds a legal or security interest, in violation of, or creating
liability under, federal, state, or local environmental statutes, regulations,
or ordinances.
(d) The term hazardous substances or hazardous waste does not include
those substances which are normally and reasonably used in connection with the
occupancy or operation of office buildings (such as cleaning fluids, and
supplies normally used in the day to day operation of business offices).
4.3.4 INSURANCE. Citizens has made available to Premier a complete
---------
list and description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, Citizens or any of its officers, directors and
employees, all of which are, and will be maintained through the Closing Date, in
full force and effect, together with a complete list of all pending claims under
any of such policies or bonds. All terms, obligations and provisions of each of
such policies and bonds have been complied with, all premiums due thereon have
been paid, and no notice of cancellation with respect thereto has been received.
Except as set forth in the Citizens Disclosure Memorandum, such policies and
bonds provide adequate coverage to insure the properties and businesses of
Citizens and the activities of its officers, directors and employees against
such risks and in such amounts as are prudent and customary. Citizens will not
as of the Closing Date have any liability for premiums or for retrospective
premium adjustments for any period prior to the Closing Date. Citizens has
heretofore made, or will hereafter make, available to Premier a true, correct
and complete copy of each insurance policy and bond in effect since January 1,
1991 with respect to the business and affairs of Citizens.
15
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4.4 PROPERTIES AND ASSETS.
---------------------
4.4.1 CONTRACTS AND COMMITMENTS. The Citizens Disclosure Memorandum
-------------------------
contains a list identifying and briefly describing all written contracts,
purchase orders, agreements, security deeds, guaranties or commitments to which
Citizens is a party or by which it may be bound involving the payment or
receipt, actual or contingent, of more than $25,000 or having a term or
requiring performance over a period of more than ninety (90) days. Each such
contract, agreement, guaranty and commitment of Citizens is in full force and
effect and is valid and enforceable in accordance with its terms, and
constitutes a legal and binding obligation of the respective parties thereto and
is not the subject of any notice of default, termination, partial termination or
of any ongoing, pending, completed or threatened investigation, inquiry or other
proceeding or action that may give rise to any notice of default, termination or
partial termination. Citizens has complied in all material respects with the
provisions of such contracts, agreements, guaranties and commitments. A true
and complete copy of each such document has been or will be made available to
Premier for examination.
4.4.2 LICENSES; INTELLECTUAL PROPERTY. Citizens has all patents,
-------------------------------
trademarks, trade names, service marks, copyrights, trade secrets and know-how
reasonably necessary to conduct its business as presently conducted and, except
as described in the Citizens Disclosure Memorandum, Citizens is not a party,
either as licensor or licensee, to any agreement for any patent, process,
trademark, service mark, trade name, copyright, trade secret or other
confidential information and there are no rights of third parties with respect
to any trademark, service mark, trade secrets, confidential information, trade
name, patent, patent application, copyright, invention, device or process owned
or used by Citizens or presently expected to be used by either of them in the
future. All patents, copyrights, trademarks, service marks, trade names, and
applications therefor or registrations thereof, owned or used by Citizens, are
listed in the Citizens Disclosure Memorandum. Citizens has complied with all
applicable laws relating to the filing or registration of "fictitious names" or
trade names.
4.4.3 PERSONAL PROPERTY. Citizens has good and marketable title to
-----------------
all of its personalty, tangible and intangible, reflected in the 1996 Citizens
Financial Statements (except as since sold or otherwise disposed of by it in the
ordinary course of business), free and clear of all encumbrances, liens or
charges of any kind or character, except (i) those referred to in the notes to
the 1996 Citizens Financial Statements as securing specified liabilities (with
respect to which no default exists or, to the knowledge of Citizens, is claimed
to exist), (ii) those described in the Citizens Disclosure Memorandum and (iii)
liens for taxes not due and payable.
4.4.4 CITIZENS LEASES.
---------------
(a) All leases (the "Citizens Leases") pursuant to which Citizens is
lessor or lessee of any real or personal property (such property, the "Leased
Property") are valid and enforceable in accordance with their terms; there is
not under any of the Citizens Leases any default or, to the knowledge of
16
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Citizens, any claimed default by Citizens, or event of default or event which
with notice or lapse of time, or both, would constitute a default by Citizens
and in respect of which adequate steps have not been taken to prevent a default
on its part from occurring.
(b) The copies of the Citizens Leases heretofore or hereafter
furnished or made available by Citizens to Premier are true, correct and
complete, and the Citizens Leases have not been modified in any respect other
than pursuant to amendments, copies of which have been concurrently delivered or
made available to Premier, and are in full force and effect in accordance with
their terms.
(c) Except as set forth in the Citizens Disclosure Memorandum, there
are no contractual obligations, agreements in principle or present plans for
Citizens to enter into new leases of real property or to renew or amend existing
Citizens Leases prior to the Closing Date.
4.4.5 REAL PROPERTY.
-------------
(a) Citizens does not own any interest in any real property (other
than as lessee) except as set forth in the Citizens Disclosure Memorandum (such
properties being referred to herein as "Citizens Realty"). Except as disclosed
in the Citizens Disclosure Memorandum, Citizens has good title to the Citizens
Realty and the titles to the Citizens Realty are covered by title insurance
policies providing coverage in the amount of the original purchase price, true,
correct and complete copies of which have been or will be furnished to Premier.
Citizens has not encumbered the Citizens Realty since the effective dates of the
respective title insurance policies.
(b) Except as set forth in the Citizens Disclosure Memorandum, the
interests of Citizens in the Citizens Realty and in and under each of the
Citizens Leases are free and clear of any and all liens and encumbrances and are
subject to no present claim, contest, dispute, action or, to the knowledge of
Citizens, threatened action at law or in equity.
(c) The present and past use and operations of, and improvements upon,
the Citizens Realty and all real properties leased by Citizens (the "Citizens
Leased Real Properties") are in compliance in all material respects with all
applicable building, fire, zoning and other applicable laws, ordinances and
regulations and with all deed restrictions of record, no notice of any violation
or alleged violation thereof has been received, and to the knowledge of Citizens
there are no proposed changes therein that would affect the Citizens Realty, the
Citizens Leased Real Properties or their uses.
(d) Except as set forth in the Citizens Disclosure Memorandum, no rent
has been paid in advance and no security deposit has been paid by, nor is any
brokerage commission payable by or to, Citizens with respect to any Lease
pursuant to which it is lessor or lessee.
(e) Citizens is not aware of any proposed or pending change in the
zoning of, or of any proposed or pending condemnation proceeding with respect
to, any of the Citizens Realty or the Citizens Leased Real Properties which may
17
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adversely affect the Citizens Realty or the Citizens Leased Real Properties or
the current or currently contemplated use thereof.
(f) The buildings and structures owned, leased or used by Citizens
are, taken as a whole, in good operating order (except for ordinary wear and
tear), usable in the ordinary course of business, and are sufficient and
adequate to carry on the business and affairs of Citizens.
4.5 EMPLOYEES AND BENEFITS.
----------------------
4.5.1 DIRECTORS OR OFFICERS OF OTHER CORPORATIONS. Except as set
-------------------------------------------
forth in the Citizens Disclosure Memorandum, no director, officer, or employee
of Citizens serves, or in the past five years has served, as a director or
officer of any other corporation on behalf of or as a designee of Citizens or
any of its subsidiaries.
4.5.2 EMPLOYEE BENEFITS.
-----------------
(a) Except as set forth in the Citizens Disclosure Memorandum,
Citizens does not provide and is not obligated to provide, directly or
indirectly, any benefits for employees, including, without limitation, any
pension, profit sharing, stock option, retirement bonus, hospitalization,
medical, insurance, vacation or other employee benefits under any practice,
agreement or understanding.
(b) The Citizens Disclosure Memorandum lists separately any employee
benefit plan within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (collectively, "ERISA Plans").
True, correct and complete copies of all ERISA Plans and, to the extent
applicable, all related trust agreements, insurance contracts, summary plan
descriptions, Internal Revenue Service determination letters and filings, the
past three years of actuarial reports and valuations, annual reports and Form
5500 filings (including attachments), and any other related documents requested
by Premier or its counsel have been, or prior to the Closing Date will be, made
available to Premier.
(c) Citizens is not currently and has never been in the past required
to contribute to a multi-employer plan as defined in Section 3(37)(A) of ERISA.
Citizens does not maintain or contribute to, nor within the past six years has
it maintained or contributed to, an employee pension benefit plan as defined in
Section 3(2) of ERISA that is or was subject to Title IV of ERISA.
(d) Each ERISA Plan has been operated and administered in all material
respects in accordance with, and has been amended to comply with (unless such
amendment is not yet required), all applicable laws, rules and regulations,
including, without limitation, ERISA, the Internal Revenue Code of 1986, as
amended ("Code"), and the regulations issued under ERISA and the Code. With
respect to each ERISA Plan, other than routine claims for benefits submitted in
the ordinary course of the benefits process, no litigation or administrative or
other proceeding is pending or, to the knowledge of Citizens, threatened
18
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involving such ERISA Plan or any of its fiduciaries. With respect to each ERISA
Plan, neither Citizens nor any of its directors, officers, employees or agents,
nor to Citizens' knowledge, any "party in interest" or "disqualified person" (as
such terms are defined in Section 3(14) of ERISA and Section 4975 of the Code)
has been engaged in or been a party to any transaction relating to the ERISA
Plan which would constitute a breach of fiduciary duty under ERISA or a
"prohibited transaction" (as such term is defined in Section 406 of ERISA or
Section 4975 of the Code), unless such transaction is specifically permitted
under Sections 407 or 408 of ERISA, Section 4975 of the Code or a class or
administrative exemption issued by the Department of Labor. Each ERISA Plan
that is a group health plan within the meaning of Section 607(l) of ERISA and
Section 4980B of the Code is in compliance with the continuation coverage
requirements of Section 501 of ERISA and Section 4980B of the Code.
(e) Of the ERISA Plans, the "employee pension benefit plans" within
the meaning of Section 3(2) of ERISA (collectively, the "Employee Pension
Benefit Plans") are separately identified on the Citizens Disclosure Memorandum.
With respect to each Employee Pension Benefit Plan, except as set forth on the
Citizens Disclosure Memorandum: (i) such Employee Pension Benefit Plan
constitutes a qualified plan within the meaning of Section 401(a) of the Code
and the trust is exempt from federal income tax under Section 501(a) of the
Code; (ii) all contributions required by such plan have been made; and (iii) no
termination, partial termination or discontinuance of contributions has occurred
without a determination by the IRS that such action does not affect the tax-
qualified status of such plan.
(f) As of the Closing Date, with respect to each ERISA Plan, Citizens
will have provided adequate reserves, or insurance or qualified trust funds, to
provide for all payments and contributions required, or reasonably expected to
be required, to be made under the provisions of such ERISA Plan or required to
be made under applicable laws, rules and regulations, with respect to any period
prior to the Closing Date to the extent reserves are required under GAAP, based
on an actuarial valuation satisfactory to the actuaries of Citizens representing
a projection of claims expected to be incurred under such ERISA Plan.
(g) Except as set forth in the Citizens Disclosure Memorandum,
Citizens does not provide and has no obligation to provide benefits, including,
without limitation, death, health or medical benefits (whether or not insured)
with respect to current or former employees of Citizens beyond their retirement
or other termination of service with Citizens other than (i) coverage mandated
by applicable law, (ii) benefits under the Employee Pension Benefit Plans, or
(iii) benefits the full cost of which is borne by the current or former employee
or his beneficiary.
(h) Except as set forth in the Citizens Disclosure Memorandum, neither
this Agreement nor any transaction contemplated hereby will (i) entitle any
current or former employee, officer or director of Citizens to severance pay,
unemployment compensation or any similar or other payment, or (ii) accelerate
the time of payment or vesting of, or increase the amount of compensation or
benefits due any such employee, officer or director.
19
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4.5.3 LABOR-RELATED MATTERS. Except as described in the Citizens
---------------------
Disclosure Memorandum, Citizens is not, and has not been, a party to any
collective bargaining agreement or agreement of any kind with any union or labor
organization or to any agreement with any of its employees which is not
terminable at will or upon ninety (90) days notice at the election of, and
without cost or penalty to, Citizens. Citizens has not received at any time in
the past five (5) years, any demand for recognition from any union, and no
attempt has been made, or will have been made as of the Closing Date, to
organize any of its employees. Citizens has complied in all material respects
with all obligations under the National Labor Relations Act, as amended, the Age
Discrimination in Employment Act, as amended, and all other federal, state and
local labor laws and regulations applicable to employees. There are no unfair
labor practice charges pending or threatened against Citizens, and there are,
and in the past three (3) years there have been, no charges, complaints, claims
or proceedings, no slowdowns or strikes pending or threatened against, or
involving, as the case may be, Citizens with respect to any alleged violation of
any legal duty (including but not limited to any wage and hour claims,
employment discrimination claims or claims arising out of any employment
relationship) by Citizens as to any of its employees or as to any person seeking
employment therefrom, and no such violations exist.
4.5.4 RELATED PARTY TRANSACTIONS. Except for (a) loans and
--------------------------
extensions of credit made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions by Citizens with other persons who are not affiliated with
Citizens, and which do not involve more than the normal risk of repayment or
present other unfavorable features, (b) deposits, all of which are on terms and
conditions identical to those made available to all customers of Citizens at the
time such deposits were entered into, and (c) transactions specifically
described in the Citizens Disclosure Memorandum, there are no contracts with or
commitments to present or former five percent (5%) or greater shareholders,
directors, officers, or employees involving the expenditure after December 31,
1991 of more than $60,000 as to any one individual, including with respect to
any business directly or indirectly controlled by any such person, or $100,000
for all such contracts or commitments in the aggregate for all such individuals
(other than contracts or commitments relating to services to be performed by any
officer, director or employee as a currently-employed employee of Citizens).
4.6 OTHER MATTERS.
-------------
4.6.1 REGULATORY REPORTS. Citizens will make available to Premier
------------------
for review and inspection all applications, reports or other documents filed by
it for each of its past three full fiscal years with any regulatory or
governmental agencies. All of such applications, reports and other documents
have been prepared in accordance with applicable rules and regulations of the
regulatory agencies with which they were filed.
4.6.2 APPROVALS, CONSENTS AND FILINGS. Except for the approval of
-------------------------------
the Federal Reserve and the Department of Banking, or as set forth in the
Citizens Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or
20
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thereby will (a) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, or (b)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Citizens, or any of Citizens' assets.
4.6.3 DEFAULT.
-------
(a) Except for those consents described in or set forth pursuant to
Section 4.6.2 above, neither the execution of this Agreement nor the
consummation of the transactions contemplated herein (i) constitutes a breach of
or default under any contract or commitment to which Citizens is a party or by
which Citizens or its properties or assets are bound, (ii) does or will result
in the creation or imposition of any security interest, lien, encumbrance,
charge, equity or restriction of any nature whatsoever in favor of any third
party upon any assets of Citizens, or (iii) constitutes an event permitting
termination of any agreement or the acceleration of any indebtedness of
Citizens.
(b) Citizens is not in default under its articles of incorporation or
bylaws or under any term or provision of any security deed, mortgage, indenture
or security agreement or of any other contract or instrument to which Citizens
is a party or by which it or any of its property is bound.
4.6.4 Representations and Warranties. No representation or warranty
------------------------------
contained in this Article IV or in any written statement delivered by or at the
direction of Citizens pursuant hereto or in connection with the transactions
contemplated hereby contains or shall contain any untrue statement, nor shall
such representations and warranties taken as a whole omit any statement
necessary in order to make any statement not misleading. Copies of all
documents that have been or will be furnished to Premier in connection with this
Agreement or pursuant hereto are or shall be true, correct and complete.
ARTICLE V
---------
CONDUCT OF BUSINESS OF CITIZENS PENDING CLOSING
-----------------------------------------------
Except as expressly otherwise provided herein, Citizens covenants and
agrees .that, without the prior written consent of Premier, between the date
hereof and the Closing Date:
5.1 CONDUCT OF BUSINESS. Citizens will conduct its business only in the
-------------------
ordinary course, without the creation of any indebtedness for borrowed money
(other than deposit and similar accounts and customary credit arrangements
between banks in the ordinary course of business).
5.2 MAINTENANCE OF PROPERTIES. Citizens will maintain its properties and
-------------------------
assets in good operating condition, ordinary wear and tear excepted.
5.3 INSURANCE. Citizens will maintain and keep in full force and effect
---------
all of the insurance referred to in Section 4.3.4 hereof or other insurance
equivalent thereto in all material respects.
21
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5.4 CAPITAL STRUCTURE. No change will be made in the authorized or issued
-----------------
capital stock or other securities of Citizens, and Citizens will not issue or
grant any right or option to purchase or otherwise acquire any of the capital
stock or other securities of Citizens.
5.5 DIVIDENDS. Except for a dividend in the amount of $.20 per share to
---------
be paid in the third quarter of 1997 and $.20 per share for any quarter
thereafter until the Closing Date, no other dividend, distribution or payment
will be declared or made in respect to the Citizens Stock, and Citizens will
not, directly or indirectly, redeem, purchase or otherwise acquire any of its
capital stock.
5.6 AMENDMENT OF ARTICLES; CORPORATE EXISTENCE. Citizens will not amend
------------------------------------------
its Articles of Incorporation or bylaws, and Citizens will maintain its
corporate existence and powers.
5.7 NO ACQUISITIONS. Citizens shall not acquire by merging or
---------------
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other entity or division thereof or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to it.
5.8 NO DISPOSITIONS. Citizens will not sell, mortgage, lease, buy or
---------------
otherwise acquire, transfer or dispose of any real property or interest therein
(except for sales in the ordinary course of business) and Citizens will not,
except in the ordinary course of business, sell or transfer, mortgage, pledge,
or subject to any lien, charge or other encumbrance any other tangible or
intangible asset.
5.9 CONTRACTS. Except for renewals of existing contracts in effect as of
---------
the date hereof, or entering into a contract for the purpose of substituting a
vendor under any such existing contract, Citizens will not enter into any
contract of the kind described in Section 4.4.1 hereof.
5.10 BOOKS AND RECORDS. The books and records of Citizens will be
-----------------
maintained in the usual, regular and ordinary course.
5.11 ADVICE OF CHANGES. Citizens shall promptly advise Premier orally and
-----------------
in writing of any change or event having, or which the Citizens Management
believes could have, a material adverse effect on the assets, liabilities,
business, operations or financial condition of Citizens.
5.12 INCUR ADDITIONAL DEBT. Citizens shall not incur any debt obligations
---------------------
or other obligations for borrowed money in excess of an aggregate of $100,000
(for Citizens on a consolidated basis) except in the ordinary course of business
of Citizens and Citizens Bank consistent with past practices (which included for
Citizens Bank creation of deposit liabilities, purchase of federal funds,
advances from the Federal Reserve Bank or Federal Home Loan Bank and entry into
and repurchase of agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition on any asset of Citizens or
Citizens Bank of any lien or permit any such lien to exist (other than in
connection with deposits, repurchase agreements, bankers acceptances, Federal
22
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Home Loan Bank advances, "treasury tax and loan" accounts established in the
ordinary course of business, the satisfaction of legal requirements in the
exercise of trust powers, and Liens in effect as of the date hereof that are
disclosed in the Citizens Disclosure Memorandum).
5.13 ADOPT NEW BENEFIT PLAN. Neither Citizens nor Citizens Bank shall
----------------------
adopt any new employee benefit plan or make any material change in or to any
existing employee benefit plan other than any such change that is required by
law or that, in the opinion of counsel, is necessary or advisable to maintain
the tax qualified status of any such plan.
5.14 CHANGE IN TAX OR ACCOUNTING METHOD. Neither Citizens nor Citizens
----------------------------------
Bank shall make any significant change in any tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in tax laws, regulatory accounting requirements or GAAP.
5.15 LITIGATION. Neither Citizens nor Citizens Bank shall commence any
----------
litigation other than in accordance with past practice, settle any litigation
involving any liability of Citizens or Citizens Bank for money damages in excess
of $50,000 or which imposes material restrictions upon the operations of
Citizens or Citizens Bank.
ARTICLE VI
----------
REPRESENTATIONS AND WARRANTIES OF PREMIER
-----------------------------------------
As an inducement to Citizens to enter into this Agreement and to consummate
the transactions contemplated hereby, Premier represents, warrants, covenants
and agrees as follows:
6.1 PREMIER DISCLOSURE MEMORANDUM. On or before June 27, 1997, Premier
-----------------------------
will deliver to Citizens a final disclosure memorandum (the "Premier Disclosure
Memorandum") containing certain information regarding Premier as indicated at
various places in this Agreement. All information set forth in the Premier
Disclosure Memorandum or in documents incorporated by reference in the Premier
Disclosure Memorandum is true, correct and complete, does not omit to state any
fact necessary in order to make the statements therein not misleading, and shall
be deemed for all purposes of this Agreement to constitute part of the
representations and warranties of Premier under this Article VI. The
information contained in the Premier Disclosure Memorandum shall be deemed to be
part of and qualify all representations and warranties contained in this Article
VI and the covenants in Article VII to the extent applicable. All information
in each of the documents and other writings furnished to Citizens pursuant to
this Agreement or the Premier Disclosure Memorandum is or will be true, correct
and complete and does not and will not omit to state any fact necessary in order
to make the statements therein not misleading. Premier shall promptly provide
Citizens with written notification of any event, occurrence or other information
23
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necessary to maintain the Premier Disclosure Memorandum and all other documents
and writings furnished to Citizens pursuant to this Agreement as true, correct
and complete in all material respects at all times prior to and including the
Closing.
