<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 4, 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)
----------------
GEORGIA 6025 58-1793778
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION) CLASSIFICATION CODE NO.)
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.
ELIZABETH O. DERRICK, ESQ.
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
SUITE 700, 1275 PEACHTREE STREET, N.E.
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. [_]
Exhibit Index on page .
CALCULATION OF REGISTRATION FEE
<TABLE>
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
<CAPTION>
PROPOSED
MAXIMUM PROPOSED
TITLE OF EACH CLASS OF AMOUNT OFFERING MAXIMUM AMOUNT OF
SECURITIES TO BE PRICE AGGREGATE REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) FEE(2)
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$1.00 par value....... 3,653,523 shares $12.625 $46,125,728 $13,977
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
</TABLE>
(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 last sale reported by NASDAQ National Market System
for the Central and Southern common stock as of April 1, 1997, 1997
($12.625).
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 BANCSHARES, INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
<TABLE>
<CAPTION>
ITEM
NUMBER CAPTION IN FORM S-4 CAPTION IN PROSPECTUS
------ ------------------- ---------------------
<C> <C> <S>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus................. Facing Page of
Registration Statement;
Joint Proxy
Statement/Prospectus
Cover Page
2. Inside Front and Outside Back Cover Pages of Joint Proxy;
Prospectus..................................... Statement/Prospectus
Cover Page; Available
Information
3. Risk Factors, Ratio of Earnings to Fixed Charges Summary and Certain
and Other Information.......................... Considerations
4. Terms of the Transaction........................ Summary; The Merger;
Effect of the Merger on
the Rights of
Shareholders;
Appendices A through C
5. Pro Forma Financial Information................. Summary; Pro Forma
Combined Condensed
Financial Data
6. Material Contract with the Company Being
Acquired....................................... Summary; The Merger
7. Additional Information Required for Reoffering
by Persons and Parties Deemed to be
Underwriters................................... Not Applicable
8. Interests of Named Experts and Counsel.......... Not Applicable
9. Disclosure of Commission Position on
Indemnification for Securities Act............. Part II of Registration
Statement--Undertakings
Liabilities
10. Information with Respect to S-3 Registrants..... Not Applicable
11. Incorporation of Certain Information............ Not Applicable by
Reference
12. Information with Respect to S-2 or S-3
Registrants.................................... Not Applicable
13. Incorporation of Certain Information............ Not Applicable by
Reference
14. Information with Respect to Registrants Other
Than S-2 or S-3 Registrants.................... Available Information;
Summary; Premier
Financial Statements;
Premier Management's
Discussion and Analysis
of Financial Condition
and Results of
Operations; Business of
Premier; Comparative
Market Prices and
Dividends; Premier
Selected Historical
Financial Data;
Description of Premier
Common Stock
15. Information with Respect to S-3 Companies....... Not Applicable
16. Information with Respect to S-2 or S-3
Companies...................................... Not Applicable
17. Information with Respect to Companies Other Than
S-2 or S-3 Companies........................... Summary; Central and
Southern Financial
Statements; Central and
Southern Management's
Discussion and Analysis
of Financial Condition
and Results of
Operations; Business of
Central and Southern;
Comparative Market
Prices and Dividends;
Central and Southern
Selected Historical
Financial Data
18. Information if Proxies, Consents or
Authorizations Are Not to be Solicited in an
Exchange Offer................................. Not Applicable
</TABLE>
<PAGE>
[PREMIER LETTERHEAD]
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Meeting") of Premier Bancshares, Inc. of ("Premier"), to be held at 2180
Atlanta Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326, on June 16,
1997, at 10:00 a.m., local time, notice of which is enclosed.
In addition to the election of Directors, the proposals to be presented at
the meeting include (a) approval of an Agreement and Plan of Reorganization,
as amended (the "Agreement"), entered into with Central and Southern Holding
Company ("Central and Southern") on February 3, 1997, and amended on March 26,
1997, pursuant to which Central and Southern will merge with and into Premier
(the "Merger"); (b) approval of the Premier Bancshares, Inc. 1997 Stock Option
Plan (the "1997 Stock Option Plan"); and (c) approval of the Directors' Stock
Option Plan (the "Directors' Plan").
Upon consummation of the Merger, each share of Central and Southern common
stock ("Central and Southern Common Stock") issued and outstanding will be
converted into and exchanged for the right to receive one share of Premier
common stock. I will continue to serve as Chairman of the Board and Chief
Executive Officer of Premier, J. Edward Mulkey, Jr., will assume the role of
Vice Chairman of Premier and will continue as President and Chief Executive
Officer of Premier Bank. Robert C. Oliver, President of Central and Southern
Holding Company will be elected President and Chief Operating Officer of
Premier upon the consummation of the Merger. Mr. Oliver will also remain as
President of The Central and Southern Bank of Georgia.
I urge you to read the accompanying Joint Proxy Statement/Prospectus, which
includes a description of the proposed Merger and the Amendment 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 is recommended by the Board to you for approval. Each member of
the Board of Directors has agreed to vote all Premier shares beneficially
owned by such member in favor of the Merger and the other proposals to be
presented at the Premier Meeting. Consummation of the Merger is subject to
certain conditions, including approval of the Agreement by the holders of
Central and Southern 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 AND
CENTRAL AND SOUTHERN 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 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 MERGER AND THE
OTHER PROPOSALS BY MARKING THE ENCLOSED PROXY CARD "FOR" THE MERGER AND THE
ADDITIONAL PROPOSALS.
Sincerely,
/s/ Darrell D. Pittard
By: _________________________________
Darrell D. Pittard
Chairman of the Board 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 ANNUAL MEETING OF SHAREHOLDERSTO BE HELD JUNE 16, 1997
Notice is hereby given that an Annual 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 June 16, 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 as of February 3, 1997, as amended on March 26, 1997,
(the "Agreement"), by and between Premier and Central and Southern Holding
Company ("Central and Southern") pursuant to which (i) Premier will acquire
all of the issued and outstanding common stock of Central and Southern
through the merger of Central and Southern with and into Premier (the
"Merger"), and (ii) each share of Central and Southern common stock will be
converted into one share of Premier common stock, as described more fully
in the accompanying Joint Proxy Statement/Prospectus. (Proposal 1).
2. Election of Directors. To elect eight directors of Premier to serve
until the 1998 Annual Meeting of Shareholders or until their successors are
duly elected. (Proposal 2)
3. 1997 Stock Option Plan. To consider and vote on the Premier
Bancshares, Inc. 1997 Stock Option Plan. (Proposal 3)
4. Directors' Stock Option Plan. To consider and vote on the Premier
Bancshares, Inc., Directors' Stock Option Plan. (Proposal 4)
5. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning the Meeting to permit, if
necessary, further solicitation of proxies.
Approval of the Agreement requires the affirmative vote of a majority of the
shares of Premier common stock entitled to vote at the Meeting. Only
shareholders of record at the close of business on April 16, 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 MERGER AND THE OTHER PROPOSALS AS DESCRIBED 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
By: _________________________________
Barbara J. Burtt
Secretary
Atlanta, Georgia
May , 1997
<PAGE>
[CENTRAL AND SOUTHERN LETTERHEAD]
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders (the
"Meeting") of Central and Southern Holding Company ("Central and Southern") to
be held at, Milledgeville, Georgia 31061, on June 16, 1997, at 11:00
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, as amended (the "Agreement")
entered into with Premier Bancshares, Inc. ("Premier") on February 3, 1997,
and amended on March 26, 1997, pursuant to which Central and Southern will
merge with and into Premier (the "Merger"). Upon consummation of the Merger,
each share of Central and Southern Common Stock issued and outstanding will be
converted into and exchanged for the right to receive one share of Premier
Common Stock.
Following the Merger, I will become President and Chief Operating Officer of
Premier and I will remain President of The Central and Southern Bank of
Georgia. Darrell D. Pittard, Chairman and Chief Executive Officer of Premier,
will remain Chairman and Chief Executive Officer of Premier.
Please read the Joint 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 Central and Southern Common Stock beneficially
owned by such member in favor of the proposals listed above.
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 PROPOSAL PRESENTED BY MARKING THE ENCLOSED PROXY CARD
"FOR" THE MERGER.
Sincerely,
/s/ Robert C. Oliver
By: _________________________________
Robert C. Oliver
President and Chief Executive
Officer
<PAGE>
[CENTRAL AND SOUTHERN LETTERHEAD]
CENTRAL AND SOUTHERN HOLDING COMPANY
150 WEST GREENE STREET
MILLEDGEVILLE, GEORGIA 31061
(912) 452-5541
NOTICE OF SPECIAL MEETING OF SHAREHOLDERSTO BE HELD JUNE 16, 1997
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Central and Southern Holding Company ("Central and Southern")
will be held at , Milledgeville, Georgia 31061, on June 16, 1997,
at 11:00 a.m., local time, for the following purpose:
1. Merger. To consider and vote on the Plan and Agreement of
Reorganization dated February 3, 1997, as amended on March 26, 1997, (the
"Agreement") by and between Premier and Central and Southern Holding
Company ("Central and Southern") pursuant to which (i) Premier will acquire
all of the issued and outstanding common stock of Central and Southern
through the merger of Central and Southern with and into Premier (the
"Merger"), and (ii) each share of Central and Southern common stock will be
converted into one share 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.
Only shareholders of record at the close of business on April 16, 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 CENTRAL AND
SOUTHERN COMMON STOCK VOTE "FOR" THE PROPOSAL 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
Central and Southern 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
_____________________________________
Secretary
Milledgeville, Georgia
May , 1997
<PAGE>
JOINT PROXY STATEMENT
FOR THE ANNUAL MEETING FOR THE SPECIAL MEETING
OF SHAREHOLDERS OF SHAREHOLDERS
TO BE HELD ON JUNE 16, 1997 TO BE HELD ON JUNE 16, 1997
PREMIER BANCSHARES, INC. CENTRAL AND SOUTHERN
2180 ATLANTA PLAZA HOLDING COMPANY
950 EAST PACES FERRY ROAD 150 WEST GREENE STREET
ATLANTA, GEORGIA 30326 MILLEDGEVILLE, GEORGIA 31061
(404) 814-3090 (912) 452-5541
----------------
PROSPECTUS
OF
PREMIER BANCSHARES, INC.
2180 ATLANTA PLAZA
950 EAST PACES FERRY ROAD
ATLANTA, GEORGIA 30326
(404) 814-3090
FOR
3,653,523 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
Central and Southern Holding Company ("Central and Southern") upon
consummation of the proposed merger (the "Merger") described herein, pursuant
to which Central and Southern will merge with and into Premier pursuant to the
terms of that certain Agreement and Plan of Reorganization dated as of
February 3, 1997, and amended on March 26, 1997, by and between Premier and
Central and Southern (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) Central and Southern will merge with and into
Premier, and (ii) each outstanding share of the $1.00 value common stock of
Central and Southern ("Central and Southern Common Stock") will be converted
into one share of Premier Common Stock.
Upon consummation of the Merger, Central and Southern will merge with and
into Premier. Premier will survive the Merger and the separate existence of
Central and Southern will cease. The Central and Southern Bank of Georgia and
The Central and Southern Bank of North Georgia, F.S.B. will become wholly
owned subsidiaries of Premier. For a further description of the terms of the
Merger, see "The Merger."
This Prospectus also constitutes a Joint Proxy Statement of Premier and
Central and Southern 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 Central and Southern Board of
Directors will be used at the Special Meeting of Shareholders of Central and
Southern (the "Central and Southern Meeting") to be held on June 16, 1997,
including any adjournment or postponement thereof, to consider and vote on the
proposed Merger and to transact such other business as may properly come
before the Central and Southern Meeting or any adjournments thereof. The
proxies solicited by the Premier Board of Directors will be used at the Annual
Meeting of Shareholders of Premier (the "Premier Meeting") to be held on June
16, 1997, including any adjournment or postponement thereof, (i) to consider
and vote on the proposed Merger, (ii) to elect eight directors to serve until
the 1998 Annual Meeting of Shareholders, (iii) to consider a proposal to adopt
the Premier Bancshares, Inc. 1997 Stock Option Plan (the "1997 Stock Option
Plan"); (iv) to consider a proposal to adopt the Premier Bancshares, Inc.
Directors' Stock Option Plan (the "Directors' Plan"); and (v) to transact such
other business as may properly come before the Premier Meeting or any
adjournment(s) thereof. This Joint Proxy Statement/Prospectus and the
accompanying proxy cards are first being mailed to shareholders of Premier and
Central and Southern on or about May , 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>
<S> <C>
AVAILABLE INFORMATION.......................................................
SUMMARY.....................................................................
The Parties...............................................................
Special Meeting of Central and Southern Shareholders......................
Annual Meeting of Premier Shareholders....................................
The Merger; Exchange Ratio................................................
Reasons for the Merger....................................................
Fairness Opinions.........................................................
Effective Date............................................................
Exchange of Stock Certificates............................................
Regulatory Approvals and Other Conditions.................................
Waiver, Amendment, and Termination of the Agreement.......................
Directors and Executive Officers Following the Merger.....................
Interests of Certain Persons in the Merger................................
Certain Federal Income Tax Consequences of the Merger.....................
Accounting Treatment......................................................
Certain Differences in Shareholders' Rights...............................
Comparative Market Prices of Common Stock.................................
Comparative Per Share Data................................................
Selected Pro Forma Financial Data.........................................
Additional Proposals Presented to Premier Shareholders Only...............
Certain Considerations....................................................
THE CENTRAL AND SOUTHERN MEETING............................................
General...................................................................
Record Date; Vote Required................................................
THE PREMIER MEETING.........................................................
General...................................................................
Record Date; Vote Required................................................
THE MERGER..................................................................
General...................................................................
Treatment of Central and Southern Options.................................
Background of and Reasons for the Merger..................................
Fairness Opinions.........................................................
Effective Date of the Merger..............................................
Distribution of Stock Certificates After the Merger.......................
Conditions to Consummation of the Merger..................................
Regulatory Approvals......................................................
No Appraisal Rights.......................................................
Waiver, Amendment, and Termination of the Agreement.......................
Conduct of Business Pending the Merger....................................
Directors and Executive Officers Following the Merger.....................
Interests of Certain Persons in the Merger................................
Certain Federal Income Tax Consequences of the Merger.....................
Accounting Treatment......................................................
Expenses and Fees.........................................................
Resales of Premier Common Stock...........................................
Description of Premier Common Stock.......................................
Certain Differences in Rights of Shareholders.............................
COMPARATIVE MARKET PRICES AND DIVIDENDS.....................................
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
CERTAIN CONSIDERATIONS
Management of Growth......................................................
Dependence on Senior Management...........................................
Highly Competitive Business...............................................
Volatility of Stock Price.................................................
Premier Market Price......................................................
Central and Southern Market Price.........................................
BUSINESS OF PREMIER.........................................................
General...................................................................
Recent Deveopments........................................................
First Alliance Bank.......................................................
Premier Bank..............................................................
Premier Lending Corporation...............................................
Alliance Finance Corporation..............................................
Employees.................................................................
Legal Proceedings.........................................................
SELECTED HISTORICAL FINANCIAL DATA OF PREMIER...............................
PREMIER MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION............................
Background................................................................
Liquidity and Capital Resources...........................................
Asset/Liability Management................................................
Changes in Financial Condition............................................
Loan Portfolio............................................................
Deposits..................................................................
Other Borrowings..........................................................
Credit Analysis...........................................................
Summary of Loan Experience................................................
Results of Operations.....................................................
Return on Equity and Assets...............................................
Quarterly Financial Data..................................................
BUSINESS OF CENTRAL AND SOUTHERN............................................
General...................................................................
Markets...................................................................
Deposits..................................................................
Loans.....................................................................
Lending Policy............................................................
Employees.................................................................
Competition...............................................................
Properties................................................................
Legal Proceedings.........................................................
SELECTED HISTORICAL FINANCIAL DATA OF CENTRAL AND SOUTHERN..................
CENTRAL AND SOUTHERN MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...........................
Background................................................................
Liquidity and Capital Resources...........................................
Asset/Liability Management................................................
Gap Analysis..............................................................
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
Changes in Financial Condition............................................
Loan Portfolio............................................................
Deposits..................................................................
Other Borrowings..........................................................
Credit Analysis...........................................................
Summary of Loan Experience................................................
Results of Operations.....................................................
Return on Equity and Assets...............................................
Quarterly Results.........................................................
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION................
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME...........................
Notes to Pro Forma Condensed Combined Financial Statements................
CERTAIN REGULATORY CONSIDERATIONS...........................................
General...................................................................
Payment of Dividends......................................................
Capital Adequacy..........................................................
Support of Subsidiary Institutions........................................
Prompt Corrective Action..................................................
FDIC Insurance Assessments................................................
Safety and Soundness Standards............................................
Depositor Preference......................................................
Certain Applicable Thrift Regulations.....................................
REPORT ON FORM 10-K.........................................................
EXPERTS.....................................................................
OPINIONS....................................................................
PREMIER ANNUAL MEETING MATTERS..............................................
Election of Directors--Proposal 2.........................................
Security Ownership of Certain Beneficial Owners and Management............
Certain Relationships and Relaed Transactions.............................
Compliance with Section 16(a) of the Securities Exchange Act of 1934......
Report of the Compensation Committee......................................
Stock Price Performance Graph.............................................
Adoption of the 1997 Stock Option Plan--Proposal 3........................
Adoption of Directors' Stock Option Plan--Proposal 4......................
Certain Federal Income Tax Consequences...................................
PROPOSALS BY PREMIER SHAREHOLDERS FOR 1998 ANNUAL MEETING...................
OTHER MATTERS...............................................................
CENTRAL AND SOUTHERN FINANCIAL STATEMENTS...................................
PREMIER FINANCIAL STATEMENTS................................................
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
APPENDIX A:AGREEMENT AND PLAN OF REORGANIZATION, AS AMENDED.................
APPENDIX B:OPINION OF BROWN, BURKE CAPITAL PARTNERS, INC....................
APPENDIX C:OPINION OF ALEX SHESHUNOFF & CO. INVESTMENT BANKING..............
APPENDIX D:PROPOSED PREMIER BANCSHARES, INC. 1997 STOCK OPTION PLAN.........
APPENDIX E:PROPOSED PREMIER BANCSHARES, INC. DIRECTORS'
STOCK OPTION PLAN..............................................
</TABLE>
iv
<PAGE>
AVAILABLE INFORMATION
Premier and Central and Southern are subject to the reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and,
in accordance therewith, file 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 and Central and Southern. 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 Central and Southern 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.
Central and Southern Common Stock is traded on the NASDAQ Stock Market.
Reports, proxy statements, and other information concerning Central and
Southern may be inspected at the offices of the National Association of
Securities Dealers, Inc. (the "NASD"), 1735 K Street, N.W., Washington, D.C.
20006.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE INCLUDED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PREMIER
OR CENTRAL AND SOUTHERN. 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 CENTRAL AND
SOUTHERN 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 Central and Southern was supplied by Central and
Southern.
v
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Premier's Annual Report on Form 10-K for the fiscal year ended December 31,
1996 previously filed by Premier (File No 0-24528) with the Commission
pursuant to the Exchange Act is incorporated herein by this reference:
Central and Southern's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996 previously filed by Central and Southern (File No. 0-15945)
with the Commission pursuant to the Exchange Act is incorporated herein by
this reference.
Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes hereof to the extent that a statement contained herein (or in any
other subsequently filed document which also is incorporated by reference
herein) modifies or supersedes such statement. Any statement so modified or
superseded shall not be deemed to constitute a part hereof except as so
modified or superseded. All information appearing in this Proxy
Statement/Prospectus is qualified in its entirety by the information and
financial statements (including notes thereto) appearing in the documents
incorporated herein by reference, except to the extent set forth in the
immediately preceding statement.
This Joint Proxy Statement/Prospectus incorporates by reference certain
documents concerning Premier and Central and Southern that are not presented
herein or delivered herewith. Copies of any such documents, other than
exhibits to such documents that are not specifically incorporated by reference
therein, are available without charge to any person, including any beneficial
owner, to whom this Joint Proxy Statement/Prospectus is delivered upon written
or oral request, as follows: (i) with respect to Premier documents, to the
Secretary, Premier Bancshares, Inc.; and (ii) with respect to Central and
Southern documents, to the Secretary, The Central and Southern Holding
Company. In order to ensure timely delivery of the documents, any request
should be made before June 1, 1997.
vi
<PAGE>
SUMMARY
The following is a summary of certain information relating to the Central and
Southern Meeting, the Premier Meeting, the proposed 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 "Central and
Southern" 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, First Alliance Bank, Premier Bank,
F.S.B., Premier Lending Corporation and Alliance Finance Corporation. As of
December 31, 1996, Premier had total consolidated assets of approximately $294
million, total consolidated deposits of approximately $237 million and total
consolidated shareholders' equity of approximately $23 million. See "Premier
Bancshares, Inc. Financial Statements." Through its subsidiaries, Premier
offers a broad range of banking and banking-related services.
On August 31, 1996, Premier (formerly known as First Alliance Bancorp, Inc.)
merged with Premier Bancshares, Inc. In that transaction, First Alliance
Bancorp, Inc. issued 746,530 shares of its common stock in exchange for all the
issued and outstanding shares of Premier Bancshares, Inc. Following the merger,
the surviving corporation was known as "First Alliance/Premier Bancshares,
Inc." On February 4, 1997, Premier amended its Articles of Incorporation to
change its name to "Premier Bancshares, Inc."
Premier was incorporated in 1988 under the laws of Georgia and is registered
as a bank holding company under the regulations of the Federal Reserve Board
("Federal Reserve"), as amended (the "BHC Act") and is 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.
Central and Southern. Central and Southern is a bank and thrift holding
company headquartered in Milledgeville, Georgia. Central and Southern operates
through its two subsidiaries, The Central and Southern Bank of Georgia
("Central and Southern Bank") and Central and Southern Bank of North Georgia,
FSB (the "Central and Southern Bank of North Georgia"). As of December 31,
1996, Central and Southern had total consolidated assets of approximately $226
million, total consolidated deposits of approximately $195 million and total
consolidated shareholders' equity of approximately $24 million. See "Central
and Southern Financial Statements."
Central and Southern was incorporated in 1980 under the laws of Georgia and
is registered as a bank holding company under the regulations of the Federal
Reserve and as a thrift holding company under the regulations of the OTS.
Central and Southern's principal executive offices are located at 150 West
Greene Street, Milledgeville, Georgia 31061, and its telephone number at such
address is (912) 452-5541.
SPECIAL MEETING OF CENTRAL AND SOUTHERN SHAREHOLDERS
The Central and Southern Meeting will be held at 11:00 a.m., local time, on
June 16, 1997, at , Milledgeville, Georgia 31061, for the purpose of
considering and voting on approval of the Agreement and transacting such other
business as may properly come before the meeting. See "The Central and Southern
Meeting."
Only holders of record of Central and Southern Common Stock at the close of
business on April 16, 1997 (the "Central and Southern Record Date"), will be
entitled to vote at the Central and Southern Meeting.
1
<PAGE>
Approval of the Agreement requires the affirmative vote of a majority of the
shares of Central and Southern Common Stock entitled to vote at the Central and
Southern Meeting. As of the Central and Southern Record Date, there were
3,653,523 shares of Central and Southern Common Stock outstanding and entitled
to be voted.
The directors and executive officers of Central and Southern beneficially
owned, as of the Central and Southern Record Date, shares (or approximately
% of the outstanding shares) of Central and Southern Common Stock.
As of the Central and Southern Record Date, the directors and executive
officers of Premier did not beneficially own any shares of Central and Southern
Common Stock. As of that date, neither Central and Southern nor Premier held
any shares of Central and Southern Common Stock in a fiduciary capacity for
others. See "The Central and Southern Meeting."
ANNUAL MEETING OF PREMIER SHAREHOLDERS
The Premier Meeting will be held at 10:00 a.m., local time, on June 16, 1997,
at Premier's main office, 2180 Atlanta Plaza, 950 East Paces Ferry Road,
Atlanta, Georgia 30326, to consider voting on (i) the approval of the
Agreement, (ii) the election of eight directors to serve until the 1998 Annual
Meeting of shareholders of Premier, (iii) approval of the 1997 Stock Option
Plan, (iv) approval of the Directors' Plan and (v) to transact such other
business as may properly come before the Meeting or any adjournment(s) thereof.
See "The Premier Meeting."
Only holders of record of Premier Common Stock at the close of business on
April 16, 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. As of the Premier Record Date, there were 4,249,747 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, shares (or approximately % of the outstanding shares)
of Premier Common Stock. Each member of the Board of Directors of Premier has
agreed to vote those shares beneficially owned by such member (except for
shares held in a fiduciary capacity) in favor of the proposals to be presented
at the Premier Meeting.
As of the Premier Record Date, the directors and executive officers of
Central and Southern did not beneficially own any shares of Premier Common
Stock. As of that date, neither Premier nor Central and Southern 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 Central and Southern with
Premier pursuant to the merger of Central and Southern with and into Premier.
On the Effective Date, each share of Central and Southern Common Stock then
issued and outstanding will be converted into one share of Premier Common Stock
(the "Exchange Ratio"). See "The Merger--General."
REASONS FOR THE MERGER
Central and Southern's Board of Directors has unanimously approved the Merger
and the Agreement and has determined that the Merger is fair to, and in the
best interests of, Central and Southern and its shareholders. ACCORDINGLY,
CENTRAL AND SOUTHERN'S BOARD UNANIMOUSLY RECOMMENDS THAT CENTRAL AND SOUTHERN'S
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT. EACH MEMBER OF THE BOARD OF
DIRECTORS OF CENTRAL AND SOUTHERN HAS AGREED TO VOTE SUCH MEMBER'S SHARES OF
CENTRAL AND SOUTHERN COMMON STOCK IN FAVOR OF THE AGREEMENT. In approving the
Merger, Central and Southern's directors considered Premier's financial
condition;
2
<PAGE>
various alternatives to the Merger (including remaining as an independent bank
and thrift holding company); the consideration to be received by Central and
Southern's shareholders relative to Premier's book value and earnings per share
of common stock; 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; and the
likelihood that the Merger would be approved by applicable regulatory
authorities without undue conditions or delay.
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 Central and Southern's financial condition,
operations and market area; Premier's overall strategic focus; the financial
terms and income tax consequences of the Merger; the opportunity to leverage
Central and Southern's excess capital; the size of Central and Southern's loan
loss reserve; and the management philosophy of Central and Southern 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."
Central and Southern. Alex Sheshunoff & Co. Investment Banking ("Sheshunoff")
has rendered an opinion to Central and Southern 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
Central and Southern. Sheshunoff's opinion is attached as Appendix C to this
Joint Proxy Statement/Prospectus. Shareholders are urged to read the opinion in
its entirety for a description of the procedures followed, matters considered,
and limitations on the reviews undertaken in connection therewith. See "The
Merger--Fairness Opinions."
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time specified in
a Certificate of Merger filed by 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 Central and Southern, 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 and; (ii)
the date on which the Agreement is approved by the requisite vote of Premier
and Central and Southern shareholders. The parties expect that all conditions
to consummation of the Merger will be satisfied so that the Merger can be
consummated in the second 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."
3
<PAGE>
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 Central and Southern a letter of
transmittal, together with instructions for the exchange of such shareholders'
certificates representing shares of Central and Southern Common Stock for
certificates representing shares of Premier Common Stock. Former shareholders
of Central and Southern will not be entitled to receive dividends on their
shares of Premier Common Stock until Premier has received their Central and
Southern stock certificates. CENTRAL AND SOUTHERN SHAREHOLDERS SHOULD NOT SEND
IN THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THE FORM LETTER OF TRANSMITTAL
AND INSTRUCTIONS. See "The Merger--Distribution of Stock Certificates After the
Merger."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Board of Governors of the Federal
Reserve System (the "Federal Reserve") and the Department of Banking and
Finance of the State of Georgia (the "Georgia Department"). Applications for
the requisite approvals have been filed with these agencies, each of which has
yet to issue its approval of the Merger. There can be no assurance that the
approvals of these agencies will be given or as to the timing or conditions of
such approvals.
Consummation of the Merger is subject to various other conditions, including
receipt of the required approval of the Premier and Central and Southern
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
Central and Southern and Premier, or by action of the Board of Directors of
either company under certain circumstances, including if the Merger is not
consummated by June 30, 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, both Premier and Central and Southern
will continue to operate as bank holding companies and thrift holding companies
under their 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 (including Darrell D. Pittard and J. Edward Mulkey, Jr.) and six
outside directors of Central and Southern to be specified by Central and
Southern and Robert C. Oliver. Central and Southern has specified that the six
outside directors to serve on the Board of the Surviving Corporation are Albert
F. Gandy, George S. Carpenter, Jr., Don N. Ellis, John H. Ferguson, C. Steve
McQuaig and Thomas E. Owen, Jr. See "The Merger-- Directors and Executive
Officers Following the Merger" and "Premier Meeting Matters--Election of
Directors--Proposal 2."
Darrell D. Pittard, the current Chairman and Chief Executive Officer of
Premier, will continue serving as Chairman and Chief Executive Officer of the
Surviving Corporation, Robert C. Oliver, the current President of Central and
Southern will be the President and Chief Operating Officer of the Surviving
Corporation, and J. Edward Mulkey, Jr., will serve as the Surviving
Corporation's Vice Chairman. Michael E. Ricketson and Frank H. Roach will serve
as Executive Vice Presidents of the Surviving Corporation.
4
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers and directors of Premier and of Central and
Southern have interests in the Merger in addition to their respective interests
as Premier or Central and Southern 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 Central and Southern Common Stock.
See "The Merger--Interests of Certain Persons in the Merger."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Premier and Central and Southern have received an opinion of Womble Carlyle
Sandridge & Rice, PLLC, counsel to Premier, to the effect that, among other
things: (i) the Merger will constitute a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
(ii) the exchange in the Merger of Central and Southern Common Stock for
Premier Common Stock will not give rise to gain or loss to Central and Southern
shareholders; and (iii) neither Premier nor Central and Southern will recognize
income, gain or loss as a consequence of the Merger (except for income, gain or
loss that has been deferred and is required to be recognized pursuant to
Treasury Regulations issued under Section 1502 of the Code). See "The Merger--
Certain Federal Income Tax Consequences of the Merger."
DUE TO THE INDIVIDUAL NATURE OF THE INCOME TAX CONSEQUENCES OF THE MERGER,
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND FOREIGN
TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Central and Southern 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
Central and Southern 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 SHAREHOLDERS' RIGHTS
On the Effective Date, Central and Southern shareholders, whose rights are
governed by the Georgia Code and by Central and Southern's Articles of
Incorporation and Bylaws, will automatically become Premier shareholders, and
their rights as Premier shareholders are determined by the Georgia Code and by
Premier's Articles of Incorporation and by Premier's Bylaws. The rights of
Premier shareholders will differ from the rights of Central and Southern
shareholders in certain respects. See "The Merger-Effect of the Merger on the
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 under the symbol "FABC." Central and Southern Common
Stock is traded on the NASDAQ National Market System under the symbol "CSBC."
The following table sets forth the last sale price of Premier Common Stock on
January 14, 1997, the date of the last sale reported by the American Stock
Exchange prior to January 15, 1997 (the date of public announcement of the
proposed Merger) as adjusted to reflect Premier's 1.8055-for-one stock split on
March 6, 1997 and the sale price of Central and Southern Common Stock on
January 14, 1997, the
5
<PAGE>
date of the last reported sale of Central and Southern Common Stock prior to
January 15, 1997. It also provides the last sale price of Premier Common Stock
on May , 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 Central and Southern Common Stock on May , 1997, the date of the
last sale reported by NASDAQ of Central and Southern Common Stock.
<TABLE>
<CAPTION>
PREMIER COMMON STOCK CENTRAL AND SOUTHERN COMMON STOCK
-------------------- ---------------------------------
<S> <C>
$13.50 at January 14, 1997.............. $11.75 at January 14, 1997
$ at May , 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 Central and Southern, (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 Central and Southern 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 Central and Southern
pro forma combined information gives effect to the Merger on a pooling-of-
interests accounting basis and assumes the Exchange Ratio of one share of
Premier Common Stock for each share of Central and Southern 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.
6
<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 Central and Southern, including the respective notes thereto, and the pro
forma financial information included herein. See "--Selected Historical
Financial Data of Premier," "--Selected Financial Data of Central and
Southern," "--Summary Pro Forma Financial Data," "Pro Forma Condensed Combined
Financial Information," "Premier Financial Statements" and "Central and
Southern Financial Statements."
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,(1)
-------------------
1996 1995
--------- ---------
(UNAUDITED EXCEPT
PREMIER AND CENTRAL
AND SOUTHERN
HISTORICAL)
<S> <C> <C>
INCOME PER SHARE
Premier historical.................................. $ .59 $ .48
Central and Southern historical..................... .81 .68
Premier and Central and Southern pro forma
combined(2)........................................ .66 .58
Central and Southern pro forma equivalent(3)........ .66 .58
DIVIDENDS DECLARED PER COMMON SHARE
Premier historical.................................. $ .58 $ .01
Central and Southern historical..................... .22 .175
Premier and Central and Southern pro forma
combined(2)........................................ .41 .09
Central and Southern pro forma equivalent(4)........ .41 .09
BOOK VALUE PER SHARE (PERIOD END)
Premier historical.................................. $5.48 $5.52
Central and Southern historical..................... 6.54 6.10
Premier and Central and Southern pro forma
combined(2)........................................ 5.90 5.72
Central and Southern pro forma equivalent(3)........ 5.90 5.72
</TABLE>
--------
(1) Both Central and Southern's and Premier's fiscal year end is
December 31.
(2) Represents the combined results of Premier and Central and
Southern as if the Merger were consummated on January 1, 1996
and were accounted for as a pooling-of-interests transaction.
(3) Represents pro forma combined information multiplied by the
Exchange Ratio.
(4) Represents pro forma combined dividends declared per share
multiplied by the Exchange Ratio.
7
<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data gives effect to the
acquisition of Central and Southern as of the date or at the beginning of the
period indicated, assuming the acquisition is accounted for as a pooling-of-
interests. The unaudited pro forma financial data is presented for
informational purposes only and is not necessarily indicative of the combined
financial position or results of operation which actually would have occurred
if the transaction had been consummated at the date and for the periods
indicated or which may be obtained in the future.