6.2 CORPORATE AND FINANCIAL.
-----------------------
6.2.1 AUTHORITY. Subject to the approval of various state and
---------
federal regulators, the execution, delivery and performance of this Agreement
and the other transactions contemplated or required in connection herewith will
not, with or without the giving of notice or the passage of time, or both, (a)
violate any provision of federal or state law applicable to Premier, the
violation of which could be reasonably expected to have a material adverse
effect on the business, operations, properties, assets, financial condition or
prospects of Premier; (b) violate any provision of the articles of incorporation
or bylaws of Premier; (c) conflict with or result in a breach of any provision
of, or termination of, or constitute a default under any instrument, license,
agreement, or commitment to which Premier is a party, which, singly or in the
aggregate, could reasonably be expected to have a material adverse effect on the
business, operations, properties, assets, financial condition or prospects of
Premier; or (d) constitute a violation of any order, judgment or decree to which
Premier is a party, or by which Premier or any of its assets or properties are
bound. Assuming this Agreement constitutes the valid and binding obligation of
Citizens, this Agreement constitutes the valid and binding obligation of
Premier, and is enforceable in accordance with its terms, except as limited by
laws affecting creditors' rights generally and by the discretion of courts to
compel specific performance.
6.2.2 CORPORATE STATUS. Premier is a business corporation duly
----------------
organized, validly existing and in good standing under the laws of the State of
Georgia and has no direct or indirect subsidiaries, which are material to
Premier, other than Premier Bank, a Georgia banking corporation, Central and
Southern Bank of Georgia, a Georgia banking corporation, Premier Bank FSB, a
federally chartered savings bank, Central and Southern Bank of North Georgia,
FSB, a federally chartered savings bank, Premier Lending Corporation, a Georgia
business corporation, and Alliance Finance, Inc., a Georgia business corporation
(collectively, the "Premier Subsidiaries"). Premier Bank and Central and
Southern Bank of Georgia are banking corporations duly organized, validly
existing and in good standing under the laws of the State of Georgia. Premier
Bank FSB and Central and Southern Bank of North Georgia, FSB are savings banks,
duly organized, validly existing and in good standing under the laws of the
United States. Premier Lending Corporation and Alliance Finance, Inc. are
business corporations duly organized, validly existing and in good standing
under the laws of the United States. Premier and the Premier Subsidiaries have
all requisite corporate power and authority and are entitled to own or lease
their respective properties and to carry on their respective businesses in the
places where such properties are now owned, leased or operated and such
businesses are now conducted.
6.2.3 CAPITAL STRUCTURE.
-----------------
(a) Premier has an authorized capital stock consisting solely of
20,000,000 shares of common stock, par value $1.00 per share, of which
7,913,235 shares are issued and outstanding as of the date hereof. All of the
24
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issued and outstanding shares of Premier Stock and the Premier Subsidiaries
capital stock (the "Premier Subsidiaries Stock") are duly and validly issued,
fully paid and nonassessable and were offered, issued and sold in compliance
with all applicable federal or state securities laws. No person has any right
of rescission or claim for damages under federal or state securities laws with
respect to the issuance of shares of Premier Stock or any of the shares of
Premier Subsidiaries Stock previously issued. None of the shares of Premier
Subsidiaries Stock has been issued in violation of the preemptive or other
rights of any shareholder of Premier. None of the shares of the Premier
Subsidiaries Stock was issued in violation of the preemptive or other rights of
any shareholder of the Premier Subsidiaries. All of the issued and outstanding
shares of the Premier Subsidiaries Stock, other than twenty percent (20%) of the
issued and outstanding shares of Alliance Finance, Inc., are owned by Premier.
(b) Except for the shares issuable upon the exercise of stock options
(the "Stock Options") and as set forth in the Premier Disclosure Memorandum,
Premier does not have outstanding any securities which are either by their terms
or by contract convertible or exchangeable into Premier Stock, or any other
securities or debt, of Premier, or any preemptive or similar rights to subscribe
for or to purchase, or any options or warrants or agreements or understandings
for the purchase or the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, its capital stock or
securities convertible into its capital stock. Premier is not subject to any
obligation (contingent or otherwise) to repurchase or otherwise acquire or
retire, or to register, any shares of its capital stock.
(c) There is no agreement, arrangement or understanding to which
Premier is a party restricting or otherwise relating to the transfer of any
shares of Premier Stock.
(d) All shares of common stock or other capital stock, or any other
securities or debt, of Premier, which have been purchased or redeemed by Premier
have been purchased or redeemed in accordance with all applicable federal, state
and local laws, rules, and regulations, including, without limitation, all
federal and state securities laws and rules and regulations of any securities
exchange or system on which such stock, securities or debt are, or at such time
were, traded, and no such purchase or redemption has resulted or will, with the
giving of notice or lapse of time, or both, result in a default or acceleration
of the maturity of, or otherwise modify, any agreement, note, mortgage, bond,
security agreement, loan agreement or other contract or commitment of Premier.
6.2.4 CORPORATE RECORDS. The stock records and minute books of
-----------------
Premier, whether heretofore or hereafter furnished or made available to Citizens
by Premier, (a) fully and accurately reflect all issuances, transfers and
redemptions of the Common Stock, (b) correctly show the record addresses and the
number of shares of such stock issued and outstanding on the date hereof held by
the shareholders of Premier, (c) correctly show all corporate action taken by
the directors and shareholders of Premier (including actions taken by consent
without a meeting) and (d) contain true and correct copies or originals of the
respective Articles of Incorporation and all amendments thereto, bylaws as
amended and currently in force, and the minutes of all meetings or consent
25
<PAGE>
actions of its directors and shareholders. No resolutions, regulations or
bylaws have been passed, enacted, consented to or adopted by such directors or
shareholders except those contained in the minute books. All corporate records
have been maintained in accordance with all applicable statutory requirements
and are complete and accurate.
6.2.5 TAX RETURNS; TAXES.
------------------
(a) Premier has duly filed or will file when due (i) all required
federal and state tax returns and reports, and (ii) all required returns and
reports of other governmental units having jurisdiction with respect to taxes
imposed upon its income, properties, revenues, franchises, operations or other
assets or taxes imposed which might create a lien or encumbrance on any of such
assets or affect adversely its business or operations. Such returns or reports
are, and when filed will be, true, complete and correct, and Premier has paid,
or will pay with respect to returns or reports not yet filed because not yet
due, to the extent such taxes or other governmental charges have become due, all
taxes and other governmental charges set forth in such returns or reports. All
federal, state and local taxes and other governmental charges paid or payable by
Premier have been paid, or have been accrued or reserved on its books in
accordance with GAAP applied on a basis consistent with prior periods. Adequate
reserves for the payment of taxes have been established on the books of Premier
for all periods through the date hereof, whether or not due and payable and
whether or not disputed. Until the Closing Date, Premier shall continue to
reserve sufficient funds for the payment of expected tax liabilities in
accordance with GAAP applied on a basis consistent with prior periods. Premier
has not received any notice of a tax deficiency or assessment of additional
taxes of any kind and, to the knowledge of the officers of Premier
(collectively, "Premier Management"), there is no threatened claim against
Premier, or any basis for any such claim, for payment of any additional federal,
state, local or foreign taxes for any period prior to the date of this Agreement
in excess of the accruals or reserves with respect to any such claim shown in
the 1996 Premier Financial Statements described in Section 6.2.6 below or
disclosed in the notes with respect thereto. There are no waivers or agreements
by Premier for the extension of time for the assessment of any taxes. The
federal income tax returns of Premier have not been examined by the Internal
Revenue Service for any period since January 1, 1993.
(b) Except as set forth in the Premier Disclosure Memorandum, proper
and accurate amounts have been withheld by Premier from its employees for all
periods in full and complete compliance with the tax withholding provisions of
applicable federal, state and local tax laws, and proper and accurate federal,
state and local tax returns have been filed by Premier for all periods for which
returns were due with respect to withholding, social security and unemployment
taxes, and the amounts shown thereon to be due and payable have been paid in
full.
6.2.6 FINANCIAL STATEMENTS AND PRO FORMA INFORMATION. Premier has
----------------------------------------------
delivered to Citizens true, correct and complete copies of (i) the audited
financial statements of Premier for the years ended December 31, 1994, 1995 and
1996, including balance sheets, statements of income, statements of
shareholders' equity, statements of cash flows and related notes (the audited
financial statements for the year ended December 31, 1996 being referred to as
the "1996 Premier Financial Statements"); (ii) unaudited financial statements of
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Premier for the period ended March 31, 1997, including a balance sheet,
statement of income and related notes; and (iii) unaudited proforma financial
statements dated March 31, 1997, reflecting the merger with the Central and
Southern Holding Company ("Central") in connection with Premier's shareholder
meeting on June 16, 1997 (the "Pro Forma Financial Statements"). All of such
financial statements have been prepared in accordance with GAAP consistently
applied and present fairly the assets, liabilities and financial condition of
Premier as of the dates indicated therein and the results of its operations for
the respective periods then ended.
6.2.7 REGULATORY REPORTS. Premier has made available to Citizens
------------------
for review and inspection the year-end Report of Condition and year-end Report
of Income and Dividends as filed by the Premier banking and thrift subsidiaries
with the FDIC and the Office of Thrift Supervision, as applicable, for each of
the three years ended December 31, 1996, 1995 and 1994, together with all such
other reports filed for the same three-year period with the FDIC, and the
Department of Banking, and other applicable regulatory agencies and the Form
F.R. Y-6 filed by Premier with the Federal Reserve for each of the three years
ended December 31, 1996, 1995 and 1994 (collectively, the "Premier Reports").
All of the Premier Reports, as amended, have been prepared in accordance with
applicable rules and regulations applied on a basis consistent with prior
periods and contain in all material respects all information required to be
presented therein in accordance with such rules and regulations.
6.2.8 ACCOUNTS. Premier has made available to Citizens a list of
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each and every bank and other institution in which Premier maintains an account
or safety deposit box, the account numbers, and the names of all persons who are
presently authorized to draw thereon, have access thereto or give instructions
regarding distribution of funds or assets therein.
6.2.9 NOTES AND OBLIGATIONS.
---------------------
(a) Except as set forth in the Premier Disclosure Memorandum or as
provided for in the loss reserve described in subsection (b) below, all notes
receivable or other obligations owned by Premier or due to it shown in the 1996
Premier Financial Statements and any such notes receivable and obligations on
the date hereof and on the Closing Date are and will be genuine, legal, valid
and collectible obligations of the respective makers thereof and are not and
will not be subject to any offset or counterclaim. Except as set forth in
subsection (b) below, all such notes and obligations are evidenced by written
agreements, true and correct copies of which will be made available to Citizens
for examination prior to the Closing Date. All such notes and obligations were
entered into by Premier in the ordinary course of its business and in compliance
with all applicable laws and regulations.
(b) Premier has established a loss reserve in the 1996 Premier
Financial Statements and as of the date of this Agreement and will establish a
loan loss reserve as of the Closing Date which is adequate within the meaning of
GAAP and applicable regulatory requirements or guidelines to cover anticipated
losses which might result from such items as the insolvency or default of
27
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borrowers or obligors on such loans or obligations, defects in the notes or
evidences of obligation (including losses of original notes or instruments),
offsets or counterclaims properly chargeable to such reserve, or the
availability of legal or equitable defenses which might preclude or limit the
ability of Premier to enforce the note or obligation, and the representations
set forth in subsection (a) above are qualified in their entirety by the
aggregate of such loss reserve. Except as described in the Premier Disclosure
Memorandum, at the Closing Date, the ratio of the loss reserve, established on
such date in good faith by Premier, to total loans outstanding at such time
shall not exceed the ratio of the loan loss reserve to the total loans
outstanding as reflected in the 1996 Premier Financial Statements, established
on or before such date in good faith by Premier, in accordance with GAAP.
6.2.10 LIABILITIES. Premier has no debt, liability or obligation of
-----------
any kind required to be shown pursuant to GAAP on the consolidated balance sheet
of Premier, whether accrued, absolute, known or unknown, contingent or
otherwise, including, but not limited to (a) liability or obligation on account
of any federal, state or local taxes or penalty, interest or fines with respect
to such taxes, (b) liability arising from or by virtue of the distribution,
delivery or other transfer or disposition of goods, personal property or
services of any type, kind or variety, (c) unfunded liabilities with respect to
any pension, profit sharing or employee stock ownership plan, whether operated
by Premier or any other entity covering employees of Premier, or (d)
environmental liabilities, except (i) those reflected in the 1996 Premier
Financial Statements, and (ii) as disclosed in the Premier Disclosure
Memorandum.
6.2.11 ABSENCE OF CHANGES. Except as specifically provided for in
------------------
this Agreement or specifically set forth in the Premier Disclosure Memorandum,
since December 31, 1996:
(a) there has been no change in the business, assets, liabilities,
results of operations or financial condition of Premier, or in any of its
relationships with customers, employees, lessors or others, other than changes
in the ordinary course of business, none of which individually or in the
aggregate has had, or which the Premier Management believes may have, a material
adverse effect on such businesses or properties;
(b) there has been no material damage, destruction or loss to the
assets, properties or business of Premier, whether or not covered by insurance,
which has had, or which the Premier Management believes may have, an adverse
effect thereon;
(c) the business of Premier has been operated in the ordinary course,
and not otherwise;
(d) the properties and assets of Premier used in its business have
been maintained in good order, repair and condition, ordinary wear and tear
excepted;
(e) the books, accounts and records of Premier have been maintained in
the usual regular and ordinary manner;
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(f) there has been no declaration, setting aside or payment of any
dividend or other distribution on or in respect of the capital stock of Premier;
(g) there has been no increase in the compensation or in the rate of
compensation or commissions payable or to become payable by Premier to any
director or executive officer, or to any employee earning $35,000 or more per
annum, or any general increase in the compensation or in the rate of
compensation payable or to become payable to employees of Premier earning less
than $35,000 per annum ("general increase" for the purpose hereof meaning any
increase generally applicable to a class or group of employees, but not
including increases granted to individual employees for merit, length of
service, change in position or responsibility or other reasons applicable to
specific employees and not generally to a class or group thereof), or any
director, officer, or employee hired at a salary in excess of $35,000 per annum,
or any increase in any payment of or commitment to pay any bonus, profit sharing
or other extraordinary compensation to any employee;
(h) there has been no change in the articles of incorporation or
bylaws of Premier;
(i) there has been no labor dispute, unfair labor practice charge or
employment discrimination charge, nor, to the knowledge of Premier, any
organizational effort by any union, or institution or threatened institution of
any effort, complaint or other proceeding in connection therewith, involving
Premier or affecting its operations;
(j) there has been no issuance, sale, repurchase, acquisition, or
redemption by Premier of any of its capital stock, bonds, notes, debt or other
securities, and there has been no modification or amendment of the rights of the
holders of any outstanding capital stock, bonds, notes, debt or other securities
thereof;
(k) there has been no mortgage, lien or other encumbrance or security
interest (other than liens for current taxes not yet due or purchase money
security interests arising in the ordinary course of business) created on or in
(including without limitation, any deposit for security consisting of) any asset
or assets of Premier or assumed by it with respect to any asset or assets;
(l) there has been no indebtedness or other liability or obligation
(whether absolute, accrued, contingent or otherwise) incurred by Premier which
would be required to be reflected on a balance sheet of Premier prepared as of
the date hereof in accordance with GAAP applied on a consistent basis, except as
incurred in the ordinary course of business;
(m) no obligation or liability of Premier has been discharged or
satisfied, other than in the ordinary course of business;
(n) there have been no sales, transfers or other dispositions of any
asset or assets of Premier, other than sales in the ordinary course of business;
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(o) there has been no amendment, termination or waiver of any right of
Premier under any contract or agreement or governmental license, permit or
permission which has had or may have an adverse effect on its business or
properties; and
(p) Premier has not taken any action or failed to take any action
prior to the date of this Agreement which would represent or result in a
material breach or violation of any of the covenants and agreements of Premier
provided in this Agreement.
6.2.12 LITIGATION AND PROCEEDINGS. Except as set forth on the
--------------------------
Premier Disclosure Memorandum, there are no actions, decrees, suits,
counterclaims, claims, proceedings or governmental actions or investigations,
pending or, to the knowledge of Premier, threatened against, by or affecting
Premier, or any officer, director, employee or agent in such person's capacity
as an officer, director, employee or agent of Premier or relating to the
business or affairs of Premier, in any court or before any arbitrator or
governmental agency, and no judgment, award, order or decree of any nature has
been rendered against or with respect thereto by any agency, arbitrator, court,
commission or other authority, nor does Premier have any unasserted contingent
liabilities which might have an adverse effect on its assets or on the operation
of its businesses or which might prevent or impede the consummation of the
transactions contemplated by this Agreement.
6.2.13 PROXY MATERIALS. Neither the Proxy Materials nor other
---------------
materials furnished by Premier to the Premier's shareholders in connection with
the transactions contemplated by this Agreement or the Merger Agreement, or in
any amendments thereof or supplements thereto, will, at the times such documents
are distributed to the holders of shares of Premier Stock and through the
acquisition of shares of Premier Stock by Citizens pursuant to the Merger,
contain with respect to Premier any untrue statement of a material fact or omit
to state any information required to be stated therein or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they are made with respect to Premier, not misleading.
6.3 BUSINESS OPERATIONS.
-------------------
6.3.1 CUSTOMERS. Premier has no knowledge of any presently existing
---------
facts which could reasonably be expected to result in the loss of any material
borrower or depositor or in Premier's inability to collect amounts due therefrom
or to return funds deposited thereby, except as set forth on the Premier
Disclosure Memorandum.
6.3.2 PERMITS; COMPLIANCE WITH LAW.
----------------------------
(a) Premier has all permits, licenses, approvals, authorizations and
registrations under all federal, state, local and foreign laws required for
Premier to own, lease or operate its Assets and to carry on its business as
presently conducted, and all of such permits, licenses, approvals,
authorizations and registrations are in full force and effect, and no suspension
or cancellation of any of them is pending or, to the knowledge of Premier,
threatened.
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(b) Premier has complied with all laws, regulations, and orders
applicable to it or its business, except for any non-compliance which would not
have a material adverse effect on Premier. The Premier Disclosure Memorandum
contains a list of any known violations of such laws, regulations, ordinances or
rules by any present officer, director, or employee of Premier which occurred
since December 31, 1991, and which resulted in any order, proceeding, judgment
or decree which would be required to be disclosed pursuant to Item 401(f) of
Regulation S-K promulgated by the SEC if Premier had been subject to the
reporting requirements under the 1933 Act or the Securities Exchange Act of
1934. No past violation of any such law, regulation, ordinance or rule has
occurred which could impair the right or ability of Premier to conduct its
business.
(c) Except as set forth in the Premier Disclosure Memorandum, no
notice or warning from any governmental authority with respect to any failure or
alleged failure of Premier to comply in any respect with any law, regulation or
order has been received, nor is any such notice or warning proposed or, to the
knowledge of Premier, threatened.
6.3.3 ENVIRONMENTAL.
-------------
(a) Except as set forth in the Premier Disclosure Memorandum, Premier
(i) has not caused or permitted, and has no knowledge of any
claim regarding the environmental condition of the property or the
generation, manufacture, use, or handling or the release or presence
of, any hazardous substances or hazardous wastes, including petroleum,
on, in, under or from any properties or facilities currently owned or
leased by Premier or adjacent to any properties so owned or leased;
and
(ii) has complied in all material respects with, and has kept all
records and made all filings or reports required by, and is otherwise
in compliance with all applicable federal, state and local laws,
regulations, orders, permits and licenses relating to the generation,
treatment, manufacture, use, handling, release or presence of any
hazardous substances or hazardous wastes, including petroleum and
asbestos, on, in, under or from any properties or facilities currently
owned or leased by Premier.
(b) Except as set forth in the Premier Disclosure Memorandum, neither
Premier nor any of its officers, directors, employees or agents, in the course
of such individual's employment by Premier, has given advice with respect to, or
participated in any respect in, the management or operation of any entity or
concern whose business relates in any way to the generation, storage, handling,
disposal, transfer, production, use or processing of hazardous substances or
hazardous wastes, including petroleum, nor to Premier's knowledge has Premier
foreclosed on any property on which there is a threatened release of any
hazardous substances or hazardous wastes, including petroleum, or on which there
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has been such a release and full remediation has not been completed, or any
property on which contained (non-released) hazardous substances or hazardous
wastes, including petroleum, are or were located.