<TABLE>
<CAPTION>
AS OF
DECEMBER 31,
1996
--------------
(IN THOUSANDS)
<S> <C>
BALANCE SHEET
Total assets..................................................... $519,944
Loans, net....................................................... 331,129
Investment securities available for sale......................... 99,732
Federal funds sold............................................... 42,896
Interest-bearing deposits in banks............................... 2,697
Total deposits................................................... 431,898
Other borrowings................................................. 35,241
Stockholders' equity............................................. 46,630
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,(1)
----------------------
1996 1995
---------- ----------
(IN THOUSANDS EXCEPT
PER SHARE DATA)
<S> <C> <C>
OPERATING DATA
Interest income....................................... $40,251 $33,575
Interest expense...................................... 20,237 16,662
Net interest income................................... 20,014 16,913
Negative provision for loan losses.................... (418) (700)
Net interest income after negative provision for loan
losses............................................... 20,432 17,613
Other income.......................................... 13,117 9,087
Other expenses........................................ 26,895 20,379
Income taxes.......................................... 1,699 1,760
Net income............................................ 4,955 4,561
Net income per common and common equivalent share..... .66 .58
Net income assuming full dilution..................... .66 .58
</TABLE>
ADDITIONAL PROPOSALS PRESENTED TO PREMIER SHAREHOLDERS ONLY
At the Premier Meeting, the shareholders of Premier will be asked to vote on
three additional proposals: (i) the election of eight members to the Board of
Directors of Premier to serve until the 1998 Annual Meeting; (ii) approval of
the Premier Bancshares, Inc. 1997 Stock Option Plan (the "1997 Stock Option
Plan"); and (iii) approval of a new Directors' Stock Option Plan (the
"Directors' Plan").
8
<PAGE>
Board of Directors. The Board of Directors of Premier have nominated its six
outside directors and Darrell D. Pittard and J. Edward Mulkey, Jr. to serve on
the Board of Directors of Premier until the 1998 Shareholders' Meeting or until
their successors have been elected. The Agreement provides that the directors
of Premier following from and after the Effective Date shall consist of six
outside directors of Premier, six outside directors of Central and Southern to
be specified to Premier and Darrell D. Pittard, Robert C. Oliver and J. Edward
Mulkey, Jr. The Board of Directors of Premier has specified its current six
outside directors to serve on the Board of Directors of the Surviving
Corporation. Central and Southern has specified that Albert F. Gandy, George S.
Carpenter, Jr., Don N. Ellis, John H. Ferguson, C. Steve McQuaig and Thomas E.
Owen, Jr. will be the outside directors to serve on the Board of Premier
following the Merger. On March 26, 1997, the Board of Premier approved a
resolution to fix the number of members of the Board of Directors of Premier at
15, effective at the Effective Date of the Merger. See "Proposals Presented to
the Premier Shareholders--Election of Directors--Proposal 2."
1997 Stock Option Plan. On March 26, 1997, the Board of Directors of Premier
approved the 1997 Stock Option Plan subject to the approval of the
shareholders. A maximum of 750,000 shares of common stock may be issued
pursuant to options granted under the 1997 Stock Option Plan. All stock options
available for grant under the First Alliance Bancorp, Inc. 1995 Stock Option
Plan and the Premier Lending Corporation 1993 Employee Stock Option Plan have
been granted. The purpose of the 1997 Stock Option Plan is to provide Premier
with the capacity to grant equity-based incentive compensation to selected key
employees, officers, directors and independent contractors of Premier or any of
its subsidiaries to promote the acquisition of shares of Premier Common Stock
by those individuals upon whose judgment and ability Premier relies to attain
its long-term growth and development and to provide a means to attract and
retain well-qualified key employees, officers, directors and independent
contractors. The Compensation Committee plans to grant the options available
under the 1997 Stock Option Plan over several years. Under the 1997 Stock
Option Plan, the Compensation Committee of the Board of Directors will grant
incentive stock options or nonqualified stock options to purchase Premier
Common Stock. See "Adoption of the 1997 Stock Option Plan--Proposal 3."
Directors' Stock Option Plan. On March 26, 1997, the Board of Directors of
Premier approved the Directors' Plan subject to approval of the shareholders. A
maximum of 150,000 shares of common stock may be issued pursuant to options
granted under the Directors' Plan. The Directors' Plan permits eligible
directors to elect to defer receipt of retainer fees, meeting fees or both and
have such amounts applied to the grant of options to purchase shares of Premier
Common Stock. Such options may be incentive stock options or nonqualified stock
options. Members of the Board of Directors of Premier and members of the Boards
of Directors of subsidiaries of Premier are eligible to participate in the
Directors' Plan. See "Adoption of Directors' Plan--Proposal 4."
CERTAIN CONSIDERATIONS
Shareholders of Premier and Central and Southern 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.
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THE CENTRAL AND SOUTHERN MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
Central and Southern Common Stock in connection with the solicitation by the
Central and Southern Board of Directors of proxies for use at the Central and
Southern Meeting, at which such Central and Southern shareholders will be
asked to vote upon a proposal to approve the Agreement. The Central and
Southern Meeting will be held at 11:00 a.m., local time, on June 16, 1997, at
, Milledgeville, Georgia 31061.
Central and Southern shareholders are requested promptly to sign, date, and
return the accompanying proxy card to Central and Southern in the enclosed
postage-paid, addressed envelope.
Any Central and Southern 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 Central and Southern a signed proxy card bearing a later date,
provided that such notice or proxy card is actually received by Central and
Southern before the vote of shareholders or in open meeting prior to the
taking of the shareholder vote at the Central and Southern Meeting. Any notice
of revocation should be sent to Central and Southern Holding Company, 150 West
Greene Street, Milledgeville, Georgia 31061, Attention: Corporate Secretary.
The shares represented by properly executed proxies received at or prior to
the Central and Southern 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 CENTRAL AND SOUTHERN MEETING. IF NECESSARY, AND UNLESS CONTRARY
INSTRUCTIONS ARE GIVEN, THE PROXY HOLDER ALSO MAY VOTE IN FAVOR OF A PROPOSAL
TO ADJOURN THE CENTRAL AND SOUTHERN MEETING TO PERMIT FURTHER SOLICITATION OF
PROXIES IN ORDER TO OBTAIN SUFFICIENT VOTES TO APPROVE THE AGREEMENT. As of
the date of this Joint Proxy Statement/Prospectus, Central and Southern is
unaware of any other matter to be presented at the Central and Southern
Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees
of Central and Southern, 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.
Central and Southern shareholders should not forward any stock certificates
with their proxy cards.
RECORD DATE; VOTE REQUIRED
Central and Southern's Board of Directors has established the close of
business on April 16, 1997, as the Record Date for determining the
shareholders entitled to notice of and to vote at the Central and Southern
Meeting. Only record holders of Central and Southern Common Stock as of the
Record Date will be entitled to vote at the Central and Southern Meeting.
Approval of the Agreement requires the affirmative vote of a majority of the
shares of Central and Southern Common Stock entitled to vote at the Central
and Southern 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 holders of 3,653,523 shares
of Central and Southern Common Stock outstanding and entitled to vote at the
Central and Southern Meeting, with each share entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares
of Central and Southern Common Stock is necessary to constitute a quorum of
the shareholders in order to take action at the Central and
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Southern Meeting. For these purposes, shares of Central and Southern Common
Stock that are present, or represented by proxy, at the Central and Southern
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 Central and Southern and their
affiliates beneficially owned, as of the Record Date, shares (or
approximately % of the outstanding shares) of Central and Southern Common
Stock.
As of the Record Date, the directors and executive officers of Premier and
their affiliates did not beneficially own any shares of Central and Southern
Common Stock. As of that date, neither Central and Southern nor Premier held
any shares of Central and Southern 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 to approve the Merger and other matters.
The Premier Meeting will be held at 10:00 a.m., local time, on June 16, 1997,
at the main office of Premier, located at 2180 Atlanta Plaza, 950 East Paces
Ferry Road, Atlanta, Georgia 30326.
Premier shareholders are requested promptly to sign, date, and return the
accompanying proxy card to Premier in the enclosed postage-paid, addressed
envelope.
Any Premier shareholder who has delivered a proxy may revoke it at any time
before it is voted by giving notice of revocation in writing or submitting to
Premier a signed proxy card bearing a later date, provided that such notice or
proxy card is actually received by Premier before the vote of shareholders 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 THE OTHER PROPOSALS PRESENTED TO THE PREMIER SHAREHOLDERS AND IN THE
DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME
BEFORE THE PREMIER MEETING. IF NECESSARY, AND UNLESS CONTRARY INSTRUCTIONS ARE
GIVEN, THE PROXY HOLDER ALSO MAY VOTE IN FAVOR OF A PROPOSAL TO ADJOURN THE
MEETING TO PERMIT FURTHER SOLICITATION OF PROXIES IN ORDER TO OBTAIN
SUFFICIENT VOTES TO APPROVE A MATTER. As of the date of this Joint Proxy
Statement/Prospectus, Premier is unaware of any other matter to be presented
at the Premier Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or telegram or in person by the directors, officers, and employees
of Premier, who will receive no additional compensation for such solicitation
but may be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
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RECORD DATE; VOTE REQUIRED
Premier's Board of Directors has established the close of business on April
16, 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 card
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 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 holders of 4,249,747 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, shares (or approximately % of the outstanding
shares) of Premier Common Stock. As of the Record Date, the directors and
executive officers of Central and Southern did not beneficially own any shares
of Premier Common Stock. As of that date, neither Central and Southern 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, Central and Southern will merge with and
into Premier, Premier will survive the Merger and the separate existence of
Central and Southern will cease. Central and Southern Bank of Georgia and The
Central and Southern Bank of North Georgia, F.S.B. will become wholly owned
subsidiaries of Premier. As soon as practicable following the Effective Date,
the Central and Southern Bank of North Georgia will change its name to
"Premier Bank F.S.B."
At the Effective Date, each share of Central and Southern Common Stock
issued and outstanding will be converted into one share of Premier Common
Stock, subject to adjustment in the event of a stock dividend, stock split or
similar stock reclassification. 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.
TREATMENT OF CENTRAL AND SOUTHERN OPTIONS
The Agreement, as amended, provides that all rights with respect to Central
and Southern Common Stock pursuant to stock options granted by Central and
Southern under its stock option plan which are outstanding at the Effective
Date, whether or not then exercisable, will be substituted for and will become
rights with respect to Premier Common Stock, or Premier will assume each of
such options in accordance with the terms of the Central and Southern Stock
Option Plan. After the Effective Date, those options will become options to
purchase Premier Common Stock, with the exercise price and number of shares of
Premier Common Stock purchasable thereunder being equal to the exercise price
and number of shares of Central and Southern Common Stock that could have been
purchased thereunder immediately prior to the consummation of the Merger. The
executive officers and directors of Central and Southern collectively hold
currently exercisable options to purchase shares of Central and Southern
Common Stock.
Background of the Merger. During the fourth quarter of 1996, the Chief
Executive Officers of Premier and Central and Southern began to explore the
possibility of combining Premier and Central and Southern. On December 18,
1996, at a special meeting of the Board of Directors of Premier, BBCP and
Premier's management presented to Premier's Board an analysis of certain
strategic options of Premier, one of which pertained to a possible merger with
Central and Southern. After a lengthy discussion by and among Premier's
management, directors, and financial advisors, Premier's Chief Executive
Officer was authorized to submit a preliminary proposal to Central and
Southern for a combination of the two holding companies. This proposal, which
generally outlined the terms of the Merger, was, in turn, discussed by the
Central and Southern Board at length at a meeting also held on December 18,
1996. Central and Southern's management presented its Board with historical
financial information on both companies and pro forma financial information,
as well as internal projections for Central and Southern on a stand alone
basis. The stock price multiples of Premier and Central and Southern were also
discussed, as well as the possible effect of the combination and the exchange
ratio on the stock price of the resulting entity. Central and Southern's
management also discussed the additional products and services which could be
made available in Central and Southern's existing market as a result of the
combination. At the conclusion of the meetings of both Boards of Directors, it
was determined that further discussions regarding the Merger and due diligence
investigations by each company of the other should be pursued. The Chief
Executive Officer of Premier was instructed to involve BBCP in additional
financial analyses of the proposed combination and also legal counsel.
Similarly, the Chief Executive Officer of Central and Southern was instructed
to contact Sheshunoff about the possibility of preparing an analysis of the
terms and consideration proposed by Premier in preparation for providing
Central and Southern with a fairness opinion for the proposed combination.
On December 30, 1996, Central and Southern's Board met with representatives
of Premier who made a presentation on behalf of Premier regarding the benefits
of the Merger. Subsequent to this presentation, the
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Premier representatives were excused and the Board continued its discussion of
the Merger. The Chief Executive Officer of Central and Southern stated that
on-site, in-depth due diligence would begin within a week by both companies.
Central and Southern's Board authorized the retention of Sheshunoff to prepare
a fairness opinion for the transaction and established January 14, 1997, as
the date to discuss the results of the due diligence investigation and to
consider formal Board approval of the Merger.
On-site due diligence of Central and Southern was conducted by
representatives of Premier on January 2 and 3, 1997. Similarly, on-site due
diligence of Premier was conducted by Central and Southern representatives
during the week of January 6, 1997. Subsequently, additional off-site due
diligence and discussions with legal counsel and financial advisors were
undertaken by both companies.
On January 13, 1997, at a special meeting of the Board of Directors of
Premier, due diligence reports on Central and Southern made by Premier's
financial officers, management, and legal counsel were considered in depth
after much discussion. Representatives of BBCP commented on the fairness of
the Merger to Premier's shareholders. Premier's management officials
summarized their due diligence findings at Central and Southern which related
to issues such as asset mix, loan loss reserve, asset quality and
documentation, and compliance. Legal counsel commented on the findings of
Premier's attorneys. Legal counsel then discussed the terms and conditions of
the proposed Agreement regarding the Merger; and, after a lengthy discussion,
Premier's Board unanimously approved the Merger on the terms and conditions
substantially as provided in the Agreement, subject to receipt of a fairness
opinion from BBCP, and further approved the issuance, when necessary and
appropriate, of a press release regarding the Merger.
On January 14, 1997, the management of Central and Southern reported to its
Board that management had found no surprises in its due diligence review of
Premier. Management discussed in detail Premier's business and the opportunity
presented by the Merger. After a discussion concerning the results of the due
diligence and a review of the terms of the Merger, Central and Southern's
Board unanimously approved the Merger on the terms and conditions
substantially as provided in the Agreement, subject to receipt of a fairness
opinion from Sheshunoff. On January 15, 1997, the parties issued a joint press
release regarding the Merger.
On February 3, 1997, the parties executed the Agreement and issued a joint
press release announcing the execution of the Agreement. On March 26, 1997,
the parties entered into an amendment to the Agreement which provided for the
substitution of Central and Southern options for Premier stock options under
the proposed 1997 Stock Option Plan.
Central and Southern's Reasons for the Merger. The Central and Southern
Board of Directors has unanimously approved the Agreement and has determined
that the Merger is in the best interests of Central and Southern and its
shareholders. The terms of the Merger were the result of arms-length
negotiations between representatives of Central and Southern and
representatives of Premier. Without assigning any relative or specific weights
to the factors, the Board of Directors of Central and Southern considered the
following material factors:
(a) the information presented to the directors by Central and Southern's
management concerning (i) the business, operations, earnings and financial
condition, including capital levels and asset quality, of Premier, and
compliance with regulatory capital requirements on a historical and
prospective basis, and (ii) the results of a due diligence review of
Premier by Central and Southern representatives;
(b) the alternatives to the Merger, including remaining as an independent
bank and thrift holding company in light of current economic conditions in
Central and Southern's primary markets;
(c) the anticipated enhancement of shareholder value as a result of the
value of the consideration to be received by Central and Southern's
shareholders relative to its core earnings and earnings potential in its
existing markets;
(d) the anticipated synergies and operating efficiencies, and the
increased managerial resources and enhanced service capabilities that would
result from the Merger;
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(e) the competitive and regulatory environment for financial institutions
and commercial lending businesses generally;
(f) the access to broader, more diverse and faster growing market areas;
(g) the income tax aspects of the Merger as a tax-free exchange of
Central and Southern Common Stock for Premier Common Stock; and
(h) the likelihood that the Merger will be approved by applicable
regulatory authorities without undue conditions or delay.
Each member of the Board of Directors of Central and Southern has agreed to
vote such member's shares of Central and Southern Common Stock in favor of the
Merger.
CENTRAL AND SOUTHERN'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CENTRAL
AND SOUTHERN 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) a review of (i) the business, operations, earnings, and financial
condition, including capital levels and asset quality, of Central and
Southern on an historical, prospective, and pro forma basis and in
comparison to other financial institutions in the area, (ii) the
demographic, economic, and financial characteristics of the markets in
which Central and Southern operates, including existing competition,
history of the market areas with respect to financial institutions, and
average demand for credit, on an historical and prospective basis; and
(iii) the results of a due diligence review of Central and Southern by
Premier management and legal counsel;
(b) the size of Central and Southern's loan loss reserve;
(c) a variety of factors affecting and relating to the overall strategic
focus of Premier, including Premier's desire to expand into some markets
served by Central and Southern;
(d) the financial terms and income tax consequences of the proposed
Merger;
(e) the commercial lending experience of the management of Central and
Southern and its subsidiaries;
(f) the opportunity to leverage Central and Southern's excess capital;
(g) the existence of Central and Southern Bank of North Georgia's savings
bank charter and resulting short-term branching opportunities in light of
the proposed sale of Premier Bank's savings bank charter; and
(h) the management philosophy of Central and Southern 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 numerous
meetings of the Premier Board of Directors including those held on December 18,
1996 and January 13, 1997 when the prospect for a merger with Central and
Southern was considered in depth. On January 13, 1997, the Premier Board
approved the Merger, subject to satisfactory completion of the Agreement. At
the January 13, 1997 meeting, BBCP rendered its oral opinion to the effect
that, as of such date and after reflecting a 1.8055 for 1 split of the Premier
Common Stock, an Exchange Ratio of one share of Premier Common Stock for each
share of Central and Southern Common Stock was fair to the Premier shareholders
from a financial point of view. BBCP has also rendered its written opinion to
the Premier Board of Directors that on the date of this Joint Proxy
Statement/Prospectus, based on the information set forth therein, the Exchange
Ratio was fair, from a financial point of view, to the Premier shareholders.
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THE FULL TEXT OF BBCP'S WRITTEN OPINION IS ATTACHED AS APPENDIX B TO THIS
JOINT PROXY STATEMENT/PROSPECTUS 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 Premier Board of Directors only and is
directed only to the Exchange Ratio and does not constitute a recommendation to
any Premier shareholder regarding how such shareholder should vote at the
Premier Meeting.
In arriving at its opinion, BBCP among other things: (i) analyzed certain
audited and unaudited financial statements and other information of Premier and
Central and Southern; (ii) reviewed and discussed with appropriate management
personnel of Premier and Central and Southern, the past and current business
activities and financial results and the business and financial outlook of
Premier and Central and Southern; (iii) reviewed the historical price and
trading activity of the common stock of Premier and Central and Southern and
other similar banking institutions; (iv) compared certain financial and stock
market data relating to Premier and Central and Southern 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 Central and
Southern shareholders with respect to earnings per share and tangible book
value per share represented by the Premier Common Stock Premier shareholders
will hold after the Merger to those same measures represented by the Premier
Common Stock; (vi) considered the relative contributions of Premier and Central
and Southern to a combined institution in terms of balance sheet, earnings and
current equity market valuation 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 Central and Southern through the Merger;
(x) evaluated the financial and capital implications to Premier of the Merger;
and (xi) 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 Central and Southern with respect to the
reasonableness and achievability of the financial forecasts (and the
assumptions and bases underlying such forecasts) provided to BBCP. BBCP also
assumed, with Premier's consent, that the aggregate allowances for loan losses
for each of Premier and Central and Southern 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 Central and Southern 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 Central and
Southern 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
interest accounting under generally accepted accounting principles.
No limitations were imposed by Premier or the Premier Board of Directors 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.
In addressing the fairness, from a financial point of view, of the
consideration to be issued by Premier to the shareholders of Central and
Southern, 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,
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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 Central and Southern's 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 Board of
Directors was one of many factors taken into consideration by the Premier Board
of Directors in making its 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 Board of Directors on January
13, 1997.
Summary of Proposal. BBCP reviewed the terms of the proposed transaction as
reflected in the Agreement, including the calculation of the Exchange Ratio.
BBCP stated that, assuming exercise of all outstanding Premier and Central and
Southern options and assuming Premier completed a 1.8055 for 1 stock split
prior to consummation of the transaction, an Exchange Ratio of one share of
Premier Common Stock for each share of Central and Southern Common Stock would
result in Central and Southern shareholders receiving 46% of the combined
institutions' fully diluted common shares. BBCP also stated that, based upon
the price of Premier Common Stock of $13.50 per share on January 14, 1997, the
Exchange Ratio would provide Central and Southern shareholders a per share
value of $12.32.
Financial and Capital Implications of the Merger to Premier. BBCP noted that
the management of Premier is following a strategy of taking full advantage of
the asset growth opportunities afforded the institution by its presence in
Atlanta's expansion corridors. BBCP further noted that, while Premier is
currently considered a well capitalized institution, continued asset growth at
accelerated rates could require that Premier undertake a public equity offering
or otherwise raise equity capital within the next few years in order to
maintain its capital at prudent levels. BBCP also noted that Central and
Southern's capital and loan loss reserve levels are considerably higher than
those same measures at Premier and that a merger with Central and Southern
would have the effect of eliminating or significantly postponing Premier's
prospective need to raise equity through the sale of newly issued common
shares. BBCP then reviewed a detailed analysis it prepared quantifying the
benefit of the improved capital and reserve levels which would accrue to
Premier as a result of the Merger. BBCP calculated that, were the Merger not to
occur, Premier would have to sell sufficient common shares to raise
approximately $4.2 million at December 31, 1996 in order to have comparable
1999 capital ratios which could be expected if the Merger with Central and
Southern did occur. BBCP further calculated that such a common stock offering
could be expected to dilute the earnings per share Premier would otherwise have
reported by 4.6% to 5.5% in the years 1997 through 1999.
Per Share Merger Consequences Analysis to Premier. Based upon the 1.8055 for
1 stock split and an Exchange Ratio of one share of Premier Common Stock for
each share of Central and Southern Common Stock, using the earnings estimates
for 1997, 1998 and 1999 for Premier developed with Premier management and
earnings estimates for 1997, 1998 and 1999 for Central and Southern developed
with Central and Southern management, BBCP compared the estimated 1997, 1998
and 1999 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. Additionally, in this analysis BBCP utilized stand alone
earnings per share estimates for Premier which reflected Premier's current
capital structure as well as earnings per share estimates which reflected the
$4.2 million common stock offering described in the previous section. BBCP
concluded that the Merger would result in an earnings per share increase of
16.0% in 1997, 10.9% in 1998 and 8.2% in 1999 for Premier shareholders in
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the combined company. Removing the assumption of the $4.2 million common stock
offering reduced the apparent earnings per share benefit of the Merger to
Premier to 10.7%, 5.4% and 2.3% in 1997, 1998 and 1999, respectively.
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 exercise of all outstanding options, assumed the $4.2 million stock
offering and utilized the above described earnings estimates for Premier and
Central and Southern. BBCP concluded that the Merger would result in an
increase of 6.1% in fully diluted tangible book value per share for Premier
shareholders at December 31, 1997. In the stand alone case, if no common stock
offering at Premier were assumed, the increase in tangible book value per share
resulting from the merger improves to 11.6%.
Per Share Merger Consequences to Central and Southern. In an analysis
utilizing the same assumptions employed to address the per share Merger
consequences to Premier described above, BBCP estimated the earnings per share
and tangible book value per share represented by the Premier Common Stock the
Central and Southern shareholders will receive in the Merger to those same
measures represented by the shares of Central and Southern Common Stock they
currently hold. Regarding earnings per share consequences, BBCP concluded that
the Merger would result in an earnings per share increase of 27.6% in 1997,
38.7% in 1998 and 35.7% in 1999 over the level Central and Southern
shareholders could expect if Central and Southern were to remain independent.
Regarding tangible book value per share consequences, BBCP concluded that the
Merger would result in a tangible book value per share decrease of 9.1% over
the level Central and Southern shareholders could expect if Central and
Southern were to remain independent.
Relative Contribution Analysis. BBCP compared various income statement,
balance sheet and market value measures for Premier and Central and Southern
and calculated the relative contribution of each institution to the combined,
post Merger organization. In this comparison, BBCP noted that Central and
Southern would have contributed 53.6% and 42.6% of the combined organization's
net income (reflecting adjustments for certain nonrecurring expenses) for the
quarter ended September 30, 1996 and projected for the year ended December 31,
1997, respectively. BBCP also noted that Central and Southern would have
contributed 40.2%, 46.5%, 44.4% and 49.6% of the combined organization's net
loans, total deposits, total assets and fully diluted shareholder's equity,
respectively. BBCP finally noted that, at the close of trading on January 10,
1997, Central and Southern had an aggregate equity market value representing
43.7% of the combined aggregate equity market values of Premier and Central and
Southern. BBCP referenced that, reflecting the Premier 1.8055 for one stock
split and the Exchange Ratio, Central and Southern shareholders and option
holders would hold 46.0% of the Surviving Corporation's Common Stock and
options following the Merger.
Analysis of Selected Other Bank Mergers Involving Southeastern Community
Banks. BBCP reviewed 29 mergers involving Georgia community banks, bank holding
companies and thrifts announced between September, 1993 and October, 1996. BBCP
noted in particular the prices paid in these mergers as a multiple of earnings
and 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 Central and Southern and to the value to be received by Central and
Southern shareholders in the Merger.
This comparison yielded a range of transaction values as multiples of latest
twelve-months earnings per share of a low of 11.1 times and a high of 27.2
times and a median value of 16.0 times. The Central and Southern multiple of
trailing earnings was 17.3 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 2.38 times and a median value of 1.96 times. The Central and
Southern multiple of book value was 2.10 times. Finally, the calculations
yielded a range of deposit base premiums paid from a low of 2.6% to a high of
22.4 %, with a median value of 10.8%. The equivalent premium on Central and
Southern deposits represented by the Exchange Ratio was 14.9%.
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No company or transaction used in the above analyses as a comparison is
identical to Premier, Central and Southern, or the Merger. Accordingly, an
analysis of the results of the foregoing necessarily involves complex
considerations and judgements concerning differences in financial 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) is not, in itself, a
meaningful method of using comparable company data.
In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, BBCP confirmed the appropriateness of its reliance on the
analyses used to render its January 13, 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. Premier has paid BBCP
a fee of $65,000 in connection with its engagement. An additional fee of
$135,000 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,
such amount being credited against other transaction fees which may become
payable to BBCP in such period. 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.
Central and Southern. Central and Southern has retained Sheshunoff based upon
its qualifications, expertise and reputation to provide its opinion as to the
fairness, from a financial point of view, of the Exchange Ratio to the holders
of Central and Southern Common Stock. On January 14, 1997, Sheshunoff submitted
its written opinion to the Central and Southern Board of Directors that, as of
such date, the Exchange Ratio was fair, from a financial point of view, to the
holders of Central and Southern Common Stock.
THE FULL TEXT OF SHESHUNOFF'S OPINION (THE "OPINION") WHICH SETS FORTH, AMONG
OTHER THINGS, ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND
LIMITATIONS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS APPENDIX C TO THIS JOINT
PROXY STATEMENT/PROSPECTUS. CENTRAL AND SOUTHERN'S SHAREHOLDERS ARE URGED TO
READ THE OPINION CAREFULLY AND IN ITS ENTIRETY. SHESHUNOFF'S OPINION IS
ADDRESSED TO CENTRAL AND SOUTHERN'S BOARD OF DIRECTORS AND DOES NOT CONSTITUTE
A RECOMMENDATION TO ANY SHAREHOLDER OF CENTRAL AND SOUTHERN REGARDING HOW SUCH
SHAREHOLDER SHOULD VOTE AT THE CENTRAL AND SOUTHERN MEETING.
In connection with rendering its Opinion, Sheshunoff, among other things: (i)
analyzed certain internal financial statements and other financial and
operating data concerning Central and Southern prepared by the management of
Central and Southern; (ii) analyzed certain publicly available financial
statements, both audited and unaudited, of Central and Southern including those
included in their annual reports for the three years ended December 31, 1995,
quarterly reports for the periods ended September 30, 1996 as well as unaudited
financial statements as of December 31, 1996; (iii) analyzed certain internal
financial statements and other financial and operating data concerning Central
and Southern prepared by the management of Central and Southern; (iv) analyzed
certain financial projections of Central and Southern and Premier as furnished
to Sheshunoff by Central and Southern and Premier; (v) discussed certain
aspects of the past and current business operations, financial condition and
future prospects of Central and Southern and Premier with certain members of
their management; (vi) reviewed reported market prices and historical trading
activity of Central and Southern's Common Stock and Premier's Common Stock;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable precedent transactions; (viii) reviewed the Agreement
between Central and Southern and Premier; and (ix) performed such other
analyses as Sheshunoff has deemed appropriate.
In connection with its review, Sheshunoff relied upon and assumed the
accuracy and completeness of all of the foregoing information provided to it or
made publicly available, and Sheshunoff has not assumed any responsibility for
independent verification of such information. With respect to the financial
projections,
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Sheshunoff assumed that they have been reasonably prepared on the basis
reflecting the best currently available estimates and judgments of the future
financial performance of Central and Southern and Premier. However, the
assumptions used to make projections of future performance are not certain to
become reality. If the projections do not become reality, actual performance
may vary substantially from the projected results. Sheshunoff has not made any
independent evaluation or appraisal of the assets or liabilities of Central and
Southern or Premier, nor has Sheshunoff been furnished with any such
appraisals, and Sheshunoff has not examined any individual loan files of
Central and Southern or Premier. Sheshunoff is not an expert in the evaluation
of loan portfolios for the purposes of assessing the adequacy of the allowance
for losses with respect thereto and has assumed that such allowances for each
of Premier and Central and Southern are in the aggregate, adequate to cover
such losses. The Opinion is based on economic, market and other conditions as
in effect on, and the information made available to Sheshunoff as of the date
of the Opinion.
In connection with rendering its Opinion, Sheshunoff performed a variety of
financial analyses. The preparation of a fairness opinion 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, such an opinion is not readily susceptible to partial analysis
or summary description. Moreover, the evaluation of the fairness, from a
financial point of view, of the consideration to be received by the
shareholders of Central and Southern is to some extent a subjective one based
on the experience and judgment of Sheshunoff and not merely the result of
mathematical analysis of financial data. Accordingly, notwithstanding the
separate factors summarized below, Sheshunoff analyses must be considered as a
whole. Selecting portions of its analyses and the factors considered by it,
without considering all analyses and factors, creates an incomplete view of the
evaluation process underlying its Opinion. The ranges of valuations resulting
from any particular analysis described below should not be taken to be
Sheshunoff's view of the actual value of Central and Southern.
In performing its analyses, Sheshunoff made numerous assumptions with respect
to industry performance, business and economic conditions and other matters,
many of which are beyond the control of Central and Southern and Premier. The
analyses performed by Sheshunoff are not necessarily indicative of actual
values or future results, which may be significantly more or less favorable
than suggested by such analyses. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold. In
addition, Sheshunoff's analyses should not be viewed as determinative of
Central and Southern's Board of Directors or Central and Southern's
management's opinion with respect to the value of Central and Southern.
The following is a summary of the analyses performed by Sheshunoff in
connection with its Opinion delivered to the Central and Southern Board of
Directors on January 14, 1997.
Contribution Analysis. Sheshunoff analyzed the relative contributions of
Central and Southern and Premier to the Surviving Corporation in terms or
earnings, tangible book value and market value to assist in determining the
appropriateness of the combination as a merger-of-equals and to serve as a
basis of analyzing an exchange ratio that would recognize and balance the
contributions. Sheshunoff analyzed certain historical balance sheet, income
statement and ratio data for Central and Southern and Premier for the year-
ended December 31, 1995 and the nine months ended September 30, 1996, and
certain projected 1996 net income data prepared by management of Central and
Southern and Premier. Sheshunoff also analyzed the market value contributions
of Central and Southern and Premier to the combined entity. The analysis showed
that, among other things; (i) for the nine months ended September 30, 1996,
Central and Southern and Premier would have contributed approximately 59.6% and
40.4%, respectively, of pro forma combined net income to common stockholders
(as reported); (ii) for year-end 1996, Central and Southern was projected to
contribute 50.5% of pro forma combined net income; (iii) at December 31, 1996
Central and Southern would have contributed 44.0% of pro forma market
capitalization; and (iv) at September 30, 1996 Central and Southern would have
contributed 51.7% of pro forma tangible net worth. At the Exchange Ratio of one
share of Premier Stock for each share of Central and Southern Common Stock
outstanding, the holders of outstanding Central and Southern Common Stock will
own approximately 46% of Premier, on a fully diluted basis as of December 31,
1996.
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Exchange Ratio Analysis. Sheshunoff performed an analysis of the implied
exchange ratio for Premier Common Stock (Central and Southern shareholders
receiving a one-for-one exchange) which would produce zero dilution in order to
determine, for each exchange measure (i.e., earnings, tangible book value and
market value), a ratio that results in no dilution to Central and Southern
existing shareholders. This provides a base from which to analyze the levels of
potential dilution produced by the negotiated ratio as well as the balancing of
dilution and accretion in each of the exchange bases. Based upon net earnings
for the nine months ended September 30, 1996, the implied zero dilution
exchange ratio for Central and Southern would be 0.95 shares of Premier Common
Stock for each share of Central and Southern Common Stock; based upon projected
1997 earnings the implied zero dilution exchange ratio would be 1.03; based
upon estimated December 31, 1996 tangible book value, the implied zero dilution
exchange ratio would be 0.70; and based upon December 31, 1996 closing prices
for Premier and Central and Southern, the implied exchange ratio which would
preserve market value contribution would be 0.95.
Analysis of Merger-of-Equals Transactions. Recent merger-of-equals
transactions were reviewed to determine if the proposed Merger is commensurate
with the patterns of other mergers-of-equals in terms of the balancing of
exchange factors, management factors and accounting treatment of the
combination in order to assist in determining that the transaction is properly
characterized as a merger-of-equals. Sheshunoff analyzed mergers-of-equals for
bank holding companies and thrifts for which public data is available. This
analysis included the pro forma distribution of ownership between the combining
companies and the pro forma contributions to the combined companies' market
value, assets, book value, and earnings. Sheshunoff analyzed eight merger-of-
equals transactions relative to the combined companies, analyzing the factors
described above. These transactions were FCB Financial Corp. and OSB Financial
Corp., Mid-Peninsula Bancorp. and Cupertino National Bancorp., Home Interstate
Bancorp. and CU Bancorp., Main Street Community and Lexington Savings Bank, New
England Community Bancorp and Equity Bank, Commercial Bancorp and West Coast
Bancorp, Northwest Illinois Bancorp and First Rock Bancorp, and TriState
Bancorp and First Savings Bancorp. With very few exceptions, merger-of-equals
transactions are accounted for as a pooling-of-interests combinations, and
usually feature relatively similar book value, earnings, and market value
contributions from the parties. Sheshunoff's review indicated that the general
pattern of mergers-of-equals in these transactions was commensurate with the
pattern in the Merger and that the Merger could appropriately be regarded as a
merger-of-equals.
Historical Stock Data Analysis. Sheshunoff analyzed the stock price and
volume data for Central and Southern and Premier to determine the degree of
liquidity in each stock, the reliability of the stock prices used as a basis
for analyzing the market-to-market exchange ratio and to review the recent
history of the market's pricing of each company as a guide for the estimation
of how the market might value the combined company. Sheshunoff reviewed stock
price and trading volume data for Central and Southern and Premier for the 52
weeks ending January 10, 1997. Sheshunoff also analyzed certain trading volume
data for Central and Southern and Premier for such periods, showing the
percentages of volume which traded in indicated price ranges.
Peer Group Analysis. The peer group analysis was performed to assist in
determining how each of the companies performed with respect to similar
companies in the region to determine if their operating philosophy and
performance appeared to be consistent with the trends for other institutions in
the region and the region's general economy. The market performance of the peer
group was used to determine the trading patterns for similar companies in the
region to assist in determining both how the market valued each of the
companies relative to others in the region and to assist in estimating
potential market performance following the combination. Sheshunoff compared the
operating performance of Central and Southern and Premier to regional publicly
traded banking institutions that Sheshunoff deemed to be comparable ("Peer
Group"). This group includes all banks with assets under $500 million located
in Georgia and its contiguous states which were not subject to an acquisition
agreement. The Peer Group consisted of 21 institutions. This analysis showed
that, among other things, at September 30, 1996, using market prices as of
December 31, 1996 the price/book ratio for Central and Southern was 186%, for
Premier was 210% and the Peer Group averaged 169%; the price/tangible book
ratio for Central and Southern was 191%, for Premier was 234% and for the Peer
Group averaged 178%; and the price/earnings ratio for Central and Southern was
14.9x, for Premier was 20.7x, and for
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the Peer Group averaged 17.2x with a median of 15.1x. At September 30, 1996,
the equity/asset ratio for Central and Southern was 10.6%, for Premier was
8.6%, and for the Peer Group averaged 10.3%. The return on average assets for
Central and Southern was 1.41%, for Premier was 0.91%, and for the Peer Group
averaged 1.13%; the return on average equity for Central and Southern was
12.99%, for Premier was 9.01%, and for the Peer Group averaged 11.18%. Finally,
the ratio of non-performing assets to total assets for Central and Southern was
0.36%, for Premier was 0.36%, and for the Peer Group averaged 0.56%.
Pro Forma Analysis. The pro forma projections provided to Sheshunoff by the
management of Central and Southern and Premier were used to determine the
benefits of the Merger to the combined company's earnings and the changes in
the combined company's book value relative to each company's projected
performance without the Merger. This analysis served as one of the bases for
assessing the gains and losses based upon expected performance and the
negotiated exchange ratio and for assisting in estimating the potential market
performance of the combined company relative to each company on a stand-alone
basis. Sheshunoff analyzed certain historical balance sheet, income statement
and ratio data, as well as certain projected data provided by management of
Central and Southern and Premier, for the companies on a pro forma combined
basis at and for the year ended December 31, 1995, the nine months ended
September 30, 1996 and projected for the year ending December 31, 1997. The
analyses showed, among other things, using managements' estimates of cost
savings and other synergies anticipated to result from the Merger, the pro
forma combined company's projected 1997 fully-diluted earnings per share
(assuming the cost savings associated with the Merger were in place for the
full year) would decrease 1.7% as compared to Central and Southern's stand-
alone projected fully-diluted earnings per share and would increase by 1.3%
from Premier's stand-alone projected fully-diluted earnings per share. The
analysis further indicated that the Merger would result in a decrease of 12.2%
in Central and Southern's stand-alone tangible book value per share and an
increase of 13.0% in Premier's stand-alone tangible book value per share at
year-end 1997. Sheshunoff concluded that, assuming the market value of the
combined companies is equal to the market values of Central and Southern and
Premier, Central and Southern's shareholders would receive stock with a market
value 2.9% above the closing price of Central and Southern's Common Stock on
December 31, 1996.
Discounted Cash Flow Analysis. The discounted cash flow analysis was
performed, within the limitations noted below, to compare the net present value
of future performance with the current levels of performance for Central and
Southern. The results of this analysis provide only broad measures of the
potential benefits of the Merger and thus serve as another measure of the
balancing of any potential accretion and dilution with potential benefits from
the transaction. Sheshunoff prepared a discounted cash flow analysis to
estimate the net present value of the estimated future value of Central and
Southern and the combined companies based on a range of terminal price/earnings
ratios between 12.0x and 22.0x and a discount rate of 14.0%. That range of
values was based upon future dividend estimates and projected earnings for the
next five years. The results of this analysis indicated a range of net present
values of estimated future values of Central and Southern between $9.17 per
share and $15.87 per share, and a range of possible net present values for
Premier between $15.50 per share and $24.59 per share. Sheshunoff also prepared
a discounted cash flow analysis based upon a range of terminal price-to-book
ratios between 150% and 250% and a discount rate of 14.0%. The range of net
present values was based upon future dividend estimates and projected earnings
growth. The analysis indicated a range of net present values of estimated
future values of Central and Southern between $6.40 per share and $11.67 per
share, and a range of net present values for Premier between $9.87 per share
and $15.15 per share.
The ranges of the multiples used in the discounted cash flow analysis were
chosen by Sheshunoff based on certain market averages or trading ratios as of
December 31, 1996. The range of price/earnings ratios was selected to include
Central and Southern's ratio of 14.9x, the Peer Group company average of 17.2x,
Premier's ratio of 20.7x and the average ratio of Georgia acquisition
participants in 1996 of 14.2x. The range of price-to-book ratios falls within
Central and Southern's 186%, the Peer Group company average of 169%, Premier's
ratio of 210%, and the average ratio of Georgia acquisition participants in
1996 of 188%. The discounted cash flow analysis does not purport to be
indicative of actual values or expected values of the shares of Central and
Southern Common Stock or Premier Common Stock before or after the Merger.
Sheshunoff noted that the discounted cash flow analysis was included because it
is a widely used methodology to estimate value but also
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noted that this methodology necessarily relies upon numerous assumptions,
including earnings growth rates, dividend payout rates, terminal values, and
discount rates, changes in any one of which could have a significant effect on
the results of the analysis, and its usefulness in analyzing a merger-of-equals
transaction is limited.
As a part of its investment banking business, Sheshunoff is regularly engaged
in the valuation of securities in connection with mergers and acquisitions,
private placements, and valuations for estate, corporate and other purposes.
Pursuant to an engagement letter dated December 23, 1996, between Central and
Southern and Sheshunoff, Central and Southern agreed to pay Sheshunoff a
$25,000 fairness opinion fee. Central and Southern has also agreed to reimburse
Sheshunoff for reasonable out-of-pocket expenses and to indemnify and hold
harmless Sheshunoff and its officers and employees against certain liabilities
in connection with its services under the engagement letter, except for
liabilities resulting from the negligence of Sheshunoff. No compensation
payable to Sheshunoff is contingent on the conclusions reached in the opinion
of Sheshunoff.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time specified in
a Certificate of Merger filed by 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 Central and Southern, 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 Central
and Southern 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 Central and Southern anticipate that all
conditions to consummation of the Merger will be satisfied so that the Merger
can be consummated in the second quarter of 1997. However, delays in the
consummation of the Merger could occur.
The Board of Directors of either Premier or Central and Southern generally
may terminate the Agreement if the Merger is not consummated by June 30, 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."
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
Central and Southern a letter of transmittal, together with instructions for
the exchange of such shareholders' certificates representing shares of Central
and Southern Common Stock for certificates representing shares of Premier
Common Stock.
CENTRAL AND SOUTHERN 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 Central and Southern Common
Stock, together with a properly completed letter of transmittal, there will be
issued and mailed to each holder of Central and Southern Common Stock
surrendering such items 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, to the extent permitted by law,
holders of record of Central and Southern 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 Central and Southern Common
Stock has been converted, regardless of whether such shareholders have
surrendered their Central and Southern 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 CENTRAL AND
SOUTHERN 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.
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After the Effective Date, there will be no transfers of shares of Central and
Southern Common Stock on Central and Southern's stock transfer books. If
certificates representing shares of Central and Southern 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 Central and
Southern 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 Central and Southern
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 reorganization within the meaning
of Section 368(a) of the Code; (ii) the exchange in the Merger of Central
and Southern Common Stock for Premier Common Stock will not give rise to
gain or loss to Central and Southern shareholders, except to the extent of
any cash received; and (iii) neither Premier nor Central and Southern will
recognize gain or loss as a consequence of the Merger (except for deferred
gain or loss recognized pursuant to Treasury Regulations issued under
Section 1502 of the Code);
(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 a letters from Mauldin & Jenkins, LLP 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 Central and Southern of opinions of their
respective counsel and certificates executed by their respective Chief
Executive Officers and Chief Financial Officers as to compliance with the
Agreement; and (ii) as of the Effective Date, the accuracy of certain
representations and warranties and the compliance in all material respects with
the agreements and covenants of each party.
REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by a conditional
requirement which causes such approvals to fail to satisfy the conditions set
forth in the Agreement. Applications for the approvals described below have
been submitted to the appropriate regulatory agencies.
Premier and Central and Southern 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.
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The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 4 of the BHC Act. In granting its approval under Section 4 of the BHC
Act, the Federal Reserve must take into consideration, among other factors, the
financial and managerial resources and future prospects of the institutions and
whether the acquisition can reasonably be expected to produce benefits to the
public, such as greater convenience, increased competition, or gains in
efficiency, that outweigh possible adverse effects, such as undue concentration
of resources, decreased or unfair competition, conflicts of interest, or
unsound banking practices. Under the BHC Act, the Merger may not be consummated
until either the 15th day or the 30th day following the date of Federal Reserve
approval, during which time the United States Department of Justice may
challenge the transaction on antitrust grounds. The commencement of any
antitrust action would stay the effectiveness of the Federal Reserve's
approval, unless a court specifically orders otherwise.
The Merger also is subject to the approval of the Georgia Department. In its
evaluations, the Georgia Department will take into account considerations
similar to those applied by the Federal Reserve.
NO APPRAISAL RIGHTS
The shares of Common Stock of both Central and Southern and Premier are
listed on national securities exchanges, as interpreted under Georgia law. As a
result, neither holders of record of Premier Common Stock nor the holders of
record of Central and Southern Common Stock will have any dissenters' or
appraisal rights under Georgia law with regard to the Merger.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Effective Date, and to the extent permitted by law, any
provision of the Agreement generally may be (i) waived by the party benefitted
by the provision or (ii) amended by a written agreement between Premier and
Central and Southern approved by their respective Boards of Directors;
provided, however, that after approval by the Premier and Central and Southern
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
Central and Southern shareholders, under certain circumstances, including:
(i) by the Board of Directors of either party upon final nonappealable
denial of any required regulatory approval;
(ii) by the Board of Directors of either party in certain circumstances,
if the shareholders of either Premier or Central and Southern have not
approved the Agreement in accordance with the provisions of the Georgia
Code;
(iii) by mutual agreement of the Boards of Directors of Premier and
Central and Southern;
(iv) by the Board of Directors of either party, in the event of the other
party's breach or failure to comply with any provision of the Agreement
which meets certain standards specified in the Agreement; or
(v) by the Board of Directors of either party if the Merger shall not
have been consummated by June 30, 1997, but only if the failure to
consummate the Merger by such date has not been caused by the terminating
party's breach of the Agreement.
If the Agreement is terminated, the parties will have no further obligations,
except with respect to certain provisions, including those providing for
payment of expenses and restricting disclosure of confidential information. See
"--Expenses and Fees" for additional information concerning the payment of
expenses.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of Central and Southern 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, preserve intact its business organization and assets, maintain its
rights and franchises, and take no action
25
<PAGE>
that would affect, adversely and materially, the ability of either party to
perform its covenants and agreements under the Agreement or that would
adversely affect either party's ability to obtain any consent or approval
required for the consummation of the transactions contemplated by the
Agreement. In addition, the Agreement contains certain other restrictions
applicable to the conduct of the business of Central and Southern and 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)
acquiring or exchanging any shares of its capital stock or paying any dividend
or other distribution in respect of its capital stock, except that Premier was
permitted to declare and pay a cash dividend of up to $.56 per share on the
shares of Premier Common Stock during the first two months of 1997 (in
connection with its 1996 earnings) and Central and Southern is permitted to pay
an annual cash dividend of up to $.27 per share in quarterly installments in
1997 before consummation of the Merger; (iv) issuing or selling any additional
shares of its capital stock, any rights to acquire any such stock, or any
security convertible into such stock, (except as set forth in the Agreement, as
previously disclosed to the other party, or pursuant to the exercise of
outstanding stock options); (v) adjusting or reclassifying any of its capital
stock, disposing of or encumbering any shares of capital stock of any
subsidiary (excluding inter-company transfers) or disposing of or encumbering
any asset with a book value of $50,000 or more other than in the ordinary
course of business; (vi) acquiring control of any other entity; (vii) granting
any increase in compensation or benefits to employees whose salaries exceed
$50,000 (except in accordance with past practice or prior obligation, in each
case as previously disclosed to the other party or as required by law), paying
any bonus (except as previously disclosed or in accordance with any existing
program or plan), entering into or amending any severance agreements with
officers, granting any general increase in compensation to all employees, or
granting any increase in compensation or other benefits to directors of the
holding company or any subsidiary; (viii) entering into or amending any
employment contract that it does not have the unconditional right to terminate
without liability other than for services already rendered; (ix) adopting any
new employee benefit plan or program, or materially changing any existing plan
or program except for any change required by law or advisable to maintain the
tax qualified status of any such plan; (x) making any significant change in any
tax or accounting methods or systems of internal accounting controls (except in
conformity to changes in tax laws, regulatory accounting requirements or
generally accepted accounting principles ("GAAP")); (xi) commencing any
litigation (except in accordance with past practice), settling any litigation
involving liability of the holding company or any subsidiary for damages in
excess of $50,000 or material restrictions upon its operations; or (xii)
modifying or terminating any material contract except in the ordinary course of
business.
In addition, each party has agreed not to solicit, directly or indirectly,
any acquisition proposal from any other person or entity. Each party also has
agreed not to negotiate with respect to any such proposal, provide nonpublic
information to any party making such a proposal, or enter into any agreement
with respect to any such proposal, except in compliance with the fiduciary
obligations of its Board of Directors. In addition, each party has agreed to
use reasonable efforts to cause its advisors and other representatives not to
engage in any of the foregoing activities.
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
Management. Assuming the directors nominated by the Board of Directors of
Premier are elected as directors of the Surviving Corporation from and after
the Effective Date, the Board of Directors of Premier will fill the vacancies
resulting from the increased number of directors so that the Board of Directors
of Premier will consist of the current directors of Premier and Albert F.
Gandy, George S. Carpenter, Jr., Donald N. Ellis, John H. Ferguson, C. Steve
McQuaig and Thomas E. Owen , Jr. In addition, Robert C. Oliver will serve on
the Board of Directors of the Surviving Corporation. See "Premier Annual
Meeting Matters--Election of Directors--Proposal 2."
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<PAGE>
Darrell D. Pittard will be the Chairman of the Board and Chief Executive
Officer of the Surviving Corporation; Robert C. Oliver will be its President
and Chief Operating Officer; J. Edward Mulkey, Jr. will be its Vice Chairman;
and Michael E. Ricketson and Frank H. Roach shall be its Executive Vice
Presidents. Such officers, together with such additional persons as may
thereafter be elected, will serve as the officers of the Surviving Corporation
from and after the Effective Date in accordance with the Bylaws of the
Surviving Corporation.
Robert C. Oliver, age 48, has been President, Chief Executive Officer and a
Director of Central and Southern since January 1993. Mr. Oliver served as
President of The Central and Southern Bank of Georgia from October 1992 to
January 1993. Prior to September 1992, Mr. Oliver was Senior Vice President and
Regional Executive of Wachovia Bank of Georgia.
Michael E. Ricketson, age 47, has been Executive Vice President of Central
and Southern and a Director since 1996 and Chief Financial Officer of
Milledgeville since October 1993. Mr. Ricketson served as First Vice President
and Financial Officer of First National Bancorp. from 1990 through April 1992.
Prior to 1990 he was controller of the First National Bank of Gainesville.
Employment Agreements.
Robert C. Oliver. Effective as of the date of the Closing of the Merger,
Premier and Central and Southern Bank will enter into a new employment
agreement with Robert C. Oliver in which he will continue as President and
Chief Executive Officer of Central and Southern Bank and become President and
Chief Operating Officer of Premier. The term of the employment agreement is
thirty-six (36) months from the closing, subject to a twelve (12) month
extension if the parties agree to the extension. Mr. Oliver's annual base
salary will be $143,500 and he is entitled to receive such additional incentive
compensation as may be awarded in the discretion of the Boards of Directors of
Premier and Central and Southern Bank, or any committee designated by them. Mr.
Oliver's base salary and any incentive pay is to be reviewed at least annually
by the Boards of Directors of Premier and Central and Southern Bank and his
base salary may be increased in their discretion to reflect performance. Mr.
Oliver is generally eligible for participation in the employee benefits
programs, including but not limited to life and health insurance, and is to be
granted the use of an automobile, is to be reimbursed for expenses and is to be
reimbursed for country club and business association dues. To the extent
approved by the Boards of Directors, Mr. Oliver may receive a loan for up to
twenty percent (20%) of his base salary for the purposes of paying any required
initiation fees to country clubs, which loan will be forgiven if he remains
employed for three (3) years, is not terminated for cause and does not
voluntarily terminate his agreement without a "change of control." In the event
of a disability, Mr. Oliver is entitled to receive 100% of his then current
base salary for twelve (12) months; provided, however, that he may be
terminated if he is disabled for a continuous period exceeding twelve (12)
months. In the event a termination for "cause" (as defined in the agreement),
Mr. Oliver will receive no right to compensation or other benefits. If Mr.
Oliver voluntarily terminates his employment due to reasons unrelated to a
"change in control," then he is entitled to receive no right to compensation or
other benefits. If Mr. Oliver's employment is terminated by the Boards of
Directors for any reason other than "cause" or disability, then he is entitled
to receive a severance payment equal to three (3) times his current base salary
and incentive compensation. In the event of a "change in control" (any
transaction in which 50% or more of the voting stock of Premier becomes
controlled by another, there is a sale, transfer, consolidation or merger of
Premier or Central and Southern Bank is sold to or merged with a corporation
that is not a majority owned subsidiary of Premier), any termination of Mr.
Oliver's employment (other than for "cause") occurring either six (6) months
prior to or twelve (12) months after the "change of control," shall entitle him
to receive a severance payment equal to three (3) times his current annual base
salary and incentive compensation. Finally, the agreement prohibits Mr. Oliver
from disclosing any confidential information during his employment and for a
period of one year after termination.
Michael E. Ricketson. Effective as of the date of the Closing of the Merger,
Premier and Central and Southern Bank will enter into a new employment
agreement with Michael E. Ricketson in which he will continue as Chief
Financial Officer of Central and Southern Bank and become Executive Vice
President of Premier. The
27
<PAGE>
term of the agreement is to be thirty-six (36) months from the date of
execution, subject to a twelve (12) month extension if the parties agree to the
extension. Mr. Ricketson's annual base salary is $85,000 per year and he is
entitled to receive such additional incentive compensation as may be awarded in
the discretion of the Boards of Directors of Premier and Central and Southern
Bank, or any committee designated by them. Mr. Ricketson's base salary and any
incentive pay is to be reviewed at least annually by the Boards of Directors
and his base salary may be increased in their discretion to reflect
performance. Mr. Ricketson is generally eligible for participation in the
employee benefits programs. In the event of a disability, Mr. Ricketson is
entitled to receive 100% of his then current base salary for six (6) months;
provided, however, that he may be terminated if he is disabled for a continuous
period exceeding six (6) months. In the event of a termination for "cause" (as
defined in the agreement), Mr. Ricketson will receive no right to compensation
or other benefits. If Mr. Ricketson voluntarily terminates his employment due
to reasons unrelated to a "change in control," then he is entitled to receive
no right to compensation or other benefits. If Mr. Ricketson's employment is
terminated by the Boards of Directors for any reason other than "cause" or
disability, then he is entitled to receive a severance payment equal to his
current annual base salary and incentive compensation. In the event of a
"change in control" (any transaction in which 50% or more of the voting stock
of Premier becomes controlled by another, there is a sale, transfer,
consolidation or merger of Premier or Central and Southern Bank is sold to or
merged with a corporation that is not a majority owned subsidiary of Premier),
any termination of Mr. Ricketson's employment (other than for "cause")
occurring either six (6) month prior to or twelve (12) months after the "change
of control," shall entitle him to receive a severance payment equal to his
current annual base salary and incentive compensation. Finally, the agreement
prohibits Mr. Ricketson from disclosing any confidential information during his
employment and for a period of one year after termination.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement also provides that, after the Effective Date, the Surviving
Corporation will provide generally to officers and employees of Central and
Southern and its subsidiaries who become officers or employees of the Surviving
Corporation or its subsidiaries, employee benefits under employee benefit plans
on terms and conditions that, taken as a whole, are substantially similar to
those currently provided by Premier and its subsidiaries to their similarly
situated officers and employees. For purposes of participation and vesting
under such employee benefit plans, service with Central and Southern or its
subsidiaries prior to the Effective Date will be treated as service with the
Surviving Corporation or its subsidiaries, provided that, with respect to any
employee benefit plan where the benefits are funded through insurance, the
granting of such service shall be subject to the consent of the appropriate
insurer and may be conditioned upon an employee's participation in a Central
and Southern benefit plan of the same type immediately prior to the Effective
Date. The Agreement further provides that the Surviving Corporation will honor
all employment, severance, consulting, and other compensation contracts
previously disclosed to Premier between Central and Southern 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 Central and Southern's benefit plans.
As described above under "--Treatment of Central and Southern Options," the
Agreement also provides that all rights with respect to Central and Southern
Common Stock pursuant to stock options granted by Central and Southern under
its stock option plan which are outstanding at the Effective Date, whether or
not then exercisable, will be converted into and will become rights with
respect to Premier Common Stock and Premier will assume each of such options in
accordance with its terms or will be substituted for stock options issued under
the 1997 Stock Option Plan.
As of the Record Date, the directors and executive officers of Central and
Southern beneficially owned no shares of Premier Common Stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF CERTAIN ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE
28
<PAGE>
STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE RULINGS, SOME
OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT PURPORT TO ADDRESS
ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER AND
IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR, AND WITHOUT
LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER TO SHAREHOLDERS IN LIGHT OF THEIR PARTICULAR
CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-EXEMPT ENTITIES,
DEALERS IN SECURITIES, INSURANCE COMPANIES, OR CORPORATIONS, AMONG OTHERS). NOR
DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER UNDER ANY STATE,
LOCAL, ESTATE, OR FOREIGN TAX LAWS. SHAREHOLDERS, THEREFORE, ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF
THE MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, THE APPLICATION AND
EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL, AND OTHER TAX LAWS, AND THE
IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX LAWS.
A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Womble Carlyle Sandridge
& Rice, PLLC, counsel to Premier, has rendered an opinion to Premier and
Central and Southern concerning certain federal income tax consequences of the
proposed Merger under federal income tax law. It is such firm's opinion that:
(a) Provided the Merger qualifies as a statutory merger under the Georgia
Code, the Merger will be a reorganization within the meaning of Section
368(a) of the Code.
(b) The shareholders of Central and Southern will recognize no gain or
loss upon the exchange of their Central and Southern Common Stock solely
for shares of Premier Common Stock.
(c) No income, gain or loss will be recognized for federal income tax
purposes by Premier or Central and Southern as a consequence of the Merger,
except for deferred gain or loss recognized pursuant to Treasury
Regulations issued under Section 1502 of the Code.
Among other things, the opinion of Womble Carlyle Sandridge & Rice, PLLC is
based on Central and Southern 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.,
Central and Southern) 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 Central
and Southern Common Stock and Premier Common Stock held by Central and Southern
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 these additional factual
matters will be satisfied.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX CONSEQUENCES
OF THE MERGER. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO THEM INDIVIDUALLY,
INCLUDING TAX CONSEQUENCES UNDER STATE OR LOCAL LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Central and Southern 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
Central and Southern 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 Central and Southern Common Stock for Premier Common Stock in the Merger by
affiliates of Central and Southern 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, except that Central
and Southern and Premier will each bear and pay one-half of the filing fees and
printing costs in connection with this Joint Proxy Statement/Prospectus.
The Agreement also provides that if it is terminated because one of the
parties breaches its representations and warranties or one of its covenants,
and the breach cannot be or has not been cured within 30 days after written
notice of the breach is given to the breaching party, then the breaching party
agrees to pay the non-breaching party (i) an amount equal to the reasonable and
documented fees and expenses incurred by the non-breaching party in connection
with the Merger and (ii) (x) $50,000 if the breach is not willful or (y)
$150,000 if the breach is willful or if the Agreement is terminated in
contemplation of a competing proposal to acquire the breaching party.
RESALES OF PREMIER COMMON STOCK
The shares of Premier Common Stock to be issued to Central and Southern
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, Central and
Southern (such persons are referred to hereinafter as "affiliates" and
generally include executive officers, directors, and 10% shareholders) at the
time of the Central and Southern 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 Central and Southern after
the consummation of the Merger have been published.
Each person who Central and Southern reasonably believes to be an affiliate
of Central and Southern 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 4,249,747 shares were issued and outstanding at March 28, 1997.
No other class of stock is currently outstanding.
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 Premier
Bank and First Alliance Bank to pay dividends, which is limited by applicable
regulatory requirements and capital guidelines. At December 31, 1996, under
such requirements and guidelines, Premier Bank and First Alliance Bank had
$1,300,000 and $45,000, 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, Central and Southern shareholders will become
shareholders of Premier, and their rights as shareholders will be determined by
Premier's Articles of Incorporation (as then amended) and Bylaws. The following
is a summary of the material differences in the rights of shareholders of
Premier and Central and Southern. Both Premier and Central and Southern are
Georgia corporations governed by the Georgia Business Corporation Code.
Accordingly, there are no material differences between the rights of a Premier
shareholder and the rights of a Central and Southern shareholder solely under
the Georgia Business Corporation Code. This summary does not purport to be a
complete discussion of, and is qualified in its entirety by reference to, the
Georgia Business Corporation Code and the Articles of Incorporation and Bylaws
of each corporation.
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<PAGE>
Authorized Capital Stock. Premier is currently authorized to issue
20,000,000 shares of common stock, $1.00 par value, of which 4,249,747 shares
were outstanding as of the Record Date. No other class of stock is currently
outstanding.
Premier's Articles of Incorporation provide for the issuance of shares 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.
Central and Southern is authorized to issue 10,000,000 shares of Central and
Southern Common Stock, $1.00 par value, of which 3,653,523 shares of Central
and Southern Common Stock were issued and outstanding as of the Record Date.
The payment of cash dividends is subject to authorization by the Board of
Directors.
As in the case of Premier, the Central and Southern Board of Directors is
authorized, without further shareholder action, to issue up to 2,000,000
shares of preferred stock, $1.00 par value, in one or more series, and to fix
the rights, preferences, privileges and restrictions thereof, including
dividend rates, conversion rights, voting rights, terms of redemption,
redemption prices, amounts payable upon liquidation and the number of shares
constituting any series or the designation of such series. The Articles of
Incorporation of Central and Southern contains an Amendment which creates a
series of preferred stock, designated "Series A Preferred Stock," and
establishes the voting powers, designations, preferences, and relative rights
thereof. 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 Central and Southern or other change in
control of Central and Southern without further action by the shareholders and
may adversely affect the voting and other rights of the holders of the common
stock, including the loss of voting control to others.
Removal of Directors. 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 Central and Southern's Bylaws, any director may be removed from office
at any shareholders' meeting with respect to which notice of such purpose has
been given, with or without cause, by the affirmative vote of shareholders
representing a majority of the issued and outstanding capital stock entitled
to vote for the election of directors.
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.
Central and Southern's Bylaws provide that when a quorum is present at any
meeting, the vote of the holders of a majority of the stock having voting
power present in person or represented by proxy shall decide any question
brought before such meeting, unless the question is one upon which by express
provision of law or of the Articles of Incorporation a different vote is
required, in which case such express provision shall govern and control the
decision of the question.
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<PAGE>
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.
Central and Southern's Bylaws provide that any action required or permitted
to be taken at any meeting of the shareholders may be taken without a meeting
if all of the shareholders consent thereto in writing setting forth the action
so taken. Such consent shall have the same force and effect as a unanimous vote
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 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.
Central and Southern's Bylaws provide that special meetings of shareholders
may be called at any time by the Chairman of the Board, the President or by the
written request of the holders of at least 50% 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 50 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 nor more than 18 directors. The number of
directors may be fixed or changed from time to time within this range by the
shareholders or the Board of Directors. The Premier Board of Directors
presently consists of 8 members. On March 24, 1997, the Board of Directors
fixed the number of directors at 15, effective upon the Effective Date of the
Merger.
Central and Southern's Bylaws state that the Board of Directors shall consist
of not less than 2 nor more than 15 directors. The number of directors within
this range may be increased or decreased from time to time by the Board of
Directors through amendment of the Bylaws, but no decrease shall have the
effect of shortening the term of an incumbent director. The Central and
Southern Board of Directors presently consists of 11 members.
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<PAGE>
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, 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 American Stock
Exchange and on NASDAQ Small Cap Market for prior periods and the high and low
sales prices for the Premier Common Stock for each of the quarters in which
trading occurred in 1995. Historical share prices have been adjusted to refect
the 1.8055 for one split of the Premier Common Stock effective March 6, 1997.
<TABLE>
<CAPTION>
SALES PRICE
-------------
CALENDAR PERIOD HIGH LOW
--------------- ------ ------
<S> <C> <C>
1995
First Quarter.............................................. $ 7.66 $ 6.86
Second Quarter............................................. 8.31 6.98
Third Quarter.............................................. 8.72 7.75
Fourth Quarter............................................. 9.28 8.72
1996
First Quarter.............................................. $ 9.83 $ 8.86
Second Quarter............................................. 10.80 9.28
Third Quarter.............................................. 11.63 10.39
Fourth Quarter............................................. 11.77 10.39
1997
First Quarter.............................................. $14.19 $11.77
Second Quarter (through May , 1997).......................
</TABLE>
CENTRAL AND SOUTHERN MARKET PRICES
Since 1987, Central and Southern's Common Stock has been traded in the over-
the-counter market and is included in The NASDAQ Stock Market ("NASDAQ") under
the symbol "CSBC." Prior to 1987, there was no established public trading
market for the Central and Southern Common Stock. The following table sets
forth quarterly high and low sales prices per share of Central and Southern
Common Stock as reported by NASDAQ.
33
<PAGE>
<TABLE>
<CAPTION>
CALENDAR PERIOD SALES PRICE
--------------- --------------
HIGH LOW
------- ------
<S> <C> <C>
1995
First Quarter............................................. $ 7.00 $ 6.00
Second Quarter............................................ 7.75 6.91
Third Quarter............................................. 9.125 7.00
Fourth Quarter............................................ 9.25 8.375
1996
First Quarter............................................. $ 9.375 $ 8.63
Second Quarter............................................ 9.125 8.25
Third Quarter............................................. 8.875 8.50
Fourth Quarter............................................ 11.88 8.75
1997
First Quarter............................................. $ 13.13 $11.00
Second Quarter (through May , 1997)......................
</TABLE>
Recent Prices. On May , 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, and the last reported sale price of Central
and Southern Common Stock as reported on NASDAQ/NMS was $ per share. At the
close of trading on January 14, 1997, the date of the last sale reported by
the American Stock Exchange prior to January 15, 1997 (the date the proposed
Merger was publicly announced), the last reported sales price of Premier
Common Stock was $ 13.50 per share and the last reported sales price of
Central and Southern Common Stock was $ 11.75 share.
Premier Dividends. The holders of Premier Common Stock are entitled to
receive 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. In 1996, Premier paid a $.27 per share
cash dividend to its shareholders. The decision to declare these dividends was
based on Premier's performance in 1996 and 1995. Premier plans to pay cash
dividends on a quarterly basis going forward. The future declaration and
payment of dividends will depend upon the earnings of its bank subsidiaries,
business conditions, operating results, capital and reserve requirements, and
the Board of Directors' consideration of other relevant factors. The primary
source of funds available to Premier is the receipt of dividends from its
subsidiaries, First Alliance Bank, Premier Bank, Premier Lending and Alliance
Finance Corporation and the management fees for management and administrative
services provided by Premier to its subsidiaries.
Central and Southern Dividends. The payment of cash dividends to the holders
of Central and Southern Common Stock is subject to authorization by the Board
of Directors of Central and Southern. During fiscal 1996, Central and Southern
paid four quarterly cash dividends totaling $.22 per share of Common Stock.