(c) Except as set forth in the Premier Disclosure Memorandum, neither
Premier, nor any of its officers, directors, employees, or agents, is aware of,
has been told of, or has observed, the presence of any hazardous substance or
hazardous wastes, including petroleum, on, in, under, or around property on
which Premier holds a legal or security interest, in violation of, or creating
liability under, federal, state, or local environmental statutes, regulations,
or ordinances.
(d) The term hazardous substances or hazardous waste does not include
those substances which are normally and reasonably used in connection with the
occupancy or operation of office buildings (such as cleaning fluids, and
supplies normally used in the day to day operation of business offices).
6.3.4 INSURANCE. Premier has made available to Citizens a complete
---------
list and description (including the expiration date, premium amount and coverage
thereunder) of all policies of insurance and bonds presently maintained by, or
providing coverage for, Premier or any of its officers, directors and employees,
all of which are, and will be maintained through the Closing Date, in full force
and effect, together with a complete list of all pending claims under any of
such policies or bonds. All terms, obligations and provisions of each of such
policies and bonds have been complied with, all premiums due thereon have been
paid, and no notice of cancellation with respect thereto has been received.
Except as set forth in the Premier Disclosure Memorandum, such policies and
bonds provide adequate coverage to insure the properties and businesses of
Premier and the activities of its officers, directors and employees against such
risks and in such amounts as are prudent and customary. Premier will not as of
the Closing Date have any liability for premiums or for retrospective premium
adjustments for any period prior to the Closing Date. Premier has heretofore
made, or will hereafter make, available to Citizens a true, correct and complete
copy of each insurance policy and bond in effect since January 1, 1991 with
respect to the business and affairs of Premier.
6.4 PROPERTIES AND ASSETS.
---------------------
6.4.1 Contracts and Commitments. The Premier Disclosure Memorandum
-------------------------
contains a list identifying and briefly describing all written contracts,
purchase orders, agreements, security deeds, guaranties or commitments to which
Premier is a party or by which it may be bound involving the payment or receipt,
actual or contingent, of more than $25,000 or having a term or requiring
performance over a period of more than ninety (90) days. Each such contract,
agreement, guaranty and commitment of Premier is in full force and effect and is
valid and enforceable in accordance with its terms, and constitutes a legal and
binding obligation of the respective parties thereto and is not the subject of
any notice of default, termination, partial termination or of any ongoing,
pending, completed or threatened investigation, inquiry or other proceeding or
action that may give rise to any notice of default, termination or partial
termination. Premier has complied in all material respects with the provisions
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of such contracts, agreements, guaranties and commitments. A true and complete
copy of each such document has been or will be made available to Citizens for
examination.
6.4.2 LICENSES; INTELLECTUAL PROPERTY. Premier has all patents,
-------------------------------
trademarks, trade names, service marks, copyrights, trade secrets and know-how
reasonably necessary to conduct its business as presently conducted and, except
as described in the Premier Disclosure Memorandum, Premier is not a party,
either as licensor or licensee, to any agreement for any patent, process,
trademark, service mark, trade name, copyright, trade secret or other
confidential information and there are no rights of third parties with respect
to any trademark, service mark, trade secrets, confidential information, trade
name, patent, patent application, copyright, invention, device or process owned
or used by Premier or presently expected to be used by either of them in the
future. All patents, copyrights, trademarks, service marks, trade names, and
applications therefor or registrations thereof, owned or used by Premier, are
listed in the Premier Disclosure Memorandum. Premier has complied with all
applicable laws relating to the filing or registration of "fictitious names" or
trade names.
6.4.3 PERSONAL PROPERTY. Premier has good and marketable title to
-----------------
all of its personalty, tangible and intangible, reflected in the 1996 Premier
Financial Statements (except as since sold or otherwise disposed of by it in the
ordinary course of business), free and clear of all encumbrances, liens or
charges of any kind or character, except (i) those referred to in the notes to
the 1996 Premier Financial Statements as securing specified liabilities (with
respect to which no default exists or, to the knowledge of Premier, is claimed
to exist), (ii) those described in the Premier Disclosure Memorandum and (iii)
liens for taxes not due and payable.
6.4.4 PREMIER LEASES.
--------------
(a) All leases (the "Premier Leases") pursuant to which Premier is
lessor or lessee of any real or personal property (such property, the "Premier
Leased Property") are valid and enforceable in accordance with their terms;
there is not under any Premier Leases any default or, to the knowledge of
Premier, any claimed default by Premier, or event of default or event which with
notice or lapse of time, or both, would constitute a default by Premier and in
respect of which adequate steps have not been taken to prevent a default on its
part from occurring.
(b) The copies of the Premier Leases heretofore or hereafter furnished
or made available by Premier to Citizens are true, correct and complete, and the
Premier Leases have not been modified in any respect other than pursuant to
amendments, copies of which have been concurrently delivered or made available
to Citizens, and are in full force and effect in accordance with their terms.
(c) Except as set forth in the Premier Disclosure Memorandum, there
are no contractual obligations, agreements in principle or present plans for
Premier to enter into new leases of real property or to renew or amend existing
Premier Leases prior to the Closing Date.
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6.4.5 REAL PROPERTY.
-------------
(a) Premier does not own any interest in any real property (other than
as lessee) except as set forth in the Premier Disclosure Memorandum (such
properties being referred to herein as "Premier Realty"). Except as disclosed
in the Premier Disclosure Memorandum, Premier has good title to the Premier
Realty and the titles to the Premier Realty are covered by title insurance
policies providing coverage in the amount of the original purchase price, true,
correct and complete copies of which have been or will be furnished to Citizens
with the Premier Disclosure Memorandum. Premier has not encumbered the Premier
Realty since the effective dates of the respective title insurance policies.
(b) Except as set forth in the Premier Disclosure Memorandum, the
interests of Premier in the Premier Realty and in and under each of the Premier
Leases are free and clear of any and all liens and encumbrances and are subject
to no present claim, contest, dispute, action or, to the knowledge of Premier,
threatened action at law or in equity.
(c) The present and past use and operations of, and improvements upon,
the Premier Realty and all real properties leased by Premier (the "Premier
Leased Real Properties") are in compliance in all material respects with all
applicable building, fire, zoning and other applicable laws, ordinances and
regulations and with all deed restrictions of record, no notice of any violation
or alleged violation thereof has been received, and to the knowledge of Premier
there are no proposed changes therein that would affect the Premier Realty, the
Premier Leased Real Properties or their uses.
(d) Except as set forth in the Premier Disclosure Memorandum, no rent
has been paid in advance and no security deposit has been paid by, nor is any
brokerage commission payable by or to, Premier with respect to any Premier Lease
pursuant to which it is lessor or lessee.
(e) Premier is not aware of any proposed or pending change in the
zoning of, or of any proposed or pending condemnation proceeding with respect
to, any of the Premier Realty or the Premier Leased Real Properties which may
adversely affect the Premier Realty or the Premier Leased Real Properties or the
current or currently contemplated use thereof.
(f) The buildings and structures owned, leased or used by Premier are,
taken as a whole, in good operating order (except for ordinary wear and tear),
usable in the ordinary course of business, and are sufficient and adequate to
carry on the business and affairs of Premier.
6.5 EMPLOYEES AND BENEFITS.
----------------------
6.5.1 DIRECTORS OR OFFICERS OF OTHER CORPORATIONS. Except as set
-------------------------------------------
forth in the Premier Disclosure Memorandum, no director, officer, or employee of
Premier serves, or in the past five years has served, as a director or officer
of any other corporation on behalf of or as a designee of Premier or any of its
subsidiaries.
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6.5.2 EMPLOYEE BENEFITS.
-----------------
(a) Except as set forth in the Premier Disclosure Memorandum, Premier
does not provide and is not obligated to provide, directly or indirectly, any
benefits for employees, including, without limitation, any pension, profit
sharing, stock option, retirement bonus, hospitalization, medical, insurance,
vacation or other employee benefits under any practice, agreement or
understanding.
(b) The Premier Disclosure Memorandum lists separately any employee
benefit plan within the meaning of Section 3(3) of ERISA (collectively, "ERISA
Plans"). True, correct and complete copies of all ERISA Plans and, to the
extent applicable, all related trust agreements, insurance contracts, summary
plan descriptions, Internal Revenue Service determination letters and filings,
the past three years of actuarial reports and valuations, annual reports and
Form 5500 filings (including attachments), and any other related documents
requested by Citizens or its counsel have been, or prior to the Closing Date
will be, made available to Citizens.
(c) Premier is not currently and has never been in the past required
to contribute to a multi-employer plan as defined in Section 3(37)(A) of ERISA.
Premier does not maintain or contribute to, nor within the past six years has it
maintained or contributed to, an employee pension benefit plan as defined in
Section 3(2) of ERISA that is or was subject to Title IV of ERISA.
(d) Each ERISA Plan has been operated and administered in all material
respects in accordance with, and has been amended to comply with (unless such
amendment is not yet required), all applicable laws, rules and regulations,
including, without limitation, ERISA, the Code and the regulations issued under
ERISA and the Code. With respect to each ERISA Plan, other than routine claims
for benefits submitted in the ordinary course of the benefits process, no
litigation or administrative or other proceeding is pending or, to the knowledge
of Premier, threatened involving such ERISA Plan or any of its fiduciaries.
With respect to each ERISA Plan, neither Premier nor any of its directors,
officers, employees or agents, nor to Premier's knowledge, any "party in
interest" or "disqualified person" (as such terms are defined in Section 3(14)
of ERISA and Section 4975 of the Code) has been engaged in or been a party to
any transaction relating to the ERISA Plan which would constitute a breach of
fiduciary duty under ERISA or a "prohibited transaction" (as such term is
defined in Section 406 of ERISA or Section 4975 of the Code), unless such
transaction is specifically permitted under Sections 407 or 408 of ERISA,
Section 4975 of the Code or a class or administrative exemption issued by the
Department of Labor. Each ERISA Plan that is a group health plan within the
meaning of Section 607(l) of ERISA and Section 4980B of the Code is in
compliance with the continuation coverage requirements of Section 501 of ERISA
and Section 4980B of the Code.
(e) Of the ERISA Plans, the "employee pension benefit plans" within
the meaning of Section 3(2) of ERISA (collectively, the "Employee Pension
Benefit Plans") are separately identified on the Premier Disclosure Memorandum.
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With respect to each Employee Pension Benefit Plan, except as set forth on the
Premier Disclosure Memorandum: (i) such Employee Pension Benefit Plan
constitutes a qualified plan within the meaning of Section 401(a) of the Code
and the trust is exempt from federal income tax under Section 501(a) of the
Code; (ii) all contributions required by such plan have been made; and (iii) no
termination, partial termination or discontinuance of contributions has occurred
without a determination by the IRS that such action does not affect the tax-
qualified status of such plan.
(f) As of the Closing Date, with respect to each ERISA Plan, Premier
will have provided adequate reserves, or insurance or qualified trust funds, to
provide for all payments and contributions required, or reasonably expected to
be required, to be made under the provisions of such ERISA Plan or required to
be made under applicable laws, rules and regulations, with respect to any period
prior to the Closing Date to the extent reserves are required under GAAP, based
on an actuarial valuation satisfactory to the actuaries of Premier representing
a projection of claims expected to be incurred under such ERISA Plan.
(g) Except as disclosed on the Premier Disclosure Memorandum, Premier
does not provide and has no obligation to provide benefits, including, without
limitation, death, health or medical benefits (whether or not insured) with
respect to current or former employees of Premier beyond their retirement or
other termination of service with Premier other than (i) coverage mandated by
applicable law, (ii) benefits under the Employee Pension Benefit Plans, or (iii)
benefits the full cost of which is borne by the current or former employee or
his beneficiary.
(h) Neither this Agreement nor any transaction contemplated hereby
will (i) entitle any current or former employee, officer or director of Premier
to severance pay, unemployment compensation or any similar or other payment, or
(ii) accelerate the time of payment or vesting of, or increase the amount of
compensation or benefits due any such employee, officer or director.
6.5.3 LABOR-RELATED MATTERS. Except as described in the Premier
---------------------
Disclosure Memorandum, Premier is not, and has not been, a party to any
collective bargaining agreement or agreement of any kind with any union or labor
organization or to any agreement with any of its employees which is not
terminable at will or upon ninety (90) days notice at the election of, and
without cost or penalty to, Premier. Premier has not received at any time in
the past five (5) years, any demand for recognition from any union, and no
attempt has been made, or will have been made as of the Closing Date, to
organize any of its employees. Premier has complied in all material respects
with all obligations under the National Labor Relations Act, as amended, the Age
Discrimination in Employment Act, as amended, and all other federal, state and
local labor laws and regulations applicable to employees. There are no unfair
labor practice charges pending or threatened against Premier, and there are, and
in the past three (3) years there have been, no charges, complaints, claims or
proceedings, no slowdowns or strikes pending or threatened against, or
involving, as the case may be, Premier with respect to any alleged violation of
any legal duty (including but not limited to any wage and hour claims,
employment discrimination claims or claims arising out of any employment
36
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relationship) by Premier as to any of its employees or as to any person seeking
employment therefrom, and no such violations exist.
6.5.4 RELATED PARTY TRANSACTIONS. Except for (a) loans and
--------------------------
extensions of credit made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for comparable
transactions by Premier with other persons who are not affiliated with Premier,
and which do not involve more than the normal risk of repayment or present other
unfavorable features, (b) deposits, all of which are on terms and conditions
identical to those made available to all customers of Premier at the time such
deposits were entered into, and (c) transactions specifically described in the
Premier Disclosure Memorandum, there are no contracts with or commitments to
present or former five percent (5%) or greater shareholders, directors,
officers, or employees involving the expenditure after December 31, 1991 of more
than $60,000 as to any one individual, including with respect to any business
directly or indirectly controlled by any such person, or $100,000 for all such
contracts or commitments in the aggregate for all such individuals (other than
contracts or commitments relating to services to be performed by any officer,
director or employee as a currently-employed employee of Premier).
6.6 OTHER MATTERS.
-------------
6.6.1 REGULATORY REPORTS. Premier will make available to Citizens
------------------
for review and inspection all applications, reports or other documents filed by
it for each of its past three full fiscal years with any regulatory or
governmental agencies. All of such applications, reports and other documents
have been prepared in accordance with applicable rules and regulations of the
regulatory agencies with which they were filed.
6.6.2 APPROVALS, CONSENTS AND FILINGS. Except for the approval of
-------------------------------
the Federal Reserve and the Department of Banking, or as set forth in the
Premier Disclosure Memorandum, neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby or
thereby will (a) require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority, or (b)
violate any order, writ, injunction, decree, statute, rule or regulation
applicable to Premier, or any of Premier's assets.
6.6.3 DEFAULT.
-------
(a) Except for those consents described in or set forth pursuant to
Section 6.6.2 above, neither the execution of this Agreement nor consummation of
the transactions contemplated herein (i) constitutes a breach of or default
under any contract or commitment to which Premier is a party or by which Premier
or its properties or assets are bound, (ii) does or will result in the creation
or imposition of any security interest, lien, encumbrance, charge, equity or
restriction of any nature whatsoever in favor of any third party upon any assets
of Premier, or (iii) constitutes an event permitting termination of any
agreement or the acceleration of any indebtedness of Premier.
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(b) Premier is not in default under its articles of incorporation or
bylaws or under any term or provision of any security deed, mortgage, indenture
or security agreement or of any other contract or instrument to which Premier is
a party or by which it or any of its property is bound.
6.6.4 REPRESENTATIONS AND WARRANTIES. No representation or warranty
------------------------------
contained in this Article VI or in any written statement delivered by or at the
direction of Premier pursuant hereto or in connection with the transactions
contemplated hereby contains or shall contain any untrue statement, nor shall
such representations and warranties taken as a whole omit any statement
necessary in order to make any statement not misleading. Copies of all
documents that have been or will be furnished to Citizens in connection with
this Agreement or pursuant hereto are or shall be true, correct and complete.
6.6.5 PREMIER STOCK. The shares of Premier Stock to be issued and
-------------
delivered to Citizens' shareholders pursuant to the terms of the Merger
Agreement, when so issued and delivered, will be validly authorized and issued,
fully paid and non-assessable, and no shareholder of Premier will have any
preemptive rights with respect thereto.
ARTICLE VII
-----------
CONDUCT OF BUSINESS OF PREMIER PENDING CLOSING
----------------------------------------------
Except as expressly otherwise provided herein, Premier covenants and agrees
that, without the prior written consent of Citizens, between the date hereof and
the Closing Date:
7.1 CONDUCT OF BUSINESS. Premier will conduct its business only in the
-------------------
ordinary course, without the creation of any indebtedness for borrowed money
(other than deposit and similar accounts and customary credit arrangements
between banks in the ordinary course of business).
7.2 MAINTENANCE OF PROPERTIES. Premier will maintain its properties and
-------------------------
assets in good operating condition, ordinary wear and tear excepted.
7.3 INSURANCE. Premier will maintain and keep in full force and effect
---------
all of the insurance referred to in Section 6.3.4 hereof or other insurance
equivalent thereto in all material respects.
7.4 CAPITAL STRUCTURE. No change will be made in the authorized or
-----------------
issued capital stock or other securities of Premier, and Premier will not issue
or grant any right or option to purchase or otherwise acquire any of the capital
stock or other securities of Premier.
7.5 DIVIDENDS. Except for quarterly dividends in the amount not to
---------
exceed $.10 per share, no other dividend, distribution or payment will be
declared or made in respect to the Premier Stock.
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7.6 AMENDMENT OF ARTICLES; CORPORATE EXISTENCE. Premier will not amend
------------------------------------------
its articles of incorporation or bylaws, and Premier will maintain its corporate
existence and powers.
7.7 NO ACQUISITIONS. Premier shall not acquire by merging or
---------------
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other entity or division thereof or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate, to it.
7.8 NO DISPOSITIONS. Premier will not sell, mortgage, lease, buy or
---------------
otherwise acquire, transfer or dispose of any real property or interest therein
(except for sales in the ordinary course of business) and Premier will not,
except in the ordinary course of business, sell or transfer, mortgage, pledge or
subject to any lien, charge or other encumbrance any other tangible or
intangible asset.
7.9 BOOKS AND RECORDS. The books and records of Premier will be
-----------------
maintained in the usual, regular and ordinary course.
7.10 ADVICE OF CHANGES. Premier shall promptly advise Citizens orally
-----------------
and in writing of any change or event having, or which the Premier Management
believes could have, a material adverse effect on the assets, liabilities,
business, operations or financial condition of Premier.
7.11 INCUR ADDITIONAL DEBT. Premier shall not incur any debt
---------------------
obligations or other obligations for borrowed money in excess of an aggregate of
$100,000 (for Premier on a consolidated basis) except in the ordinary course of
business of Premier consistent with past practices (which included for Premier
Subsidiaries, creation of deposit liabilities, purchase of federal funds,
advances from the Federal Reserve Bank or Federal Home Loan Bank and entry into
and repurchase of agreements fully secured by U.S. government or agency
securities), or impose, or suffer the imposition on any asset of Premier of any
lien or permit any such lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, Federal Home Loan Bank advances,
Atreasury tax and loan@ accounts established in the ordinary course of business,
the satisfaction of legal requirements in the exercise of trust powers, and
liens in effect as of the date hereof that are disclosed in the Premier
Disclosure Memorandum).
7.12 ADOPT NEW BENEFIT PLAN. Premier shall not adopt any new employee
----------------------
benefit plan or make any material change in or to any existing employee benefit
plan other than any such change that is required by law or that, in the opinion
of counsel, is necessary or advisable to maintain the tax qualified status of
any such plan.
7.13 CHANGE IN TAX OR ACCOUNTING METHOD. Premier shall not make any
----------------------------------
significant change in any tax or accounting methods or systems of internal
accounting controls, except as may be appropriate to conform to changes in tax
laws or regulatory accounting requirements or GAAP.
39
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7.14 LITIGATION. Premier shall not commence any litigation other than
----------
in accordance with past practice, settle any litigation involving any liability
of Premier for money damages in excess of $50,000 or which imposes material
restrictions upon the operations of Premier.
ARTICLE VIII
------------
CONDITIONS TO OBLIGATIONS OF PREMIER
------------------------------------
All of the obligations of Premier under this Agreement are subject to the
fulfillment prior to or at the Closing Date of each of the following conditions,
any one or more of which may be waived by Premier:
8.1 VERACITY OF REPRESENTATIONS AND WARRANTIES. The representations
------------------------------------------
and warranties of Citizens contained herein or in any certificate, schedule or
other document delivered pursuant to the provisions hereof, or in connection
herewith, shall be true in all material respects as of the date when made and
shall be deemed to be made again at and as of the Closing Date and shall be true
in all material respects at and as of such time, except as a result of changes
or events expressly permitted or contemplated herein.