The primary source of funds available to Central and Southern is the receipt
of dividends from the Central and Southern Banks and management fees for
management and administrative services provided by Central and Southern to the
Central and Southern Banks.
Premier and Central and Southern are legal entities separate and distinct
from their respective subsidiaries and their revenues depend in significant
part on the payment of dividends from their subsidiary financial institutions,
which are subject to certain legal restrictions on the amount of dividends
they are permitted to pay. See "Certain Regulatory Considerations--Payment of
Dividends."
Shareholders of Record. As of the Record Date, there were approximately
holders of record of Premier Common Stock, and holders of record of Central
and Southern Common Stock.
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<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 Central and Southern in evaluating the Merger.
MANAGEMENT OF GROWTH
Premier has experienced significant growth, principally through its merger
with Premier Bancshares on August 31, 1996. 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 of the Central and Southern Banks and any other
organizations acquired by Premier. 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's 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's 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 banking business is extremely competitive. Certain of Premier's primary
competitors offer substantially similar services as Premier and many 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 extreme 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 and especially its Chairman and Chief
Executive Officer, Darrel D. Pittard. The loss of the services of Messrs,
Pittard, or other members of senior management of Premier or Central and
Southern could have a material adverse effect on Premier's business and
prospects. Upon consummation of the Merger, the existing employment agreement
with Mr. Pittard will be amended and extended. Premier believes that its
future success will also depend in part 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.
35
<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: First Alliance Bank ("First Alliance Bank"),
Premier Bank, F.S.B. ("Premier Bank"), Premier Lending Corporation ("Premier
Lending") and Alliance Finance Corporation ("Alliance Finance") that offer a
broad range of banking and bank-related services. Premier was incorporated in
1988 under the laws of Georgia and is registered as a bank holding company
under the regulations of the Federal Reserve and as a thrift holding company
under the regulations of the OTS. As of December 31, 1996, Premier had total
consolidated assets of approximately $294 million, total consolidated deposits
of approximately $237 million and total consolidated shareholders' equity of
approximately $23 million.
On August 31, 1996, Premier (formerly known as "First Alliance Bancorp,
Inc.") merged with Premier Bancshares, Inc. Upon the merger, the surviving
corporation was known as "First Alliance/Premier Bancshares, Inc." On February
4, 1997, Premier changed its name to "Premier Bancshares, Inc." Premier's
principal executive offices are located at 2180 Atlanta Plaza, 950 East Paces
Ferry Road, Atlanta, Georgia 30326, and its telephone number at such address
is (404) 814-3090.
Premier continually evaluates business combination opportunities and
frequently conducts due diligence activities in connection with possible
business combinations. As a result, business combination discussions and, in
some cases, negotiations regularly take place, and future business
combinations involving cash, debt, or equity securities can be expected. Any
future business combination or series of business combinations that Premier
might undertake may be material, in terms of assets acquired or liabilities
assumed, to Premier's financial condition. Recent business combinations in the
banking industry have typically involved the payment of a premium over book
and market values. This practice could result in dilution of book value and
net income per share for the acquiror.
RECENT DEVELOPMENTS
Merger Matters. In contemplation of the Merger, the Board of Directors
changed Premier's name to "Premier Bancshares, Inc." and approved a 1.8055-
for-one split of the common stock of Premier which had a record date of March
6, 1997 and a distribution date of March 20, 1997. On March 26, 1997, the
Agreement was amended to allow for the substitution of Central and Southern's
outstanding stock options for options under Premier's 1997 Stock Option Plan
upon consummation of the Merger.
Proposed Transaction Among Premier Bank, First Alliance Bank and
Net.B@nk. In connection with the sale of its thrift charter, Premier Bank has
entered into a Purchase and Assumption Agreement with First Alliance Bank
dated December 19, 1996, whereby First Alliance Bank has agreed to purchase
and assume substantially all of the assets and liabilities, respectively, of
Premier Bank (except for Premier Bank's savings bank charter and approximately
$5 million of assets and $5 million of deposit liabilities). Immediately
following consummation of the Purchase and Assumption Agreement, all of the
outstanding common stock of Premier Bank, now owned by Premier, will be
purchased by Net.B@nk, Inc., a corporation organized and existing under the
laws of the State of Georgia ("Net.B@nk"), pursuant to an Amended and Restated
Stock Purchase Agreement by and between Premier and Net.B@nk dated December
19, 1996 (the "Stock Purchase Agreement").
On February 25, 1997, Premier and Net.B@nk executed a First Amendment to the
Stock Purchase Agreement for the purpose of extending the termination date of
the Stock Purchase Agreement to May 31, 1997, increasing the amount of
Net.B@nk stock to be paid to Premier and requiring a $150,000 cash payment
from Net.B@nk to Premier for the purpose of reimbursing expenses incurred by
Premier in connection with the Stock
36
<PAGE>
Purchase Agreement. In addition, the Purchase and Assumption Agreement was
amended on March 13, 1997 for the purpose of extending the termination date to
April 30, 1997. The Purchase and Assumption Agreement was amended again on
March 25, 1997 to further extend the termination date to May 31, 1997. Under
the Stock Purchase Agreement, as amended, Net.B@nk will transfer to Premier
1,250 shares of the common stock of Net.B@nk in exchange for the Premier Bank
common stock. The Purchase and Assumption Agreement is subject to the approval
of the Georgia Department of Banking and Finance (the "Georgia Department")
and the Federal Deposit Insurance Corporation. In addition, Net.B@nk's
purchase of the Premier Bank common stock is subject to the approval of the
Federal Reserve Bank of Richmond. The transfer of all the Premier Bank common
stock from Premier to Net.B@nk is contingent upon the successful completion of
Net.B@nk's $10 million initial public offering.
The purpose of the Purchase and Assumption Agreement is to consolidate the
operations of Premier Bank and First Alliance Bank. In the event that the
transactions described in the Purchase and Assumption Agreement, as amended,
have not been consummated by May 31, 1997, then the Purchase and Assumption
Agreement shall, unless otherwise extended or modified, terminate under its
own terms. In the event of the termination of the Purchase and Assumption
Agreement, Premier Bank and First Alliance Bank intend to merge pursuant to an
Agreement and Plan of Merger by and between Premier Bank and First Alliance
Bank whereby Premier Bank would merge with and into First Alliance Bank, with
First Alliance Bank being the surviving institution.
FIRST ALLIANCE BANK
General. First Alliance Bank's predecessor opened for business in 1984.
First Alliance Bank is organized under the laws of the State of Georgia and
operates a full-service commercial banking business based in Cobb County,
Georgia. As of December 31, 1996, First Alliance Bank had assets of
approximately $183,920,000, deposits of approximately $153,931,000 and
shareholders' equity of approximately $16,943,000. It provides 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. First Alliance Bank also finances short-
and medium-term commercial transactions, makes secured and unsecured loans,
performs commercial cash management services and provides other ancillary
financial services to its customers. In addition, the First Alliance Bank
provides a traditional first mortgage product to its customers providing
financing for single-family homes on a permanent basis.
Market Area and Competition. First Alliance Bank has five branch locations
in Cobb County, Georgia, that offer a broad range of banking and banking-
related services. First Alliance Bank competes for both deposits and loan
customers with many other financial institutions with equal or greater
resources than are available to First Alliance Bank. Currently, there are
approximately 20 commercial banks located in the northern Metropolitan Atlanta
banking market. The banking business in this market is highly competitive.
Deposits. First Alliance Bank offers a wide range of commercial and consumer
deposit accounts, including noninterest bearing checking accounts, money
market checking accounts (consumer and commercial), negotiable order of
withdrawal ("NOW") accounts, individual retirement accounts, time certificates
of deposit, and regular savings accounts. The sources of deposits typically
are residents and businesses and their employees within First Alliance Bank's
market area and are obtained through personal solicitation by First Alliance
Bank's officers and directors, direct mail solicitation, and advertisements
published in the local media. First Alliance Bank pays competitive interest
rates on time and savings deposits and has implemented a service charge fee
schedule competitive with other financial institutions in First Alliance
Bank's market area, covering such matters as maintenance fees on checking
accounts, per item processing fees on checking accounts, returned check
charges, and the like.
For additional information including the amounts of deposits in the various
types and information concerning deposits greater than or equal to $100,000,
see the information set forth under the caption "Premier Management's
Discussion and Analysis of Financial Condition and Results of Operations."
37
<PAGE>
Lending Activities. First Alliance Bank makes loans for single family home
construction, owner-occupied commercial buildings, and other loans to small
businesses and individuals who secure these loans by mortgages on their homes
(76% of total loans). In addition, loans are made to small- and medium-sized
commercial business (15% of total loans), as well as to consumers for a variety
of purposes (9% of total loans). With the exception of single family home
construction loans, repayment of First Alliance Bank's loans does not depend on
the sale or cash flow from the collateral securing the loan.
Real Estate Loans. First Alliance Bank makes single-family residential
construction loans, generally for one- to four-unit structures. First Alliance
Bank requires a first lien position on the land associated with the
construction projects and offers these loans only to bona fide professional
building contractors. Loan disbursements require independent, on-site
inspections to assure the project is on budget and that the loan proceeds are
being used in accordance with the plans, specifications and survey for the
construction project and not being diverted to other uses. The loan-to-value
ratio for such loans is predominately 75% of the as-built appraised value.
Loans for construction can present a high degree of risk to the lender,
depending on, among other things, whether the builder can sell the home to a
buyer, whether the buyer can obtain permanent financing, whether the
transaction produces income in the interim, and the nature of changing economic
conditions. First Alliance Bank seeks to reduce this risk by limiting the
number of loans to any one builder and the number of loans made in any one
subdivision.
Additionally, First Alliance Bank makes acquisition and development loans to
approved developers for the purpose of developing acreage into single-family
lots on which houses will be built. These loans are carefully scrutinized by
outside members of the Board of Directors as well as the senior officers of
First Alliance Bank and require independent inspection of the project by
professional inspectors to ensure adherence to the loan agreement as well as to
the construction budget. The loan-to-value ratio for such loans does not exceed
80%, or 100% of the discounted value, whichever is less, as defined by an
independent appraisal. Loans for acquisition and development can present a high
degree of risk to the lender, depending upon, among other things, whether the
developer can find builders to buy the lots, whether the builder can obtain
financing, whether the transaction produces income in the interim, and the
nature of changing economic conditions. First Alliance Bank seeks to reduce
this risk by limiting the number of loans to any one developer and the size of
the development.
Consumer Loans. First Alliance Bank makes consumer loans, consisting
primarily of installment loans to individuals for personal, family and
household purposes including loans for automobiles, home improvements and
investments. Consumer lending decisions are based on a determination of the
borrower's ability and willingness to repay the loan, which in turn are
impacted by such factors as the borrower's income, job stability, length of
time as a resident in the community, previous credit history and collateral for
the loan. Risks associated with these loans include, but are not limited to,
fraud, deteriorated or non-existing collateral, general economic downturn, and
customer financial problems.
Commercial Loans. Commercial lending is directed principally toward
businesses (i) whose annual sales are in the $1 to $5 million category within
the defined trade area of First Alliance Bank or whose demand for funds falls
within its legal lending limits and (ii) which are existing or potential
deposit customers. Commercial lending decisions are based upon a determination
of the borrower's ability and willingness to repay the loan, which in turn are
impacted by such factors as the borrower's cash flow, sales trends and
inventory levels, as well as relevant economic conditions. This category
includes loans made to individual, partnership or corporate borrowers and
obtained for a variety of purposes. Risks associated with these loans can be
significant. Risks include, but are not limited to, fraud, bankruptcy, economic
downturn, deteriorated or non-existing collateral, and changes in interest
rates.
Investment Activities. After establishing necessary cash reserves and funding
loans, First Alliance Bank invests its remaining liquid assets in investments
allowed under banking laws and regulations. First Alliance Bank invests
primarily in obligations of the United States or obligations guaranteed as to
principal and interest
38
<PAGE>
by the United States, and other taxable securities and in certain obligations
of states and municipalities. First Alliance Bank also engages in Federal Funds
transactions with its principal correspondent banks and primarily acts as a net
seller of such funds. The sale of Federal Funds amounts to a short-term loan
from First Alliance Bank to another bank. Risks associated with these
investments include, but are not limited to, mismanagement in terms of interest
rate, maturity and concentration. Historically, losses associated with the
investment portfolio have been minimal. For additional information concerning
Investment Activities, see the information set forth under "Premier
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Asset/Liability Management. It is the objective of First Alliance Bank to
manage its assets and liabilities to provide a satisfactory, consistent level
of profitability within the framework of established cash, loan, investment,
borrowing and capital policies. Certain officers of First Alliance Bank are
charged with the responsibility for developing and monitoring policies and
procedures that are designed to insure acceptable composition of the
asset/liability mix. It is the overall philosophy of management to support
asset growth primarily through growth of core deposits, which include deposits
of all categories made by individuals, partnerships and corporations.
Management seeks to invest the largest portion of First Alliance Bank's assets
in loans to local builders, small businesses and individuals. First Alliance
Bank's asset/liability mix is monitored on a timely basis with a report
reflecting interest-sensitive assets and interest-sensitive liabilities being
prepared and presented to the asset/liability committee of First Alliance
Bank's Board of Directors on a quarterly basis. In addition, First Alliance
Bank's liquidity is monitored on a monthly basis by its Board of Directors. The
objective of this policy is to manage interest-sensitive assets and liabilities
so as to minimize the impact of substantial movements in interest rates on
First Alliance Bank's earnings. See "Premier Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Properties. First Alliance Bank's offices are located in Marietta, Georgia,
at 63 Barrett Parkway, 2760 Cobb Parkway, 4210 Wade Green Road, 833 South Cobb
Drive, and 1269 Barclay Circle.
First Alliance Bank leases the land on which its main office is located
pursuant to an agreement dated August 28, 1985, as amended. The lease provides
for an initial term of 5 years following the capitalization of First Peoples
Bank of Cobb, with 9 renewal periods of 5 years each. Rent escalation features
include a 5% increase every 5 years plus an additional amount equal to the
average yearly amount for the Consumer Price Index (CPI) for metropolitan
Atlanta for the previous five years, not to exceed 8% per year. At any time
after the first 5 years, the Bank may exercise an option to purchase the
property for $1,000,000. First Alliance Bank also leases its branch office at
Barclay Circle pursuant to an agreement dated December 6, 1990. The lease
provides for an initial term of 5 years following regulatory approval of the
branch with 2 renewal periods of 4 years each. By letter agreement dated
December 15, 1995, the parties agreed to renew the lease for 3 years at the
then current annual rental amount. First Alliance Bank owns its remaining
branches without encumbrance.
Employees. As of February 28, 1997, First Alliance Bank employed 88 full-time
equivalent employees. First Alliance Bank is not a party to any collective
bargaining agreement and management believes that First Alliance Bank enjoys
satisfactory relations with its employees.
PREMIER BANK
General. Premier Bank had approximately $100 million in total assets,
deposits of approximately $85 million and net worth of approximately $7 million
at December 31, 1996. Premier Bank's primary service area is currently Cobb
County, Cherokee County, Bartow County, Gwinnett County and Paulding County,
and the northern part of Fulton and DeKalb Counties, Georgia. Premier Bank's
main office is located at 4900 Ross Road, Acworth, Cobb County, Georgia.
39
<PAGE>
Premier Bank received its charter as a federal stock savings bank from the
Federal Home Loan Bank Board, the predecessor of the Office of Thrift
Supervision ("OTS"), on November 21, 1986. Premier Bank commenced operations on
March 29, 1988. The primary business of Premier Bank is to attract deposits
from the general public and invest those funds in residential real estate
loans, commercial real estate loans, commercial loans and consumer loans.
Customer deposits with Premier Bank are insured to the maximum extent provided
by law through the Savings Association Insurance Fund, a unit of the Federal
Deposit Insurance Corporation. Premier Bank is also a member of the Federal
Home Loan Bank System.
Market Area and Competition. Premier Bank experiences competition in
attracting and retaining business and personal checking and savings accounts
and in making residential real estate, commercial real estate and consumer
loans in its primary service area. The principal factors in competing for such
accounts are interest rates, the range of financial services offered,
convenience of office and branch locations and flexible office hours. Direct
competition for such accounts comes from other savings institutions, commercial
banks, credit unions, brokerage firms and money market funds. The primary
factors in competing for loans are interest rates, loan origination fees and
the range of lending services offered. The competition for origination of loans
normally comes from other savings institutions, commercial banks, credit unions
and mortgage banking firms. Such entities may have competitive advantages as a
result of greater resources and higher lending limits (by virtue of greater
capitalization) and may offer their customers certain services which Premier
Bank may not presently provide.
Operations. Premier Bank's income is primarily derived from interest and fees
collected on loans and interest on investment securities and gains on sales of
loans. The principal expenses of Premier Bank are interest paid on deposits,
interest paid on other borrowings by Premier Bank, employee compensation,
office expenses and other overhead expenses.
Premier Bank offers a full range of banking services to individuals,
professional and business customers in its primary service area. These services
include personal and business checking accounts and savings and other time
certificates of deposit. Premier Bank acts as a merchant depository for
cardholder drafts under both VISA and Mastercard. Premier Bank offers night
depository and bank-by-mail services and sells official checks and travelers
checks (issued by an independent entity).
Premier Bank's residential real estate lending activities are directed
primarily toward individuals requiring a 15- to 30-year mortgage loan.
Commercial real estate lending activities are directed primarily toward
builders and developers and are generally short- and medium-term loans.
Commercial lending activities are primarily directed toward current customers
for such purposes as business equipment, working capital, lines of credit and
letters of credit secured by certificates of deposit. In addition, Premier Bank
originates loans to small businesses secured by real estate and other
collateral, which loans are in part (up to 75% of each loan) guaranteed by the
U.S. Small Business Administration ("SBA") and are generally in amounts less
than $500,000; and Premier Bank has been designated by the SBA as a Certified
Lender. Consumer lending is oriented primarily to the needs of Premier Bank's
customers for such purposes as automobiles and personal needs. Premier Bank
also originates a limited number of variable rate and fixed rate mortgage loans
for its own account and both variable and fixed rate mortgage loans for resale.
Properties. Premier Bank conducts its business from its main office location
at 4900 Ross Road, Acworth, Georgia 30101 and from two full service branch
offices. Premier Bank owns its main office building, which contains
approximately 4,880 square feet of space. Premier Bank leases (i) a branch
office at 2390 Mt. Vernon Road, Suite 100, Dunwoody, Georgia 30338 (which lease
expires in July 2000) and (ii) a branch office at 875 Oak Road, Suite 101,
Lawrenceville, Georgia 30244 (which lease expires in March 2001).
Employees. As of February 28, 1997, Premier Bank employed 24 full-time
equivalent employees. Premier Bank is not a party to any collective bargaining
agreement and management believes that Premier Bank enjoys satisfactory
relations with its employees.
40
<PAGE>
PREMIER LENDING CORPORATION
General. Premier Lending Corporation ("Premier Lending") 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.
Premier Lending's administrative offices are located at 2759 Delk Road,
Suite 201, Marietta, Georgia 30067.
Market Area and Competition. Premier Lending's primary service area for its
residential loan originations and its mortgage banking operations is the
greater Atlanta, Georgia metropolitan area. Premier Lending operates from its
administrative offices in Marietta (Cobb County), and has loan production
offices in Gwinnett County, Fulton County, Henry County, DeKalb County and
Cobb County. The mortgage banking business is highly competitive and
fragmented. Premier Lending competes with other mortgage bankers, state and
national banks, thrift institutions and insurance companies for loan
originations. Many of its competitors have substantially greater resources
than Premier Lending.
Operations. Premier Lending's loan officers originate residential mortgage
loans through referrals from real estate agents and brokers, builders,
developers, and other relationships developed over the past years by
management, as well as through direct solicitation of borrowers. The level of
Premier Lending's loan originations is subject to seasonal variations with the
heaviest demand occurring in the spring, summer and fall and with the lightest
demand occurring in the winter.
Premier Lending originates mortgage loans and sells them to Premier Bank
which independently underwrites the credit. Premier Bank holds these mortgage
loans for a period ranging from one to 20 days after closing. During the
holding period the loans are serviced by Premier Lending.
The results of operations of Premier Lending depend primarily upon its
ability to originate, fund and sell residential mortgage loans. This ability,
in turn, depends substantially upon current interest rate levels and national
economic conditions, which affect the degree to which prospective purchasers
of residential real estate and homeowners considering refinancing their
existing mortgage loans seek mortgage financing. For example, mortgage loan
origination activity is generally greater in a period of lower interest rates
and favorable economic conditions. Economic conditions in Premier Lending's
service area will also have a significant effect on the residential housing
market and, therefore, on Premier Lending's mortgage loan origination
activities.
Loan Servicing. Premier Lending does not generally retain servicing of the
permanent mortgage loans which it originates. However, Premier Lending does
service commercial finance loans for other investors. The servicing rights on
all of Premier Lending's permanent mortgage loans are sold for a fee along
with the loans to correspondent or institutional mortgage investors.
Permanent Loan Market. Premier Lending's operations depend on the ability of
its prospective borrowers to qualify for and obtain permanent loans through
Premier Lending from correspondent or institutional mortgage investors.
Accordingly, any significant change in the permanent loan market which reduces
the ability of Premier Lending's borrowers to obtain permanent financing on a
timely and acceptable basis, including a change in the
41
<PAGE>
operations, level of activity, or underwriting criteria of such correspondent
or institutional investors or other permanent lenders, could have a material
adverse effect on Premier Lending's business and the results of operations.
Sale of Residential Loans. Premier Lending sells the mortgage loans which it
originates or purchases indirectly through Premier Bank to correspondent or
institutional mortgage investors. These loans are sold on a loan-by-loan
basis, and the sales are made without recourse.
Lending Activities. Premier Lending principally originates conventional
residential first and second mortgage loans primarily secured by one-to-four
family residential properties, including both FNMA and FHLMC loans. Premier
Lending concentrates on compliance with the spirit of the Community
Reinvestment Act through originating government insured or guaranteed
mortgages such as FHA, VA and state bond issues. Although Premier Lending's
emphasis is on loan amounts which are considered "conforming" (less than
$214,000), Premier Lending also originates a number of "non-conforming" loans
(more than $214,000). Premier Lending has a division, Premier Acceptance,
which originates residential mortgage loans to borrowers with credit
impairments. The level of revenues per loan from Premier Lending's residential
loan originations is primarily a function of the sale of the loans and
servicing to correspondent or institutional investors and the fees Premier
Lending can charge.
Premier Lending seeks to originate commercial finance loans which focus on
revolving lines of credit secured primarily by receivables and, to a lesser
extent, inventory. These loans are funded through loan participations with
other financial institutions (including First Alliance Bank and Premier Bank)
and lines of credit. Management will consider term loans secured by machinery,
equipment or real estate based on traditional underwriting criteria, as well
as prior experience of management with the borrower. Management focuses its
commercial finance lending toward small and medium sized businesses that
generally are not being served by banks or finance companies in the market
area.
In addition, Premier Lending originates commercial real estate loans which
typically range from $500,000 to $5,000,000. These loans provide construction
and permanent financing for both owner-occupied and income-producing
properties; and, like the commercial finance loans, are funded through loan
participations with other financial institutions (including First Alliance
Bank and Premier Bank) and lines of credit.
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<PAGE>
Properties. Premier Lending leases its administrative and loan production
offices and does not own any real estate. The following is a summary of the
offices leased by Premier Lending:
<TABLE>
<CAPTION>
LOCATION PRIMARY USE LEASE EXPIRATION DATE
-------- ----------- ---------------------
<S> <C> <C>
17 Executive Park Drive Loan production May 2001
Suite 290 --DeKalb County
Atlanta, Georgia 30326
2019 Scenic Highway Loan production May 2001
Snellville, Georgia --Gwinnett County
30278
205 Market Place Loan production September 1999
Suite 102 --Fulton County
Roswell, Georgia 30075
1235 Eagle's Landing Loan production May 1997
Parkway, Suite A --Henry County
Stockbridge, Georgia
30281
3075 Breckenridge Blvd. Loan production January 1999
Suite 425 --Gwinnett County
Duluth, Georgia 30136
2759 Delk Road Mortgage Division December 1999
Suite 201 and Loan production
Marietta, Georgia --Cobb County
30067
</TABLE>
Employees. At February 28, 1997, Premier Lending employed 133 full time
equivalent employees.
Litigation. Premier Lending is not a defendant in any litigation arising out
of the conduct of its business.
ALLIANCE FINANCE CORPORATION
Alliance Finance is a traditional consumer finance company that makes small
loans to individuals secured by varied collateral. Alliance Finance has two
locations in Cobb County and Paulding County, Georgia. As of December 31,
1996, Alliance Finance had assets of approximately $2,900,000, net loans of
approximately $900,000 and shareholders' equity of approximately $68,000 with
net income for the period ended December 31, 1996, of approximately $59,000.
Alliance Finance leases its main office pursuant to an agreement dated
December 19, 1995. The lease provides for an initial term of one year (from
May 1, 1996 through April 30, 1997), with a renewal period of one year, which
Alliance Finance has exercised. Alliance Finance owns its other office without
encumbrance. At February 28, 1997, Alliance Finance employed 6 full time
equivalent employees.
EMPLOYEES
As of February 28, 1997, Premier had no employees and its subsidiaries had
an aggregate of 253 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.
43
<PAGE>
LEGAL PROCEEDINGS
In July 1996, the management of Premier Bank learned that a group in Dalton,
Georgia was organizing a de novo bank under the name Premier National Bank
("PNB"). Specifically, Premier Bank learned of PNB's intent to provide
commercial banking services from a facility located in Dalton, Whitfield
County, Georgia. Premier Bank contacted PNB's banking consultant and advised
the consultant of Premier Bank's demand that PNB cease any and all efforts to
use the name Premier National Bank. Premier Bank had subsequent communications
with representatives of PNB in which PNB was informed of Premier Bank's
superior right, title and interest in the Premier name. PNB refused to cease
using the name and filed a prospectus on October 8, 1996, publicly announcing
its intent to open and operate a bank under the Premier name.
Due to the need to protect the strength and reputation of its trademark and
trade name and due to PNB's refusal to abandon its intent to use the Premier
name, Premier Bank filed suit in the Northern District of Georgia, Rome
Division (Premier Bank, F.S.B. v. Premier National Bank v. T. Stephen Johnson
& Associates, Inc., United States District Court for the Northern District of
Georgia, Rome Division, Civil Action File No. 4:96-CV-0283-HLM). The complaint
sought damages and injunctive relief based upon the Lanham Act, 15 U.S.C.
section 1125(a)(1)(A), the Georgia Uniform Deceptive Trade Practices Act,
O.C.G.A. section 10-1-370, the Georgia Unfair Competition Statute, O.C.G.A.
section 23-2-55, the trademark and trade name statute, O.C.G.A. section 10-1-
451, and the common law of Georgia. In response, PNB opened for business and
defended the lawsuit on the grounds that Premier Bank has no right, title or
interest in the Premier name in the Whitfield County community and filed a
counterclaim seeking injunctive relief and unspecified compensatory and
punitive damages against Premier Bank.
On March 13, 1997, the District Court denied Premier Bank's preliminary
injunction but concluded that Premier Bank's claims had merit. A trial on the
merits of the case is scheduled to commence in May of this year.
Other than as described above, there are no material pending proceedings to
which Premier is a party or of which any of its properties are subject; nor
are there material proceedings known to Premier to be contemplated by any
governmental authority; nor are there material proceedings known to Premier,
pending or contemplated, in which any director, officer or affiliate or any
principal security holder of Premier, or any associate of any of the
foregoing, is a party or has an interest adverse to Premier.
44
<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 combination of First Alliance Bancorp, Inc. and
Premier Bancshares, Inc. which was consummated on August 31, 1996. The
financial statements for the years ended December 31, 1992 through 1996, and
the operating data for the years ended December 31, 1992 through 1996 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
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>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
--------- --------- --------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET:
Total assets................. $ 294,158 $ 237,525 $ 151,526 $ 140,313 $130,383
Loans held for sale.......... 24,408 25,912 26,047 4,446 -
Loans, net................... 184,452 131,072 81,097 83,838 82,221
Securities available-for-
sale........................ 35,154 45,795 11,584 26,427 25,444
Federal funds sold........... 21,680 2,530 19,110 10,880 9,027
Interest-bearing deposits.... 1,447 9,948 -- 703 794
Deposits..................... 236,733 178,453 118,166 117,323 113,751
Borrowings................... 30,221 30,692 14,429 4,399
Stockholders' equity......... 23,275 23,430 17,554 17,860 14,205
OPERATING DATA:
Interest income.............. 23,016 17,301 10,954 10,296 10,359
Interest expense............. 11,282 8,281 4,111 3,897 4,928
Net interest income.......... 11,734 9,020 6,843 6,399 5,431
Provisions for losses on
loans....................... 598 338 285 1,007 441
Net interest income after
provision for losses on
loans....................... 11,136 8,682 6,558 5,392 4,990
Other income................. 11,855 8,153 2,962 2,915 1,446
Other expenses............... 19,371 13,696 8,660 7,900 6,277
Income tax expense........... 1,068 1,137 569 98 5
Net income................... 2,552 2,002 291 309 154
Net income per share......... .59 .48 .08 .11 .06
</TABLE>
45
<PAGE>
PREMIER MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
BACKGROUND
Premier was incorporated in 1988 under the laws of Georgia and is a bank
holding company registered under the regulations of the Federal Reserve, and a
registered thrift holding company under the regulations of the OTS. Premier's
bank subsidiary, First Alliance Bank is a commercial bank which opened for
business in 1984. On August 31, 1996, Premier acquired, through a pooling of
interests, Premier Bancshares, Inc., a thrift holding company. Premier
Bancshares, Inc. operated two 100% owned subsidiaries, Premier Lending and
Premier Bank. Premier also owns 80% of Alliance Finance.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the matching of the cash flow requirements of
customers who may be either depositors desiring to withdraw funds or borrowers
needing assurance that sufficient funds will be available to meet their credit
needs and the ability of Premier to meet those needs. Premier seeks to meet
liquidity requirements primarily through management of short-term investments
(principally Federal Funds sold and overnight funds), monthly amortizing
loans, repayment of single payment loans, periodic repayments of mortgage-
backed securities, and draws on lines of credit. In addition, at December 31,
1996, First Alliance Bank and Premier Bank had $11,000,000 in approved Federal
Funds lines with correspondent banks which could provide funds on an immediate
basis if the need arose. Also, First Alliance Bank has access to various
Certificate of Deposit ("CD") networks which would allow it to raise deposits
from credit unions and other small banks for varying time periods at rates
comparable to the short-term U.S. Government Bond rate. These deposits are not
brokered and no fee outside of the market rate is paid.
First Alliance Bank and Premier Bank are members of the Federal Home Loan
Bank system. At December 31, 1996, First Alliance Bank and Premier Bank had
the ability to borrow approximately $20 million by pledging qualifying loans
and securities as collateral.
The liquidity and capital resources of, First Alliance Bank and Premier Bank
are monitored on a periodic basis by federal regulatory authorities. In
addition, management performs liquidity analyses in the same manner as the
federal regulatory agencies. As of December 31, 1996, the various liquidity
ratios were considered adequate by regulatory definitions. In management's
opinion, First Alliance Bank, and Premier Bank maintained liquidity that was
adequate to meet their respective needs.
First Alliance Bank, and Premier Bank continue to be well-capitalized by
both industry and regulatory definitions. At December 31, 1996, Premier's
consolidated capital ratios were as follows:
<TABLE>
<CAPTION>
MINIMUM REGULATORY
REQUIREMENT
------------------
<S> <C> <C>
Leverage Capital Ratio............................ 7.27% 5.00%
Risk Based Capital Ratios:
Tier 1 Capital.................................. 9.69% 6.00%
Total Capital................................... 10.79% 10.00%
</TABLE>
A more detailed chart of regulatory capital ratios is included in Note 13 of
the Notes to Consolidated Financial Statements. Management is not aware of any
current recommendations of the regulatory authorities which, if they were
implemented, would have a material effect on Premier's liquidity, capital
resources, or operations.
Premier regularly evaluates business combination opportunities and conducts
due diligence activities in connection with possible business combinations. As
a result, business combination discussions and, in some cases, negotiations
take place, and future business combinations involving cash, debt, or equity
securities may
46
<PAGE>
be expected. Any future business combination or series of business
combinations that Premier might undertake may be material, in terms of assets
acquired or liabilities assumed, to Premier's financial condition.
ASSET/LIABILITY MANAGEMENT
At December 31, 1996, Premier, utilizing a "static gap" view of interest
rate sensitivity, was positioned in an asset-sensitive position (1.44%) at
three months and a slightly asset-sensitive position (1.01%) at one year. This
"static gap" view of interest rate sensitivity at a point in time looks at the
volume of assets and liabilities that will mature or reprice within varying
time periods. Such a view does not necessarily indicate the impact of general
interest rate movements on the net interest margin since the repricing of
various categories of assets and liabilities is subject to competitive
pressures and the needs of Premier's customers. It is also probable that
actual repricing may happen at different times than estimated and at different
rates than anticipated.
Management also utilizes a forecasting model for First Alliance Bank and
Premier Bank which attempts to project the net interest margin in various
rising, flat, and falling interest rate scenarios. The model assumes that
First Alliance Bank and Premier Bank make no material changes in the
composition, maturity, or interest rate sensitivity of their earning assets
and interest-bearing liabilities as a result of a change in interest rate
cycles. The model projects that in the next 12 months, First Alliance Bank and
Premier Bank combined would earn approximately 4.93% more net interest income
in a 200 basis point rising rate environment and approximately 5.12% less in a
200 basis point falling rate environment. However, management will act to
change Premier's asset or liability composition and interest rate sensitivity
in response to a definitive change in the direction of interest rates.
Specifically, Premier actively manages the mix of asset and liability
maturities to control the effects of changes in the general level of interest
rates on net interest income. Except for its effect on the general level of
interest rates, inflation does not have a material impact on Premier due to
the rate variability and short-term maturities of its earning assets.
Interest Rate Sensitivity
<TABLE>
<CAPTION>
AFTER AFTER
THREE ONE YEAR
MONTHS BUT
WITHIN BUT WITHIN
THREE WITHIN FIVE AFTER
MONTHS ONE YEAR YEARS FIVE YEARS TOTAL
-------- -------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Earning assets:
Interest bearing deposits... $ 1,447 $ -- $ -- $ -- $ 1,447
Federal funds sold.......... 21,680 -- -- -- 21,680
Securities.................. 6,814 6,107 19,770 2,463 3,515
Loans....................... 146,216 16,029 42,782 6,237 211,264
-------- -------- ------- ------- --------
Total interest earning
assets................... 176,157 22,136 62,552 8,700 269,545
-------- -------- ------- ------- --------
Interest bearing liabilities:
Interest bearing demand
deposits................... 57,562 -- -- -- 57,562
Savings..................... 8,302 -- -- -- 8,302
Time deposits, less than
$100,000................... 23,273 52,842 29,465 -- 105,580
Time deposits, $100,000 and
over....................... 10,476 17,712 6,916 -- 35,104
Other borrowings............ 22,824 2,755 1,980 2,661 30,220
-------- -------- ------- ------- --------
Total interest bearing
liabilities.............. 122,437 73,309 38,361 2,661 236,768
-------- -------- ------- ------- --------
Interest rate sensitivity
gap.......................... $ 53,720 $(51,173) 24,191 $ 6,039 $ 32,777
======== ======== ======= ======= ========
Cumulative interest rate sen-
sitivity gap................. 53,720 $ 2,547 26,738 $32,777
======== ======== ======= =======
Interest rate sensitivity gap
ratio........................ 1.44 0.30 1.63 3.27
======== ======== ======= =======
Cumulative interest rate sen-
sitivity gap ratio........... 1.44 1.01 1.11 1.14
======== ======== ======= =======
</TABLE>
47
<PAGE>
CHANGES IN FINANCIAL CONDITION
Cash and Short-term Assets
Total assets as of December 31, 1996 increased $56,633,000 since December
31, 1995. Non-earning cash and due from banks increased $2,088,000 as of
December 31, 1996, from December 31, 1995. This change is representative of
normal daily fluctuations in cash and check clearings and an increase in
transaction account balances of $17,513,000. Interest-bearing deposits of
First Alliance Bank and Premier Bank decreased $8,501,000 to $1,447,000 at
December 31, 1996. This balance is primarily excess funds that are held at the
Federal Home Loan Bank and accrue interest at a rate approximately equal to
the Federal Funds rate. Federal Funds sold increased $19,150,000 from December
31, 1995 to $21,680,000 at December 31, 1996. The increase in Federal Funds is
the result of seasonal deposits placed in First Alliance Bank by a local
municipality and the movement of Premier Bank's excess cash from the Federal
Home Loan Bank to the Federal Funds market.
Securities Portfolio
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Types of Securities:
U.S. Government and agency securities................ $19,577 $22,313 $12,092
Municipal securities................................. 105 304 292
Mortgage-backed securities........................... 13,693 21,767 19,033
Equity securities.................................... 1,779 1,412 1,089
------- ------- -------
$35,154 $45,796 $32,506
======= ======= =======
</TABLE>
- --------
All securities are held as available-for-sale and are reported at their fair
values.
Maturities
The amounts of securities in each category as of December 31, 1996 are shown
in the following table according to contractual maturity classifications (i)
one year or less, (ii) after one year through five years, (iii) after five
years through ten years, and (iv) after ten years.
<TABLE>
<CAPTION>
U.S. GOVERNMENT AND
AGENCY SECURITIES
AND MORTGAGE-BACKED MUNICIPAL OTHER
SECURITIES(1) SECURITIES(2) SECURITIES
----------------------- ----------------- -------------------
AMOUNT YIELD(3) AMOUNT YIELD(3) AMOUNT YIELD(3)
----------- -------- -------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
One year or less........ $ -- -- $ -- -- $ 380,600 7.86%
After one year through
five years............. 19,327,933 6.12% 104,691 8.60% -- --
After five years through
ten years.............. 5,408,410 6.08% -- -- -- --
After ten years......... 8,533,131 6.01% -- -- 1,398,876 6.40%
----------- -------- ----------
Total................. $33,269,474(1) $104,691 $1,779,476
=========== ======== ==========
</TABLE>
- --------
(1) Includes mortgage-backed securities based on their contractual maturity
date.
(2) Yields on municipal securities have not been computed on a tax equivalent
basis.
(3) Yields were computed using coupon interest, adding discount accretion, or
subtracting premium amortization, as appropriate, on a ratable basis over
the life of each security. The weighted average yield for each maturity
range was computed using the carrying value of each security in that
range.
48
<PAGE>
Changes in Securities Portfolio
Securities available-for-sale on December 31, 1996 decreased $10,643,000
from December 31, 1995. In the first quarter of 1996, Premier sold
approximately $10,000,000 in securities from the available-for-sale portfolio.
These sales represented the termination of an arbitrage transaction made up of
these assets and various floating rate deposits and borrowings. These
securities were primarily floating rate collateralized mortgage obligations
and mortgage-backed passthroughs. The proceeds from the sale of securities
provided funding for the increase in loans.
LOAN PORTFOLIO
Types of Loans
Management realizes that Premier's loan portfolio is concentrated in loans
secured by real estate. Real estate loans include real estate mortgages, real
estate construction projects, and consumer home equity lines. The amount of
loans outstanding at the indicated dates are shown in the following table
according to the type of loan. The other concentration is in commercial and
financial loans which are made primarily to businesses in the Atlanta, Georgia
metropolitan area. The following table presents this major category of net
loans for each period, excluding the allowance for loan losses.
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Real Estate:
Secured by Mortgages............... $ 73,272 $ 58,463 $46,602 $46,278 $46,895
Construction....................... 67,432 36,987 19,518 15,326 9,131
Consumer and other loans............. 17,553 15,242 10,656 15,983 17,825
Commercial and financial............. 28,599 22,182 6,275 7,833 9,773
-------- -------- ------- ------- -------
$186,856 $132,874 $83,051 $85,420 $83,624
======== ======== ======= ======= =======
</TABLE>
Maturities and Sensitivity to Changes in Interest Rates
Total loans as of December 31, 1996 are shown in the following table
according to maturity classifications (i) one year or less, (ii) after one
year through five years, and (iii) after five years.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Maturity:
One year or less................................. $ 74,368
After one year through five years................ 104,399
After five years................................. 8,089
--------
$186,856
========
</TABLE>
The following table summarizes loans at December 31, 1996 with due dates
after one year which have predetermined and floating or adjustable interest
rates.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Predetermined interest rates....................... $ 42,032
Floating or adjustable interest rates.............. 70,456
--------
$112,488
========
</TABLE>
49
<PAGE>
Changes in Loan Portfolio
Loans held for sale decreased $1,504,000 from December 31, 1995 to December
31, 1996. These loans represent first mortgage loans which have been
originated by Premier Lending and have been sold to third party investors and
are waiting for funding from the investor. This balance fluctuates based on
time of month, new loan volumes, and length of investor closing periods. These
loans are sold servicing released and the investor commitment price is
obtained simultaneously with the closing of most loans; therefore, minimizing
the effect of interest rate fluctuation.
Loans grew by $53,982,000 at December 31, 1996 from December 31, 1995. In
addition, at December 31, 1996, construction loans increased $30,445,000,
other loans secured by real estate increased $14,809,000, commercial loans
increased $6,417,000, and consumer loans increased $2,311,000 from December
31, 1995. The primary reason for these increases was the addition of five
experienced real estate and commercial loan officers. Loan officers at Premier
Lending generate loans that are specifically underwritten by First Alliance
Bank. In prior periods, the majority of these loans were sold to third party
financial institutions due to the former Premier Bancshares, Inc. group's not
having the capital to fund these loans.
DEPOSITS
Deposits and the yield on those deposits classified as to noninterest-
bearing demand, interest-bearing demand, savings, and time deposits, for the
years indicated are presented below.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------------------
1996 1995 1994
---------------- ---------------- ----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing
demand................... $ 29,472 -- % $ 24,936 -- % $ 21,652 -- %
Interest-bearing demand... 50,993 3.09 37,833 3.39 36,407 2.97
Savings................... 8,515 2.96 10,438 2.66 11,048 2.96
Time...................... 114,961 5.95 78,736 5.72 53,551 4.41
-------- -------- --------
Total deposits.......... $203,941 $151,943 $122,658
======== ======== ========
</TABLE>
The amount of time deposits issued in amounts of $100,000 or more as of
December 31, 1996 are shown below by category, which is based on time
remaining until maturity of (i) three months or less, (ii) over three through
12 months, and (iii) over 12 months.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Three months or less............................... $10,476
Over three through twelve months................... 17,807
Over twelve months................................. 6,820
-------
Total............................................ $35,104
=======
</TABLE>
Changes in Deposits
Total deposits grew $58,280,000 at December 31, 1996 from December 31, 1995.
Non-interest bearing demand deposits increased $889,000 at December 31, 1996
from December 31, 1995. Interest-bearing demand
50
<PAGE>
deposits were up $16,624,000 primarily due to a seasonal increase in the
balances of a local municipal depositor and growth in commercial money market
accounts. Other time deposits increased by $40,767,000 at December 31, 1996
from December 31, 1995 as both First Alliance Bank and Premier Bank
aggressively marketed for deposits in several key submarkets in Premier's
market area.
OTHER BORROWINGS
The following table sets forth certain information regarding securities sold
under repurchase agreements, FHLB borrowings, and other borrowings.
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Balance at December 31.............................. $30,221 $31,862 $14,429
Weighted average interest rate at December 31....... 6.72 8.09 7.54
Maximum month end balance during year............... 30,221 60,731 14,429
Average amount outstanding during the year.......... 38,600 32,715 5,371
Weighted average interest rate during the year...... 6.77 6.77 6.31
</TABLE>
Federal Home Loan Bank advances were down $6,500,000 at December 31, 1996
compared to December 31, 1995 due to the sale of securities involved in an
arbitrage funded primarily by FHLB advances. Retail repurchase agreements
increased by $7,135,000 as First Alliance Bank received a $6,000,000
repurchase agreement from a corporate customer in the first quarter of 1996.
It is anticipated that this balance will remain in First Alliance Bank for the
foreseeable future. Other borrowings decreased by $2,276,000 at December 31,
1996 compared to December 31, 1995 due primarily to First Alliance Bank's and
Premier Bank's increasing their purchases of the mortgage loans from Premier
Lending by funding those purchases with increases in other time deposits.
In addition to the above, Premier Lending and Alliance Finance also utilize
a combination of subordinated debentures and revolving lines of credit to fund
their mortgage, commercial, and consumer finance lending activities. Note 5 in
the Notes to Consolidated Financial Statements details the maturities, rates,
and terms of these instruments. Additionally, Premier owed $4 million at
December 31, 1996 in term debt which is an increase of $1 million from
December 31, 1995. This increase was used by Premier to inject additional
capital into Premier Bank for asset growth. The original $3 million was also
used as capital in the acquisition of Premier Bank in 1995.
CREDIT ANALYSIS
Non-performing Loans
Information with respect to impaired, past due, and restructured loans at
December 31, 1996 is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1996 1995 1994 1993 1992
------ ---- ---- ---- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Impaired loans................................... $1,224 $268 $604 $309 $2,892
Loans contractually past due ninety days or more
as to interest or principal payments and still
accruing........................................ -- 1 -- 127 10
Loans, the terms of which have been renegotiated
to provide a reduction or deferral of interest
or principal because of deterioration in the
financial position of the borrower.............. 60 -- -- -- 700
Loans, now current, about which there are serious
doubts as to the ability of the borrower to
comply with present loan repayment terms........ -- -- -- -- --
Interest income that would have been recorded on
impaired loans under original terms............. 92
Interest income that was recorded on impaired and
restructured loans.............................. 15
</TABLE>
51
<PAGE>
At December 31, 1996, three first mortgage loans totaling $464,000, made to
individuals who subsequently declared bankruptcy are included in the non-
accrual number. In addition, $641,000 related to one residential builder was
also in the non-accrual number. Of that amount, all but $70,000 has been paid
out subsequent to year end. Management expects no material losses on the
remaining balances.
Accrual of interest income is discontinued on all loans when they become 90
days past due or, in the opinion of management, collection of interest becomes
doubtful. When a loan is determined to be impaired, all interest previously
accrued but not collected is reversed against current interest income. Accrual
of interest on such loans is resumed when, in management's judgment, the
collection of interest and principal becomes probable.
In the opinion of management, any loans classified by regulatory authorities
as doubtful, substandard, or special mention that have not been included in
the table above do not represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources. These classified loans do not represent (i)
material credits about which management is aware or (ii) any information which
causes management to have serious doubts as to the ability of such borrowers
to comply with the loan repayment terms. Any loans classified by regulatory
authorities as loss are charged off at the time such loans are identified.
Commitments and Lines of Credit
Premier 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, Premier 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.
Premier'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 to
extend credit and standby letters of credit is represented by the contractual
amount of those instruments. A summary of Premier's commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Unfunded mortgage loan commitments................. $20,000,000 $31,968,000
Residential construction and commercial loan com-
mitments.......................................... 27,277,198 18,526,425
Commitments to extend credit....................... 49,987,828 20,387,000
Standby letters of credit.......................... 695,742 1,249,532
----------- -----------
$97,960,768 $72,130,957
=========== ===========
</TABLE>
SUMMARY OF LOAN EXPERIENCE
The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to the allowance. The factors that influence
management's judgment in determining the amount charged to operating expense
are past loan loss experience, composition of the loan portfolio, evaluation
of possible future losses, current economic conditions, and other relevant
facts. Premier's
52
<PAGE>
allowance for loan losses was approximately $2,404,000 at December 31, 1996
compared with $1,802,000 at December 31, 1995. The allowance for loan losses
is reviewed regularly based on management's evaluation of current risk
characteristics of the loan portfolio, as well as the impact of prevailing and
expected economic business conditions. Management considers the allowance for
loan loss adequate to cover possible loan losses on the loans outstanding.
Management has not allocated Premier's allowance for loan losses to specific
categories of loans. Based on management's best estimate, approximately 45% of
the allowance should be allocated to real estate loans, 40% to commercial and
financial loans, and 15% to consumer loans.
<TABLE>
<CAPTION>
PERCENT OF LOANS
IN EACH CATEGORY OF TOTAL LOANS
DECEMBER 31,
------------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Commercial.......................... 15% 17% 7% 9% 12%
Real estate......................... 76 72 80 72 67
Consumer............................ 9 11 13 19 21
------ ------ ------ ------ ------
100% 100% 100% 100% 100%
====== ====== ====== ====== ======
</TABLE>
The following table summarizes average loan balances for each year, changes
in the allowance for loan losses arising from loans charged off, recoveries on
loans previously charged off, additions to the reserve which have been charged
to operating expense, and the rate of net charge-offs during the period to
average loans.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
-------- -------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Average amount of loans out-
standing $183,367 $134,712 $90,640 $86,765 $83,905
Balance of allowance for loan
losses at beginning of year... 1,802 1,301 1,581 1,403 1,478
Charge offs:
Commercial and financial..... (51) (149) (204) (736) (349)
Real estate.................. (13) (181) (398) (125) (292)
Consumer..................... (88) (59) (132) (176) (421)
-------- -------- ------- ------- -------
(152) (389) (734) (1,037) (1,062)
-------- -------- ------- ------- -------
Recoveries:
Commercial and financial..... 78 132 80 67 21
Real estate.................. 34 83 32 28 20
Consumer..................... 44 43 57 113 45
-------- -------- ------- ------- -------
156 258 169 208 86
-------- -------- ------- ------- -------
Net (charge-offs), recoveries.. 4 (131) (565) (829) (976)
-------- -------- ------- ------- -------
Allowance acquired in business
combinations.................. -- 294 -- -- 460
-------- -------- ------- ------- -------
Additions to allowance charged
to operating expense during
year.......................... 598 338 285 1,007 441
-------- -------- ------- ------- -------
Balance of allowance for loan
losses at end of year......... $ 2,404 $ 1,802 $ 1,301 $ 1,581 $ 1,403
======== ======== ======= ======= =======
Ratio of net loans charged off
during the year to average
loans outstanding............. -- % 0.10% 0.62% 0.96% 1.16%
======== ======== ======= ======= =======
</TABLE>
Provision for Loan Loss
The provision for loan losses was $598,000 in 1996 as compared to $338,000
in 1995. Premier had net recoveries of $4,000 in 1996. The ratio of net
charge-offs to average loans in 1996 was at its lowest level in the last five
years. The provision expense is primarily related to the growth in loans of
$53,982,000.
53
<PAGE>
RESULTS OF OPERATIONS
Premier reported record earnings of $2,540,000 for the year ended December
31, 1996. This amount was an increase of $551,000 or 28% from the previous
year's net income of $1,989,000. Year to date earnings include unusual
expenses of $1,036,000. This figure includes merger expenses, data processing
conversion expenses, severance expenses, as well as the special SAIF fund
recapitalization assessment. On an after tax basis, these unusual items
totaled $854,000. Fourth quarter 1996 net income was $1,002,000, exclusive of
any unusual expense or income items.
Interest Income and Interest Expense
The following table sets forth the amount of Premier's average balances,
interest income, and interest expense for each category of interest-earning
assets and interest-bearing liabilities, average interest rates for interest-
earning assets and interest yields for interest-bearing liabilities, net
interest spread, and net yield on average interest-earning assets.
Distribution of Assets, Liabilities, and Stockholders' Equity Interest Rates
and Interest Differentials
<TABLE>
<CAPTION>
1996 1995 1994
--------------------------- --------------------------- ---------------------------
AVERAGE AVERAGE AVERAGE
YIELDS/ INCOME OR YIELDS/ INCOME OR YIELDS/ INCOME OR
BALANCES(1) EXPENSES RATES BALANCES(1) EXPENSES RATES BALANCES(1) EXPENSES RATES
----------- --------- ----- ----------- --------- ----- ----------- --------- -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-bearing depos-
its in banks........... $ 7,716 $ 381 4.94% $ 2,521 $ 119 4.72% $ 523 $ 18 3.44%
Taxable securities(4)... 37,185 2,284 6.14 41,683 2,735 6.56 34,020 1,743 5.12
Federal funds sold...... 10,902 592 5.43 9,481 560 5.91 9,977 451 4.52
Loans(2)................ 183,367 19,759 10.78 134,712 13,887 10.31 90,640 8,743 9.65
Allowance for loan
losses................. (2,122) (1,683) (1,509)
Cash and due from
banks.................. 7,982 10,978 5,689
Other assets............ 13,477 11,721 7,955
--------- --------- --------
Total.................. $ 258,507 $ 23,016 $ 209,413 $17,301 $147,295 $10,955
========= ======== ========= ======= ======== ======= ====
Total interest-earning
assets................. $ 239,170 9.62% $ 188,397 9.18% $135,160 8.11%
========= ===== ========= ===== ======== ====
Noninterest-bearing
demand................. $ 29,472 $ $ 24,936 $ $ 21,652
Interest-bearing
demand................. 50,993 1,577 3.09 37,833 1,283 3.39 36,407 1,082 2.97
Savings................. 8,515 252 2.96 10,438 278 2.66 11,048 327 2.96
Time.................... 114,961 6,838 5.95 78,736 4,504 5.72 53,551 2,364 4.41
--------- -------- ----- --------- ------- ----- -------- ------- ----
Total deposits......... 203,941 8,667 151,943 6,065 122,648 3,773
Borrowings.............. 28,096 2,615 9.31 32,714 2,216 6.77 5,371 339 6.31
Other liabilities....... 3,220 2,738 1,195
Stockholders' equi-
ty(3).................. 23,250 22,018 18,071
--------- -------- --------- ------- -------- -------
Total.................. $ 258,507 $ 11,282 $ 209,413 $ 8,281 $147,295 $ 4,112
========= ======== ========= ======= ======== =======
Total interest-bearing
liabilities............ $ 202,565 5.57% $ 159,721 5.18% $106,377 3.87%
========= ===== ========= ===== ======== ====
Net interest spread..... 4.05% 4.00% 4.24%
===== ===== ====
Net yield on average
interest- earning
assets................. $ 11,734 4.91% $ 9,020 4.79% $ 6,843 5.06%
======== ===== ======= ===== ======= ====
</TABLE>
- -------
(1)Average balances were determined using the daily average balances.
(2)Average loans include impaired loans and are stated net of unearned income.
Income on impaired loans is recognized on the cash basis.
(3)Average shareholders' equity is net of unrealized losses on securities
available-for-sale, net of taxes
(4)Average taxable securities represent securities available-for-sale and are
based on their fair values.
(5)Interest and fees on loans include $1,285,892, $902,787, and $685,034 of
loan fee income for the years ended December 31, 1996, 1995, and 1994.
54
<PAGE>
Net interest income increased by $2,714,000 during fiscal 1996. The
following table reflects the changes in net interest income resulting from
changes in interest rates and from asset and liability volume. The change in
interest attributable to rate has been determined by applying the change in
rate between years to average balances outstanding in the earlier year. The
change in interest due to volume has been determined by applying the rate from
the earlier year to change in average balances outstanding between years.
Thus, changes that are not solely due to rate or volume have been consistently
allocated between rate and volume.
<TABLE>
<CAPTION>
1995 TO 1996 1994 TO 1995
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN DUE TO CHANGE IN
------------------------ -------------------------
RATE VOLUME TOTAL RATE VOLUME TOTAL
------ ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Income from interest-
earning assets:
Interest and fees on
loans................. $ 654 $ 5,218 $ 5,872 $ 637 $ 4,507 $ 5,144
Interest on taxable
securities............ (168) (283) (451) 551 441 992
Interest on Federal
funds sold............ (50) 82 32 135 (26) 109
Interest on deposits in
banks................. 6 256 262 9 92 101
------ ------- ------- ------- ------- -------
Total interest
income.............. $ 442 $ 5,273 $ 5,715 $ 1,332 $ 5,014 $ 6,346
====== ======= ======= ======= ======= =======
Expense from interest-
bearing liabilities:
Interest on interest-
bearing deposits...... $ (116) $ 410 $ 294 $ 158 $ 43 $ 201
Interest on savings
deposits.............. 28 (54) (26) (32) (17) (49)
Interest on time
deposits.............. 186 2,148 2,334 827 1,313 2,140
Interest on other
borrowings............ 732 (333) 399 27 1,850 1,877
------ ------- ------- ------- ------- -------
Total interest
expense............. $ 830 $ 2,171 $ 3,001 $ 980 $ 3,189 $ 4,169
------ ------- ------- ------- ------- -------
Net interest income.. $ (388) $ 3,102 $ 2,714 $ 352 $ 1,825 $ 2,177
====== ======= ======= ======= ======= =======
</TABLE>
Non-Interest Income
Total non-interest income increased $3,702,000 in fiscal 1996 over fiscal
1995. This was primarily due to the increase in mortgage loan activity
resulting in an increase in related income of $2,934,000. Commercial finance
maintenance fees were up $515,000 in fiscal 1996 from fiscal 1995. The
increase in income of these business lines is a continuation of a trend which
began in 1994. In 1995, mortgage origination fees were up $4,683,000 and
commercial finance fees were up $432,000 over fiscal 1994. Management expects
these income streams to continue to grow in 1997.
Non-Interest Expense
Total non-interest expense increased $5,675,000 in fiscal 1996 over fiscal
1995. As discussed above, unusual expenses related to merger, conversion, and
special SAIF fees totaled $1,036,000. In addition, Premier acquired Premier
Bank in a purchase accounting transaction in April of 1995. An estimate of the
increase in expense of twelve months in 1996 versus eight months since
acquisition in 1995 is $870,000. Salary and commission expense was up
$2,591,000 in Premier Lending due to increased volume and the addition of a
new origination office and staff. Expenses in Premier Bank were up an
estimated $400,000 due to a full year of one new branch and six months of an
additional branch.
Non-interest expenses were up $5,036,000 in fiscal 1995 over fiscal 1994.
Salary and commission expense in Premier Lending was up $2,413,000 due
primarily to increases in volume. Premier Bank opened a new branch and Premier
Lending opened two additional offices in 1995.
55
<PAGE>
Income Taxes
Consolidated income taxes decreased in 1996 by $69,000 as compared to 1995.
Premier was able to utilize net operating loss ("NOL") carryforwards of
$237,000 in Premier Bank and Premier Lending which had been incurred and not
utilized in 1994 and 1995. The effective tax rate is higher in 1996 versus
1995 due to the non-deductibility of merger related expenses. A more complete
discussion and detailed schedule are contained in Note 10 of the Notes to
Consolidated Financial Statements.
RETURN ON EQUITY AND ASSETS
The following rate of return information for the years indicated is
presented below.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------- ------- --------
<S> <C> <C> <C>
Return on assets(1)........................... .98% .95% .20%
Return on equity(2)........................... 10.92 9.03 1.61
Cash dividend payout ratio(3)................. 96.15 2.76 105.00
Equity to assets ratio(4)..................... 8.99 10.51 12.27
</TABLE>
- --------
(1) Net income divided by average total assets
(2) Net income divided by average equity
(3) Cash dividends declared divided by net income
(4) Average equity divided by average total assets
In 1996, a dividend related to 1995 earnings was declared and paid in
January 1996. An additional dividend related to 1996 earnings was declared in
December 1996 and paid in January 1997. In addition, Premier Bancshares, Inc.,
which was acquired by Premier in 1996, incurred net losses in 1994 and 1995,
and had never paid a common stock dividend.
QUARTERLY FINANCIAL DATA
<TABLE>
<CAPTION>
1996
---------------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income........... $5,693 $5,787 $5,386 $6,150
Interest expense.......... 2,706 2,668 2,766 3,141
----------- ----------- ----------- ------------
Net interest income....... 2,987 3,119 2,620 3,009
Provision for loan
losses................... 129 202 132 135
----------- ----------- ----------- ------------
Net interest income after
provision for loan
losses................... 2,858 2,917 2,488 2,874
Noninterest income........ 2,557 2,763 2,917 3,618
Noninterest expense....... 4,324 4,776 5,201 5,070
----------- ----------- ----------- ------------
Income before income
taxes.................... 1,091 904 204 1,422
Income tax expense........ 325 229 97 418
Minority interest in net
income................... 3 3 4 2
----------- ----------- ----------- ------------
Net income................ $ 763 $ 672 $ 103 $ 1,002
=========== =========== =========== ============
Net income per share...... $ 0.32 $ 0.28 $ 0.04 $ 0.42
=========== =========== =========== ============
</TABLE>
The quarterly information reported on Forms 10-QSB by Premier for the
quarters ended March 30, 1996 and June 30, 1996 have been restated above to
reflect the business combination of First Alliance Bancorp, Inc. (predecessor
to Premier) with Premier Bancshares, Inc. which was consummated on August 31,
1996. The business combination was accounted for as a pooling of interests.
There were no other changes from previously reported amounts.
56
<PAGE>
BUSINESS OF CENTRAL AND SOUTHERN
GENERAL
Central and Southern was organized under the laws of the State of Georgia in
1980 and is a registered bank and thrift holding company. All of Central and
Southern's activities are conducted by its wholly-owned subsidiaries, 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") ("Central and Southern Bank" and "Central and Southern Bank
of North Georgia" are collectively referred to as the "Central and Southern
Banks"), which were organized as Georgia banking corporations in 1874 and
1926, respectively. Central and Southern Bank of North Georgia was formerly
known as The Central and Southern Bank of Greensboro until its name was
changed in 1996. On April 1, 1996, Central and Southern converted Central and
Southern Bank of North Georgia to a federal savings bank.
Both Central and Southern Banks are community-oriented, with particular
emphasis on retail banking, and offer such customary banking services as
consumer and commercial checking accounts, NOW accounts, savings accounts,
certificates of deposit, lines of credit and money transfers. The Central and
Southern Banks finance commercial and consumer transactions, make secured and
unsecured loans, and provide a variety of other banking services.
At December 31, 1996, Central and Southern had total consolidated assets of
approximately $226 million, total consolidated deposits of approximately $195
million and total consolidated shareholders' equity of approximately $24
million.
MARKETS
Central and Southern conducts banking activities through the Central and
Southern Banks primarily in Baldwin, Greene, Barrow, Hall and surrounding
counties of Georgia. Customers of the Central and Southern Banks are primarily
consumers and small businesses.
DEPOSITS
The Central and Southern Banks offer a full range of depository accounts and
services to both consumers and businesses. At December 31, 1996, the Central
and Southern Banks' deposits, totaling an aggregate of approximately $195
million, consisted of approximately $18 million in non-interest-bearing demand
deposits (9% of total deposits); approximately $41 million in interest-bearing
demand deposits (21% of total deposits); approximately $9 million in savings
deposits (5% of total deposits); approximately $88 million in time deposits in
amounts less than $100,000 (47% of total deposits); and approximately $39
million in time deposits of $100,000 or more (18% of total deposits).
LOANS
The Central and Southern Banks make both secured and unsecured loans to
individuals, firms and corporations, and both consumer and commercial lending
operations include various types of credit for the Central and Southern Banks'
customers. Secured loans include first and second real estate mortgage loans.
The Central and Southern Banks also make direct installment loans to consumers
on both a secured and unsecured basis.
57
<PAGE>
LENDING POLICY
The current lending strategy of the Central and Southern Banks is to make
loans only to local customers or to national or international firms doing
business locally. Unsecured loans normally will not made to persons who do not
reside or work in the Central and Southern Banks' primary trade areas. Secured
loans can be made to customers outside the Central and Southern Banks' 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 Baldwin County, in the case of Central and
Southern Bank, or in Greene, Barrow and Hall Counties, in the case of Central
and Southern Bank of North Georgia.
The Central and Southern Banks provide each lending officer with written
guidelines for lending activities. Lending authority is delegated by the Board
of Directors of each of the Central and Southern Banks 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.
EMPLOYEES
As of February 28, 1997, the Central and Southern Bank had 57 full-time
employees and 15 part-time employees. As of February 28, 1997, Central and
Southern Bank of North Georgia had 34 full-time employees and 9 part-time
employees. Central and Southern has no employees. Neither Central and Southern
Bank nor Central and Southern Bank of North Georgia is a party to any
collective bargaining agreement, and management of the Central and Southern
Banks believes that the employee relations at the Central and Southern Banks
are good.
COMPETITION
The banking business is highly competitive. The Central and Southern Banks
compete with other banks, many of which are substantially larger and have
greater financial resources than the Central and Southern Banks. In
particular, Central and Southern Bank competes with four other banks in
Baldwin County, and Central and Southern Bank of North Georgia competes with
two other banks in Greene County. The Central and Southern Banks also compete
with other financial service organizations, including finance companies,
insurance companies, credit unions and certain governmental agencies. To the
extent that the Central and Southern Banks must maintain non-interest-earning
reserves against deposits, they 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.
PROPERTIES
The executive offices of Central and Southern and the main banking office of
Central and Southern Bank are located in a 22,800 square-foot facility at 150
West Greene Street, Milledgeville, Georgia. Both the building and the land for
this facility, which includes parking and a five lane drive-in teller
operation, are owned by Central and Southern Bank. Central and Southern Bank
has a full-service branch located on North Columbia Street in Milledgeville,
which includes drive-in facilities and an automated teller machine linked to
the HONOR and CIRRUS networks. The land and building for the branch are owned
by Central and Southern Bank.
Central and Southern owns a parcel of land and a 7,000 square foot building
in Winder, Georgia, which is leased to Central and Southern Bank of North
Georgia as a bank branch.
58
<PAGE>
Central and Southern Bank of North Georgia owns the land and a 9,000 square-
foot building, including drive-in teller lanes, for its banking facility
located at 201 South Main Street, Greensboro, Georgia, approximately 35 miles
from Milledgeville.
Central and Southern leases its office in Gainesville, Georgia pursuant to a
lease that terminates in August of 1999.
None of the real properties owned by Central and Southern is subject to any
encumbrances.
LEGAL PROCEEDINGS
There are no material pending proceedings to which Central and Southern is a
party or of which any of its properties are subject.
59
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CENTRAL AND SOUTHERN
The following selected financial data is derived from the consolidated
financial statements of Central and Southern. The following data should be
read in conjunction with Central and Southern's consolidated financial
statements and the related notes contained elsewhere in this Joint Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest income............ $ 17,236 $ 16,274 $ 16,769 $ 20,938 $ 28,986
Interest expense........... 8,956 8,381 8,916 11,307 16,766
Net interest income........ 8,280 7,893 7,853 9,631 12,220
Provision for possible loan
losses.................... (1,016) (1,038) -- 2,725 11,842
Other income............... 1,263 934 1,660 1,110 2,237
Other expense.............. 6,975 6,683 7,499 8,707 6,796
Net earnings (loss)........ 2,954 2,559 1,617 (111) (2,983)
Per share data:
Net earnings (loss)...... 0.81 0.68 0.44 (0.05) (0.88)
Cash dividends declared.. 0.22 0.175 0.03 0.10
Note payable to bank....... 1,600 250 300
Average total equity....... 22,917 21,480 19,435 19,002 19,104
Average total assets....... 212,833 200,579 227,412 259,651 305,332
Ratios:
Net earnings (loss) to
average assets.......... 1.39% 1.28% 0.71% (0.04)% (0.98)%
Net earnings (loss) to
average equity.......... 12.89% 11.91% 8.32% (0.58)% (15.61)%
Dividend payout ratio.... 27.16% 25.82% 6.82% N/A N/A
Average equity to average
assets.................. 10.77% 10.71% 8.55% 7.32% 6.26%
</TABLE>
<TABLE>
<CAPTION>
1996 1995 % CHANGE
------------- ------------- --------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Statement of condition:
Assets............................. $ 225,786 $ 207,849 8.63%
Loans, net of unearned interest.... 126,433 114,071 10.84%
Deposits........................... 195,165 180,474 8.14%
Stockholders' equity............... 23,905 22,660 5.49%
Statement of earnings:
Net interest income.............. 8,280 7,893 4.90%
Provision for loan losses........ (1,016) (1,038) (2.12)%
Other income..................... 1,263 934 35.22%
Other expense.................... 6,975 6,683 4.37%
Net earnings................... 2,954 2,559 15.46%
Per share data
Book value......................... 6.52 6.10 7.21%
Net earnings....................... 0.81 0.68 18.88%
Cash dividends declared............ 0.22 0.175 25.71%
Performance ratios
Return on average total assets..... 1.39% 1.28%
Return on average total equity..... 12.89% 11.91%
</TABLE>
60
<PAGE>
CENTRAL AND SOUTHERN MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
BACKGROUND
Central and Southern was organized under the laws of the State of Georgia in
1980 and is a registered bank and thrift holding company. All of the Central
and Southern's activities are conducted by its wholly-owned subsidiaries, 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") ("Central and Southern Bank" and "Central and Southern Bank
of North Georgia" are collectively referred to as the "Central and Southern
Banks"), which were organized as Georgia banking corporations in 1874 and
1926, respectively. Central and Southern Bank of North Georgia was formerly
known as The Central and Southern Bank of Greensboro until its name was
changed in 1996. On April 1, 1996, Central and Southern converted Central and
Southern Bank of North Georgia to a federal savings bank.