8.2 PERFORMANCE OF AGREEMENTS. Citizens shall have performed and
-------------------------
complied with all agreements and conditions required by this Agreement to be
performed or complied with by it prior to or on the Closing Date.
8.3 CERTIFICATES, RESOLUTIONS, OPINION. Citizens shall have delivered
----------------------------------
to Premier:
(a) a certificate executed by the President and Secretary of Citizens,
dated as of the Closing Date, and certifying in such detail as Premier may
reasonably request to the fulfillment of the conditions specified in Sections
8.1 and 8.2 hereof;
(b) duly adopted resolutions of the Board of Directors and
shareholders of Citizens certified by the Secretary thereof, dated the Closing
Date, (i) authorizing and approving the execution of this Agreement (with
respect to the directors of Citizens) and the Merger Agreement (with respect to
the directors and shareholders of Citizens) and the consummation of the
transactions contemplated herein and therein in accordance with their respective
terms and (ii) authorizing all other necessary and proper corporate action to
enable Citizens to comply with the terms hereof and thereof;
(c) certificates of the valid existence of Citizens and the Citizens
Bank under the laws of the State of Georgia, executed by the Secretary of State
and the Department of Banking, respectively, and dated not more than five (5)
business days prior to the Closing Date;
40
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(d) certificates from the appropriate public officials of the State of
Georgia, dated not more than five (5) business days prior to the Closing Date,
certifying that Citizens has filed all corporate tax returns required by the
laws of such state and has paid all taxes shown thereon to be due;
(e) an opinion of Porter Keadle Moore LLP, certified public
accountants, to the effect that the Merger will be accounted for as a "pooling
of interests," which opinion will be subject only to such qualifications,
exceptions and factual assumptions as are satisfactory to Premier;
(f) an opinion of Kilpatrick Stockton LLP, counsel for Citizens, dated
the Closing Date, in the form attached hereto as Exhibit "E;" and
----------
(g) letters from each of the directors and officers of Citizens in
substantially the form of Exhibit "D."
----------
8.4 SHAREHOLDER APPROVAL. The Merger Agreement shall have been
--------------------
approved by the vote of the holders of at least a majority of Citizens Stock and
Premier Stock. The aggregate number of shares of Citizens Common Stock
dissenting to the Merger shall not exceed 24,235 shares.
8.5 REGULATORY APPROVALS. Premier shall have received from any and all
--------------------
governmental authorities, bodies or agencies having jurisdiction over the
transactions contemplated by this Agreement and the Merger Agreement, including,
but not limited to the Federal Reserve and the Department of Banking, such
consents, authorizations and approvals as are necessary for the consummation
thereof and all applicable waiting or similar periods required by law shall have
expired.
8.6 EFFECTIVE REGISTRATION STATEMENT. The Premier Registration
--------------------------------
Statement shall have been declared effective by the SEC and no stop order shall
have been entered with respect thereto.
8.7 CERTIFICATE OF MERGER. The Secretary of State of the State of
---------------------
Georgia shall have issued a Certificate of Merger with regard to the Merger in
accordance with the provisions of the Georgia Business Corporation Code.
8.8 PREMIER FAIRNESS OPINION. Premier shall have received from Brown,
------------------------
Burke Capital Partners, Inc. a letter, dated not more than five (5) business
days prior to the date of the Proxy Statement, to the effect that, in the
opinion of such firm, the consideration to be paid to Citizens' shareholders in
connection with the Merger is fair, from a financial point of view, to the
shareholders of Premier.
41
<PAGE>
ARTICLE IX
----------
CONDITIONS TO OBLIGATIONS OF CITIZENS
-------------------------------------
All of the obligations of Citizens under this Agreement are subject to the
fulfillment prior to or at the Closing Date of each of the following conditions,
any one or more of which may be waived by it:
9.1 VERACITY OF REPRESENTATIONS AND WARRANTIES. The representations and
------------------------------------------
warranties of Premier contained herein or in any certificate, schedule or other
document delivered pursuant to the provisions hereof, or in connection herewith,
shall be true in all material respects as of the date when made and shall be
deemed to be made again at and as of the Closing Date and shall be true in all
material respects at and as of such time, except as a result of changes or
events expressly permitted or contemplated herein.
9.2 PERFORMANCE OF AGREEMENTS. Premier shall have performed and complied
-------------------------
with all agreements and conditions required by this Agreement to be performed or
complied with by it prior to or at the Closing Date.
9.3 CERTIFICATES, RESOLUTIONS, OPINION. Premier shall have delivered to
----------------------------------
Citizens:
(a) a certificate executed by the President and Secretary of Premier,
dated the Closing Date, certifying in such detail as Citizens may reasonably
request to the fulfillment of the conditions specified in Sections 9.1 and 9.2
hereof;
(b) duly adopted resolutions of the Board of Directors of Premier,
certified by the Secretary thereof, dated the Closing Date, (i) authorizing and
approving the execution of this Agreement and the Merger Agreement on behalf of
Premier, and the consummation of the transactions contemplated herein and
therein in accordance with their respective terms, and (ii) authorizing all
other necessary and proper corporate actions to enable Premier to comply with
the terms hereof and thereof;
(c) a certificate of the valid existence of Premier, under the laws of
the State of Georgia executed by the Secretary of State of the State of Georgia,
dated not more than five (5) business days prior to the Closing Date;
(d) certificates from the appropriate public officials of the State of
Georgia, dated not more than five (5) business days prior to the Closing Date,
certifying that Premier has filed all corporate tax returns required by the laws
of such state and has paid all taxes shown thereon to be due;
42
<PAGE>
(e) an opinion of Mauldin & Jenkins LLC, certified public accountants,
to the effect that the Merger will be accounted for as a "pooling of interests,"
which opinion will be subject only to such qualifications, exceptions and
factual assumptions as are satisfactory to Citizens; and
(f) an opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel for
Premier, dated the Closing Date, in the form attached hereto as Exhibit "F."
----------
9.4 Shareholder Approval. The Merger Agreement shall have been approved
--------------------
by the vote of the holders of at least a majority of Citizens Stock and Premier
Stock. The aggregate number of shares of Citizens Common Stock dissenting to
the Merger shall not exceed 24,235 shares.
9.5 REGULATORY APPROVALS. Any and all governmental authorities, bodies
--------------------
or agencies having jurisdiction over the transactions contemplated by this
Agreement and the Merger Agreement, including, but not limited to the Federal
Reserve and the Department of Banking, shall have granted such consents,
authorizations and approvals as are necessary for the consummation hereof and
thereof, and all applicable waiting or similar periods required by law shall
have expired.
9.6 EFFECTIVE REGISTRATION STATEMENT. The Premier Registration Statement
--------------------------------
shall have been declared effective by the SEC and no stop order shall have been
entered with respect thereto.
9.7 TAX OPINION. Citizens shall have received from Kilpatrick Stockton
-----------
LLP its opinion, in form and substance reasonably satisfactory to Citizens, to
the effect that:
(1) The Merger and the issuance of shares of Premier Stock in
connection therewith, as described herein and in the Merger Agreement, will
constitute a tax-free reorganization under Section 368(a)(1)(A) of the
Code;
(2) Except for the recognition of gain as required by Section 302 of
the Code with respect to the receipt by the holders of Citizens Stock of
cash in lieu of fractional shares of Premier Stock and the recognition of
gain as required by Section 356(a) of the Code upon exercise by a
shareholder of his, her or its dissenters rights, no gain or loss will be
recognized by holders of Citizens Stock upon the exchange of such stock
solely for Premier Stock as a result of the Merger;
(3) No gain or loss will be recognized by Citizens as a result of the
Merger;
(4) The aggregate tax basis of Premier Stock received by shareholders
of Citizens pursuant to the Merger will be the same as the tax basis of the
shares of Citizens Stock exchanged therefor decreased by any portion of
such tax basis allocated to fractional shares of Premier Stock that are
treated as redeemed by Premier; and
(5) The holding period of the shares of Premier Stock received by the
shareholders of Citizens will include the holding period of the shares of
43
<PAGE>
Citizens Stock exchanged therefor, provided that the stock of Citizens is
held as a capital asset on the date of the consummation of the Merger.
9.8 CERTIFICATE OF MERGER. The Secretary of State of the State of
---------------------
Georgia shall have issued a Certificate of Merger with regard to the Merger in
accordance with the provisions of the Georgia Business Corporation Code.
9.9 CITIZENS FAIRNESS OPINION. Citizens shall have received from The
---------------------------
Carson Medlin Company a letter, dated not more than five (5) business days prior
to the date of the Proxy Statement, to the effect that, in the opinion of such
firm, the consideration to be paid to Citizens' shareholders in connection with
the Merger is fair, from a financial point of view, to the shareholders of
Citizens.
ARTICLE X
---------
WARRANTIES, NOTICES, ETC.
-------------------------
10.1 WARRANTIES. All statements contained in any certificate or other
----------
instrument delivered by or on behalf of Citizens or Premier pursuant hereto or
in connection with the transactions contemplated hereby shall be deemed
representations and warranties hereunder by them. Unless the context otherwise
requires, the representations and warranties required of Citizens shall be
required to be made, and shall be considered made, on behalf of both Citizens
and its subsidiary Citizens Bank, and the representations and warranties
required of Premier, shall be required to be made, and shall be considered made,
on behalf of Premier and the Premier Subsidiaries.
10.2 SURVIVAL OF REPRESENTATIONS. All representations, warranties,
---------------------------
covenants, and agreements made by either party hereto in or pursuant to this
Agreement or in any instrument, exhibit, or certificate delivered pursuant
hereto shall be deemed to have been material and to have been relied upon by the
party to which made, but, except as set forth hereafter or specifically stated
in this Agreement, such representations, warranties, covenants, and agreements
shall expire and be of no further force and effect upon the consummation of the
Merger; provided, however, that the following shall survive consummation of the
Merger and the transactions contemplated hereby:
(a) the opinions of counsel referred to in Sections 8.3(f) and 9.3(e)
of this Agreement;
(b) any intentional misrepresentation of any material fact made by
either party hereto in or pursuant to this Agreement or in any instrument,
document or certificate delivered pursuant hereto; and
(c) the provisions of this Section 10 and the provisions contained in
Sections 3.4, 3.6, 3.12, 3.13 and 11.13.
44
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10.3 NOTICES. All notices or other communications required or permitted
-------
to be given or made hereunder shall be in writing and delivered personally or
sent by pre-paid, first class certified or registered mail, return receipt
requested, or by facsimile transmission, to the intended recipient thereof at
its address or facsimile number set out below. Any such notice or communication
shall be deemed to have been duly given immediately (if given or made in person
or by facsimile confirmed by mailing a copy thereof to the recipient in
accordance with this Paragraph 10.3 on the date of such facsimile), or five days
after mailing (if given or made by mail), and in proving same it shall be
sufficient to show that the envelope containing the same was delivered to the
delivery service and duly addressed, or that receipt of a facsimile was
confirmed by the recipient as provided above. Either party may change the
address to which notices or other communications to such party shall be
delivered or mailed by giving notice thereof to the other party hereto in the
manner provided herein.
(1) To Citizens: Citizens Gwinnett Bankshares, Inc.
3209 US Hwy. 23
Duluth, Georgia 30136-3546
Attention: Thomas J. Martin President
Facsimile: (770) 476-3209
With copies to: Kilpatrick Stockton LLP
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309
Attention: Richard R. Cheatham, Esq.
Facsimile: (404) 815-6555
(2) To Premier: Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Attention: Darrell D. Pittard Chairman and CEO
Facsimile: (404) 814-3672
With copies to: Womble Carlyle Sandridge & Rice, PLLC
Suite 700
1275 Peachtree Street, N.E.
Atlanta, Georgia 30309
Attention: Steven S. Dunlevie, Esq.
Facsimile: (404) 888-7490
10.4 ENTIRE AGREEMENT. This Agreement and the Merger Agreement supersede
----------------
all prior discussions and agreements between Citizens and Premier with respect
to the Merger and the other matters contained herein and therein, and this
45
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Agreement and the Merger Agreement contain the sole and entire agreement between
Citizens and Premier with respect to the transactions contemplated herein and
therein.
10.5 WAIVER; AMENDMENT. Prior to or on the Closing Date, Premier shall
-----------------
have the right to waive any default in the performance of any term of this
Agreement by Citizens, to waive or extend the time for the fulfillment by
Citizens of any or all of Citizens' obligations under this Agreement, and to
waive any or all of the conditions precedent to the obligations of Premier under
this Agreement, except any condition which, if not satisfied, would result in
the violation of any law or applicable governmental regulation. Prior to or on
the Closing Date, Citizens shall have the right to waive any default in the
performance of any term of this Agreement by Premier, to waive or extend the
time for the fulfillment by Premier of any or all of Premier's obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of Citizens under this Agreement, except any condition which, if not
satisfied, would result in the violation of any law or applicable governmental
regulation. This Agreement may be amended by a subsequent writing signed by the
parties hereto, provided, however, that the provisions of Sections 8.5 and 9.5
requiring regulatory approval shall not be amended by the parties hereto without
regulatory approval.
ARTICLE XI
----------
TERMINATION
-----------
This Agreement may be terminated at any time prior to or on the Closing
Date upon written notice to the other party as follows, and, upon any such
termination of this Agreement, neither party hereto shall have any liability to
the other, except that the provisions of Section 3.4 and 11.13 hereof shall
survive the termination of this Agreement for any reason.
11.1 MATERIAL ADVERSE CHANGE. (a) By Premier, if, after the date hereof,
-----------------------
a material adverse change in the financial condition or business of Citizens
shall have occurred which change would reasonably be expected to have a material
adverse effect on the market price of Citizens Stock, or if Citizens shall have
suffered a material loss or damage to any of its properties or assets, which
change, loss or damage materially affects or impairs its ability to conduct its
business. (b) By Citizens, if, after the date hereof, a material adverse change
in the financial condition or business of Premier shall have occurred which
change would reasonably be expected to have a material adverse effect on the
market price of Premier Stock, or if Premier shall have suffered a material loss
or damage to any of its properties or assets, which change, loss or damage
materially affects or impairs its ability to conduct its business.
11.2 NONCOMPLIANCE. (a) By Premier, if the terms, covenants or conditions
-------------
of this Agreement to be complied with or performed by Citizens before the
Closing shall not have been substantially complied with or substantially
performed at or before the Closing Date and such noncompliance or nonperformance
shall not have been waived by Premier. (b) By Citizens, if the terms, covenants
46
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or conditions of this Agreement to be complied with or performed by Premier
before the Closing shall not have been substantially complied with or
substantially performed at or before the Closing Date and such noncompliance or
nonperformance shall not have been waived by Citizens.
11.3 FAILURE TO DISCLOSE. (a) By Premier, if it learns of any fact or
-------------------
condition not disclosed in this Agreement, the Citizens Disclosure Memorandum,
or the 1996 Citizens Financial Statements, which was required to be disclosed by
Citizens pursuant to the provisions of this Agreement at or prior to the date of
execution hereof with respect to the business, properties, assets or earnings of
Citizens which materially and adversely affects such business, properties,
assets or earnings or the ownership, value or continuance thereof, (b) By
Citizens, if it learns of any fact or condition not disclosed in this Agreement,
the Premier Disclosure Memorandum, or the 1996 Premier Financial Statements,
which was required to be disclosed by Premier pursuant to the provisions of this
Agreement at or prior to the date of execution hereof with respect to the
business, properties, assets or earnings of Premier which materially and
adversely affect such business, properties, assets or earnings or the ownership,
value or continuance thereof.
11.4 ADVERSE PROCEEDINGS. By either party, if any action, suit or
-------------------
proceeding shall have been instituted or threatened against either party to this
Agreement to restrain or prohibit, or to obtain substantial damages in respect
of, this Agreement or the consummation of the transactions contemplated herein,
which, in the good faith opinion of Citizens or Premier makes consummation of
the transactions herein contemplated inadvisable.
11.5 DISCLOSURE MEMORANDUM. By either party on or before June 30, 1997,
---------------------
in the event that the review of the disclosures contained in the other party's
Disclosure Memorandum causes its Board of Directors to determine, in its
reasonable good faith judgment, that fact or circumstance exists or is likely to
exist or result which materially and adversely impacts one or more of the
economic benefits to it of the transactions contemplated by this Agreement so as
to render inadvisable the consummation of the Merger.
11.6 ACCOUNTING TREATMENT. By either party on or before July 24, 1997, if
--------------------
the board of directors of a party determines that the Merger may not be
structured in a manner satisfactory to both boards of directors in their sole
discretion to qualify for "pooling of interests" accounting treatment.
11.7 TERMINATION DATE. By either party, if the Closing Date shall not
----------------
have occurred on or before November 30, 1997.
11.8 SHAREHOLDERS VOTE. By either party, if the Merger Agreement is not
-----------------
approved by the vote of the holders of either Citizens Stock or Premier Stock as
required by applicable law.
11.9 ENVIRONMENTAL LIABILITY OF CITIZENS. By Premier, if it learns of any
-----------------------------------
potential liability of Citizens arising from noncompliance with any federal,
state or local environmental law by Citizens, or any potential liability of
Citizens arising from any environmental condition of the properties or assets of
47
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Citizens, including any properties or assets in which Citizens holds a security
interest.
11.10 ENVIRONMENTAL LIABILITY OF PREMIER. By Citizens, if it learns of
----------------------------------
any potential liability of Premier arising from noncompliance with any federal,
state or local environmental law by Premier, or any potential liability of
Premier arising from any environmental condition of the properties or assets of
Premier, including any properties or assets in which Premier holds a security
interest.
11.11 MUTUAL CONSENT. By the mutual consent of the Board of Directors of
--------------
both Citizens and Premier.
11.12 PREMIER STOCK PRICE. By Citizens or Premier within 3 days of the
-------------------
filing date of Premier's Registration Statement with the SEC, if the Market
Value of Premier Stock is less than $15.69 or greater than $19.19. For purposes
of this provision, the "Market Value of Premier Stock" shall be determined on
the basis of the ten (10) trading day average of the closing price of Premier
Stock during the ten (10) trading days preceding the filing date of Premier's
Registration Statement with the SEC.
11.13 EXPENSES UPON TERMINATION. If for any reason this Agreement is
-------------------------
terminated pursuant to Section 11.3 or in contemplation of an acquisition
proposal, the terminating party shall agree to pay the non-terminating party (i)
an amount equal to the reasonable and documented fees and expenses incurred by
the non-terminating party in connection with the examination and investigation
of the non-terminating party, the preparation and negotiation of this Agreement
and related agreements, regulatory filings and other documents related to the
transactions contemplated hereunder, including, without limitation, fees and
expenses of investment bankers, consultants, accountants, attorneys and other
agents, and (ii) (x) $50,000 if this Agreement is terminated pursuant to Section
11.3 and the nondisclosure is not willful or (y) $150,000 if this Agreement is
terminated pursuant to Section 11.3 and the nondisclosure is willful or if this
Agreement is terminated in contemplation of an acquisition proposal, which sums
represent compensation for the non-terminating party's loss as a result of the
transaction contemplated by this Agreement not being consummated. Final
settlement with respect to such fees and expenses shall be made within thirty
(30) days after the termination of this Agreement. For purposes of this Section
11.13, an Aacquisition proposal@ shall mean any tender offer or exchange offer,
any proposal for merger, acquisition of all the stock or assets of, or other
business combination involving such terminating party or the acquisition of a
substantially equity interest in, or a substantial portion of the assets of such
terminating party or any of its subsidiaries, a definitive agreement with
respect to which is entered into within one year of the date of this Agreement.
Notwithstanding anything contained herein to the contrary, no expenses shall be
payable upon termination pursuant to this Section 11.13 in the event of
termination pursuant to Section 11.6 herein.
48
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ARTICLE XII
-----------
COUNTERPARTS, READINGS, ETC.
----------------------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. The headings herein set out are for
convenience of reference only and shall not be deemed a part of this Agreement.
A pronoun in one gender includes and applies to the other genders as well.
ARTICLE XIII
------------
BINDING EFFECT
--------------
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns; provided, however,
that this Agreement may not be assigned by either party without the prior
written consent of the other.
ARTICLE XIV
-----------
GOVERNING LAW
-------------
The validity and effect of this Agreement and the Merger Agreement and the
rights and obligations of the parties hereto and thereto shall be governed by
and construed and enforced in accordance with the laws of the State of Georgia.
IN WITNESS WHEREOF, Citizens and Premier have caused this Agreement to be
executed by their respective duly authorized corporate officers and their
respective corporate seals to be affixed hereto as of the day and year first
above written.
CITIZENS GWINNETT BANKSHARES, INC.
(CORPORATE SEAL) By: /s/ Thomas J. Martin
----------------------
Thomas J. Martin
President
Attest:
/s/ Darrell W. Moore
- ---------------------------
Darrell W. Moore, Secretary
PREMIER BANCSHARES, INC.
(CORPORATE SEAL) By: /s/ Darrell D. Pittard
------------------------
Darrell D. Pittard
Chairman and Chief Executive Officer
Attest:
/s/ Frank H. Roach
- ---------------------------
Frank H. Roach, Executive Vice President
and Treasurer
49
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered
into as of this _____ day of June, 1997, by and between PREMIER BANCSHARES, INC.
("Premier") and CITIZENS GWINNETT BANKSHARES, INC. ("Citizens"), both Georgia
corporations (said corporations are hereinafter collectively referred to as the
"Constituent Corporations").
R E C I T A L S :
WHEREAS, the authorized capital stock of Premier consists of 20,000,000
shares of Common Stock, $1.00 par value per share (the "Premier Stock"), of
which 7,913,235 shares are issued and outstanding;
WHEREAS, the authorized capital stock of Citizens consists of 10,000,000
shares of Common Stock, $10.00 par value per share, of which 242,350 shares are
issued and outstanding and up to 27,200 shares are issuable upon the exercise of
stock options on the Effective Date (as defined herein) ("Citizens Stock");
WHEREAS, the respective Boards of Directors of the Constituent Corporations
deem it advisable and in the best interests of each such corporation and its
shareholders that Citizens merge with Premier, with Premier being the surviving
corporation;
WHEREAS, the respective Boards of Directors of the Constituent
Corporations, by resolutions duly adopted, have unanimously approved and adopted
this Agreement, and the Board of Directors of Citizens, by resolution duly
adopted, has directed that this Agreement be submitted to the shareholders of
Citizens for their approval; and
WHEREAS, Premier has agreed to issue shares of Premier Stock which
shareholders of Citizens will be entitled to receive, according to the terms and
conditions contained herein, on or after the Effective Date (as defined herein)
of the merger provided for herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
agreements herein contained, and other good and valuable consideration, the
receipt and adequacy of which as legally sufficient consideration are hereby
acknowledged, the parties hereto have agreed and do hereby agree, as follows:
<PAGE>
1. MERGER.
------
Pursuant to and with the effects provided in the applicable provisions
of Article 11 of the Georgia Business Corporation Code, as amended (Chapter 2 of
Title 14 of the Official Code of Georgia), Citizens (hereinafter sometimes
referred to as the "Merged Corporation") shall be merged with and into Premier
(the "Merger"). Premier shall be the surviving corporation (the "Surviving
Corporation") and shall continue under the name "Premier Bancshares, Inc.". On
the Effective Date (as defined herein) of the Merger, the individual existence
of the Merged Corporation shall cease and terminate.
2. ACTIONS TO BE TAKEN.
-------------------
The acts and things required to be done by the Georgia Business
Corporation Code in order to make this Agreement effective, including the
submission of this Agreement to the shareholders of the Merged Corporation, the
shareholders of the Surviving Corporation and the filing of the Certificate of
Merger relating hereto in the manner provided in said Code, shall be attended to
and done by the proper officers of the Constituent Corporations with the
assistance of counsel as soon as practicable.
3. EFFECTIVE DATE.
--------------
The Merger shall be effective upon the approval of this Agreement by
the shareholders of the Merged Corporation, the shareholders of the Surviving
Corporation, and the filing of the Certificate of Merger relating hereto in the
manner provided in the Georgia Business Corporation Code (the "Effective Date").
4. ARTICLES OF INCORPORATION AND BYLAWS OF THE SURVIVING CORPORATION.
----------------------------------------------------- -----------
(a) The Articles of Incorporation of Premier, as heretofore amended,
shall on the Effective Date be the Articles of Incorporation of the Surviving
Corporation.
(b) Until altered, amended or repealed, as therein provided, the
Bylaws of Premier as in effect on the Effective Date shall be the Bylaws of the
Surviving Corporation.
5. MANNER AND BASIS OF CONVERTING SHARES OF CAPITAL STOCK; CAPITAL
------------------------------------------------------- -------
STRUCTURE OF THE SURVIVING CORPORATION.
- --------------------------------------
The manner and basis of converting the shares of capital stock of each
of the Constituent Corporations into shares of the Surviving Corporation shall
be as follows:
2
<PAGE>
(a) Based on $17.44 ("Premier Target Price"), upon the Effective Date
each share of Citizens' stock outstanding shall be converted into fully-paid and
nonassessable shares of Premier Stock at the following ratios ("Exchange Ratio")
based upon the following assumptions:
(i) If Premier Market Value is greater than 94% of the Premier
Target Price and less than 106% of the Premier Target Price, the Exchange Ratio
---
shall equal: [8.0876 x Premier Target Price/Premier Market Value].
(ii) If Premier Market Value is greater than 106% of the Premier
Target Price, the Exchange Ratio shall equal: [8.0876/1.06].
(iii) If Premier Market Value is less than 94% of the Premier Target
Price, the Exchange Ratio shall equal [8.0876/0.94].
The "Premier Market Value" shall be determined on the basis of the ten
trading day average of the daily closing price of Premier Stock on the American
Stock Exchange during the ten trading days preceding the filing date of the
Registration Statement with the Securities and Exchange Commission.
(b) Any holder of shares of Citizens Common Stock who perfects such
holder's dissenter's rights of appraisal in accordance with and as contemplated
by Section 14-2-1106 of the Georgia Business Corporation Code (the "GBCC") shall
be entitled to receive the value of such shares in cash as determined pursuant
to such provision of the GBCC; provided, that no such payment shall be made to
any dissenting shareholder unless and until such dissenting shareholder has
complied with the applicable provisions of the GBCC and surrendered to Citizens
the certificate or certificates representing shares for which payment is being
made. In the event that after the Effective Date a dissenting shareholder of
Citizens fails to perfect, or effectively withdraws or loses, such holder's
right to appraisal and of payment for such holder's shares, the Surviving
Corporation shall issue and deliver the consideration to which such holder of
shares of Citizens Common Stock is entitled under this Section 5 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of Citizens Common Stock held by such holder.
(c) If either party should change the number of its outstanding shares
as a result of a stock split, stock dividend, or similar recapitalization with
respect to such shares prior to the Effective Date then the shares of Premier
Stock to be issued hereunder to holders of Citizens Stock shall be
proportionately adjusted.
(d) No scrip or fractional share certificates of Premier Stock shall
be issued in connection with the Merger and an outstanding fractional share
interest will not entitle the owner thereof to vote, to receive dividends or to
have any of the rights of a shareholder with respect to such fractional
interest. In lieu of any fractional interest, there shall be paid in cash an
amount (computed to the nearest cent) equal to such fraction multiplied by the
Premier Market Value.
3
<PAGE>
(e) As soon as practicable after the Effective Date, each holder as of
the Effective Date of any of the shares of Citizens Stock, upon presentation and
surrender of the certificates representing such shares to Premier, shall be
entitled to receive in exchange therefor a certificate representing the number
of shares of Premier Stock to which such shareholder shall be entitled according
to the terms of this Agreement. Until such surrender, each such outstanding
certificate which prior to the Effective Date represented Citizens Stock shall
be deemed for all corporate purposes to evidence ownership of the number of
shares of Premier Stock into which the same shall have been converted and the
right to receive payment for fractional shares.
(f) Upon the Effective Date, each share of Premier Stock issued and
outstanding immediately prior to the Effective Date shall continue unchanged and
shall continue to evidence a share of common stock of the Surviving Corporation.
6. TERMINATION OF SEPARATE EXISTENCE.
---------------------------------
Upon the Effective Date, the separate existence of the Merged
Corporation shall cease and the Surviving Corporation shall possess all of the
rights, privileges, immunities, powers and franchises, as well of a public
nature as of a private nature, of each of the Constituent Corporations; and all
property, real, personal and mixed, and all debts due on whatever account, and
all other choses in action, and all and every other interest of or belonging to
or due to each of the Constituent Corporations shall be taken and deemed to be
transferred to and vested in the Surviving Corporation without further act or
deed, and the title to any real estate or any interest therein, vested in either
of the Constituent Corporations shall not revert or be in any way impaired by
reason of the Merger. The Surviving Corporation shall thenceforth be responsible
and liable for all the liabilities, obligations and penalties of each of the
Constituent Corporations; and any claim existing or action or proceeding, civil
or criminal, pending by or against either of said Constituent Corporations may
be prosecuted as if the Merger had not taken place, or the Surviving Corporation
may be substituted in its place, and any judgment rendered against either of the
Constituent Corporations may thenceforth be enforced against the Surviving
Corporation; and neither the rights of creditors nor any liens upon the property
of either of the Constituent Corporations shall be impaired by the Merger.
7. FURTHER ASSIGNMENTS.
-------------------
If at any time the Surviving Corporation shall consider or be advised
that any further assignments or assurances in law or any other things are
necessary or desirable to vest in said corporation, according to the terms
hereof, the title to any property or rights of the Merged Corporation, the
proper officers and directors of the Merged Corporation shall and will execute
and make all such proper assignments and assurances and do all things necessary
and proper to vest title in such property or rights in the Surviving
Corporation, and otherwise to carry out the purposes of this Agreement.
4
<PAGE>
8. CONDITIONS PRECEDENT TO CONSUMMATION OF THE MERGER.
--------------------------------------------------
This Agreement is subject to, and consummation of the Merger is
conditioned upon, the fulfillment as of the Effective Date of each of the
following conditions:
(a) Approval of this Agreement by the affirmative vote of the holders
of a majority of the outstanding voting shares of Citizens Stock;
(b) Approval of this Agreement by the affirmative vote of the holders
of a majority of the outstanding voting shares of Premier Stock; and
(c) All the terms, covenants, agreements, obligations and conditions
of the Agreement and Plan of Reorganization (the "Acquisition Agreement") of
even date herewith by and between Citizens and Premier to be complied with,
satisfied and performed on or prior to the Closing Date (as defined therein),
shall have been complied with, satisfied and performed in all material respects
unless accomplishment of such covenants, agreements, obligations and conditions
has been waived by the party benefited thereby.
9. TERMINATION.
-----------
This Agreement may be terminated and the Merger abandoned in
accordance with the terms of the Acquisition Agreement, at any time before or
after adoption of this Agreement by the directors of either of the Constituent
Corporations, notwithstanding favorable action on the Merger by the shareholders
of the Merged Corporation, but not later than the issuance of the certificate of
merger by the Secretary of State of Georgia with respect to the Merger in
accordance with the provisions of the Georgia Business Corporation Code.
10. COUNTERPARTS; TITLE; HEADINGS.
-----------------------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument. The title of this Agreement and the
headings herein set out are for the convenience of reference only and shall not
be deemed a part of this Agreement.
11. AMENDMENTS; ADDITIONAL AGREEMENTS.
---------------------------------
At any time before or after approval and adoption by the shareholders
of Citizens, this Agreement may be modified, amended or supplemented by
additional agreements, articles or certificates as may be determined in the
judgment of the respective Boards of Directors of the Constituent Corporations
to be necessary, desirable or expedient to further the purposes of this
Agreement, to clarify the intention of the parties, to add to or modify the
covenants, terms or conditions contained herein or to effectuate or facilitate
any governmental approval of the Merger or this Agreement, or otherwise to
5
<PAGE>
effectuate or facilitate the consummation of the transactions contemplated
hereby; provided, however, that no such modification, amendment or supplement
shall reduce to any extent the consideration into which shares of Citizens Stock
shall be converted in the Merger pursuant to Section 5 hereof.
IN WITNESS WHEREOF, the Constituent Corporations have each caused this
Agreement to be executed on their respective behalfs and their respective
corporate seals to be affixed hereto as of the day and year first above written.
PREMIER BANCSHARES, INC.
(CORPORATE SEAL) By: /s/ Darrell D. Pittard
------------------------
Darrell D. Pittard
Chairman and Chief Executive Officer
Attest:
/s/ Barbara J. Burtt
- ---------------------------
Secretary
CITIZENS GWINNETT BANKSHARES, INC.
(CORPORATE SEAL) By: /s/ Thomas J. Martin
----------------------
Thomas J. Martin
President
Attest:
/s/ Darrell W. Moore
- --------------------------
Secretary
6
<PAGE>
EXHIBIT B
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Gentlemen:
In connection with the proposed merger (the "Merger") of Citizens Gwinnett
Bankshares, Inc. ("Citizens") with and into Premier Bancshares, Inc.
("Premier"), pursuant to the Agreement and Plan of Reorganization of even date
herewith among Premier and Citizens (the "Reorganization Agreement"), the
undersigned hereby covenants, represents and warrants as follows:
1. Recommendation for Merger and Voting of Citizens Stock. The
------------------------------------------------------
undersigned agrees to recommend to all holders of the capital stock of Citizens
("Citizens Stock") that they vote in favor of the Merger. In addition, the
undersigned agrees to vote any and all shares of Citizens Stock owned or
controlled by him in favor of the Merger.
2. Compliance with Securities Laws. The undersigned acknowledges that he
-------------------------------
will be subject to the restrictions on resales contained in Rule 145 of the
Rules and Regulations of the Securities and Exchange Commission ("SEC") under
the Securities Act of 1933, as amended, and agrees to sell, transfer or
otherwise dispose of any shares of capital stock of Premier ("Premier Stock")
received by him pursuant to the Merger only in compliance with the provisions of
such Act and Rule. The undersigned acknowledges that Premier is not under any
obligation to file a registration statement with the SEC covering the
disposition of the undersigned's shares of Premier Stock to be received pursuant
to the Merger.
3. Restrictive Legend. The undersigned agrees that the certificates
------------------
representing shares of Premier Stock to be issued to the undersigned pursuant to
the Merger will be stamped or otherwise imprinted with a legend in substantially
the following form:
The shares represented by this certificate may not be sold, transferred or
otherwise disposed of except in a transaction covered by an effective
registration statement under the Securities Act of 1933, as amended, or in
accordance with Rule 145 promulgated thereunder, or in accordance with a
legal opinion satisfactory to the Company that such sale or transfer is
otherwise exempt from the requirements of such Act.
4. Initial Restriction on Disposition. The undersigned agrees that the
----------------------------------
undersigned will not, except by operation of law, by will or under the laws of
descent and distribution, sell, transfer, or otherwise dispose of the
<PAGE>
undersigned's interests in, or reduce the undersigned's risk relative to, any of
the shares of Citizens Stock or Premier Stock into which the undersigned's
shares of Citizens Stock are converted upon consummation of the Merger until
such time as Premier notifies the undersigned that the requirements of SEC
Accounting Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met.
The undersigned understands that ASR 130 and 135 relate to publication of
financial results of post-Merger combined operations of Premier and Citizens.
Premier agrees that it will publish such results within 45 days after the end of
the first fiscal quarter of Premier containing the required period of post-
Merger combined operations and that it will notify the undersigned promptly
following such publication.
Sincerely,
[Director or Executive Officer]
2
<PAGE>
EXHIBIT D
CLAIMS/INDEMNIFICATION LETTER
June ___, 1997
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Ladies and Gentlemen:
This letter is delivered pursuant to Section 8.3(g) of the Agreement and
Plan of Reorganization (the "Agreement"), dated as of June 24, 1997, by and
between Citizens Gwinnett Bankshares, Inc. ("Citizens") and Premier Bancshares,
Inc. ("Premier") which provides for the merger (the "Merger") of Citizens and
Premier.
Concerning claims which I may have against Citizens or its wholly-owned
subsidiary, Citizens Gwinnett Bank, in my capacity as an officer or director:
(a) Premier shall assume all liability (to the extent Citizens was so
liable) for claims for indemnification arising under Citizens' Articles of
Incorporation or Bylaws or under any indemnification contract disclosed to
Premier, as existing on June 24, 1997, and for claims for salaries, wages
or other compensation, employee benefits, reimbursement of expenses, or
worker's compensation arising out of employment through the effective date
of the Merger;
(b) Citizens Bank shall retain all liability (to the extent it was so
liable) for claims for indemnification arising under their respective
Articles of Incorporation or Bylaws as existing on June 24, 1997 and for
claims for salaries, wages, or other compensation, employee benefits,
reimbursement of expenses, or worker's compensation arising out of
employment through the effective date of the Merger; and
(c) In my capacity as an officer or a director, I am not aware that I
have any claims (other than those referred to in paragraphs (a) or (b)
above) against Citizens or Citizens Bank (other than routine deposit, loan
and other banking services conducted in the ordinary course of business
with Citizens or Citizens Bank).
3
<PAGE>
By executing this letter on behalf of Premier, you shall acknowledge the
assumption by Premier of the liabilities described in paragraphs (a) and (b)
above.
Sincerely,
__________________________________
Signature of Officer or Director
__________________________________
Printed Name of Officer or Director
On behalf of Premier, I hereby acknowledge receipt of this letter and
affirm the assumption by Premier of the liabilities described in paragraph (a)
and (b) above, as of this _____ day of _______________, 1997.
PREMIER BANCSHARES, INC.
By: ________________________________________
Darrell D. Pittard, Chairman and CEO
4
<PAGE>
EXHIBIT E
(1) Citizens was duly organized as a corporation, and is existing and in
good standing, under the laws of the State of Georgia.
(2) Citizens has the corporate power to execute and deliver the Agreement
and Plan of Reorganization (the "Reorganization Agreement") and the Agreement
and Plan of Merger (the "Merger Agreement"), to perform its obligations
thereunder, to own and use its Assets and to conduct its business.
(3) Citizens has duly authorized the execution and delivery of the
Reorganization Agreement and the Merger Agreement and all performance by
Citizens thereunder, and has duly executed and delivered the Reorganization
Agreement and the Merger Agreement.
(4) No consent, approval, authorization or other action filed by, or filing
with, any governmental authority of the United States or the State of Georgia is
required for Citizens' execution and delivery of the Reorganization Agreement
and the Merger Agreement and consummation of the Transaction, which consent,
approval or authorization has not been previously received.
(5) The Reorganization Agreement and the Merger Agreement are enforceable
against Citizens.
(6) The authorized capital stock of Citizens consists of 10,000,000 shares
of Common Stock, par value $10.00 per share, of which 242,350 shares are issued
and outstanding. All of the issued and outstanding capital stock of Citizens
has been duly authorized and validly issued and are fully paid and non-
assessable and, to such counsel's knowledge, there are no outstanding options,
warrants, rights, calls, commitments, conversion rights, plans or other
agreements providing for the purchase or issuance of any authorized but unissued
shares of such capital stock.
<PAGE>
EXHIBIT F
(1) Premier was duly organized as a corporation, and is existing and in
good standing, under the laws of the State of Georgia.
(2) Premier has the corporate power to execute and deliver the Agreement
and Plan of Reorganization (the "Reorganization Agreement") and the Agreement
and Plan of Merger (the "Merger Agreement") to perform its obligations
thereunder, to own and use its Assets and to conduct its business.
(3) Premier has duly authorized the execution and delivery of the
Reorganization Agreement and the Merger Agreement and all performance by Premier
thereunder, and has duly executed and delivered the Reorganization Agreement and
Merger Agreement.
(4) No consent, approval, authorization or other action filed by, or filing
with, any governmental authority of the United States or the State of Georgia is
required for Premier's execution and delivery of the Reorganization Agreement
and the Merger Agreement and consummation of the Transaction, which consent,
approval or authorization has not been previously received.
(5) The Reorganization Agreement and the Merger Agreement are enforceable
against Premier.
(6) The shares of Premier Stock to be issued upon consummation of the
Merger have been duly authorized and upon issuance as contemplated in the Merger
Agreement, will be validly issued, fully paid and non-assessable.
<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This First Amendment (the "Amendment") to Agreement and Plan of
Reorganization (the "Agreement") dated June 24, 1997, between Premier
Bancshares, Inc. ("Premier") and Citizens Gwinnett Bankshares, Inc. ("Citizens")
is made and entered into as of the 24th day of July 1997. Unless otherwise
defined herein, all capitalized terms used herein shall have the meanings
ascribed to them in the Agreement.
WHEREAS, the parties desire to amend the Agreement to extend the
termination period in connection with a determination whether the Merger may be
accounted for as a pooling of interests.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained, and for the purpose of amending the Agreement,
Premier and Citizens agree as follows:
1. That Section 11.6 of the Agreement be deleted in its entirety and the
following Section 11.6 shall be inserted in lieu thereof:
"11.6. ACCOUNTING TREATMENT. By either party on or before August
8, 1997, if the board of directors of a party determines that the Merger
may not be structured in a manner satisfactory to both boards of directors
in their sole discretion to qualify for "pooling of interests" accounting
treatment."
Except as specifically amended herein the Agreement shall remain in
full force and effect. In witness whereof, the parties have caused this
Amendment to be signed by their duly authorized officers as of the date first
shown above.
Attest: PREMIER BANCSHARES, INC.
/s/ Barbara J. Burtt /s/ Darrell D. Pittard
- -------------------- ----------------------
Barbara J. Burtt, Secretary Darrell D. Pittard, Chairman
[CORPORATE SEAL]
Attest: CITIZENS GWINNETT BANKSHARES, INC.