Both Central and Southern Banks are community-oriented, with particular
emphasis on retail banking, and offer such customary banking services as
consumer and commercial checking accounts, NOW accounts, savings accounts,
certificates of deposit, lines of credit and money transfers. The Central and
Southern Banks finance commercial and consumer transactions, make secured and
unsecured loans, and provide a variety of other banking services.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is an important factor in the financial condition of Central and
Southern and affects Central and Southern's ability to meet the borrowing
needs and deposit withdrawal requirements of its customers. Assets, consisting
principally of loans and investment securities, are funded by customer
deposits, purchased funds and borrowed funds.
The investment portfolio is one of Central and Southern's primary sources of
liquidity. Maturities of securities provide a constant flow of funds which are
available for cash needs. Investment securities that mature within one year
total $6.4 million. However, mortgage-backed securities and securities with
call provisions create cash flows earlier than the contractual maturities.
Estimates of prepayments on mortgage-backed securities and call provisions on
state and municipals increase the forecasted cash flow from the investment
portfolio within one year to approximately $18 million. Maturities in the loan
portfolio also provide a steady flow of funds. Central and Southern's
liquidity also continues to be enhanced by a relatively stable core deposit
base. At December 31, 1996, the loan to deposit ratio was 65%.
Central and Southern continues to be well-capitalized by both industry and
regulatory definitions. A detailed review of the regulatory capital ratios is
set forth in note 18 of the Consolidated Financial Statements.
ASSET/LIABILITY MANAGEMENT
The following table details average balances of interest-earning assets and
interest-bearing liabilities, the fully taxable equivalent amount of interest
earned/paid, and the fully taxable equivalent yield/rate for each of the three
years ended December 31, 1996. The loan averages include non-accrual loans.
61
<PAGE>
<TABLE>
<CAPTION>
1996 1995 1994
------------------------- -------------------------- --------------------------
YIELD/ YIELD/ YIELD/
AVG. BAL. INT. RATE AVG. BAL. INT. RATE AVG. BAL. INT. RATE
--------- ------- ------ --------- -------- ------ --------- -------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net of unearned
interest............... $117,251 $11,975 10.21% $ 108,273 $ 11,190 10.34% $ 113,712 $ 11,125 9.78%
Interest-bearing
deposits other banks... 1,397 46 3.29% 1,404 55 3.92% -- --
Investment securities:
Taxable................ 58,624 3,626 6.19% 58,906 3,531 5.99% 70,596 3,957 5.61%
Non-taxable............ 9,892 901 9.11% 9,894 1,017 10.28% 13,690 1,380 10.08%
Federal funds sold...... 17,242 952 5.52% 14,250 828 5.81% 18,813 776 4.12%
-------- ------- --------- -------- --------- --------
Total interest earning
assets................. $204,406 $17,500 8.56% 192,727 $ 16,621 8.62% $ 216,811 $ 17,238 7.95%
Allowance for loan loss-
es..................... (4,274) (4,299) (4,732)
Other assets............ 12,701 12,151 15,333
-------- --------- ---------
Total assets............ $212,833 $ 200,579 $ 227,412
LIABILITIES AND STOCKHOLDERS' EQUITY
Savings and interest-
bearing
Demand deposits........ $ 48,126 $ 1,588 3.30% $ 42,627 $ 1,319 3.09% $ 53,242 $ 1,523 2.86%
Time deposits........... 121,678 7,227 5.94% 118,398 6,988 5.90% 128,829 7,054 5.48%
Repurchase agreements... 1,252 65 5.22% 1,379 74 5.36% 6,704 339 5.06%
Note payable to bank.... 1,100 76 6.94% -- -- -- --
-------- ------- --------- -------- --------- --------
Total interest-bearing
liabilities............ 172,156 $ 8,956 5.20% 162,404 $ 8,381 5.16% $ 188,775 $ 8,916 4.72%
Demand deposits......... 16,414 15,561 18,004
Other liabilities....... 1,346 1,134 1,198
-------- --------- ---------
Total liabilities....... 189,916 179,099 207,977
Total stockholders' eq-
uity................... 22,917 21,480 19,435
-------- --------- ---------
Total liabilities and
stockholders' equity... $212,833 $ 200,579 $ 227,412
Net interest income..... $ 8,544 $ 8,240 $ 8,322
Net interest margin..... 4.18% 4.28% 3.84%
Net interest spread..... 3.36% 3.46% 3.23%
</TABLE>
Interest Rate Sensitivity
Interest rates play a major part in the net interest income of a financial
institution. The sensitivity to rate changes is known as "interest rate risk."
The repricing of interest-earning assets and interest-bearing liabilities can
influence the changes in net interest income. As part of Central and
Southern's asset/liability management program, the timing of repricing assets
and liabilities is referred to as Gap management. It is the policy of Central
and Southern to maintain a Gap ratio in the one-year time horizon of .80 to
1.20. The table below has two measures of Gap, regulatory and management
adjusted. The regulatory Gap considers only contractual maturities or
repricings. The management adjusted Gap considers such things as prepayments
on certain interest rate sensitive assets and the circumstances under which
core deposits are repriced. Although interest-bearing transaction accounts are
available to reprice in the three-month window, historical experience shows
these deposits to be more stable over the course of one year. The management
adjusted Gap indicates Central and Southern to be somewhat neutral in relation
to changes in market interest rates.
62
<PAGE>
GAP ANALYSIS
<TABLE>
<CAPTION>
REGULATORY DEFINED
---------------------------
3-MONTH 6-MONTH 1-YEAR
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Rate Sensitive Assets (RSA)................. $83,304 $100,567 $124,746
Rate Sensitive Liabilities (RSL)............ 86,802 114,821 149,493
------- -------- --------
RSA minus RSL (Gap)......................... $(3,498) $(14,254) $(24,747)
======= ======== ========
Gap Ratio (RSA/RSL)......................... .96 .88 .84
======= ======== ========
<CAPTION>
MANAGEMENT DEFINED
---------------------------
3-MONTH 6-MONTH 1-YEAR
------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Rate Sensitive Assets (RSA)................. $86,770 $107,500 $135,145
Rate Sensitive Liabilities (RSL)............ 66,078 98,242 137,059
------- -------- --------
RSA minus RSL (Gap)......................... $20,692 $ 9,258 $ (1,914)
======= ======== ========
Gap Ratio (RSA/RSL)......................... 1.32 1.10 .99
======= ======== ========
</TABLE>
Central and Southern uses simulation analysis to monitor changes in net
interest income due to changes in market interest rates. The simulation of
rising, declining, and most likely interest rate scenarios allow management to
monitor and adjust interest rate sensitivity to minimize the impact of market
interest rate swings. Each month management updates all available data
concerning cash flows of assets and liabilities, changes in market interest
rates, and expectations as to new volumes of loans.
CHANGES IN FINANCIAL CONDITION
Securities Portfolio
The carrying values of investment securities at the indicated dates are
presented below:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. Treasury and U.S. Gov't agencies............ $21,150 $23,996 $25,344
State and municipals............................. 9,735 9,578 10,248
Mortgage-backed securities....................... 32,626 29,558 35,179
Other............................................ 645 475 491
------- ------- -------
Total.......................................... $64,156 $63,607 $71,262
======= ======= =======
</TABLE>
Maturities
Investment portfolio policy stresses quality and liquidity. At December 31,
1996, the average maturity of U. S. Treasury and government agency securities
was 2.9 years and the average maturity of obligations of states and political
subdivisions was 4.98 years. Mortgage-backed securities had an estimated
average maturity of 12.50 years due to purchases of adjustable rate mortgage
securities which adjust annually. Overall, the average maturity of the
portfolio was 8.19 years using contractual maturities and slightly greater
than 2.40 years using expected maturities. Expected maturities differ from
contractual maturities because borrowers have the right to call or prepay
obligations with or without call or prepayment penalties. Securities purchased
during the last few years have primarily short to intermediate term
maturities.
63
<PAGE>
The following table shows the contractual maturities of investment
securities at December 31, 1996 and the average yields (for all obligations on
a fully taxable basis assuming a 34% tax rate) on such securities:
INVESTMENT SECURITIES MATURING
<TABLE>
<CAPTION>
AFTER ONE WITHIN AFTER FIVE WITHIN
WITHIN ONE YEAR FIVE YEARS TEN YEARS AFTER TEN YEARS
---------------- ----------------- ------------------ ----------------
AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD AMOUNT YIELD
-------- ------- --------- ------- --------- -------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S.
Gov't agencies......... $ 2,410 6.24% $ 18,741 6.48% $ -- -- $ -- --
State and municipal..... 2,094 11.13% 3,615 9.17% 3,774 9.30% 252 11.50%
Mortgage-backed securi-
ties................... 1,925 4.93% 11,685 6.93% 5,160 6.01% 13,856 6.21%
-------- --------- --------- --------
Total................. $ 6,429 6.87% $ 34,041 6.93% $ 8,934 7.48% $ 14,108 6.45%
======== ========= ========= ========
</TABLE>
The estimated fair market value of Central and Southern's investment
portfolio at December 31, 1996, was $422,000 above amortized cost. Market
values vary significantly as interest rates change. Management expects normal
maturities in the portfolio to meet and exceed liquidity requirements.
Of the tax-free securities rated by Moody's Investors Service, Inc., 80% are
rated "A" or better. Twenty percent of the tax-free bond portfolio is non-
rated. These non-rated securities are principally issued by various political
subdivisions within the State of Georgia. The portfolio is carefully monitored
to assure there is no unreasonable concentration of securities in the
obligations of a single debtor.
LOAN PORTFOLIO
Types of Loans
The amount of loans outstanding by loan type at the indicated dates are
shown in the following tables:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural............... $ 22,260 $ 25,178 $ 26,103 $ 32,574 $ 29,108
Real estate-construction.... 27,696 21,747 13,271 3,263 9,291
Real estate-mortgage........ 64,145 51,104 41,204 36,703 48,281
Sales finance............... 1,314 5,822 18,233 43,952 86,398
Consumer installment........ 11,091 10,554 10,397 11,146 12,503
-------- -------- -------- -------- --------
126,506 114,405 109,208 127,638 185,581
Less:
Unearned income........... (73) (334) (1,478) (4,886) (12,523)
Allowance for loan
losses................... (4,164) (4,190) (4,313) (4,681) (5,106)
-------- -------- -------- -------- --------
Loans, net.............. $122,269 $109,881 $103,417 $118,071 $167,952
======== ======== ======== ======== ========
</TABLE>
Of the loans maturing after one year, approximately $49,000,000 have fixed
rates and approximately $23,000,000 have variable rates. The maturity of real
estate construction and commercial, financial and agricultural loans
outstanding at December 31, 1996 are as follows:
64
<PAGE>
Maturities
<TABLE>
<CAPTION>
COMMERCIAL,
REAL ESTATE FINANCIAL
CONSTRUCTION AND AGRICULTURAL
------------ ----------------
(IN THOUSANDS)
<S> <C> <C>
In one year or less............................... $24,181 $10,485
After one year but within five years.............. 1,457 10,735
After five years.................................. 2,058 1,040
------- -------
Total........................................... $27,696 $22,260
======= =======
</TABLE>
DEPOSITS
The following table summarizes average deposits and related weighted average
rates for each of the three years in the period ended December 31, 1996.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------
1996 1995 1994
------------- ------------- -------------
AMOUNT RATE AMOUNT RATE AMOUNT RATE
-------- ---- -------- ---- -------- ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-interest-bearing demand de-
posits.......................... $ 16,414 -- $ 15,561 -- $ 18,004 --
Savings and interest-bearing de-
mand deposits................... 48,126 3.30% 42,627 3.09% 53,242 2.86%
Time deposits.................... 121,678 5.94% 118,398 5.90% 128,829 5.48%
-------- -------- --------
Total average deposits......... $186,218 4.73% $176,586 4.70% $200,075 4.29%
</TABLE>
The maturities of certificates of deposit of $100,000 or more as of December
31, 1996 are presented below:
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
3 months or less........................................... $10,613
Over 3 through 6 months.................................... 14,000
Over 6 through 12 months................................... 8,290
Over 12 months............................................. 6,297
-------
$39,200
</TABLE>
OTHER BORROWINGS
Central and Southern had short-term borrowings of $5,021,000 at December 31,
1996. These borrowings represent $3,421,000 of repurchase agreements and
$1,600,000 line of credit. The repurchase agreements include seven day
automatic renewal agreements as well as daily automatic renewal agreements
with interest rates paying from 75 to 50 basis points under the daily Federal
funds rate. The weighted average interest rate was 4.65% at December 31, 1996.
The repurchase agreements maximum amount during the year was $3,500,000 with a
weighted average interest rate of 4.70%. The line of credit has a variable
rate indexed to the prime rate and was at 7.50% at December 31, 1996.
Central and Southern had short-term borrowings of $2,600,000 at December 31,
1995. These borrowings represented two repurchase agreements and one line of
credit. The repurchase agreements were seven day automatic renewal agreements
with interest rates paying from 75 to 50 basis points under the daily Federal
funds rate. The weighted average interest rate was 5.35% at December 31, 1995.
The repurchase agreements maximum amount during the year 1995 was $6,715,000
with a weighted average interest rate of 5.34%. The line of credit of $250,000
has a variable rate indexed to the prime rate and was at 7.75% at December 31,
1995.
65
<PAGE>
CREDIT ANALYSIS
Non-performing loans/assets
The following table presents non-performing loans at December 31, 1996,
1995, 1994, 1993 and 1992. Non-performing loans consist of loans which are
contractually past due 90 days or more as to interest or principal payments
(past-due loans) and loans accounted for on a non-accrual basis (non-accrual
loans).
<TABLE>
<CAPTION>
PAST- NON-
DUE LOANS ACCRUAL LOANS
--------- -------------
(IN THOUSANDS)
<S> <C> <C>
December 31, 1996................................. $-- $ 201
December 31, 1995................................. 12 796
December 31, 1994................................. 205 1,060
December 31, 1993................................. 99 2,761
December 31, 1992................................. 674 2,879
</TABLE>
Total interest income recognized on non-performing loans for the year ended
December 31, 1996 was $104,000. Additional interest income of $20,000 would
have been recorded in 1996 if all non-performing loans had performed in
accordance with their original terms.
Non-performing assets (non-performing loans and other real estate owned) of
Central and Southern peaked in June, 1993. They have steadily declined since
that time. Non-performing assets have declined by $1,828,000, or 77% since
December 31, 1994.
The following table analyzes non-performing assets for each of the past
three years.
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Loans past due 90 days or more................... $ $ 12 $ 205
Non accrual loans................................ 201 796 1,060
-------- ------ ------
Total non-performing loans..................... 201 808 1,265
Other real estate................................ 346 594 1,110
-------- ------ ------
Total non-performing assets.................... $ 547 $1,402 $2,375
======== ====== ======
Non-performing loans/Total loans, net of
unearned........................................ 0.16% 0.71% 1.17%
Non-performing assets/Total assets............... 0.24% 0.67% 1.16%
Loan loss allowance/Total loans, net of
unearned........................................ 3.29% 3.67% 4.00%
Loan loss allowance/Non-performing loans......... 2,072.74% 518.56% 340.95%
</TABLE>
The allowance for loan losses as a percentage of non-performing loans
(including loans past due ninety days or more) was 2,073% at December 31,
1996, compared to 519% at December 31, 1995. Management considers the current
level of the allowance for loan losses more than adequate to absorb losses
from loans in the portfolio. Management's determination of the adequacy of the
allowance for loan losses, which is based on the factors and risk
identification procedures, requires the use of judgments and estimations that
may change in the future. Unfavorable changes in the factors used by
management to determine the adequacy of the allowance, or the availability of
new information, could cause the allowance for loan losses to be increased or
decreased in future periods.
Generally, Central and Southern's market areas have not experienced rapid
increases in real estate property values or significant overbuilding.
Therefore, in management's opinion, real estate loan collateral values in
Central and Southern's market areas should not be as vulnerable to significant
deterioration as would other market areas which have experienced rapidly
increasing property values and significant overbuilding. However, collateral
values, are difficult to estimate and are subject to change depending on
economic conditions, the supply of and demand for properties, and other
factors. Central and Southern attempts to mitigate the risky nature of real
estate lending by adhering to conservative loan underwriting standards and by
diversifying the portfolio within its market area and within industry groups.
66
<PAGE>
SUMMARY OF LOAN LOSS EXPERIENCE
All loans carry some degree of risk. The risk is reflected in the
consolidated financial statements by the allowance for loan losses, the amount
of loans charged off and the provision for loan losses charged to operating
expense. It is Central and Southern's policy that when a loss is identified,
it is charged against the loan loss allowance in the current period. The
policy regarding recognition of losses requires immediate recognition of a
loss if significant doubt exists as to principal repayment. In addition,
consumer installment credit is generally recognized as a loss when it becomes
90 days or more past due, or the consumer has filed for protection under the
bankruptcy laws. A loss will not be recognized if the underlying collateral or
the customer's financial position makes a loss improbable.
Central and Southern's provision for loan losses is a reflection of actual
losses experienced during the year and management's judgment as to the
adequacy of the allowance for loan losses to absorb future losses. Some of the
factors considered by management in determining the amount of the provision
and resulting allowance include: (1) credit reviews of individual loans; (2)
gross and net loan charge-offs in the current year; (3) growth in the loan
portfolio; (4) the current level of the allowance in relation to total loans
and to historical loss levels, (5) past due and non-accruing loans; (6)
collateral values of properties securing loans; (7) the composition of the
loan portfolio (types of loans); and (8) management's estimate of future
economic conditions and the resulting impact on Central and Southern. Central
and Southern made $1,016,000 of negative provisions to the allowance for loan
losses during 1996.
The following table summarizes loan balances at the end of each year,
average loans outstanding and charge-offs and recoveries during the year and
activity in the allowance for loan losses for each of the last five years:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Amount of loans, net of
unearned income and
allowance for loan losses at
end of year................. $122,269 $109,881 $103,417 $118,071 $167,952
======== ======== ======== ======== ========
Average loans, net of un-
earned income............... $117,252 $108,273 $113,712 $145,016 $184,560
======== ======== ======== ======== ========
Allowance for loan losses at
beginning of year........... $ 4,190 $ 4,313 $ 4,681 $ 5,106 $ 2,513
-------- -------- -------- -------- --------
Loans charged off:
Commercial, financial, and
agricultural.............. 17 167 826 838 1,544
Real estate loans.......... 36 231 741 694 3,911
Consumer installment....... 310 838 1,613 3,723 5,086
-------- -------- -------- -------- --------
Total loans charged off.. 363 1,236 3,180 5,255 10,541
-------- -------- -------- -------- --------
Recoveries of loans previ-
ously charged off:
Commercial, financial, and
agricultural.............. 117 324 493 148 23
Real estate loans.......... 166 92 210 115 91
Consumer installment....... 1,070 1,735 2,109 1,842 1,178
-------- -------- -------- -------- --------
Total loans recovered.... 1,353 2,151 2,812 2,105 1,292
-------- -------- -------- -------- --------
Net (recoveries) charge-
offs........................ (990) (915) 368 3,150 9,249
-------- -------- -------- -------- --------
Provision for loan losses.... (1,016) (1,038) -- 2,725 11,842
-------- -------- -------- -------- --------
Allowance for loan losses at
end of year................. $ 4,164 $ 4,190 $ 4,313 $ 4,681 $ 5,106
======== ======== ======== ======== ========
Ratio of net charge-offs
(recoveries) to average net
loans outstanding........... (.84)% (.85)% .32% 2.17% 5.01%
</TABLE>
67
<PAGE>
Allowance for Loan Loss
A coordinated effort is undertaken to identify risks in the loan portfolio
for management purposes and to establish the loan loss provision and resulting
allowance. A regular, formal and ongoing loan review is conducted to identify
loans with unusual risks. The primary responsibility for this review rests
with the management of the individual banks. Their work is supplemented with
reviews by Central and Southern's internal audit staff. Bank regulatory
agencies provide additional levels of review. This process provides
information which helps in assessing the quality of the portfolio, assists in
the prompt identification of problems and potential problems and aids in
deciding if a loan represents a loss which should be recorded immediately or a
risk for which an allowance should be maintained. Management believes this
continuous effort will identify the majority of potential problem loans and
recognize their impact on future earnings.
If, as a result of Central and Southern's loan review and evaluation
procedures, it is determined that payment of interest on a commercial or real
estate loan is questionable, it is Central and Southern's policy to reverse
interest previously accrued on the loan against interest income. Interest on
such loans is thereafter recorded on a "cash basis" and is included in
earnings only when actually received in cash and when full payment of
principal is no longer doubtful. A loan can be reinstated to full accrual
status when and if the borrower's financial condition and payment performance
can justify sustainable performance of all conditions and terms of the loan.
Central and Southern has allocated the allowance for loan losses according
to the amount deemed to be reasonably necessary at each year end to provide
for losses projected to be incurred within the categories of loans set forth
in the table below, based on the previous year's gross charge-offs in each
category as a percentage of total charge-offs. The components of the allowance
for loan losses for each of the past five years, and the percent of loans in
each category to total loans are presented below.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance allocation by loan category:
Commercial, financial and agricul-
ture................................. $ 562 $1,089 $ 690 $ 702 $ 510
Consumer installment.................. 2,823 2,125 3,062 2,247 3,116
Real estate........................... 779 976 561 1,732 1,480
------ ------ ------ ------ ------
$4,164 $4,190 $4,313 $4,681 $5,106
====== ====== ====== ====== ======
Percent of loans by category to total
loans:
Commercial, financial and agricul-
ture................................. 18% 22% 24% 26% 16%
Consumer installment.................. 10% 14% 26% 43% 53%
Real estate........................... 72% 64% 50% 31% 31%
------ ------ ------ ------ ------
100% 100% 100% 100% 100%
====== ====== ====== ====== ======
</TABLE>
Although it is Central and Southern's policy to immediately charge off as
loss all loan amounts judged to be uncollectible, historical experience
indicates that certain losses exist in the loan portfolio which have not been
specifically identified. To anticipate and provide for these unidentifiable
losses, the allowance for loan losses is established by charging the provision
for loan losses against current earnings. No portion of the resulting
allowance is in any way allocated or restricted to any individual loan or
group of loans. The entire allowance is available to absorb losses from any
and all loans.
Under normal circumstances, this provision is used to establish the
allowance for loan losses. Actual loan losses, net of recoveries, are charged
directly to the allowance. Provision recorded is a reflection of actual losses
experienced during the year and management's judgment as to the adequacy of
the allowance to absorb future losses.
Central and Southern did not make a provision for loan losses during 1996.
Instead, Central and Southern made negative provisions which amounted to
$1,016,000 for the year. The negative provisions were based on the net
recovery stream of previously charged off loans which amounted to $990,000 for
the year.
68
<PAGE>
Central and Southern did not make a provision for loan losses during 1995.
Instead, Central and Southern made negative provisions which amounted to
$1,038,000 for the year. The negative provisions were based on the net
recovery stream of previously charged off loans which amounted to $915,000 for
the year.
Several years ago, Central and Southern experienced credit problems with its
concentration of loans in dealer sales finance paper on automobiles. During
1990 and 1991 the charge off experience for Central and Southern was over 2%
of average loans outstanding. In 1992, regulators placed Cease and Desist
Orders on the Central and Southern Banks (lifted in 1994) and subsequent
analysis of the loan portfolio determined that the Central and Southern Banks
had not recognized the risk within their portfolios. In 1992, Central and
Southern made a provision of $11.8 million to the allowance for loan losses
and charged off $10.5 million in loans. Under new management, Central and
Southern discontinued its sales finance operation in the spring of 1993 which
has resulted in a contraction of the loan portfolio since that time. Total
sales finance loans have declined $85 million since the end of 1992.
Management's analysis of the allowance for loan losses, non-performing
assets, and net recoveries on a monthly basis concluded that the allowance was
more than adequate given the risk resident within the loan portfolio. The
allowance as a percent of total loans is 3.29%, non-performing loans to total
loans are .16%, and net recoveries as a percent of average loans (net of
unearned interest) were .84% for the year.
Management does not anticipate having any provision for loan losses during
1997. Central and Southern will most likely make negative provisions during
1997 to balance the level of the allowance for loan losses in relation to non-
performing loans, net charge-offs, and projected loan growth.
RESULTS OF OPERATIONS
Interest Income and Interest Expense
Net interest income in 1996 on a tax equivalent basis increased for the
first time in four years as Central and Southern continued its rebuilding
process and expanded its market area by opening three new branches during
1996. The average balance sheet for 1996 grew $12 million due to loan demand
in Central and Southern's new markets. The net interest margin declined by 10
basis points as Central and Southern's cost of funds increased faster than
overall yields on earning assets. Management anticipates improvement in the
net interest margin for 1997 as loan demand increases continue.
The table below illustrates the changes in the net interest margin over the
past four years.
<TABLE>
<CAPTION>
1996 1995 1994 1993
---------------- ---------------- ---------------- ----------------
% OF % OF % OF % OF
EARNING EARNING EARNING EARNING
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
-------- ------- -------- ------- -------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income......... $ 17,236 $ 16,274 $ 16,769 $ 20,938
Tax-equivalent
adjustment............. 264 347 469 625
-------- -------- -------- --------
Interest income, taxable
equivalent............. 17,500 8.56% 16,621 8.62% 17,238 7.95% 21,563 8.74%
Interest expense........ 8,956 4.38% 8,381 4.35% 8,916 4.11% 11,307 4.58%
-------- ---- -------- ---- -------- ---- -------- ----
Net interest income,
taxable equivalent..... $ 8,544 4.18% $ 8,240 4.28% $ 8,322 3.84% $ 10,256 4.16%
======== ==== ======== ==== ======== ==== ======== ====
Average earning assets.. $204,406 $192,727 $216,811 $246,743
</TABLE>
69
<PAGE>
The following table shows a summary of the changes in interest income and
interest expense on a fully taxable equivalent basis resulting from changes in
volume and changes in rates for each category of interest-earning assets and
interest-bearing liabilities for 1996/1995 and 1995/1994. Changes not solely
attributable to a change in rate or volume are allocated proportionately
relative to the total change of rate and volume.
<TABLE>
<CAPTION>
1996 VERSUS 1995 1995 VERSUS 1994
------------------------- ------------------------
INCREASE (DECREASE) INCREASE (DECREASE)
DUE TO CHANGE IN: DUE TO CHANGE IN:
------------------------- ------------------------
VOLUME YIELD/ VOLUME YIELD/
OUTSTANDING RATE TOTAL OUTSTANDING RATE TOTAL
----------- ------ ----- ----------- ------ -----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income on:
Deposits with other
banks.................... $ -- $ (9) $ (9) $ 55 $ -- $ 55
Loans..................... 915 (130) 785 (546) 611 65
Investment securities:
Taxable................... (17) 112 95 (687) 261 (426)
Non-taxable............... (116) (116) (390) 27 (363)
Federal funds sold........ 163 (39) 124 (217) 269 52
----- ----- ---- ------- ------ -----
Total interest income... 1,061 (182) 879 (1,785) 1,168 (617)
----- ----- ---- ------- ------ -----
Interest expense on:
Saving and interest-
bearing demand deposits.. 178 91 269 (321) 117 (204)
Time deposits............. 195 44 239 (594) 528 (66)
Repurchase agreements..... (7) (2) (9) (284) 19 (265)
Notes payable to bank..... 76 -- 76 -- -- --
----- ----- ---- ------- ------ -----
Total interest expense.. 442 133 575 (1,199) 664 (535)
----- ----- ---- ------- ------ -----
Net interest income... $ 619 $(315) $304 $ (586) $ 504 $ (82)
===== ===== ==== ======= ====== =====
</TABLE>
A sound credit policy and careful, consistent credit review are vital to a
successful lending program. The Central and Southern Banks operate under
written loan policies which attempt to maintain a consistent lending
philosophy, provide sound traditional credit decisions, provide an adequate
return and render service to the communities in which they are located. Credit
reviews and loan examinations help confirm that the Central and Southern Banks
are adhering to these loan policies.
The Central and Southern Banks make both secured and unsecured loans to
individuals, firms and corporations, and both consumer and commercial lending
operations include various types of credit for the Central and Southern Banks'
customers. Secured loans include first and second real estate mortgage loans.
The Central and Southern Banks also make direct installment loans to consumers
on both a secured and unsecured basis.
From 1975 through 1992, The Central and Southern Bank's principal source of
loans was the purchase of sales finance loans for new and used motor vehicles
and to a lesser extent, mobile homes. This portfolio grew to $89,000,000
(including unearned interest) by December 31, 1991. Under new management, The
Central and Southern Banks discontinued the operation in April, 1993. This has
resulted in the sales finance portfolio declining to $1,314,000 by December
31, 1996.
Non-interest Income
Total non-interest income increased $329,000 in 1996, or 35% as compared to
1995. The majority of the increase was due to a $228,000 securities loss in
1995. However, service charges on deposits increased in 1996 as well as
mortgage loan origination fees due to deposit fees being revised and mortgage
originations increasing.
70
<PAGE>
Total non-interest income decreased $726,000 in 1995 as compared to 1994.
The majority of the decrease was due to the sale in 1995 of approximately
$4,000,000 in collateralized mortgage obligations which created a loss of
$228,000 compared to a gain on the sale of securities in 1994 of $241,000.
Additionally, other income declined $215,000 during 1995 as the Company had a
gain in 1994 from the disposition of collateral from a bankrupt customer.
Non-interest Expense
Total non-interest expense increased $292,000 in 1996, or 4% compared to
1995. Central and Southern opened three new branches during 1996 which added
to expense. Management anticipates continued increases in non-interest expense
during 1997 as the expansion into new markets will require additional
expenses.
Several areas which registered significant changes for the year were:
. Compensation expense increased $388,000 for the year due to Central and
Southern hiring staff for new branches.
. Net occupancy increased $116,000 as the new branches became operational
during the year.
. Professional service fees declined $105,000 as problem assets and their
resolution have required less assistance from professionals.
. Other real estate expense was reduced approximately $130,000 as
properties were sold and levels and quality of the properties maintained
became more manageable.
Total non-interest expense decreased $816,000 in 1995, or 11% compared to
1994.
Several areas which registered significant changes for the 1995 year were:
. Employee benefits increased $192,000 for the year due to Central and
Southern recognizing certain pension plan costs related to anticipated
termination of the pension plan during 1996.
. Legal fees were reduced over $106,000 as the reliance on counsel for
determinations concerning problem loans and the overall number of such
loans has declined.
. Professional service fees declined $99,000 as problem assets and their
resolution have required less assistance from professionals outside
Central and Southern.
. Federal Deposit Insurance Corporation premiums were down $300,000 as
risk rated premiums were reduced as well as refunds of premiums received
from the FDIC.
. Other real estate expense was reduced approximately $134,000 as
properties were sold and levels and quality of the properties maintained
became more manageable.
Income Tax
Central and Southern experienced pre-tax operating earnings of $3,584,000
for the year 1996 which resulted in a tax provision of $630,000. The effective
rate of 18% resulted from a reduction of a valuation allowance against a
portion of the deferred tax assets and tax-exempt income. For more information
on income taxes, see note 9 of the consolidated financial statements.
Inflation
Inflation has an impact on financial assets which can be readily identified
in a market value economy. However, the past several years have seen inflation
fall to a level which has had a nominal effect on the banking industry.
RETURN ON EQUITY AND ASSETS
Central and Southern maintains a ratio of stockholders' equity to total
assets that is adequate relative to industry standards. Central and Southern's
ratio of stockholders' equity to total assets was 10.59% at December 31, 1996,
compared to 10.90% at December 31, 1995 and 9.55% at December 31, 1994.
Central and Southern
71
<PAGE>
has initiated a stock repurchase program that allows the purchase of up to
170,000 shares of Central and Southern's common stock for treasury purposes.
At December 31, 1996, Central and Southern had repurchased 123,494 shares of
common stock.
Central and Southern and its subsidiary banks are required to comply with
capital adequacy standards established by the Federal Reserve and the FDIC.
Currently, there are two basic measures of capital adequacy: risk-based
measure and leverage measure. 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 enhance the value of holding liquid assets. The
resulting capital ratios represent capital as a percentage of total risk-
weighted assets and off-balance sheet items. Recently, the Federal Reserve and
the FDIC proposed that interest rate risk be considered in computing risk-
based capital ratios.
The minimum standard for the ratio of total capital to risk-weighted assets
is 8%. At least 50% of that capital level must consist of common equity,
undivided profits and noncumulative perpetual preferred stock, less goodwill
and certain other intangibles ("Tier I capital"). The remainder ("Tier II
capital") may consist of a limited amount of other preferred stock, mandatory
convertible securities, subordinated debt and a limited amount of the
allowance for loan losses. The sum of Tier I capital and Tier II capital is
"total risk-based capital."
The Federal Reserve and the FDIC also adopted regulations which supplement
the risk-based guidelines to include a minimum leverage ratio of 3% of Tier I
capital to total assets less goodwill (the "leverage ratio"). Depending upon
the risk profile of the institution and other factors, the regulatory agencies
may require a leverage ratio 1% to 2% higher than the minimum 3% level.