/s/ Darrell W. Moore /s/ Thomas J. Martin
- -------------------- --------------------
Secretary Thomas J. Martin, President
[CORPORATE SEAL]
<PAGE>
SECOND AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This Second Amendment (the "Second Amendment") to Agreement and Plan of
Reorganization dated June 24, 1997 as amended on July 24, 1997 (the
"Agreement"), between Premier Bancshares, Inc. ("Premier") and Citizens Gwinnett
Bankshares, Inc. ("Citizens") is effective as of the 15th day of September,
1997. Unless otherwise defined herein, all capitalized terms used herein shall
have the meanings ascribed to them in the Agreement.
WHEREAS, the parties desire to further amend the Agreement to provide for
the issuance of stock to the holders of vested and unvested stock options
granted under the Citizens Directors' Stock Option Plan and the Citizens
Employee Stock Option Plan.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
agreements herein contained, and for the purpose of amending the Agreement,
Premier and Citizens agree as follows:
1. That Section 3.12 of the Agreement be deleted in its entirety and the
following Section 3.12 shall be inserted in lieu thereof:
"3.12 Assumption of Directors Stock Option Plan; Stock-Out of Stock
-------------------------------------------------------------
Options
-------
(a) The Surviving Corporation shall assume the rights and
obligations under Citizens Directors Stock Option Plan
(the "Directors Plan") and such Directors Plan shall
remain in full force and effect with respect to shares of
Surviving Corporation Common Stock, subject to the right
of Premier to terminate such Plan and adopt a substitute
plan as it determines to be in the best interest of
Premier.
(b) As soon as practicable after the Effective Date, each
holder of options under the Directors Stock Option Plan
and holders of vested stock options under the Employee
Stock Option Plan, upon presentation and surrender of the
stock option agreements representing such options to
Premier (and all rights attendant thereto), shall be
entitled to receive in exchange therefore a certificate
representing the number of shares of Premier Stock equal
to the number of shares subject to the Citizens options
multiplied by the Exchange Ratio as defined in the Merger
Agreement attached hereto as Exhibit "A" less the per
-----------
share exercise price of each such Citizens
option adjusted to reflect the Exchange Ratio."
<PAGE>
"(c) As soon as practicable after the Effective Date, each
holder of unvested options under the Citizens Employee
Stock Option Plan, upon presentation and surrender of the
stock option agreements representing such options to
Premier (and all rights attendant thereto), shall be
entitled to receive in exchange therefore, a certificate
representing the number of shares of Premier Stock equal
to the number of shares subject to the Citizens unvested
options multiplied by the Exchange Ratio as defined in the
Merger Agreement attached hereto as Exhibit "A" less the
-----------
per share exercise price of each such unvested Citizens
employee stock option adjusted to reflect the Exchange
Ratio. The number of shares of Premier stock that each
holder of unvested stock options is entitled to receive
shall be further reduced by an amount for each such
unvested option equal to 1% for each whole month (measured
at the Effective Time) remaining until the unvested option
would have vested had the Merger not occurred and the
employee holder had remained an employee of Citizens."
2. That Section 3.13 of the Agreement be deleted in its entirety and
the following Section 3.13 shall be inserted in lieu thereof:
"3.13 Officers and Directors. The officers and directors of the
---------------------------
Surviving Corporation from and after the Effective Date shall consist
of officers and directors of the Surviving Corporation on the date
hereof, provided, however, that Thomas J. Martin shall be elected,
should he agree to serve, to the Board of Directors of Premier after
the Effective Date. The remaining members of the Citizens Board and
Mr. Martin, if he elects not to serve as a Director of Premier,
immediately preceding the Closing shall be appointed to serve as
members of Premier's Marketing and Development Board for Gwinnett
County commencing immediately following the Closing. Premier shall
cause such members of the Citizens Board (other than Mr. Martin) to be
reappointed to the Marketing and Development Board for Gwinnett County
for periods extending at least through April 1, 1999, subject in each
case to such person's eligibility and willingness to serve and to such
person's compliance with applicable standards of conduct for persons
holding such positions. The members of the Marketing and Development
Board for Gwinnett County shall be entitled to receive such cash
compensation commensurate with for their services and to receive
options under the Directors' Plan assumed by Premier as determined in
Premier's discretion."
2
<PAGE>
Except as specifically amended herein the Agreement shall remain in
full force and effect. In witness whereof, the parties have caused this Second
Amendment to be signed by their duly authorized officers as of the date first
shown above.
Attest: PREMIER BANCSHARES, INC.
/s/ Barbara J. Burtt /s/ Darrell D. Pittard
- -------------------- ----------------------
Barbara J. Burtt, Secretary Darrell D. Pittard, Chairman
[CORPORATE SEAL]
Attest: CITIZENS GWINNETT BANKSHARES, INC.
/s/ Darrell W. Moore /s/ Thomas J. Martin
- -------------------- --------------------
Darrell W. Moore, Secretary Thomas J. Martin, President
[CORPORATE SEAL]
3
<PAGE>
THIRD AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This Third Amendment (the "Third Amendment") to Agreement and Plan of
Reorganization, as amended (the "Agreement"), dated June 24, 1997, between
Premier Bancshares, Inc. ("Premier") and Citizens Gwinnett Bankshares, Inc.
("Citizens"), is made and entered into as of the 19th day of September, 1997.
Unless otherwise defined herein, all capitalized terms used herein shall have
the meanings ascribed to them in the Agreement.
WHEREAS, the parties desire to further amend the Agreement for the purpose
of amending the definition of Exchange Ratio contained in the Agreement, to
extend the Termination Date of the Agreement, and to obtain a representation
from Citizens regarding pooling of interests accounting treatment; and
WHEREAS, the Boards of Directors of Premier and Citizens have unanimously
approved the Agreement and this Third Amendment;
NOW, THEREFORE, in consideration of the premises, mutual covenants, and
agreements herein contained, the receipt and sufficiency of which is hereby
acknowledged, and for the purpose of amending the Agreement, Premier and
Citizens agree as follows:
1. That notwithstanding any other provision of the Agreement and the
Exhibits thereto, the Exchange Ratio is hereby established at 8.00 so that, upon
----
the Effective Date, each share of Citizens Common Stock issued and outstanding
on the Effective Date shall cease to be outstanding and shall be converted into
and exchanged for the right to receive 8.00 fully-paid and nonassessable shares
----
of Premier Common Stock. As a result of the Exchange Ratio established above,
at the Effective Date a total of 2,066,850 shares of Premier Common Stock will
---------
be issued to the (i) holders of Citizens Common Stock, (ii) holders of stock
options granted under the Citizens' Directors' Stock Option Plan, and (iii)
holders of vested and unvested stock options granted under the Citizens'
Employee Stock Option Plan.
2. That Section 11.7 of the Agreement be deleted in its entirety and the
following new Section 11.7 shall be inserted in lieu thereof:
11.7 TERMINATION DATE. By either party, if the Closing Date
----------------
shall not have occurred on or before December 31, 1997.
3. That Section 11.12 of the Agreement be deleted in its entirety.
Except as specifically amended herein the Agreement shall remain in
full force and effect.
The parties further agree that this Third Amendment may be signed in
any number of counterparts and delivery of such counterparts may be effected by
a facsimile transmission thereof; and any such facsimile counterpart shall be
deemed to be an original, with the same effect as if the signatures thereto were
upon the same original document.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be
signed by their duly authorized officers as of the date first shown above.
Attest: PREMIER BANCSHARES, INC.
/s/ Barbara J. Burtt /s/ Darrell D. Pittard
--------------------- -----------------------
Barbara J. Burtt, Secretary Darrell D. Pittard, Chairman
[CORPORATE SEAL]
Attest: CITIZENS GWINNETT BANKSHARES, INC.
/s/ Darrell W. Moore /s/ Thomas J. Martin
--------------------- ---------------------
Secretary Thomas J. Martin, President
[CORPORATE SEAL]
<PAGE>
APPENDIX B
September 29, 1997
Board of Directors
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Dear Members of the Board:
You have asked us to advise you with respect to the fairness of the shareholders
of Premier Bancshares, Inc. ("Premier"), from a financial point of view, of the
exchange ratio (the "Exchange Ratio") provided for in the Agreement and Plan of
Reorganization (the "Merger Agreement") dated as of June 24, 1997 as amended on
July 24, 1997, September 15, 1997 and September 19, 1997 between Premier and
Citizens Gwinnett Bankshares, Inc. ("Citizens"). The Merger Agreement provides
for a merger (the "Merger") of Premier and Citizens pursuant to which the common
shareholders of Citizens will receive eight Premier common shares for every
common share of Citizens held.
In arriving at our opinion, we have reviewed certain publicly available business
and financial information relating to Premier and Citizens. We have also
reviewed certain other information, including financial forecasts and budgets,
provided to us by Premier and Citizens, and have discussed the business and
prospects of Premier and Citizens with respective managements.
We have also considered certain financial and stock market data of Premier and
have compared that data with similar data for other publicly held bank holding
companies. Additionally, we have considered the financial terms of certain
other comparable transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant. In connection with our review, we have not independently verified any
of the foregoing information and have relied on its being complete and accurate
in all material respects. With respect to the financial forecasts and budgets,
we have assumed that each has been reasonably prepared on bases reflecting the
best currently available estimates and judgments of Premier's and Citizen's
managements as to the future financial performance of Premier and Citizens. We
have not made an independent evaluation or appraisal of the assets of Premier or
Citizens. We have assumed that the aggregate allowances for loan losses for
both Premier and Citizens are adequate to cover such losses.
<PAGE>
Board of Directors
Premier Bancshares, Inc.
September 29, 1997
Page 2
It should be noted that this opinion is based on market conditions and other
circumstances existing on the date hereof and this opinion does not represent
our view as to what the value of the Premier common shares necessarily will be
when those shares are issued to the stockholders of Citizens upon consummation
of the Merger.
We have acted as financial advisor to Premier in connection with the Merger and
will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger.
We agree to the inclusion of this opinion letter in the Proxy Statement/
Prospectus relating to the Merger. The opinion may not, however, be summarized,
excerpted from or otherwise publicly referred to without our prior written
consent.
Based upon and subject to the foregoing, it is our opinion that as of the date
hereof, the Exchange Ratio of the Merger is fair to the common shareholders of
Premier from a financial point of view.
Very truly yours,
/s/ Brown, Burke Capital Partners, Inc.
BROWN, BURKE CAPITAL PARTNERS, INC.
<PAGE>
APPENDIX C
September 29, 1997
Board of Directors
Citizens Gwinnett Bankshares, Inc.
3209 Buford Highway
Duluth, GA 30136
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the terms of the Merger to the stockholders of Citizens Gwinnett
Bankshares, Inc. ("Citizens") under the terms of a Proposed Agreement and Plan
of Reorganization dated as of June 24, 1997, as amended on July 24, 1997 and on
September 15, 1997 and September 19, 1997 (the "Agreement") by and between
Premier Bancshares, Inc. ("Premier") and Citizens pursuant to which Citizens
will merge with and into Premier. Under the terms of the Agreement, each of the
outstanding shares of Citizens' Common Stock shall be converted into the right
to receive eight shares of Premier Common Stock. The foregoing summary of the
Merger is qualified in its entirety by reference to the Proposed Agreement.
The Carson Medlin Company is a National Association of Securities Dealers,
Inc. (NASD) member investment banking firm which specializes in the securities
of southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in North Carolina and the Southeast and the major
commercial banks operating in that market. We have been retained by Citizens in
a financial advisory capacity to render our opinion hereunder, for which we will
receive compensation.
In reaching our opinion, we have analyzed the respective financial
positions, both current and historical, of Citizens and Premier. We have
reviewed: (i) the Agreement and Plan of Reorganization dated as of June 24,
1997, as amended on July 24, 1997 and on August 1997; (ii) the annual reports to
shareholders of Citizens, including audited financial statements for the five
years ended December 31, 1996; (iii) the Proxy Statement dated February 21,
1997 for the annual meeting of shareholders held on March 11, 1997; (iv) the
Consolidated Report of Condition and Income of Citizens Bank of Gwinnett as of
June 30, 1997; (v) the Uniform Bank Performance Report for Citizens Bank of
Gwinnett as of March 31, 1997; (vi) the annual report to shareholders of
Premier, including audited financial statements for the year ended December 31,
1996; (vii) the annual report on Form 10-K of Premier for the year ended
December 31, 1996; (viii) the annual report to shareholders of First Alliance
Bancorp, Inc, including audited financial statements for the year ended December
31, 1995; (ix) the Joint Proxy Statement/Prospectus for the meetings to consider
the merger of First Alliance Bancorp, Inc. and Premier Bancshares, Inc. held on
August 15, 1996; (x) the annual reports to shareholders of Central and Southern
Holding Company for the two years ended December 31, 1995; (xi) the annual
report on Form 10-K of Central and Southern Holding Company for the year ended
December 31, 1996; (xii) the Joint Proxy Statement/Prospectus for the meetings
to consider the merger of Perimeter and Central and Southern Holding Company
held on June 16, 1997; (xiii) the Uniform Bank Performance Report for First
Alliance Bank as of March 31, 1997; (xiv) the Uniform Bank Performance Report
for The Central and Southern Bank of Georgia as of March 31, 1997; (xv) the
Uniform Bank Performance Report for First Alliance Bank as of March 31, 1997;
(xvi) the Uniform Thrift Performance Report for Premier Bank, FSB, dated as of
June 21, 1997; (xvii) the Uniform Thrift Performance Report for Central and
Southern Bank of North Georgia, dated as of June 21, 1997; (xviii) the
Consolidated Report of Condition and Income of The Central and Southern Bank of
Georgia as of June 30,1997; (xix) the Consolidated Report of Condition and
Income of First Alliance Bank as of June 30, 1997; (xx) the Thrift Financial
Report of Premier Bank, FSB, report dated June 30, 1997; (xxi) the Thrift
Financial Report of Central and Southern Bank of North Georgia, report dated
June 30, 1997; (xxii) report on Form 10-Q of Premier Bancshares' Inc. for the
quarter ended June 30, 1997; (xxiii) unaudited interim financial statements of
Traditional Mortgage Corporation as of July 31, 1997; (xxiv) unaudited interim
financial statements of Citizens and Premier for the six months ended June 30,
1997; (xxv) a preliminary copy of the Proxy Statement/Prospectus prepared for
special meetings of the shareholders (of Citizens and Premier to consider the
Merger; and (xxvi) certain other financial and operating information with
respect to the business, operations
<PAGE>
and prospects of Citizens and Premier. We also: (i) held discussions with
members of the senior management of Citizens and had discussions with the
management of Premier regarding its historical and current business operations,
financial conditions and future prospects, (ii) reviewed the historical market
prices and trading activity for the common stocks of Citizens and Premier and
compared them with those of certain publicly traded companies which we deemed to
be relevant; (iii) compared the results of operations of Citizens and Premier
with those of certain banking companies which we deemed to be relevant; (iv)
compared the proposed financial terms of the Merger with the financial terms, to
the extent publicly available, of certain other recent business combinations of
commercial banking and thrift organizations; (v) analyzed the pro forma
financial impact of the Merger on Premier; and (vi) conducted such other
Studies, analyses, inquiries and examinations as we deemed appropriate.
We have relied upon and assumed, without independent verification, the
accuracy, and completeness of all information provided to us. We have not
performed or considered any independent appraisal or evaluation of the assets of
Citizens or Premier, The opinion we express herein is necessarily based upon
market, economic and other relevant considerations as they exist and can be
evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the terms of the Merger
provided for in the
Agreement are fair, from a financial point of view, to the stockholders of
Citizens.
Very truly yours,
THE CARSON MEDLIN COMPANY
<PAGE>
APPENDIX D
TITLE 14, CHAPTER 2, ARTICLE 13 OF THE
GEORGIA BUSINESS CORPORATION CODE
RELATING TO RIGHTS OF DISSENTING SHAREHOLDERS
<PAGE>
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
(S) 14-2-1301. DEFINITIONS.
As used in this article, the term:
a. "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
b. "Corporate Action" means the transaction or other action by the
corporation that creates dissenters' rights under the Code Section 14-2-1302.
c. "Corporation" means the issuer of shares held by a dissenter before the
corporate action, or the surviving or acquiring corporation by merger or share
exchange of that issuer.
d. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right when
and in the manner required by Code Sections 14-2-1320 through 14-2-1327.
e. "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to which
the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
f. "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable under all
the circumstances.
g. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
h. "Shareholder" means the record shareholder or the beneficial
shareholder.
(S) 14-2-1302. RIGHT TO DISSENT.
a. A record shareholder of the corporation is entitled to dissent from,
and obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a
party:
(A) If approval of the shareholders of the corporation is
required for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger;
or
(B) If the corporation is a subsidiary that is merged with its
parent under Code Section 14-2-1104;
<PAGE>
(2) Consummation of a plan of share exchange to which the corporation
is a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of
the property of the corporation if a shareholder vote is required on the
sale or exchange pursuant to Code Section 14-2-1202, but not including a
sale pursuant to court order or a sale for cash pursuant to a plan by which
all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of
redemption, including a provision respecting a sinking fund for the
redemption or repurchase, of the shares;
(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any
matter, or to cumulate votes, other than a limitation by dilution
through issuance of shares or other securities with similar voting
rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of
the class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with the procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporation action
was obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
D-2
<PAGE>
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series which,
at the record date fixed to determine the shareholders entitled to receive
notice of and to vote at a meeting at which a plan of merger or share exchange
or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
(S) 14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf he
asserts dissenters' rights. The rights of a partial dissenter under this Code
section are determined as if the shares as to which he dissents and his other
shares were registered in the names of different shareholders.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
(S) 14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the meeting
notice must state that shareholders are or may be entitled to assert dissenters'
rights under this article and be accompanied by a copy of this article.
(b) If corporate action creating dissenter's rights under Code Section 14-
2-1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenter's notice described in Code Section 14-2-
1322 no later than ten days after the corporate action was taken.
(S) 14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
D-3
<PAGE>
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of
subsection (a) of this Code section is not entitled to payment for his shares
under this article.
(S) 14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action created dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied the
requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must;
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than 30 nor more than 60 days after the
date the notice required in subsection (a) of this Code section is
delivered; and
(4) Be accompanied by a copy of this article.
(S) 14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code
Section 14-2-1322 must demand payment and deposit his certificates in accordance
with the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
D-4
<PAGE>
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice, is
not entitled to payment for his shares under this article.
(S) 14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until these
rights are cancelled or modified by the taking of the proposed corporate action.
(S) 14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a payment
demand, the corporation shall by notice to each dissenter who complied with Code
Section 14-2-1323 offer to pay to such dissenter the amount the corporation
estimates to be the fair value of his or her shares, plus accrued interest.
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment for
his or her shares shall be made within 60 days after the making of the offer or
the taking of the proposed corporate action, whichever is later.
(S) 14-2-1326. FAILURE TO TAKE ACTION.
D-5
<PAGE>
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertified shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
(S) 14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate
of the fair value of his shares and amount of interest due, and demand payment
of his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section
14-2-1325 is less than the fair value of his shares or that the interest
due is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does
not return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
section and is deemed to have accepted the corporation's offer unless he or she
notifies the corporation of his or her demand in writing under subsection (a) of
this Code section within 30 days after the corporation offered payment for his
or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under
subsection (b) of Code Section 14-2-1325, and the corporation shall provide
the information to the shareholder within ten days after receipt of a
written demand for the information; and
(2) The shareholder may at any time, subject to the limitations period
of Code Section 14-2-1332, notify the corporation of his own estimate of
the fair value of his shares and the amount of interest due and demand
payment of his estimate of the fair value of his shares and interest due.
PART 3. JUDICIAL APPRAISAL OF SHARES.
(S) 14-2-1330. COURT ACTION.
D-6
<PAGE>
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the shares
and accrued interest. If the corporation does not commence the proceeding
within the 60-day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall commence
the proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided by
law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by publication,
or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced
under subsection (b) of this Code section is plenary and exclusive. The court
may appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provide din this chapter, Chapter 11 of Title 9, known as the "Georgia
Civil Practice Act," applies to any proceeding with respect to dissenters'
rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
(S) 14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective parties.
The court shall assess the costs against the corporation, except that the court
may assess the costs against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters acted arbitrarily,
vexatiously, or not in good faith in demanding payment under Code Section 14-2-
1327.
(b) The court may also asses the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
D-7
<PAGE>
(1) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
(S) 14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given by
the corporation in compliance with the provisions of Code Section 14-2-1320 and
Code Section 14-2-1322.
D-8
<PAGE>
PREMIER BANCSHARES, INC.
DIRECTORS' DEFERRED STOCK UNIT PLAN
<PAGE>
PREMIER BANCSHARES, INC.
DIRECTORS' DEFERRED STOCK UNIT PLAN
1. PURPOSE
-------
The purpose of the Premier Bancshares, Inc. Directors' Deferred Stock
Unit Plan (the "Plan") is to encourage and enable members of the Board of
Directors (the "Board") of Premier Bancshares, Inc. (the "Corporation") and
members of the boards of directors of its subsidiaries to acquire or to increase
their proprietary interests in the Corporation in order to promote a closer
identification of their interests with those of the Corporation and its
shareholders, thereby further stimulating their efforts to enhance the
efficiency, soundness, profitability, growth and shareholder value of the
Corporation. This purpose will be carried out through the granting of deferred
stock units to eligible Directors, which, subject to the terms of the Plan,
shall entitle the recipient to a payment in cash or shares of the common stock
of the Corporation (the "Common Stock") based on the value of the Common Stock
at the time of settlement of the award. For the purposes of the Plan, such
deferred stock units (including fractional units) are referred to herein
individually as a "Unit" and collectively as "Units," and the grant of Units to
a Director as provided herein is referred to individually as an "Award" and
collectively as "Awards."
2. ADMINISTRATION OF THE PLAN
--------------------------
(a) The Plan shall be administered by the Board of Directors of the
Corporation, or, upon delegation by the Board, by the Compensation
Committee (the "Committee") of the Board. The Committee shall be comprised
solely of members of the Board and shall include no fewer than the minimum
number of "directors," as such term is defined in Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
as may be required by Rule 16b-3 or any successor rule. (Reference to the
"Committee" shall also include the Board if the Board is exercising its
authority to administer the Plan.)
(b) Any action of the Committee may be taken by a written instrument
signed by all of the members of the Committee and any action so taken by
written consent shall be as fully effective as if it had been taken by a
majority of the members at a meeting duly called and held. Subject to the
provisions of the Plan, the Committee shall have full and final authority,
in its discretion, to take action with respect to the Plan including,
without limitation, the authority to (i) to prescribe the form or forms of
the agreements evidencing Awards granted under the Plan; (ii) to establish,
amend and rescind rules and regulations for the administration of the Plan;
and (iii) to construe and interpret the Plan, the rules and regulations and
the agreements, and to make all other determinations deemed necessary or
advisable for administering the Plan.
3. EFFECTIVE DATE
--------------
The Plan, as initially titled the "Premier Bancshares, Inc. Directors'
Stock Option Plan," was adopted effective June 15, 1997 (the "Effective Date").
The Plan was amended and restated as the "Premier Bancshares, Inc. Directors'
Deferred Stock Unit Plan" effective ______________________ ____, 1997. Awards
may be granted on or after ____________________ ____, 1997.
<PAGE>
4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
------------------------------------------
Subject to adjustment as provided in Section 14, the shares of Common
Stock that may be issued pursuant to the settlement of Awards granted under the
Plan shall not exceed 150,000 shares of authorized but unissued or reacquired
shares of the Common Stock of the Corporation. The Corporation hereby reserves
sufficient authorized shares of Common Stock to provide for the settlement of
Awards hereunder. Any shares of Common Stock subject to an Award which, for any
reason, expires or is terminated without settlement of such shares may again be
subject to an Award under the Plan.
5. ELIGIBILITY
-----------
Awards may be granted only to individuals who are members of the Board
of the Corporation or the board of directors of a Subsidiary of the Corporation
at the time of grant. Such individuals may be employees or non-employees of the
Corporation or a related corporation. Persons who are eligible to participate
in the Plan are referred to herein individually as a "Director" and collectively
as "Directors," and a Director who elects to participate in the Plan is also
referred to herein as a "Participant."
6. GRANT OF AWARDS
---------------
(a) Directors Fees. For purposes of the Plan, a Participant's total
--------------
compensation for services as a Director shall consist of a combination of
(1) the annual retainer received by such Director (the "Retainer Fee") and
(2) the sum of all meeting fees of the Board, Subsidiary board and Board or
board committee on which such Director serves (the "Meeting Fees").
(Retainer Fees and Meeting Fees are collectively referred to herein as
"Directors Fees."). A Director's Retainer Fee for a year shall be deemed
earned and payable in four quarterly installments which shall coincide with
each Quarterly Award Date (as defined in Section 6(b)(ii), below). A
Director's Meeting Fees for a year shall also be deemed earned and payable
in four quarterly installments which shall coincide with each Quarterly
Award Date and which, for each quarter, shall be equal to the amount of
Meeting Fees earned by the Director during each quarter ending on the
Quarterly Award Date. In the event that a quarter does not end on a
Quarterly Award Date, the Directors Fees for that quarter shall be equal to
the amount of Meeting Fees and Retainer Fees earned during the quarter
ending nearest the Quarterly Award Date.
(b) Quarterly Awards. Each Director may elect to defer all or a
----------------
portion (in increments of 25%) of the Directors Fees payable to the
Director by making a deferral election on or prior to December 31 of the
year preceding the year in which such fees are earned. such an election
shall continue for successive years unless modified or revoked pursuant to
Section 8 herein. Each Director who makes such a deferral election shall
receive in lieu of the Directors Fees an Award of Units (the "Quarterly
Award") on each Quarterly Award Date as of which a Directors Fees would
otherwise be paid.
(i) The number of Units represented by each such Quarterly Award
for each Director shall be equal to that number of whole [OR
FRACTIONAL] shares of Common Stock as could be purchased on the
Quarterly Award Date with the amount of Directors Fees
E-2
<PAGE>
otherwise payable on such date, based on a purchase price equal to 85%
of the Fair Market Value per share of the Common Stock as determined
on the Quarterly Award Date.
(ii) For the purposes of the Plan, a "Quarterly Award Date" shall
be March 31, June 30, September 30 and December 31 of each year.
(iii) For the purposes of the Plan, the "Fair Market Value" per
share of the Common Stock shall mean: (A) if the shares of Common
Stock are listed for trading on the American Stock Exchange or the New
York Stock Exchange or included in The Nasdaq National Market, the
fair market value shall be the closing sales price of the shares on
the American Stock Exchange or the New York Stock Exchange or as
reported in The Nasdaq National Market (as applicable) on the date
immediately preceding the date the Award is granted, or, if there is
no transaction on such date, then on the trading date nearest
preceding the date the Award is granted for which closing price
information is available; or (B) if the shares of Common Stock are not
listed or reported in any of the foregoing, then fair market value
shall be determined by the Committee in accordance with the applicable
provisions of Section 20.2031-2 of the Federal Estate Tax Regulations,
or in any manner consistent with the Code and accompanying
regulations.
(c) Awards for Directors Fees Previously Deferred.
---------------------------------------------
(i) Each Director who has previously elected to defer payment of
Directors Fees pursuant to or any other deferred compensation plan or
arrangement sponsored by Premier or its subsidiaries for Directors
(collectively, "Deferred Compensation Plans") may make a one-time
election to transfer such Director's account balance under the
Deferred Compensation Plan(s) to this Plan. Such election may be made
effective on or after [EFFECTIVE DATE OF RESTATED PLAN], but not later
than December 31, 1997.
(ii) A newly elected Director having an account balance under a
Deferred Compensation Plan may also make a one-time election to
transfer such account balance to this Plan during a [60-] day election
period following the election of the Director to the Board or a
subsidiary board.
(iii) A Director who has made a Deferred Compensation Plan
election pursuant to this Section 6(c) shall receive as of the
Quarterly Award Date coincident with or next following such election
an Award equal to that number of whole [OR FRACTIONAL] shares of
Common Stock as may be purchased for the amount of the transferred
account balance of the Director as of each Quarterly Award Date based
on a purchase price equal to 85% of the Fair Market Value (as defined
in Section 6(b)(iii)) per share of the Common Stock as determined on
such Quarterly Award Date. Notwithstanding the foregoing, Awards
granted pursuant to the election procedure described in Section
6(c)(i) herein shall be deemed granted on March 31, 1998.
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<PAGE>
(d) Dividend Equivalent Grants. Each Director who has elected to
--------------------------
defer all or part of his Directors Fees shall be granted an Award of Units
("Dividend Equivalent Awards") calculated by (i) multiplying the number of
Units credited to a Director as of the record date for such dividend by the
dividend then paid on a share of the Common Stock, then (ii) dividing that
result by the [AVERAGE OF THE HIGHEST AND LOWEST PRICE PER SHARE OF COMMON
STOCK ON THE AMERICAN STOCK EXCHANGE AS REPORTED IN THE WALL STREET
---------------
JOURNAL] for the date the dividend is paid (the "Dividend Payment Date").
--------
Dividend Equivalent Awards will be granted to each Director as of the
Quarterly Award Date coincident with or next following the Dividend Payment
Date to which the Dividend Equivalent Award relates.
(e) Director's Accounts. The Corporation shall establish an account
-------------------
for each Director (individually, a "Director's Account") to which the
number of Units represented by each Quarterly Award, Deferred Retainer
Award and Dividend Equivalent Award shall be credited.
(f) Vesting. The number of Units credited to a Director's Account
-------
pursuant to the grant of Awards shall be fully vested at all times.
7. SETTLEMENT.
----------
(a) Time of Settlement. Upon the date that the service of a Director
------------------
as a member of the Board or subsidiary board is terminated for any reason
(the "Termination Date"), the Director (or his beneficiary in the event of
his death) shall be entitled to settlement of the number of Units credited
to the Director's Account. The settlement shall occur on the later of (i)
the [FEBRUARY 1] coincident with or next following the Termination Date, or
(ii) the Quarterly Award Date which follows by at least six months the last
Award (other than a Dividend Equivalent Award) granted to the Director (the
"Payment Date").
(b) Form of Settlement. The settlement paid to a Director shall be
------------------
paid either in a cash payment or in shares of Common Stock, as elected by
the Director. An election as to the form of distribution must be made by
the Director at the time he elects to participate in the Plan and such
election shall be irrevocable unless a change in the form of settlement is
approved in advance by the Committee or is otherwise made in accordance
with Rule 16b-3.
(i) Settlements shall be made in a cash lump sum payment equal to
the Fair Market Value per share of Common Stock as determined on the
Payment Date, multiplied by the number of Units then credited to the
Director's Account, unless the Director elects at the time of his
deferral election to receive the settlement in annual cash
installments for a period of up to ten years beginning on the Payment
Date and continuing on each anniversary thereof during the payment
period (an "Installment Payment Date"). The amount of each annual
installment payment shall be calculated by (x) multiplying the Fair
Market Value per share of Common Stock as determined on the
Installment Payment Date by the number of Units credited to the
Director's Account on the Payment Date (as increased by the Units
credited to the Director's Account for Dividend Equivalent Awards and
decreased by the number of Units for which payment has been made since
the Payment Date), then (y) dividing that result by the number of
installment payments
E-4
<PAGE>
remaining in the payment period (including the installment payment due
on such Installment Payment Date).
(ii) Settlements made in the form of Common Stock shall be equal
to the number of Units credited to the Director's Account on his
Termination Date. Each Unit shall represent one share of Common
Stock. Settlements made in the form of Shares of Common Stock shall be
issued to the Director (or his beneficiary in the event of his death)
in a single distribution. No person shall have any rights as a
shareholder unless and until a certificate for shares of Common Stock
has been issued to him.
8. CHANGES IN ELECTION TO PARTICIPATE
----------------------------------
A Director may terminate his election to participate in the Plan or
may amend his election with respect to his Directors Fees to be deferred by
written request to the Committee by December 31 of each year for Directors Fees
to be earned in the calendar year following the year in which the request is
made. In no event shall any such termination or amendment affect amounts
previously deferred under the Plan, and, in the event a Director terminates his
election to participate in the Plan and remains in service as a Director, he
shall not be entitled to receive any distribution from his Director's Account
until his service as a Director terminates and the terms of Section 7 are met.
9. NONTRANSFERABILITY OF AWARDS.
----------------------------
Awards shall not be transferable (including by pledge or
hypothecation) other than by will, the laws of intestate succession or pursuant
to a qualified domestic relations order (as defined by the Internal Revenue
Code, or Title I of the Employee Retirement Income Security Act or the rules
thereunder). The designation of a beneficiary does not constitute a transfer.
Further, to the extent required pursuant to Rule 16b-3 under the Exchange Act or
any successor statute or rule, Awards granted under the Plan may not be settled
or otherwise disposed of for a period of six months from the date of grant of
the Award.
10. BENEFICIARY.
-----------
Each Director may designate in writing a person or persons as
beneficiary, which beneficiary shall be entitled to receive settlement of Awards
to which the Director is otherwise entitled in the event of death. In the
absence of such designation by a Director, and in the event of the Director's
death, the estate of the Director shall be treated as beneficiary for purposes
of the Plan. The Committee shall have sole discretion to approve the form or
forms of such beneficiary designation.
11. UNFUNDED PLAN.
-------------
The Plan, insofar as it provides for the grant of Awards, shall be
unfunded and the Corporation shall not be required to segregate any assets that
may at any time be represented by Awards made under
E-5
<PAGE>
the Plan. Any liability of the Corporation to any person with respect to any
Award made under the Plan shall be based solely upon any contractual obligations
that may be created pursuant to the Plan, and no term or provision in the Plan
shall be construed to give any person any security, interest, lien or claim
against any specific asset of the Corporation. Neither a Director nor his
beneficiary shall have any rights under the Plan other than as a general
creditor of the Corporation. Notwithstanding the foregoing, the Corporation may,
in its sole discretion, elect to segregate assets in a trust for the purpose of
making payments under this Plan. However, assets of any such trust shall remain
subject to the claims of creditors of the Corporation. No person shall have any
interest in or claim against the assets of the trust as beneficiaries or
otherwise.
12. EFFECT ON SERVICE.
-----------------
Neither the adoption and operation of the Plan, nor the grant of
Awards hereunder, shall confer upon any Director any right to continue in the
service of the Corporation as a member of the Board or a subsidiary board or in
any way affect the right of the Corporation or a subsidiary to terminate the
service of the Director at any time.
13. AMENDMENT AND TERMINATION.
-------------------------
The Plan may be amended, suspended or terminated by action of the
Board at any time; provided, that (i) such amendment, suspension or termination
shall not, without the consent of a Director, adversely affect the rights of the
Director with respect to an outstanding Award. The term of the Plan shall end
on the effective date of termination of the Plan by the Board.
14. ADJUSTMENT OF AWARDS.
--------------------
If there is any change in the shares of Common Stock because of a
merger, consolidation or reorganization involving the Corporation or a related
corporation, or if the Board declares a stock dividend or stock split
distributable in shares of Common Stock, or if there is a change in the capital
stock structure of the Corporation or a related corporation affecting the Common
Stock, the number of Units credited to a Director's Account shall be
correspondingly adjusted, and the Committee shall make such adjustments to
Awards or to any provisions of this Plan as the Committee deems equitable to
prevent dilution or enlargement of Awards.
15. APPLICABLE LAW.
--------------
Except as otherwise provided herein, the Plan shall be construed and
enforced according to the laws of the State of Georgia.
16. CHANGE OF CONTROL.
-----------------
(a) Upon a "Change of Control" of the Corporation (as defined in
Section 16(b), below), a Director may elect to obtain settlement of the
Units then credited to the Director's Account in the manner described in
Section 7, treating for this purpose the date of the Change of Control as
if it were the Termination Date of the Director. An election by a Director
to obtain settlement pursuant to this Section 16 must be filed by the
Director with the Committee at least six
E-6
<PAGE>
months prior to the Payment Date. Such an election will not affect the
rights of the Director to continue participation in accordance with the
terms of this Plan following the Change of Control.
(b) For the purposes herein, as "Change of Control" shall be deemed to
have occurred on the earliest of the following dates:
(i) The date any entity or person shall have become the
beneficial owner of, or shall have obtained voting control over,
[THIRTY] percent [(30%)] or more of the outstanding Common Stock of
the Corporation;
(ii) The date the shareholders of the Corporation approve a
definitive agreement (A) to merge or consolidate the Corporation with
or into another corporation, in which the Corporation is not the
continuing or surviving corporation or pursuant to which any shares of
Common Stock of the Corporation would be converted into cash,
securities or other property of another corporation, other than a
merger of the Corporation in which holders of Common Stock immediately
prior to the merger have the same proportionate ownership of Common
Stock of the surviving corporation immediately after the merger as
immediately before, or (B) to sell or otherwise dispose of
substantially all the assets of the Corporation; or
(iii) The date there shall have been a change in a majority of
the Board of Directors of the Corporation within a 12-month period
unless the nomination for election by the Corporation's shareholders
of each new director was approved by the vote of two-thirds of the
directors then still in office who were in office at the beginning of
the 12-month period.
(For the purposes herein, the term "person" shall mean any individual,
corporation, partnership, group, association or other person, as such term
is defined in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act,
other than the Corporation, a subsidiary of the Corporation or any employee
benefit plan(s) sponsored or maintained by the Corporation or any
subsidiary thereof, and the term "beneficial owner" shall have the meaning
given the term in Rule 13d-3 under the Exchange Act.)
17. WITHHOLDING
-----------
The Corporation shall require any recipient of an Award to pay to the
Corporation in cash the amount of any tax or other amount required by any
governmental authority to be withheld and paid over by the Corporation to such
authority for the account of such Director. Notwithstanding the foregoing, the
Director may satisfy such obligation in whole or in part, and any other local,
state or federal income tax obligations relating to the Award, by electing (the
"Election") to have the Corporation withhold shares of Common Stock from the
shares to which the Director is entitled. The number of shares to be withheld
shall have a fair market value (determined in accordance with Section 6(b)(iii))
as of the date that the amount of tax to be withheld is determined (the "Tax
Date") as nearly equal as possible to (but not exceeding) the amount of such
obligations being satisfied. Each Election must be made in writing to the
Committee prior to the Tax Date.
18. RESTRICTIONS ON SHARES
----------------------
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<PAGE>
The Corporation may impose such restrictions on any shares acquired
upon distribution of an Award granted under the Plan as it may deem advisable,
including, without limitation, restrictions necessary to ensure compliance with
the Securities Act, under the requirements of any applicable self-regulatory
organization and under any blue sky or state securities laws applicable to such
shares. The Corporation may cause a restrictive legend to be placed on any
certificate issued pursuant to the settlement of an Award in such form as may be
prescribed from time to time by applicable laws and regulations or as may be
advised by legal counsel to the Corporation.
IN WITNESS WHEREOF, this Premier Bancshares, Inc. Directors' Deferred
Stock Unit Plan has been executed in behalf of the Corporation effective as of
the _____ day of _________________, 1997.
PREMIER BANCSHARES, INC.
By: /s/ Darrell D. Pittard
-------------------------
Darrell D. Pittard
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ Barbara Burtt
- ------------------------
Barbara Burtt, Secretary
[Corporate Seal]
E-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The provisions of the Georgia Code and the Registrant's Bylaws set forth the
extent to which the Registrant's directors and officers may be indemnified
against liabilities they may incur while serving in such capacities. Under the
Registrant's Bylaws, the Registrant is required to indemnify its officers and
directors against reasonable expenses (including attorneys' fees) incurred by
them in the defense of any action, suit or proceeding to which they were made
a party, or in defense of any claim, issue or matter therein, by reason of the
fact that they are or were officers, directors, employees or agents of the
Registrant, to the extent that they have been successful, on the merits or
otherwise, in such defense. The Registrant's Bylaws also permit
indemnification of its directors and officers against any liability incurred
in connection with any threatened, pending or completed action, suit or
proceeding by reason of the fact that they are or were directors or officers
of the Registrant or who, while directors or officers of the Registrant, are
or were serving at the Registrant's request as directors, officers, partners,
trustees, employees or agents of another entity, if they acted in a manner
they believed in good faith to be in, or not opposed to, the best interests of
the Registrant, or, with respect to any criminal proceeding, had no reasonable
cause to believe their conduct was unlawful, if a determination has been made
that they have met these standards of conduct. Such indemnification in
connection with a proceeding by or in the right of the Registrant, however, is
limited to reasonable expenses, including attorneys' fees, incurred in
connection with the proceeding. The Registrant must also provide advancement
of expenses incurred by any director or officer in defending any such action,
suit or proceeding upon receipt of an undertaking by or on behalf of such
officer or director to repay such advances unless it is ultimately determined
that he or she is not entitled to indemnification by the Registrant.
The Registrant may not indemnify a director or officer in connection with a
proceeding by or in the right of the Registrant in which the director or
officer was adjudged liable to the Registrant for appropriation of a business
opportunity or payment of unlawful dividends, in connection with a proceeding
in which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit or for intentional misconduct or a knowing
violation of law.
The indemnification provisions of the Georgia Code are essentially identical
to those set forth above, except that the Georgia Code permits, but does not
require, a corporation to advance expenses under the circumstances for such
payments described above.
The Registrant maintains an insurance policy insuring the Registrant and its
directors and officers against certain liabilities, including liabilities
under the Securities Act of 1933.
The Registrant's Articles of Incorporation provide that no director of
Premier shall be personally liable to the Registrant or its shareholders for
monetary damages for a breach of the duty of care or of any other duty as a
director, except in the case of: (i) wrongful appropriation of any business
opportunity of the Registrant; (ii) acts or omissions not in good faith or
involving intentional misconduct or a knowing violation or law; (iii)
liability for unlawful distributions; or (iv) any transaction from which the
director derived an improper personal benefit.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated June 24, 1997, between
Premier and Citizens (included as Appendix A to the Joint Proxy
Statement/Prospectus contained herein).