The following table summarizes Central and Southern's capital ratios at
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
MINIMUM
1996 1995 REQUIREMENTS
----- ----- ------------
<S> <C> <C> <C>
Tier 1 Capital leverage ratio.................. 11.49% 10.59% 3%
Tier 1 Risk-based capital ratio................ 15.22% 17.15% 4%
Tier 2 Risk-based capital ratio................ 1.25% 1.25%
Total Risk-based capital ratio................. 16.47% 18.40% 8%
</TABLE>
72
<PAGE>
QUARTERLY RESULTS
Central and Southern had a profit of $668,000 for the fourth quarter 1996.
Return on average assets was 1.19%, return on average equity was 10.94%. The
net interest margin was 4.20% which compared to fourth quarter 1995's 4.23%,
showed a decline of three basis points.
<TABLE>
<CAPTION>
1996 QUARTER ENDED
------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income.................. $4,239 $4,184 $4,356 $4,457
Net interest income.............. 2,056 1,974 2,092 2,158
Provision for loan losses........ (300) (260) (270) (186)
Earnings before income taxes..... 1,014 965 920 685
Net earnings..................... 742 782 762 668
Net earnings per share........... .20 .21 .21 .19
<CAPTION>
1995 QUARTER ENDED
------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income.................. $3,968 $4,007 $4,087 $4,212
Net interest income.............. 1,957 1,887 1,990 2,059
Provision for loan losses........ (200) (300) (250) (288)
Earnings before income taxes..... 790 806 928 658
Net earnings..................... 608 631 668 652
Net earnings per share........... .16 .17 .18 .17
</TABLE>
73
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
GENERAL
The following unaudited pro forma condensed combined financial statements
are presented assuming the Merger will be accounted for as a pooling of
interests and reflect the combination of the historical consolidated financial
statements of Premier and Central and Southern. The pro forma condensed
combined statements of income and balance sheet assume the Merger was
consummated on January 1, 1996. The unaudited pro forma condensed combined
financial statements do reflect expenses of approximately $550,000 expected to
be incurred by Premier and Central and Southern in connection with the Merger.
In addition, 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
Central and Southern's combined results of operations actually would have been
if the Merger had occurred on January 1, 1996.
PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CENTRAL AND
PREMIER SOUTHERN PRO FORMA
BANCSHARES HOLDING ADJUSTMENTS PRO FORMA
INC. COMPANY DEBIT (CREDIT) COMBINED
---------- ----------- -------------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks....... $ 11,634 $ 7,907 $ $ 19,541
Interest-bearing deposits in
banks........................ 1,447 1,250 2,697
Federal funds sold............ 21,680 21,216 42,896
Securities available-for-
sale......................... 35,154 64,578 99,732
Loans held for sale........... 24,408 -- 24,408
Loans......................... 186,856 126,433 313,289
Less allowance for loan loss-
es........................... 2,404 4,164 6,568
-------- -------- ------ --------
Loans, net.................. 184,452 122,269 $ 0 306,721
-------- -------- ------ --------
Premises and equipment........ $ 6,635 5,930 12,565
Goodwill and other intangi-
bles......................... 2,277 686 2,821
Other assets.................. 6,471 1,950 8,651
-------- -------- ------ --------
Total assets.............. $294,158 $225,786 $ 0 $519,944
======== ======== ====== ========
DEPOSITS
Noninterest-bearing demand.... $ 30,184 $ 18,088 $ $ 48,272
Interest-bearing demand....... 57,563 40,982 98,545
Savings....................... 8,302 9,313 17,615
Time deposits................. 140,684 126,782 267,466
-------- -------- ------ --------
Total deposits............ $236,733 $195,165 $431,898
Securities sold under repur-
chase agreements............. $ 8,443 $ 3,421 $ 11,864
Other borrowings.............. 21,777 1,600 23,377
Other liabilities............. 3,916 1,695 (550)(b) 6,161
-------- -------- ------ --------
Total liabilities......... 270,869 201,881 (550) 473,300
-------- -------- ------ --------
Minority interest in subsidi-
ary.......................... 14 14
-------- -------- ------ --------
Common stock.................. 2,354 3,777 (1,896)(a) 8,027
Capital surplus............... 20,450 6,492 1,896 (a) 25,046
Retained earnings............. 640 14,491 550 (b) 14,581
Unrealized gains (losses) on
securities available-for-
sale, net of tax............. (169) 278 109
-------- -------- ------ --------
23,275 25,038 550 47,763
Less treasury stock, at cost.. (1,133) (1,133)
-------- -------- ------ --------
23,275 23,905 550 46,630
-------- -------- ------ --------
Total liabilities and
stockholders' equity..... $294,158 $225,786 $ 0 $519,944
======== ======== ====== ========
</TABLE>
See "Notes to Pro Forma Condensed Combined Financial Statements."
74
<PAGE>
PRO FORMA CONDENSED COMBINED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
CENTRAL AND
PREMIER SOUTHERN PRO FORMA
BANCSHARES HOLDING ADJUSTMENTS PRO FORMA
INC. COMPANY DEBIT (CREDIT) COMBINED
---------- ----------- -------------- ----------
<S> <C> <C> <C> <C>
Interest income............ $ 23,015 $ 17,236 $ $ 40,251
Interest expense........... 11,281 8,956 20,237
---------- ---------- --- ----------
Net interest income...... 11,734 8,280 0 20,014
Provision for loan losses.. 598 (1,016) (418)
---------- ---------- --- ----------
Net interest income after
provision for loan loss-
es........................ 11,136 9,296 0 20,432
---------- ---------- --- ----------
Other income:
Service charges on
deposit accounts........ 960 758 1,718
Other service charges,
commissions and fees.... 1,376 -- 1,376
Gain on sale of loans.... 4,720 -- 4,720
Security transactions,
net..................... 279 -- 279
Mortgage loan origination
fees.................... 135 -- 135
Gain on sale of other
real estate............. 4,182 -- 4,182
Other.................... 203 504 707
---------- ---------- --- ----------
11,855 1,262 13,117
---------- ---------- --- ----------
Other expenses:
Salaries and employee
benefits................ 11,870 3,938 15,808
Occupancy and equipment
expense................. 2,408 882 3,290
Other operating
expenses................ 5,093 2,154 550 7,797
---------- ---------- --- ----------
19,371 6,974 550 26,895
---------- ---------- --- ----------
Income before income tax-
es........................ 3,620 3,584 550 6,654
Income tax expense......... 1,069 630 1,699
---------- ---------- --- ----------
Income before minority
interest in net income of
subsidiary................ 2,551 2,954 550 4,955
---------- ---------- --- ----------
Minority interest in net
income of subsidiary...... 11 -- 11
---------- ---------- --- ----------
Net income................. $ 2,540 $ 2,954 550 $ 4,944
---------- ---------- --- ----------
Net income per share of
common stock.............. $ 1.06 $ 0.81 $ 0.66
========== ========== ==========
Average shares outstand-
ing....................... 2,385,397 3,664,604 7,959,269
========== ========== ==========
Net income per share after
1.8055 stock split........ $ 0.59
==========
Average shares outstanding
after stock split......... 4,306,835
==========
</TABLE>
See Notes to Pro Forma Condensed Combined Financial Statements.
75
<PAGE>
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined balance sheet and statement of income as of
and for the year ended December 31, 1996 has been prepared based upon the
historical consolidated balance sheets and statements of income, which gives
effect to the merger of Premier with Central and Southern accounted for as a
pooling-of-interests, based on the exchange of one share of Premier for each
outstanding common share of Central and Southern. The pro forma financial
statements include all adjustments necessary to reflect the acquisition on a
"pooling-of-interests" basis. The pro forma combined financial statements
should be read in conjunction with the accompanying historical consolidated
financial statements of Premier and Central and Southern and notes thereto
included elsewhere in this Joint Proxy Statement/Prospectus.
Provided below are the pro forma adjustments necessary to reflect the
business combination of Premier and Central and Southern accounted for as a
pooling-of-interests. Earnings per common and common equivalent share were
computed by dividing net income by the weighted average number of shares of
common stock and common stock equivalents outstanding during the year,
restated for the Premier stock split.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
(a) Surplus
Common Stock...................................... $ 1,896 $ 1,896
(To record retroactive stock split)
(b) Other operating expenses
Other liabilities................................. 550 550
(To record combined merger expenses)
</TABLE>
76
<PAGE>
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 Central and
Southern.
GENERAL
Premier is a bank and thrift holding company registered with the Federal
Reserve under the BHC Act and is registered with the OTS. As such, Premier and
its non-bank subsidiaries are subject to the supervision, examination, and
reporting requirements of the BHC Act and the regulations of the Federal
Reserve and are subject to regulation, supervision, examination and reporting
requirements of the OTS. As a bank and thrift holding company, Central and
Southern is also registered with the Federal Reserve and the OTS and is
subject to regulation, supervision and examination by, and the reporting
requirements of the Federal Reserve and the OTS.
The BHC Act requires every bank holding company to obtain the prior approval
of the Federal Reserve before: (i) it may acquire direct or indirect ownership
or control of any voting shares of any bank if, after such acquisition, the
bank holding company will directly or indirectly own or control more than 5%
of the voting shares of the bank; (ii) it or any of its subsidiaries, other
than a bank, may acquire all or substantially all of the assets of any bank;
or (iii) it may merge or consolidate with any other bank holding company.
Similar federal statutes require savings and loan holding companies and other
companies to obtain prior approval of the OTS before acquiring director
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, and any other bank holding company
located in Georgia may now acquire a bank located in any other state, and any
bank holding company located outside Georgia may lawfully acquire any Georgia-
based bank, regardless of state law to the contrary, in either case subject to
certain deposit-percentage, aging requirements, and other restrictions. The
Interstate Banking Act also generally provides that, after June 1, 1997,
national and state-chartered banks may branch interstate through acquisitions
of banks in other states. By adopting legislation prior to that date, a state
has the ability either to "opt in" and accelerate the date after which
interstate branching is permissible or "opt out" and prohibit interstate
branching altogether.
In response to the Interstate Banking Act, the Georgia 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
77
<PAGE>
Georgia and all non-Georgia banks and bank holding companies owning or
acquiring banks in Georgia the right to merge any lawfully acquired bank into
an interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish de novo branches on a limited basis beginning July 1, 1996.
Beginning July 1, 1998, the number of de novo branches which may be
established will no longer be limited.
The BHC Act generally prohibits 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 holding company or its
subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or such ownership or control constitutes a
serious risk to the financial safety, soundness, or stability of any bank
subsidiary of that bank holding company.
Each of the bank and thrift subsidiaries of Premier and Central and Southern
is a member of the Federal Deposit Insurance Corporation (the "FDIC"), and as
such, its deposits are insured by the FDIC to the maximum extent provided by
law. Each such subsidiary is also subject to numerous state and federal
statutes and regulations that affect its business, activities, and operations,
and each is supervised and examined by one or more state or federal bank
regulatory agencies.
First Alliance Bank and Central and Southern Bank of Georgia are subject to
regulation, supervision, and examination by the FDIC and the Georgia
Department. Premier Bank and Central and Southern Bank of North Georgia are
subject to regulation, supervision, and examination by the OTS and the FDIC.
The federal banking regulator for each of the bank and thrift subsidiaries of
Premier and Central and Southern, as well as the Georgia Department in the
case of First Alliance Bank and Central and Southern Bank of Georgia,
regularly examine the operations of First Alliance Bank, Premier, 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 Central and Southern 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, First Alliance Bank
and Alliance Finance. The principal sources of cash flow to Central and
Southern, including cash flow to pay dividends to its shareholders, are
dividends from the Central and Southern Banks. There are statutory and
regulatory limitations on the payment of dividends by Premier Bank and First
Alliance Bank to Premier and The Central and Southern Bank of Georgia and the
Central and Southern Bank of North Georgia to Central and Southern,
respectively, as well as by Premier and Central and Southern to their
shareholders.
78
<PAGE>
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
that paying dividends that deplete a depository institution's capital base to
an inadequate level would be an unsafe and unsound banking practice. Under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a
depository institution may not pay any dividend if payment would cause it to
become undercapitalized or if it already is undercapitalized. See "--Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At December 31, 1996, under dividend restrictions imposed under federal and
state laws, Premier Bank and First Alliance Bank, without obtaining
governmental approvals, could declare aggregate dividends to Premier of
approximately $1,345,000. At December 31, 1996, retained earnings available
from the Central and Southern Banks to pay dividends totaled approximately
$2.0 million.
The payment of dividends by Premier and Central and Southern 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 Central and Southern 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, noncumulative perpetual
preferred stock, and a limited amount of cumulative perpetual preferred stock,
less goodwill and certain other intangible assets ("Tier 1 Capital"). The
remainder may consist of subordinated debt, other preferred stock, and a
limited amount of loan loss reserves ("Tier 2 Capital"). At December 31, 1996,
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 10.79% and 9.69%, respectively. At December 31, 1996, Central and
Southern'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 16.47% and 15.22%, 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 December 31, 1996 was 7.27%.
Central and Southern's Leverage Ratio
79
<PAGE>
at December 31, 1996 was 11.49%. 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.
Premier Bank, First Alliance Bank, The Central and Southern Bank of Georgia
and the Central and Southern Bank of North Georgia 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.
In determining compliance with the capital standards, all of a thrift's
investments in and extensions of credit to any subsidiary engaged in activity
not permissible for a national bank are deducted from the savings association
capital. The required deduction from capital for investments in subsidiaries
engaged in activities not permitted for a national bank was phased in through
July 1, 1996.
Each of the subsidiary depository institutions was in compliance with
applicable minimum capital requirements as of December 31, 1996. Neither
Premier nor Central and Southern 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, proposed an amendment to the risk-based capital standards that would
calculate the change in an institution's net economic value attributable to
increases and decreases in market interest rates and would require banks with
excessive interest rate risk exposure to hold additional amounts of capital
against such exposures. The OTS has already included an interest-rate risk
component in its risk-based capital guidelines for savings associations that
it regulates.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, Premier and Central and Southern 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 Central and
Southern 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
80
<PAGE>
agency to maintain the capital of a banking subsidiary will be assumed by the
bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution
or (ii) any assistance provided by the FDIC to any commonly controlled FDIC-
insured depository institution "in danger of default." "Default" is defined
generally as the appointment of a conservator or receiver, and "in danger of
default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is
subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. Upon consummation of the Merger, Premier Bank and
Central and Southern Bank will be subject to these cross-guarantee provisions.
As a result, any loss suffered by the FDIC in respect of any of these
subsidiaries would likely result in assertion of the cross-guarantee
provisions, the assessment of such estimated losses against the depository
institution's banking or thrift affiliates, and a potential loss of the
Surviving Corporation's investment in such other subsidiary depository
institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions
in the three undercapitalized categories, the severity of which will depend
upon the capital category in which the institution is placed. Generally,
subject to a narrow exception, FDICIA requires the banking regulator to
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation
the relevant capital level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of
10% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage
Ratio of 4.0% or greater is considered to be adequately capitalized. A
depository institution that has a Total Risk-Based Capital Ratio of less than
8.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, or a Leverage Ratio
of less than 4.0% is considered to be undercapitalized. A depository
institution that has a Total Risk-Based Capital Ratio of less than 6.0%, a
Tier 1 Risk-Based Capital Ratio of less than 3.0%, or a Leverage Ratio of less
than 3.0% is considered to be significantly undercapitalized, and an
institution that has a tangible equity capital to assets ratio equal to or
less than 2.0% is deemed to be critically undercapitalized. For purposes of
the regulation, the term "tangible equity" includes core capital elements
counted as Tier 1 Capital for purposes of the risk-based capital standards,
plus the amount of outstanding cumulative perpetual preferred stock (including
related surplus), minus all intangible assets with certain exceptions. A
depository institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meets its capital restoration plan, subject to certain
limitations. The obligation of a controlling holding company under FDICIA to
fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
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<PAGE>
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 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 December 31, 1996, First Alliance Bank, Premier Bank and the Central and
Southern Banks had the requisite capital levels to qualify as "well
capitalized."
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, and replaced a transitional
system that the FDIC had utilized for the 1993 calendar year, assigns an
institution to one of three capital categories: (i) well capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based
on a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to
which it is assigned. Under the final risk-based assessment system, as well as
the prior transitional system, there are nine assessment risk classifications
(i.e., combinations of capital groups and supervisory subgroups) to which
different assessment rates are applied. Assessment rates for members of both
the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund
("SAIF") for the first half of 1995, as they had during 1994, ranged from 23
basis points (0.23% of deposits) for an institution in the highest category
(i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of
deposits) for an institution in the lowest category (i.e., "undercapitalized"
and "substantial supervisory concern"). These rates were established for both
funds to achieve a designated ratio of reserves to insured deposits (i.e.,
1.25%) within a specified period of time.
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<PAGE>
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. Thrift industry
representatives argued that this significant premium disparity resulted in
savings associations having to operate at a competitive disadvantage to their
BIF insured bank counterparts.
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, the
record date established in the original drafts of the legislation. 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.
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. The SAIF special assessment was due by November
27, 1996. Premier Bank's portion of this special assessment amounted to
$202,000. Premier Bank accrued this amount in the quarter ended September 30,
1996, as mandated by the Financial Accounting Standards Board that ruled that
the SAIF special assessment should be recorded as an ordinary non-interest
expense for the quarter ended September 30, 1996. As a BIF insured savings
institution The Central and Southern Bank of North Georgia was not subject to
this special assessment.
In addition, DIFA mandates the merger of the SAIF and BIF, effective January
1, 1999, but only if no insured depository institution is a savings
association on that date. The combined deposit insurance fund would be called
the "deposit insurance fund" or "DIF."
Prior to DIFA, federal regulators and thrift industry trade groups were
predicting that a default would occur on the bonds issued by the Financing
Corporation ("FICO") as early as 1998, as SAIF-assessable deposits continued
to decline. DIFA amends the Federal Home Loan Bank Act to impose the FICO
assessment against both SAIF and BIF deposits beginning after December 31,
1996. But the assessment imposed on insured depository institutions with
respect to any BIF-assessable deposit will be assessed at a range equal to
one-fifth (1/5) of the rate (approximately 1.3 basis points) of the
assessments imposed on insured depository institutions with respect to any
SAIF-assessable deposit (approximately 6.7 basis points). The FICO assessment
for 1996 was paid entirely by SAIF-insured institutions. BIF-insured banks
will pay the same FICO assessment as SAIF-insured institutions beginning as of
the earlier of December 31, 1999, or the date as of which the last savings
association ceases to exist.
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<PAGE>
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is
in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
The FDIA, as amended by the FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation and fees and benefits. In general, the guidelines require,
among other things, appropriate systems and practices to identify and manage
the risks and exposures specified in the guidelines. The guidelines prohibit
excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director, or principal shareholders. The federal banking agencies determined
that stock valuation standards were not appropriate. In addition, the agencies
adopted regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable
compliance plan or fails in any material respect to implement an acceptable
compliance plan, the agency must issue an order directing action to correct
the deficiency and may issue an order directing other actions of the types to
which an undercapitalized institution is subject under the "prompt corrective
action" provisions of FDICIA. See "--Prompt Corrective Action." If an
institution fails to comply with such an order, the agency may seek to enforce
such order in judicial proceedings and to impose civil money penalties. The
federal bank regulatory agencies also proposed guidelines for asset quality
and earnings standards.
DEPOSITOR PREFERENCE
The Omnibus Budget Reconciliation Act of 1993 provides that deposits and
certain claims for administrative expenses and employee compensation against
an insured depository institution would be afforded a priority over other
general unsecured claims against such an institution in the "liquidation or
other resolution" of such an institution by any receiver.
CERTAIN APPLICABLE THRIFT REGULATIONS
Premier Bank and The Central and Southern Bank of North Georgia, as thrift
institutions, are 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
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<PAGE>
and hospitals, and 200% of investments in loans for low-to-moderate-income
housing and certain other community oriented investments.
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 December 31, 1996, approximately 75.6% of Premier Bank's assets were
invested in Qualified Thrift Investments as currently defined. At December 31,
1996, approximately 80.42% of Central and Southern Bank of North Georgia's
assets were invested in Qualified Thrift Investments, as currently defined.
Liquidity Requirements. Thrift institutions, including Premier Bank and
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, Premier Bank and Central and Southern
Bank of North Georgia, F.S.B. 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
Central and Southern Bank of North Georgia at December 31, 1996, was 37.64%.
The liquidity ratio of Premier Bank at December 31, 1996 was 8.83%.
REPORT ON FORM 10-K
Premier's Annual Report on Form 10-K for the fiscal year ended December 31,
1996, as filed until 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.P.,
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 consolidated financial statements of Central and Southern 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 auditing and accounting.
OPINIONS
The legality of the shares of the Premier Common Stock to be issued in the
Merger and certain income tax consequences of the Merger will be passed upon
by Womble Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia.
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<PAGE>
PREMIER ANNUAL MEETING MATTERS
ELECTION OF DIRECTORS--PROPOSAL 2
The members of the Board of Directors of Premier are elected by the
shareholders. The Board of Directors of Premier presently consists of eight
members.
The Board of Directors has nominated the eight incumbent directors listed
below for re-election as directors of Premier to serve a one-year term that
will expire at the 1998 Annual Meeting of Shareholders or when their
successors are elected and qualified. It is intended that each proxy solicited
on behalf of the Board of Directors will be voted only for the election of the
nominees designated below. At this time, the Board of Directors knows of no
reason why a nominee might be unable to serve, but if that should occur before
the Meeting, it is intended that the proxy will be voted for the election of
such other person or persons as the Board of Directors may recommend.
The following table sets forth for each director nominee (i) the person's
name, (ii) his or her age at March 1, 1997, (iii) the year he or she was first
elected as a director of Premier (or its predecessor), and (iv) his or her
positions with Premier other than as a director.
THE PREMIER BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES LISTED
BELOW.
<TABLE>
<CAPTION>
YEAR FIRST
NAME AGE ELECTED CURRENT POSITION WITH COMPANY
- ---- --- ---------- -----------------------------
<S> <C> <C> <C>
N. Michael Anderson......... 49 1993 Director
James L. Coxwell, Sr........ 55 1988 Director
William M. Evans, Jr........ 45 1993 Director
James E. Freeman............ 60 1988 Director
Robin R. Howell............. 32 1992 Director
Billy H. Martin............. 55 1993 Director
J. Edward Mulkey, Jr........ 58 1992 Director and President
Darrell D. Pittard.......... 49 1993 Chairman and Chief Executive Officer
</TABLE>
There are no arrangements or understandings between Premier and any person
pursuant to which any of the above persons have been or will be elected a
director. Each of the nominees has consented to being named in this Joint
Proxy Statement/Prospectus and to serve as a director of Premier if elected.
The affirmative vote of a majority of all votes cast at the meeting by the
holders of Premier Common Stock is required for the election of the eight
nominees standing for election. Management of Premier has no reason to believe
that any nominee will not serve if elected.
If the above directors nominated by the Board of Directors are elected as
directors of Premier and the Merger is approved, the Board of Directors will
fill the vacancies on the Premier Board of Directors resulting from the
increased number of directors so that the number of directors of Premier will
consist of the nominees named above and Robert C. Oliver, Albert F. Gandy,
George S. Carpenter, Jr., Donald N. Ellis, John H. Ferguson, C. Steve McQuaig
and Thomas E. Owen, Jr. (collectively, the "Additional Directors"). Each of
the Additional Directors have consented to being named in this Joint Proxy
Statement/Prospectus and to serve as a director of Premier if the Merger is
consummated.
During 1996, Premier's Board of Directors held 12 meetings. Each director
attended at least 75% of the aggregate of (i) the total number of meetings of
the Premier Board and (ii) the total number of meetings held by committees of
the Premier Board of which the director was a member. Premier has a standing
Audit Committee, Compensation Committee and Executive Committee. The members
of the Audit Committee are James L. Coxwell (chairman) and William M. Evans,
Jr. The Audit Committee is responsible for reviewing and making
recommendations regarding Premier's employment of independent auditors, the
annual audit of Premier's financial statements, and Premier's internal
accounting policies and practices. The Audit Committee met seven times in
1996.
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The members of the Executive Committee are James E. Freeman, William M.
Evans, Jr., Billy H. Martin, J. Edward Mulkey, Jr. and Darrell D. Pittard. The
Executive Committee exercises all powers of the Board of Directors in the
management of the business affairs of Premier. The Executive Committee met 17
times in 1996.
The Compensation Committee has been assigned the functions of approving and
monitoring the renumeration arrangements for the executive officers of Premier
and the stock option grants under Premier's stock option plans. The members of
the Compensation Committee are N. Michael Anderson, Robin R. Howell, Billy H.
Martin and two additional members, Jo S. Hill and George T. Hovis who serve on
the Board of Directors of Premier Bank and Premier Lending respectively. The
Compensation Committee met one time in 1996.
Management of Premier
The members of the Board of Directors of First Alliance Bank, Premier Bank,
Premier Lending and Alliance Finance Corporation 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 March 28, 1997, (iii) the year he was first
elected as an officer of Premier (or its predecessor), and (iv) his positions
with Premier, First Alliance Bank and Premier Bank.
<TABLE>
<CAPTION>
YEAR
FIRST
NAME AGE ELECTED POSITION WITH PREMIER OR SUBSIDIARIES
---- --- ------- -------------------------------------
<C> <C> <S> <C>
Darrell D. Pittard 49 1993 Chairman of the Board and Chief Executive Officer of Premier
Edward Mulkey, Jr. 58 1992 President and Chief Operating Officer of Premier and
Premier Bank
Frank H. Roach 45 1992 Chief Financial Officer and Executive Vice President of Premier
George S. Phelps 44 1996 President of Premier Lending Corporation
Michael W. Lane 47 1996 Executive Vice President of Premier Lending Corporation
</TABLE>
Biographies of Directors and Executive Officers of Premier
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, at which time the stock
of Prime Bancshares, Inc. was traded on the American Stock Exchange.
J. Edward Mulkey, Jr., has served as President of Premier and First Alliance
Bank since 1992. From 1987 until 1992 when First Peoples Bank of Cobb and
Commercial Exchange Bank were merged to form Premier, Mr. Mulkey served as
President of First Peoples Bank of Cobb.
Frank H. Roach currently serves as Executive Vice President and Chief
Financial Officer of Premier and has served as an officer of Premier and First
Alliance Bank since 1992. From 1974 to 1992, Mr. Roach served in various
capacities including Group Vice President and Controller of First American
Bank, Atlanta, Georgia.
Michael W. Lane has served as 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
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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.
George S. Phelps has served as President of Premier Lending since April 1995
when Premier Bancshares, Inc. acquired Allatoona Federal Savings Bank. Mr.
Phelps was Senior Vice President at Allatoona Federal Savings Bank and was
responsible for mortgage lending from 1991 to April 1995.
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.
James E. Freeman has served on the Board of Directors since 1988. Mr.
Freeman has been President of Kenworth of Atlanta, a truck dealership since
1992.
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.
Robin R. Howell has been a member of the Board of Directors since 1992. Ms.
Howell has served as Vice President of Delta Life Insurance Company since
1993.
William M. Evans, Jr. has been a member of the Board of Directors since
1993. Mr. Evans has served as President of William Evans and Associates, Inc.,
a real estate developer since 1978.
Biographies of Additional Directors
BIOGRAPHIES
Robert C. Oliver, age 48, has been 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.
John H. Ferguson, age 53, has been a Director of Central and Southern since
1980. Dr. Ferguson was elected as secretary of Central and Southern in 1987.
Dr. Ferguson is an orthodontist.
Albert F. Gandy, age 63, has been 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.
George S. Carpenter, Jr., age 66, has been Director of Central and Southern
since 1980. Mr. Carpenter is an attorney.
Donald N. Ellis, age 52, has been 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.
C. Steve McQuaig, age 47, has been a Director of Central and Southern since
1984. Dr. McQuaig is a physician and President of Milledgeville Ophthalmology
Associates, P.C.
Thomas E. Owen, Jr., age 66, has been a Director of Central and Southern
since 1986. Mr. Owen is President and Chief Operating Officer of Protective
Laundry and Cleaners, Inc.
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Executive Compensation
The following table provides certain summary information concerning
compensation paid or accrued by Premier and its subsidiaries to or on behalf of
its Chief Executive Officer for the years indicated and for one other executive
officer of Premier who earned over $100,000 in salary and bonus during fiscal
1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
-------------------------------- ------------
SECURITIES
OTHER UNDERLYING
ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTED(#) COMPENSATION
- --------------------------- ---- -------- ------- --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Darrell D. Pittard....... 1996 $175,000 $51,640 $14,400(2) 0
Chairman and Chief
Executive 1995 $138,000 $84,488 $ 4,100(2) 10,000
Officer 1994 $124,500 $ 0 $ 800(2) 0
J. Edward Mulkey, Jr..... 1996 $131,250 $25,000 $ 2,500 $
President and Chief
Operating 1995 $127,502 $35,000 $ 0 5,000 $6,767(3)
Officer 1994 $125,004 $15,000 $ 0 0 $6,400(4)
Michael W. Lane.......... 1996 $110,000 $20,524 $ 2,600 0
Executive Vice President
of 1995 $ 95,000 $32,808 $ 600 5,500
Premier Lending
Corporation 1994 $ 75,000 $ 0 $ 0 0
George S. Phelps......... 1996 $ 96,000 $27,372 $ 1,600 0
President of Premier
Lending 1995 $ 54,560 $30,744 $ 1,000 3,500
Corporation 1994 $ 49,440 $28,216 $ 0 0
</TABLE>
- --------
(1) Does not reflect non-cash compensation in the form of personal benefits,
the value of which did not exceed the lesser of $50,000 or 10% of salary
and bonus for any fiscal year to which such benefits pertain.
(2) Consists of Directors' Fees.
(3) Consists of $3,600 for life insurance premiums and a $3,167 401(k) plan
matching contribution.
(4) Consists of $3,600 for life insurance premiums and a $2,800 401(k) plan
matching contribution.
There were no stock option grants to the named executive officers during
fiscal 1996. The following table sets forth information concerning the options
held by Messrs. Pittard, Mulkey, Lane and Phelps at December 31, 1996. Neither
Messrs. Pittard, Mulkey, Lane nor Phelps exercised any stock options during
fiscal 1996.
FISCAL 1996 YEAR-END OPTION HOLDINGS AND VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
DECEMBER 31, 1996 DECEMBER 31, 1996
------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Darrell D. Pittard......... 18,055 -- $108,736(1) --
J. Edward Mulkey, Jr....... 9,028 -- $ 31,890(2) --
Michael W. Lane............ 9,730 -- $ 59,805(1) --
George S. Phelps........... 6,319 -- $ 38,058(1) --
</TABLE>
- --------
(1) Calculated by subtracting the exercise price ($5.54) from $11.5625, the
closing price of Premier's Common Stock as reported by NASDAQ Small Cap
Market on December 31, 1996, the last day of fiscal 1996 on which the
Common Stock was traded, and multiplying the difference by the number of
shares underlying the option.
(2) Calculated by subtracting the exercise price ($8.03) from $11.5625, the
closing price of Premier Common Stock as reported by NASDAQ Small Cap
Market on December 31, 1996, the last day of fiscal 1996 on which the
Common Stock was traded, and multiplying the difference by the number of
shares underlying the option.
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Compensation of Directors
All of the members of the Board of Directors of Premier receive $1,000 per
meeting as a retainer for their service as directors. The Board holds regularly
scheduled quarterly meetings and calls additional meetings from time to time.
Directors who serve on committees of the board also receive $100 per committee
meeting.
Stock Option Plans
Premier has adopted or assumed obligations under three stock option plans,
the First Alliance Bancorp, Inc. 1995 Stock Option Plan (the "First Alliance
Plan"), the Premier Lending Corporation 1993 Employee Stock Option Plan (the
"Premier Employee Plan") and the Premier Lending Corporation Directors Stock
Option Plan (the "Premier Directors Plan"). The First Alliance Plan (now
maintained by Premier) provides for the grant of options to purchase up to
150,000 shares of Common Stock at the discretion of the Board of Directors of
Premier. The options that may be granted under the First Alliance Plan shall be
designated as either Incentive Stock Options or Nonqualified Stock Options. The
exercise price for each option granted under the First Alliance Plan shall be
determined by the Compensation Committee of the Board of Directors at the time
the option is granted. In no event shall the exercise price for an Incentive
Stock Option be less than 100% of the Fair Market Value of the Common Stock on
the date the option is granted. The term of each option shall be determined by
the Stock Option Plan Committee at the time the option is granted; provided,
however, that no option shall be exercisable after ten years from the date such
option was granted.
The Premier Employee Plan provides for the grant of options to purchase up to
40,000 shares of Common Stock at the discretion of the Board of Directors.
Under the Premier Employee Plan, all employees are eligible to participate in
the Plan. The exercise price for each option granted under the Premier Employee
Plan shall be determined by the Stock Option Plan Committee of the Board of
Directors at the time the option is granted, but in no event shall such
exercise price be less than 100% of the Fair Market Value of the Common Stock
on the date of grant. The term of each option shall be determined by the Stock
Option Plan Committee at the time the option is granted; provided, however,
that no option shall be exercisable after ten years from the date such option
was granted.
The Premier Directors Plan provides for the grant of option to purchase up to
20,000 shares of Common Stock, which amount may be adjusted subject to the
provisions of the Premier Directors Plan. Under the Premier Directors Plan, all
directors of Premier, other than directors who are employees of Premier, are
eligible to receive options under the Premier Directors Plan. The option
exercise price for each option granted under the Premier Directors Plan shall
be $10.00 per share. Any option granted under the Premier Directors Plan shall
not be exercisable after the expiration of ten years from the date such option
was granted.
Employee Retirement Savings Plan
Premier has established a savings and profit-sharing plan that qualifies as a
tax-deferred savings plan under Section 401(k) of the Internal Revenue Code
(the "401(k) Plan") for its salaried employees who are at least 21 years old
and who have completed three months of service with Premier. Under the 401(k)
Plan, eligible employees may contribute up to 20% of their gross salary to the
401(k) Plan or $9,240, whichever is less. Each participating employee is fully
vested in contributions made by such employee. Premier presently matches 75% of
the amount contributed by an employee up to 4% of the employee's salary, but
Premier's policy regarding matching contributions may be changed annually in
the discretion of the Board of Directors. All amounts contributed under the
401(k) Plan are invested in one or more investment accounts administered by an
independent plan administrator.