2.2 First Amendment to Agreement and Plan of Reorganization dated July
24, 1997, between Premier and Citizens (included as Appendix A to the
Joint Proxy Statement/Prospectus contained herein).
2.3 Second Amendment to Agreement and Plan of Reorganization dated
September 15, 1997 between Premier and Citizens (included as Appendix
A to the Joint Proxy Statement/Prospectus contained herein).
2.4 Third Amendment to Agreement and Plan of Reorganization dated
September 19, 1997 between Premier and Citizens (Included on Appendix
A to the Joint Proxy Statement/Prospectus contained herein).
3.1 Articles of Incorporation of the Registrant, as amended, through
February 6, 1997. (Incorporated by reference as Exhibit 3.1 to the
Registrant's Form 10-K for the fiscal year ended December 31, 1996).
3.2 Articles of Incorporation (Incorporated by reference as Exhibit 3.1
to the Registrant's Form 10-K for the fiscal year ended December 31,
1996).
3.3 Bylaws of the Registrant (Incorporated by reference as Exhibit 3.2
from the Registrant's Form 10-QSB for the quarter ended September 30,
1996).
4.1 Form of Stock Certificate (Incorporated by reference as Exhibit 4.1
to the Registrant's Form 10-K for the fiscal year ended December 31,
1996).
5.1 Legal opinion of Womble Carlyle Sandridge & Rice, PLLC.
8.1 Tax opinion of Kilpatrick Stockton LLP
10.1 Individual Director's Defined Benefit Plan Agreements, dated January
1, 1994, between First Alliance Bank and each of its directors.
(Incorporated by reference as Exhibit 10.6 to the Registrant's Form
10-KSB for the year ended December 31, 1996).
10.2 Employment Agreement dated as of July 1, 1995 by and among Premier,
First Alliance Bank and J. Edward Mulkey, Jr. (Incorporated by
reference as Exhibit 10.5 to the Registrant's Form 10-KSB for the
fiscal year ended December 31, 1995).1
10.3 First Alliance Bank 1995 Stock Option Plan, dated as of August 8,
1995 and amended as of March 12, 1996, and related form of employee
incentive stock option agreement. (Incorporated by reference as
Exhibit 10.5 to the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1995).
10.4 Guaranty, dated March 25, 1996 by Premier relating to a $2,000,000
loan made by The Bankers Bank to Interim Alliance Corporation (d/b/a
Alliance Finance). (Incorporated by reference as Exhibit 10.5 to the
Registrant's Form 10-KSB for the fiscal year ended December 31,
1995).
10.5 Employment Agreement dated as of January 1, 1997 by and between
Premier Lending Corporation and George S. Phelps. (Incorporated by
reference as Exhibit 10.4 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996).
10.6 Employment Agreement dated as of January 1, 1997 by and between
Premier Lending Corporation and Michael W. Lane. (Incorporated by
reference as Exhibit 10.5 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996)./1/
10.7 Employment Agreement dated as of January 1, 1997 by and between
Premier Lending Corporation and Brian D. Schmitt. (Incorporated by
reference as Exhibit 10.6 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996)./1/
10.8 Amendment to Employment Agreement dated as of January 1, 1997 by and
between First Alliance/Premier Bancshares, Inc. and Darrell D.
Pittard. (Incorporated by reference as Exhibit 10.7 to the
Registrant's Form 10-K for the fiscal year ended December 31,
1996)./1/
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.9 Form of Employment Agreement by and among Premier Bancshares, Inc.,
Premier Lending Corporation and Darrell D. Pittard. (Incorporated by
reference as Exhibit 10.8 to the Registrant's Form 10-K for the fiscal
year ended December 31, 1996).
10.10 Amended and Restated Stock Purchase Agreement by and between Premier
Bancshares, Inc. (formerly known as First Alliance/Premier Bancshares,
Inc.)
and Net.B@nk, Inc. dated December 19, 1996. (Incorporated by reference
as Exhibit 10.9 to the Registrant's Form 10-K for the fiscal year
ended December 31, 1996.)
10.11 First Amendment to the Amended and Restated Stock Purchase Agreement
by and between Premier Bancshares, Inc. and Net.B@nk, Inc. dated
February 25, 1997. (Incorporated by reference as Exhibit 10.10 to the
Registrant's Form 10-K for the fiscal year ended December 31, 1996.)
10.12 Second Amendment to the Amended and Restated Stock Purchase Agreement
by and between Premier Bancshares, Inc. and Net.B@nk, Inc. dated May
31, 1997. (Incorporated by reference as Exhibit 10.12 to the
Registrant's Form 10-Q for the quarter ended June 30, 1997).
10.13 Purchase and Assumption Agreement by and between Premier Bank, FSB and
First Alliance Bank dated December 19, 1996. (Incorporated by
reference as Exhibit 10.11 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996.)
10.14 First Amendment to Purchase and Assumption Agreement by and between
Premier Bank, FSB and First Alliance Bank dated March 13, 1997.
(Incorporated by reference as Exhibit 10.12 to the Registrant's Form
10-K for the fiscal year ended December 31, 1996.)
10.15 Second Amendment to Purchase and Assumption Agreement by and between
Premier Bank, FSB and First Alliance Bank dated March 25, 1997.
(Incorporated by reference as Exhibit 10.13 to the Registrant's Form
10-K for the fiscal year ended December 31, 1996.)
10.16 Third Amendment to Purchase and Assumption Agreement by and between
Premier Bank, FSB and First Alliance Bank dated May 31, 1997.
(Incorporated by reference as Exhibit 10.16 to the Registrant's Form
10-Q for the quarter ended June 30, 1997).
10.17 Premier Bancshares, Inc. 1997 Stock Option Plan./1/ (Incorporated by
reference as Exhibit 10.14 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996.)
10.18 Premier Bancshares, Inc. Directors' Stock Option Plan./1/
(Incorporated by reference as Exhibit 10.15 to the Registrant's Form
10-K for the fiscal year ended December 31, 1996.)
10.19 Agreement and Plan of Reorganization, dated February 3, 1997, between
Premier and Central and Southern Holding Company (included as Appendix
A to the Joint Proxy Statement/Prospectus contained in Premier's Form
S-4 Registration Statement No. 333-24537).
10.20 Amendment to Agreement and Plan of Reorganization dated March 26,
1997, between Premier and Central and Southern Holding Company
(included as Appendix "A" to the Joint Proxy Statement/Prospectus
contained in Premier's Form S-4 Registration Statement No. 333-24537).
10.21 Agreement for Purchase of Certain Assets and Assumption of Certain
Liabilities by and between The Central and Southern Bank of North
Georgia, FSB and The Central and Southern Bank of Georgia dated August
11, 1997. (Incorporated by reference as Exhibit 10.21 to the
Registrant's Form 10-Q for the quarter ended June 30, 1997).
10.22 Agreement and Plan of Merger by and among Premier Bancshares, Inc.,
Premier Bank and The Central and Southern Bank of North Georgia, FSB
dated August 11, 1997. (Incorporated by reference as Exhibit 10.22 to
Registrant's Form 10-Q for the quarter ended June 30, 1997).
10.23 Amended and Restated Premier Bancshares, Inc. Director's Stock Option
Plan (included as Appendix E to the Joint Proxy/Prospectus contained
herein).
11.1 Statement of Per Share Earnings.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
21.1 Subsidiaries of Registrant.
Consent of Womble Carlyle Sandridge & Rice, PLLC (included in
23.1 Exhibit 5).
23.2 Consent of Kilpatrick Stockton LLP (included in Exhibit 8).
23.3 Consent of Mauldin & Jenkins, L.L.C.
23.4 Consent of Porter Keadle Moore L.L.P.
23.6 Consent of The Carson Medlin Company
24 Power of Attorney (see signature page to the Registration Statement).
27 Financial Data Schedule.
99.1 Proxy Card for Premier Bancshares, Inc.
99.2 Proxy Card for Citizens Gwinnett Bankshares, Inc.
</TABLE>
- --------
1 Management Contracts and compensatory arrangements.
(b) Financial Statement Schedules
Schedules are omitted because they are not required or are not applicable,
or the required information is shown in the financial statements or notes
thereto.
Item 22. Undertakings.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
II-4
<PAGE>
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions
(see Item 20), or otherwise, the Registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-5
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF ATLANTA, STATE OF
GEORGIA, ON SEPTEMBER 26, 1997.
PREMIER BANCSHARES, INC.
By /s/ Darrell D. Pittard
_____________________________________
Darrell D. Pittard
Chairman and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears on
the signature pages to this Registration Statement constitutes and appoints
Darrell D. Pittard and Robert C. Oliver, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits hereto and other documents
in connection herewith with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents and each of them, full power and
authority to do so and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ N. Michael Anderson Director September 26, 1997
____________________________________
N. Michael Anderson
/s/ George S. Carpenter Director September 26, 1997
____________________________________
George S. Carpenter
/s/ James L. Coxwell Director September 26, 1997
____________________________________
James L. Coxwell
/s/ Donald N. Ellis Director September 26, 1997
____________________________________
Donald N. Ellis
/s/ William M. Evans, Jr. Director September 26, 1997
____________________________________
William M. Evans, Jr.
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John H. Ferguson Director September 26, 1997
____________________________________
John H. Ferguson
/s/ James E. Freeman Director September 26, 1997
____________________________________
James E. Freeman
/s/ Albert F. Gandy Director September 26, 1997
____________________________________
Albert F. Gandy
/s/ Robin R. Howell Director September 26, 1997
____________________________________
Robin R. Howell
/s/ Billy H. Martin Director September 26, 1997
____________________________________
Billy H. Martin
/s/ C. Steve McQuaig Director September 26, 1997
____________________________________
C. Steve McQuaig
/s/ Robert C. Oliver Director, President and September 26, 1997
____________________________________ Chief Operating Officer
Robert C. Oliver
/s/ Thomas E. Owen Director September 26, 1997
____________________________________
Thomas E. Owen
/s/ Darrell D. Pittard Chairman and Chief Executive September 26, 1997
____________________________________ Officer (principal executive
Darrell D. Pittard officer)
/s/ Michael E. Ricketson Chief Financial Officer and September 26, 1997
____________________________________ Executive Vice President
Michael E. Ricketson (principal financial and
accounting officer)
</TABLE>
II-7
<PAGE>
[LETTERHEAD OF WOMBLE CARLYLE SANDRIDGE & RICE APPEARS HERE]
September 25, 1997
EXHIBIT 5.1
Board of Directors
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 E. Paces Ferry Road
Atlanta, Georgia 30326
RE: Premier Bancshares, Inc.
Registration Statement on Form S-4
2,066,850 Shares of Common Stock (the "Registration Statement")
Ladies and Gentlemen:
We have acted as counsel for Premier Bancshares, Inc. (the "Company")
in connection with the proposed public offering of the shares of its Common
Stock covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Georgia;
(2) The Bylaws of the Company, certified as complete and correct by
the Secretary of the Company;
(3) The minute book of the Company, certified as correct and complete
by the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company, issued
by the Georgia Secretary of State; and
(5) The Registration Statement (including exhibits thereto).
Based upon such examination and upon examination of such other
instruments and records as we have deemed necessary, we are of the opinion that:
(A) The Company has been duly incorporated under the laws of the State
of Georgia and is validly existing and in good standing under the
laws of Georgia.
<PAGE>
(B) The 2,066,850 shares of Common Stock covered by the Registration
Statement have been legally authorized and when issued in
accordance with the terms described in said Registration
Statement, will be validly issued, fully paid and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to this firm under the caption
"Legal Matters" in the Proxy Statement/Prospectus. In giving this consent, we
do not thereby admit that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, or the rules and
regulations of the Securities and Exchange Commission thereunder.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE
A PROFESSIONAL LIMITED LIABILITY COMPANY
/s/ Womble Carlyle Sandridge & Rice, PLLC
EOD:ts
<PAGE>
EXHIBIT 8.1
September 18, 1997
Citizens Gwinnett Bankshares, Inc.
3209 US Highway 23
P.O. Box 1449
Duluth, GA 30136
RE: AGREEMENT AND PLAN OF MERGER BY AND BETWEEN PREMIER
BANCSHARES, INC. AND CITIZENS GWINNETT BANKSHARES, INC.
Gentlemen:
We have been requested as counsel for Citizens Gwinnett Bankshares,
Inc. ("Citizens"), a business corporation organized under the laws of Georgia,
to render our opinion expressed below in connection with the proposed merger
(the "Merger") of Citizens into and with Premier Bancshares, Inc. ("Premier"),
pursuant to the terms and conditions of that certain Agreement and Plan of
Merger (the "Merger Agreement") by and between Premier and Citizens described in
that certain Registration Statement on Form S-4 to be filed by Premier (the
"Registration Statement"). Unless otherwise indicated, terms used herein shall
have the same meaning as defined in the Registration Statement.
In rendering our opinion, we have examined the Acquisition Agreement
and the Merger Agreement, applicable law, regulations, rulings and decisions.
Our opinion is based upon our understanding and belief that the facts set forth
in the Registration Statement are true and correct, and that the representations
made in the Acquisition Agreement and the Merger Agreement are true and correct.
Based on and in reliance on the foregoing, and provided that the
Merger is consummated in accordance with the Acquisition Agreement and the
Merger Agreement, it is our opinion that:
<PAGE>
Citizens Gwinnett Bankshares, Inc.
September 18, 1997
Page 2
(1) The Merger of Citizens into Premier and the issuance of shares of
Premier Stock in connection therewith, as described in the Acquisition Agreement
and the Merger Agreement, will constitute a tax-free reorganization under
Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as amended.
(2) No gain or loss will be recognized for Federal income tax purposes
by holders of Citizens Stock upon the exchange of such stock solely for Premier
Stock as a result of the Merger.
(3) Gain or loss will be recognized pursuant to Section 302 of the
Code by holders of Citizens Stock upon their receipt of cash in lieu of
fractional shares of Premier Stock and upon their exercise of dissenters rights.
(4) No gain or loss will be recognized by Citizens as a result of the
Merger.
(5) The aggregate tax basis of the Premier Stock received by
shareholders of Citizens pursuant to the Merger will be the same as the
aggregate tax basis of the shares of Citizens exchanged therefor, less any
portion of such tax basis allocated to shares of Citizens Stock for which cash
is received in lieu of fractional shares of Premier Stock.
(6) The holding period of the shares of Premier Stock received by the
shareholders of Citizens will include the holding period of the shares of
Citizens Stock exchanged therefor, provided that Citizens Stock is held as a
capital asset on the date of the consummation of the Merger.
This letter is solely for your information and use and, except to the
extent that such may be referred to in the Registration Statement, it is not to
be used, circulated, quoted, or referred to for any other purpose or relied upon
by any other person for whatever reason without our prior written consent.
KILPATRICK STOCKTON LLP
By: /s/ R. Alexander Bransford, Jr.
-------------------------------
R. Alexander Bransford, Jr.
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Six Months Year Ended December 31,
Ended June 30, ------------------------------------
1997 1996 1995 1994
-------------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
Primary
- -------
Weighted average Premier common shares outstanding during
the period 7,910,903 7,971,439 7,906,511 7,000,025
Common shares issuable in connection with assumed
exercise of options under the treasury stock method 151,356 119,930 76,149 41,638
---------- ---------- ---------- ----------
Total 8,062,259 8,091,369 7,982,660 7,041,663
========== ========== ========== ==========
Net income less preferred dividends $4,088,000 $5,493,739 $4,547,944 $1,790,999
---------- ---------- ---------- ----------
Per share earnings 0.51 0.68 0.57 0.25
========== ========== ========== ==========
</TABLE>
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF PREMIER BANCSHARES, INC.
Premier Bank
Premier Lending Corproation
The Central and Southern Bank of North Georgia
The Central and Southern Bank
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 4, 1997, accompanying the consolidated
financial statements of Citizens Gwinnett Bankshares, Inc. and subsidiary
contained in this Form S-4 Resignation Statement and Prospectus and to the use
of our name as it appears under the caption "Experts."
PORTER KEADLE MOORE, LLP
/s/ Porter Keadle Moore, LLP
Atlanta, Georgia
September 29, 1997
<PAGE>
EXHIBIT 23.5
CONSENT OF FINANCIAL ADVISOR
September 29, 1997
We hereby consent to the use of our Fairness Opinion addressed to the Board
of Directors of Premier Bancshares, Inc. which is to be used in the Form S-4
Registration Statement and the Prospectus/Proxy Statement forming a part of this
Form S-4 Registration Statement and to all references to our firm in such
Prospectus/Proxy Statement. In giving such consent, we do not hereby admit that
we come within the category of persons whose consent is required under Section 7
of the Securities Act of 1933 or the rules and regulations of the Securities and
Exchange Commission thereunder.
Brown, Burke Capital Partners, Inc.
/s/ Brown, Burke Capital Partners, Inc.
<PAGE>
EXHIBIT 23.6
CONSENT OF FINANCIAL ADVISOR
September 29, 1997
We hereby consent to the use of our Fairness Opinion addressed to the Board
of Directors of Citizens Gwinnett Bankshares, Inc. which is to be used in the
Form S-4 Registration Statement and the Prospectus/Proxy Statement forming a
part of this Form S-4 Registration Statement and to all references to our firm
in such Prospectus/Proxy Statement. In giving such consent, we do not hereby
admit that we come within the category of persons whose consent is required
under Section 7 of the Securities Act of 1933 or the rules and regulations of
the Securities and Exchange Commission thereunder.
The Carson Medlin Company
/s/ The Carson Medlin Company
<PAGE>
EXHIBIT 99.1
PREMIER BANCSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of the Special
Meeting of Shareholders and Proxy Statement and does hereby appoint Darrell D.
Pittard and Robert C. Oliver and either of them with full power of substitution,
as proxies of the undersigned to represent the undersigned and to vote all
shares of PREMIER BANCSHARES, INC. ("Premier") common stock which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders of Premier, to be held at the executive offices of
Premier, 2180 Atlanta Plaza, 950 E. Paces Ferry Road, Atlanta, Georgia 30326, at
10:00 o'clock a.m. local time, on November 20, 1997 and at any adjournment
thereof.
PROPOSAL 1
Proposal to: approve the Agreement and Plan of Reorganization, dated June 24,
1997, as amended on July 24, 1997, September 15, 1997 and September 19, 1997
(the "Agreement"), between Premier and Citizens Gwinnett Bankshares, Inc.
("Citizens") and to approve the merger (the "Merger") pursuant to which Citizens
will be merged with and into Premier, and in which each issued and outstanding
share of Citizens common stock will be converted into the right to receive eight
shares of Premier common stock and the rights and obligations under the Citizens
Directors Stock Option Plan will be assumed by Premier.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL 2
Proposal to: ratify and approve the Amended and Restated Premier Bancshares,
Inc. Directors' Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment(s). This
Proxy may be revoked at any time prior to voting hereof.
This proxy, when properly executed, duly returned and not revoked will be
voted. It will be voted in accordance with the directions given by the
undersigned shareholder. If no direction is made, it will be voted in favor of
the Proposals listed on this Proxy.
Signature(s)
_____________________________________________
_____________________________________________
Dated: ________________________, 1997
NOTE: Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title
as such. If the signatory is a corporation,
sign the full corporate name by a duly
authorized officer.
<PAGE>
EXHIBIT 99.2
CITIZENS GWINNETT BANKSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of the Special
Meeting of Shareholders and Proxy Statement and does hereby appoint Thomas J.
Martin and Darrell W. Moore and either of them with full power of substitution,
as proxies of the undersigned to represent the undersigned and to vote all
shares of CITIZENS GWINNETT BANKSHARES, INC. ("Citizens") common stock which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders of Citizens, to be held at the executive offices of
Citizens, 3209 Buford Highway, Duluth, Georgia, 30136, at 10:00 o'clock a.m.
local time, on November 20, 1997 and at any adjournment thereof.
PROPOSAL
Proposal to: approve the Agreement and Plan of Reorganization, dated June 24,
1997, as amended on July 24, 1997, September 15, 1997 and September 19, 1997
(the "Agreement"), between Premier Bancshares, Inc. ("Premier") and Citizens and
to approve the merger (the "Merger") pursuant to which Citizens will be merged
with and into Premier, and in which each issued and outstanding share of
Citizens common stock will be converted into the right to receive 8.0 shares
of Premier common stock and the rights and obligations under the Citizens
Directors Stock Option Plan will be assumed by Premier.
[ ] FOR [ ] AGAINST [ ]ABSTAIN
In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment(s). This
Proxy may be revoked at any time prior to voting hereof.
This proxy, when properly executed, duly returned and not revoked will be
voted. It will be voted in accordance with the directions given by the
undersigned shareholder. If no direction is made, it will be voted in favor of
the Proposal listed on this Proxy.
Signature(s)
___________________________________________
___________________________________________
Dated: ________________________, 1997
NOTE: Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If the signatory
is a corporation, sign the full corporate
name by a duly authorized officer.