Employment and Change in Control Agreements
Darrell D. Pittard. Darrell D. Pittard is currently employed pursuant to an
employment agreement dated as of September 1, 1995 and amended effective
January 31, 1997, which agreement, as amended, provides an annual salary of
$200,000 and expires on July 1, 1998. Effective as of the date of the Closing
of the Merger, Premier and Premier Lending will enter into a new employment
agreement with Mr. Pittard in which he will continue as Chairman of the Board
and Chief Executive Officer of Premier and as Chairman of the Board and
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Chief Executive Officer of Premier Lending. The term of the new employment
agreement will be thirty-six (36) months from the date of the Closing of the
Merger, subject to a twelve (12) month extension if the boards of directors for
Premier and Premier Lending determine that it should be extended. Mr. Pittard's
annual base salary is $200,000, and he is entitled to receive such additional
incentive compensation as may be awarded in the discretion of the Boards of
Directors of Premier and Premier Lending, or any committee designated by them.
Mr. Pittard's base salary and any incentive pay is to be reviewed at least
annually by the Boards of Directors of Premier and Premier Lending and his base
salary may be increased in their discretion to reflect performance. Mr. Pittard
is generally eligible for participation in the employee benefits programs,
including but not limited to life and health insurance, and is to be granted
the use of an automobile, is to be reimbursed for expenses and is to be
reimbursed for country club and business association dues. To the extent
approved by the Boards of Directors of Premier and Premier Lending, Mr. Pittard
may receive a loan for up to twenty percent (20%) of his base salary for the
purposes of paying any required initiation fees to country clubs, which loan
will be forgiven if he remains employed for three (3) years, is not terminated
for cause and does not voluntarily terminate his agreement without a "change of
control." In the event of a disability, Mr. Pittard is entitled to receive 100%
of his then current base salary for twelve (12) months; provided, however, that
he may be terminated if he is disabled for a continuous period exceeding twelve
(12) months. In the event of a termination for "cause" (as defined in the
agreement), Mr. Pittard will receive no right to compensation or other
benefits. If Mr. Pittard voluntarily terminates his employment due to reasons
unrelated to a "change in control," then he is entitled to receive no right to
compensation or other benefits. If Mr. Pittard's employment is terminated by
the Boards of Directors of Premier and Premier Lending for any reason other
than "cause" or disability, then he is entitled to receive a severance payment
equal to three (3) times his current base salary and incentive compensation. In
the event of a "change in control" (any transaction in which 50% or more of the
voting stock of Premier becomes controlled by another, there is a sale,
transfer, consolidation or merger of Premier or Premier Lending is sold to or
merged with a corporation that is not a majority owned subsidiary of Premier),
any termination of Mr. Pittard's employment (other than for "cause") occurring
either six (6) months prior to or twelve (12) months after the "change of
control," shall entitle him to receive a severance payment equal to three (3)
times his current base salary and incentive compensation. Finally, the
agreement prohibits Mr. Pittard from disclosing any confidential information
during his employment and for a period of one year after termination.
J. Edward Mulkey, Jr. As of July 1, 1995, Premier and First Alliance Bank
entered into an employment agreement with J. Edward Mulkey, Jr., with regard to
Mr. Mulkey's continued service as President and Chief Executive Officer of
Premier and of First Alliance Bank. The term of the employment agreement
extends through June 30, 1998, subject to an additional 12-month extension upon
written notice to Mr. Mulkey from Premier and First Alliance Bank of their
intent to extend the term and Mr. Mulkey's written acceptance of such offer.
Mr. Mulkey's annual base salary is $130,000 for the first 12-month period under
the agreement, $132,500 for the second 12-month period and $135,000 for the
third 12-month period. Mr. Mulkey is also entitled to such additional incentive
compensation as may be awarded from time to time by the Boards of Directors of
Premier and First Alliance Bank or any committee designated thereby, and Mr.
Mulkey's base salary may be increased in their discretion to reflect his
performance. The agreement also entitles Mr. Mulkey to participate in employee
benefit programs generally, including health and life insurance, grants him the
use of an automobile and entitles him to reimbursement for country club and
other professional association dues.
In the event of disability, Mr. Mulkey will be entitled to receive 100% of
his then current base salary during the first 12 months of his disability. If
he is disabled for a continuous period exceeding 12 months, however, Premier or
First Alliance Bank may terminate the employment agreement, in which event
payment of Mr. Mulkey's base salary will cease. If Mr. Mulkey is terminated for
"cause" (as defined in the employment agreement), he will have no right to
compensation or other benefits. If his employment is terminated for any reason
other than cause or disability, Mr. Mulkey will receive a severance payment
equal to his then current annual base salary. In the event of a "change of
control" (defined as any transaction resulting in control of more than 50% of
any class of Premier voting securities or the sale, transfer, consolidation or
merger of First Alliance Bank with a corporation that is not a majority owned
subsidiary of Premier), and within six months preceding or one year after the
change of control, Mr. Mulkey's employment is terminated for any reason other
than for cause, Mr. Mulkey will receive a severance payment of $300,000 as
liquidated damages in lieu of all other claims. The
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agreement also contains a non-competition provision that prohibits Mr. Mulkey
from performing banking services substantially identical to those performed on
behalf of Premier or First Alliance Bank within the limits of Cobb County,
Georgia for a period of one year after the termination of his employment and a
non-solicitation provision prohibiting him from employing or attempting to
employ Premier or First Alliance Bank employees in a competing bank or other
business. The agreement also prohibits his disclosure of any confidential
information regarding Premier or First Alliance Bank during his employment and
for a period of one year beginning upon termination of his employment.
George S. Phelps. Effective as of the date of the Closing of the Merger,
Premier Lending will enter into a new employment agreement with George S.
Phelps in which he will continue as President of Premier Lending. The term of
the agreement is to be twelve (12) months from the date of execution, subject
to a twelve (12) month extension if the parties agree to the extension. Mr.
Phelps's annual base salary is $100,800, and he is entitled to receive such
additional incentive compensation as may be awarded in the discretion of the
Board of Directors or any committee designated by them. Mr. Phelps's base
salary and any incentive pay is to be reviewed at least annually by the Board
of Directors of Premier Lending and his base salary may be increased in their
discretion to reflect performance. Mr. Phelps is generally eligible for
participation in the employee benefits programs. In the event of a disability,
Mr. Phelps is entitled to receive 100% of his then current base salary for six
(6) months; provided, however, that he may be terminated if he is disabled for
a continuous period exceeding six (6) months. In the event a termination for
"cause" (as defined in the agreement), Mr. Phelps will receive no right to
compensation or other benefits. If Mr. Phelps voluntarily terminates his
employment due to reasons unrelated to a "change in control," then he is
entitled to receive no right to compensation or other benefits. If Mr. Phelps's
employment is terminated by the Board of Directors for any reason other than
"cause" or disability, then he is entitled to receive a severance payment equal
to his current base salary and incentive compensation. In the event of a
"change in control" (any transaction in which 50% or more of the voting stock
of Premier becomes controlled by another, there is a sale, transfer,
consolidation or merger of Premier, or Premier Lending is sold to or merged
with a corporation that is not a majority owned subsidiary of Premier), any
termination of Mr. Phelps's employment (other than for "cause") occurring
either six (6) month prior to or twelve (12) months after the "change of
control," shall entitle him to receive a severance payment equal to his current
base salary and incentive compensation. Finally, the agreement prohibits Mr.
Phelps from disclosing any confidential information during his employment and
for a period of one year after termination.
Michael W. Lane. Effective as of the date of the Closing of the Merger,
Premier Lending will enter into a new employment agreement with Mr. Michael W.
Lane in which he will continue as Executive Vice President of Commercial
Finance of Premier Lending. The term of the agreement is to be twelve (12)
months from the date of execution, subject to a twelve (12) month extension if
the parties agree to the extension. Mr. Lane's annual base salary is $115,500,
and he is entitled to receive such additional incentive compensation as may be
awarded in the discretion of the Board of Directors of Premier Lending, or any
committee designated by them. Mr. Lane's base salary and any incentive pay is
to be reviewed at least annually by the Board of Directors of Premier Lending,
and his base salary may be increased in their discretion to reflect
performance. Mr. Lane is generally eligible for participation in the employee
benefits programs, including but not limited to life and health insurance. In
the event of a disability, Mr. Lane is entitled to receive 100% of his then
current base salary for six (6) months; provided, however, that he may be
terminated if he is disabled for a continuous period exceeding six (6) months.
In the event a termination for "cause" (as defined in the agreement), Mr. Lane
will receive no right to compensation or other benefits. If Mr. Lane
voluntarily terminates his employment due to reasons unrelated to a "change in
control," then he is entitled to receive no right to compensation or other
benefits. If Mr. Lane's employment is terminated by the Board of Directors for
any reason other than "cause" or disability, then he is entitled to receive a
severance payment equal to his current base salary and incentive compensation.
In the event of a "change in control" (any transaction in which 50% or more of
the voting stock of Premier becomes controlled by another, there is a sale,
transfer, consolidation or merger of Premier or Premier Lending is sold to or
merged with a corporation that is not a majority owned subsidiary of Premier),
any termination of Mr. Lane's employment (other than for "cause") occurring
either six (6) month prior to or twelve (12) months after the "change of
control," shall entitle him to receive a severance payment equal to his current
base salary and
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incentive compensation. Finally, the agreement prohibits Mr. Lane from
disclosing any confidential information during his employment and for a period
of one year after termination.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the Premier
Common Stock owned, as of the Record Date and on a pro forma basis giving
effect to the Merger, (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 PERCENT OF
NUMBER OF COMMON STOCK COMMON STOCK
NAME OF BENEFICIAL OWNER SHARES(1) PRIOR TO MERGER(11) FOLLOWING MERGER(11)
- ------------------------ --------- ------------------- --------------------
<S> <C> <C> <C>
N. Michael Anderson(2)..... 82,370 1.83% *
James L. Coxwell, Sr.(3)... 96,978 2.16 1.16%
William M. Evans, Jr.(4)... 44,902 * *
James E. Freeman(5)........ 278,305 6.19% 3.35%
Robin R. Howell(6)......... 92,011 2.05% 1.11%
Billy H. Martin(7)......... 41,985 * *
J. Edward Mulkey, Jr.(8)... 70,995 1.58% *
Darrell D. Pittard(9)...... 263,550 5.86% 3.17%
J. Mack Robinson(10)....... 473,237 10.52% 5.69%
All directors and executive
officers as a group (9
persons).................. 987,159 22% 12%
</TABLE>
- --------
* Represents less than one percent of the shares outstanding.
(1) Except as otherwise indicated, the persons named in the table have sole
voting and investment power with respect to all shares shown as
beneficially owned by them. The information shown above is based upon
information furnished by the named persons and based upon "beneficial
ownership" concepts set forth in rules promulgated under the Exchange Act.
Under such rules, a person is deemed to be a "beneficial owner" of a
security if that person has or shares "voting power," which includes the
power to vote or to direct the voting of such security, or "investment
power," which includes the power to dispose or to direct the disposition
of such security. A person is also deemed to be a beneficial owner of any
security of which that person has the right to acquire beneficial
ownership within 60 days. More than one person may be deemed to be a
beneficial owner of the same securities.
(2) Consists of 75,148 owned directly by Mr. Anderson and 7,222 shares subject
to currently exercisable options. Mr. Anderson's address is 1296 West
Wesley Road, Atlanta, Georgia 30327.
(3) Consists of 96,978 shares owned directly by Mr. Coxwell. Mr. Coxwell's
address is 3830 Baltimore Place, Acworth, Georgia 30101.
(4) Consists of 37,680 shares owned directly by Mr. Evans and 7,222 shares
subject to currently exercisable options. Mr. Evans address is 876
Lullwater Road, N.E., Atlanta, Georgia 30307.
(5) Consists of 278,305 shares owned by Mr. Freeman. Mr. Freeman's address is
6770 Atlanta Yacht Club Drive, Acworth, Georgia 30102.
(6) Consists of 92,011 shares held by Harriett J. Robinson, as trustee for the
benefit of Robin Robinson Howell, as to which beneficial ownership is
shared. Ms. Howell's address is 567 Peachtree Battle Avenue, Atlanta,
Georgia 30305. J. Mack Robinson and Ms. Howell are father and daughter,
and the 92,011 shares beneficially owned by Ms. Howell are also listed as
beneficially owned by Mr. Robinson.
(7) Consists of 41,985 shares owned directly by Mr. Martin. Mr. Martin's
address is 3420 Pinetree Drive, Smyrna, Georgia 30080.
(8) Consists of (a) 12,757 shares owned directly by Mr. Mulkey; (b) 9,784
shares held in Premier Bank's 401(k) plan for the benefit of Mr. Mulkey as
of December 1996; (c) 27,082 shares subject to currently exercisable
options; and (d) 21,371 shares owned by Mr. Mulkey's spouse as to which
beneficial ownership is shared. Mr. Mulkey's address is 170 Hardage Drive,
Atlanta, Georgia 30064.
(9) Consists of 218,413 held directly by Darrell D. Pittard and 45,137 shares
subject to currently exercisable stock options. Mr. Pittard's address is
5385 Peachtree-Dunwoody Road, No. 503, Atlanta, Georgia 30342.
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(10) 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's
address is 4370 Peachtree Road, Atlanta, Georgia 30319. 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.
(11) On a fully-diluted basis.
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, First
Alliance Bank and Premier Lending and are expected to continue such
relationships with Premier Bank, First Alliance Bank and Premier Lending in the
future. As of March 1, 1997, the aggregate outstanding balance of all such
loans was $667,933 or 2.79% of shareholders' equity. In the opinion of
Premier's management, the extensions of credit made by Premier Bank, First
Alliance Bank or Premier Lending 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.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities and Exchange Act of 1934 requires Premier's
executive officers, directors and greater than 10% shareholders ("Reporting
Persons") to file certain reports ("Section 16 Reports") with respect to
beneficial ownership of Premier equity securities. Based on its review of the
Section 16 Reports furnished to Premier by its Reporting Persons, all Section
16 filing requirements applicable to 1996 have been complied with on a timely
basis, except that J. Edward Mulkey, Jr., reported one transaction late.
REPORT OF THE COMPENSATION COMMITTEE
During the fiscal year ended December 31, 1996, the Compensation Committee of
the Board of Directors was comprised of five non-employee members of the Board
of Premier and two of its subsidiaries. The Compensation Committee is
responsible for: (i) setting Premier's compensation philosophy and policies;
(ii) reviewing and approving pay recommendations for the executive officers of
Premier; and (iii) initiating all compensation actions for the Chief Executive
Officer of Premier.
Premier's compensation policies have been designed to align the financial
interests of Premier's management with those of its shareholders, and reflect
the nature of Premier by taking into account Premier's operating environment
and the expectations for continued growth and enhanced profitability.
Compensation for each of Premier's executive officers consists of a base
salary, an annual discretionary bonus and stock options. Premier does not
currently provide executive officers with other long-term incentive
compensation other than the ability to contribute their earnings to Premier's
401(k) Plan.
The Compensation Committee's philosophy is that a significant portion of an
executive's compensation should be based directly upon the value of long-term
incentive compensation in the form of stock option awards. The Compensation
Committee believes that providing executives with the opportunities to acquire
significant stakes in the growth and prosperity of Premier (through grants of
stock options), while maintaining other elements of Premier's compensation
program at conservative levels, will enable Premier to attract and retain
executives with the outstanding management abilities and entrepreneurial spirit
which are essential to Premier's ongoing success. Furthermore, the Compensation
Committee believes that this approach to compensation motivates executives to
perform to their full potential.
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At least annually, the Compensation Committee and the entire Board of
Directors reviews salary recommendations for Premier's executives and then
approves such recommendations, with any modifications it has deemed
appropriate. The annual salary recommendations are made under the direction of
the Chief Executive Officer, based on peer group and regional industry surveys
of total compensation packages, as well as evaluations of the individual
executive's past and expected future performance. Similarly, the Compensation
Committee fixes the base salary of the Chief Executive Officer based on a
review of competitive compensation data, the Chief Executive Officer's overall
compensation package, and the Compensation Committee's assessment of his past
performance and its expectation as to his future performance in leading
Premier.
The Compensation Committee also determines, based upon the recommendation of
the Chief Executive Officer, the annual bonus, if any, to be paid to executive
officers. The amount of each individual bonus is determined based upon an
evaluation of such factors as individual performance, increases in Premier's
revenue, net income, net income per share and market penetration, as well as
the executive's contribution to Premier's performance. The Compensation
Committee applies similar criteria in setting the amount of annual bonus, if
any, earned by the Chief Executive Officer.
Stock Options represent a substantial portion of compensation for Premier's
executive officers, including the Chief Executive Officer. Stock options are
granted at the prevailing market price on the date of grant, and will only have
value if Premier's stock price increases. Generally, grants vest in equal
amounts over a period of ten years (although certain special types of grants
may vest either immediately or over a shorter period) and executives must be
employed by Premier at the time of vesting in order to exercise the options.
Grants of stock options generally are based upon the level of the executive's
position with Premier and an evaluation of the executive's past and expected
future performance. The Compensation Committee believes that dependence on
stock options for a portion of executives' compensation more closely aligns
such executives' interests with those of Premier's shareholders, since the
ultimate value of such compensation is linked directly to stock price.
The Chief Executive Officer's current employment agreement provides for an
annual base salary of $200,000. The base salary paid to the Chief Executive
Officer is reviewed annually by the Compensation Committee and may be adjusted
based on competitive compensation data, the Chief Executive Officer's overall
compensation package and the Compensation Committee's assessment of his past
experience and its expectation as to his future contributions in leading
Premier and its subsidiaries.
The Compensation Committee regularly evaluates Premier's compensation
policies and procedures with respect to executives. Although the Compensation
Committee believes that current compensation policies have been successful in
aligning the financial interests of executive officers with those of Premier's
shareholders and with company performance, it continues to examine what
modifications, if any, should be implemented to further link executive
compensation with both individual and company performance.
Compensation Committee
N. Michael Anderson
Robin R. Howell
Billy H. Martin
Jo S. Hill (Director of Premier Bank)
George T. Hovis (Director of Premier Lending)
Notwithstanding anything to the contrary set forth in any of Premier's
previous filings under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Joint Proxy Statement/Prospectus, in whole or in part,
the foregoing Report of Compensation and Stock Option Committees on Executive
Compensation shall not be incorporated by reference into any such filings.
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STOCK PRICE PERFORMANCE GRAPH
Set forth below is a line graph comparing the yearly percentage change in
the cumulative total stockholder return on Premier's Common Stock against the
cumulative total return of the American Stock Exchange Bank Index for the
period commencing on January 26, 1995 and ending December 31, 1996. The graph
assumes that the value of the investment in Premier's Common Stock and each
index was $100 on January 26, 1995. The yearly change in cumulative total
return is measured by dividing (1) the sum of (i) the cumulative amount of
dividends for each fiscal year, assuming dividend reinvestment, and (ii) the
change in share price between the beginning and end of the Measuring Period,
by (2) the share price at the beginning of the Measuring Period.
[GRAPH APPEARS HERE]
<TABLE>
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
BETWEEN PREMIER BANCSHARES, INC. AND SNL AMEX BANK INDEX
<CAPTION>
Premier SNL AMEX
Measurement period Bancshares, Inc. Bank Index
- --------------------- ---------------- ----------
<S> <C> <C>
Measurement PT -
01/26/95 $ 100.00 $ 100.00
06/30/95 $ 108.95 $ 111.85
12/29/95 $ 115.83 $ 138.90
06/28/96 $ 143.65 $ 149.73
12/31/96 $ 155.78 $ 179.59
</TABLE>
Notwithstanding anything to the contrary set forth in any of Premiers
previous filings under the Securities Act of 1933, as amended, that might
incorporate future filings, including, this Joint Proxy Statement/Prospectus,
in whole or in part, the foregoing Stock Price Performance Graph shall not be
incorporated by reference into any such filings.
ADOPTION OF THE 1997 STOCK OPTION PLAN--PROPOSAL 3
Background. On March 26, 1997, the Board of Directors of Premier adopted the
Premier Bancshares, Inc. 1997 Stock Option Plan (the "1997 Stock Option
Plan"), subject to approval of the 1997 Stock Option Plan by the shareholders
of Premier. The 1997 Stock Option Plan provides for the grant of options for
shares of the Common Stock to eligible employees, independent contractors,
consultants and advisors of Premier and its related corporations. Options may
be granted under the plan on and after the effective date (June 15, 1997), but
no later than June 14, 2007. The discussion which follows is qualified in its
entirety by reference to the 1997 Stock Option Plan, a copy of which is
attached to this Joint Proxy Statement/Prospectus as Appendix D.
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A maximum of 750,000 shares of Common Stock may be issued pursuant to
options granted under the 1997 Stock Option Plan and the Board of Directors
has reserved such number of shares for this purpose. All stock options
available under the First Alliance Plan and the Premier Employee Plan have
been granted. The number of shares issuable under the plan may be adjusted in
the event of a change in the outstanding shares of Common Stock as a result of
a merger, reorganization, stock dividend, stock split distributable in shares
or other similar change in capital structure. No optionees may be granted
options in any calendar year for more than 15,000 shares of Common Stock
(subject to adjustment as provided herein).
Purpose and Eligibility. The purpose of the 1997 Stock Option Plan is to
encourage and enable selected key employees, independent contractors,
consultants and advisors of Premier and its related corporations to acquire or
increase their holdings of Common Stock in order to promote a closer
identification of their interests with those of Premier and its shareholders,
thereby further stimulating their efforts to enhance the efficiency,
soundness, profitability, growth and shareholder value of Premier. The 1997
Stock Option Plan will be administered by the Compensation Committee of the
Board of Directors of Premier (the "Committee"). The Compensation Committee
plans to grant the options under the 1997 Stock Option Plan over several
years.
The purpose will be carried out by the granting of options to purchase
shares of Common Stock to eligible participants. Options may be incentive
stock options or nonqualified stock options. For purposes of the plan, a "key
employee" means an employee of Premier or a related corporation whom the
Committee determines qualifies as a key employee based on the nature and
extent of such employee's duties, responsibilities, personal capabilities,
performance and potential, or any combination of such factors. Approximately
persons qualify as key employees at this time. The 1997 Stock Option Plan
also provides for the grant of options to independent contractors, consultants
and advisors (collectively "independent contractors"). Approximately
persons qualify as independent contractors at this time. The number of persons
who may be eligible to participate in the Plan is subject to change from time
to time.
The plan also authorizes the Committee to grant options to non-employees and
non-key employees in connection with mergers, reorganizations or other
business combinations involving Premier or a related corporation. In
connection with the Merger, Premier may grant substitute options to optionees
under the Central and Southern Stock Option Plan (or elect to assume such
options), and any such substitute options will be granted under the 1997 Stock
Option Plan. Approximately persons are eligible to receive such substitute
options. The number of non-employees or non-key employees who may be eligible
for options in connection with a business combination is subject to change
from time to time.
Administration; Amendment and Termination. The 1997 Stock Option Plan will
be administered by the Committee. The Committee will include no fewer than the
minimum number of non-employee directors (as such term is defined in Rule 16b-
3 promulgated under Section 16 of the Securities Exchange Act of 1934 (the
"Exchange Act") as may be required by Rule 16b-3. The Committee has full
authority to take any action with respect to the Plan, including without
limitation (and subject to plan terms), the authority to select persons who
will be eligible for options, to determine if options will be designated as
incentive options or nonqualified options, to establish the option price, the
option period and the periods during which an option will be exercisable; to
prescribe the form of option agreements; to establish rules and regulations
for the operation of the plan; and to construe and interpret the plan and
applicable rules, regulations and agreements. In addition, the Committee has
authority to accelerate the date that any option which was not otherwise
exercisable may become exercisable. Transactions under the plan are intended
to comply with Rule 16b-3 and Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"), and the regulations thereunder.
The 1997 Stock Option Plan may be amended or terminated by the Premier Board
at any time; however, any amendment that would materially increase the number
of shares issuable under the plan or materially change the requirements for
eligibility will require shareholder approval. In addition, no outstanding
option may be amended or terminated without an optionee's consent if the
amendment or termination would adversely affect the optionee's rights.
Terms of Options. As noted above, the plan authorizes the grant of both
incentive options (as determined according to Section 422 of the Code) and
nonqualified options. The Committee will establish the option price for an
option at the time of grant. The option price for an incentive option must be
equal to or greater than the fair market value per share of the Common Stock
on the date of grant. "Fair market value" is generally defined
97
<PAGE>
as follows: (i) if shares of the Common Stock are listed on the American Stock
Exchange (or the New York Stock Exchange or included in the Nasdaq National
Market), fair market value is the closing sales price of the shares on such
listing organization on the date immediately preceding the date the option is
granted, or, if there is no transaction on that date, then on the trading date
nearest preceding the date the option is granted for which closing price
information is available; or (ii) if the shares are not listed or reported in
any of the foregoing, then fair market value will be determined by the
Committee in accordance with applicable Code provisions. On May , 1997, the
closing sales price of the Common Stock as reported on the American Stock
Exchange was $ per share.
The period during which an option may be exercised will be determined by the
Committee at the time of grant and may not exceed 10 years. The Committee will
also determine the periods during which an option will be exercisable and
establish any other terms or conditions related to the option. An option price
may be paid in cash; shares of Common Stock owned by the optionee or withheld
upon exercise; cashless exercise; or any combination of these methods.
Optionees are subject to certain restrictions on exercise of options after
termination (such as termination due to death, disability, etc.).
In addition, the plan provides that upon a change of control of Premier, all
outstanding options will become fully exercisable even if not otherwise
exercisable. The Committee, however, has authority not to accelerate
exercisability in the event of certain business combinations if, in its
discretion, appropriate or equitable action has been taken to protect the
rights and interests of plan participants (e.g., upon the grant of substitute
options or assumption of 1997 Stock Option Plan options). A change of control
is generally defined as (i) the date any person or entity becomes the
beneficial owner of 30% or more of the Common Stock; (ii) the date Premier
shareholders approve (A) an agreement to merge or consolidate with another
corporation in which Premier is not the surviving corporation or pursuant to
which cash, securities or other property of another corporation (other than a
merger in which Premier shareholders retain the same proportionate ownership of
the surviving corporation); or (B) the sale or disposition of all or
substantially all of Premier's assets; or (iii) the date on which a change in a
majority of Premier's Board of Directors occurs within a 12-month period.
Incentive Options granted under the 1997 Stock Option Plan are
nontransferable other than by will or the laws of intestate succession or
pursuant to a qualified domestic relations order. Nonqualified options are also
nontransferable other than by will or the laws of intestate succession or
pursuant to a qualified domestic relations order, except as may be permitted by
the Committee in a manner consistent with the registration provisions of the
Securities Act.
Certain Federal Income Tax Consequences. The following summary generally
describes the principal federal (and not state and local) income tax
consequences of awards granted under the 1997 Stock Option Plan. The summary is
general in nature and is not intended to cover all tax consequences that may
apply to a particular participant or to Premier. The provisions of the Code and
regulations thereunder relating to these matters are complicated and their
impact in any one case may depend upon the particular circumstances.
Incentive Stock Options. Incentive stock options granted under the 1997 Stock
Option Plan are intended to qualify as incentive stock options under Section
422 of the Code. Pursuant to Section 422, the grant and exercise of an
incentive stock option will generally not result in taxable income to the
optionee (with the possible exception of alternative minimum tax liability) if
the optionee does not dispose of shares received upon exercise of such option
less than one year after the date of exercise and two years after the date of
grant, and if the optionee has continuously been an employee of Premier or a
related corporation from the date of grant to three months before the date of
exercise (or twelve months in the event of retirement, death or disability).
Premier will not be entitled to a deduction for income tax purposes in
connection with the exercise of an incentive stock option. Upon the disposition
of shares acquired pursuant to exercise of an incentive stock option, the
optionee will be taxed on the amount by which the amount realized upon such
disposition exceeds the option price, and such amount will be treated as long-
term capital gain or loss. If the holding period requirements for incentive
stock option treatment described above are not met, the option will be treated
as a nonqualified stock option.
Pursuant to the Code and the terms of the 1997 Stock Option Plan, in no event
can there first become exercisable by an optionee in any one calendar year
incentive stock options granted by Premier or any related
98
<PAGE>
corporation with respect to shares having an aggregate fair market value
(determined at the time an option is granted) greater than $100,000. To the
extent an incentive stock option granted under the 1997 Stock Option exceeds
the foregoing limitation, it will be treated for all purposes under the plan
as a nonqualified stock option. In addition, no incentive stock option may be
granted to an individual who owns, immediately before the time that the option
is granted, stock possessing more than 10% of the total combined voting power
of all classes of stock of Premier or a related corporation (unless certain
requirements are met, including an option price greater than or equal to 110%
of the fair market value of the shares and an option period of five years or
less).
Nonqualified Stock Options. If an optionee receives a nonqualified stock
option, the difference between the market value of the stock on the date of
exercise and the option price will constitute taxable ordinary income to the
optionee on the date of exercise. Premier will be entitled to a deduction in
the same year in an amount equal to the income taxable to the optionee. The
optionee's basis in shares of Common Stock acquired upon exercise of an option
will equal the option price plus the amount of income taxable at the time of
exercise. Any subsequent disposition of the stock by the optionee will be
taxed as a capital gain or loss to the optionee, and will be long-term capital
gain or loss if the optionee has held the stock for more than one year at the
time of sale.
Pursuant to the terms of the 1997 Stock Option Plan, Premier will require
any recipient of shares of Common Stock pursuant to exercise of a nonqualified
stock option to pay 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 recipient.
Benefits which will be received by or allocated to participants in the 1997
Stock Option Plan are not yet determinable.
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
1997 STOCK OPTION PLAN. THE BOARD OF PREMIER RECOMMENDS THAT THE SHAREHOLDERS
VOTE FOR THE PROPOSAL TO ADOPT THE 1997 STOCK OPTION 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 voting
authority with respect to any matter.
ADOPTION OF THE DIRECTORS' STOCK OPTION PLAN--PROPOSAL 4
Background; Purpose and Eligibility. Effective March 26, 1997, the Premier
Board of Directors adopted the Premier Bancshares, Inc. Directors' Stock
Option Plan (the "Directors' Plan"), subject to the approval of Premier's
shareholders. The Directors' Plan permits eligible persons to elect to defer
receipt of retainer fees, meeting fees or both and have such amounts applied
to the grant of options to purchase shares of 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 plan. The discussion which follows is qualified in its entirety by the
terms of the Directors' Plan, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Appendix E.
The purpose of the Directors' Plan is to provide Directors with the
opportunity to defer receipt of all or part of their compensation as a
Director and to acquire or increase their holdings of Common Stock in order to
promote a closer identification of their interests with those of Premier and
its shareholders, thereby further stimulating their efforts to enhance the
efficiency, soundness, profitability, growth and value of Premier. Both
incentive stock options (as determined in accordance with Section 422 of the
Code) and nonqualified stock options may be granted under the plan.
Approximately Directors are eligible to participate in the Directors' Plan
at this time.
The Directors' Plan authorizes the issuance of up to 150,000 shares of
Common Stock pursuant to options granted under the plan, and the Premier Board
has reserved such number of shares for this purpose. The number of shares
issuable under the plan is subject to adjustment in the event of a merger,
stock split, or similar change in capital structure. Options may be granted on
or after the effective date of the plan (June 15, 1997), but no later than
June 14, 2007. No Director may be granted options in any calendar year for
more than 15,000 shares of Common Stock (subject to adjustment as described
herein).
99
<PAGE>
Administration; Amendment and Termination. The Directors' Plan will be
administered by the Compensation Committee of the Premier Board (the
"Committee"). The Committee will include no fewer than the minimum number of
non-employee directors (as such term is defined in Rule 16b-3 promulgated
under Section 16 of the Exchange Act as may be required by the rule. The
Committee has authority to take action with respect to the plan, including
without limitation (and subject to plan terms) the authority to establish
rules and regulations for plan administration; prescribe the form(s) of option
agreements; and interpret the plan, rules, regulations and option agreements.
In addition, the Committee has authority to accelerate the date that any
option which was not otherwise exercisable may become exercisable.
Transactions under the Directors' Plan are intended to comply with Rule 16b-3
and Section 162(m) of the Code and related regulations.
The Directors' Plan may be amended or terminated by the Board. However, any
amendment that would materially increase the number of shares issuable under
the plan or materially change the requirements for eligibility will require
shareholder approval. In addition, no outstanding option may be amended or
terminated without a Director's consent if the amendment or termination would
adversely affect the Director's rights.
Terms of Options. Pursuant to the terms of the Directors' Plan, each
Director may elect to defer, prior to the start of the year in which such fees
are earned, 0%, 50% or 100% of the Director's annual retainer fees and meeting
fees for the calendar year and apply that percentage toward the grant of
options to purchase shares of Common Stock. Options are granted on July 1 of
each year with respect to options granted based on deferred retainer fees for
the year and deferred meeting fees earned in the first six months of the year.
Options are granted on December 31 of each year for the deferred portion of
meeting fees earned in the second half of the year. The number of shares
subject to an option will equal that number of whole shares of Common Stock
that has an aggregate fair market value on the date of grant closest to, but
not in excess of, the combined amount of elected retainer fees and/or meeting
fees that are applied to the grant of options at that time.
The option price for an incentive option granted under the Directors' Plan
will be equal to the fair market value per share of the Common Stock on the
date the option is granted. The option price for a nonqualified option will be
equal to 85% of the fair market value of the Common Stock on the date of
grant. See "Adoption of the 1997 Stock Option Plan--Proposal 3--Terms of
Options" for the definition of the term "fair market value."
The period during which options granted under the Directors' Plan shall be
ten years from the date of grant. Options are fully exercisable as of the date
of grant. Directors are subject to certain restrictions on exercise of options
after termination (such as due to death, disability, etc.).
Incentive options granted under the plan are nontransferable other than by
will or the laws of intestate succession or pursuant to a qualified domestic
relations order. Nonqualified options are also nontransferable other than by
will or the laws of intestate succession or pursuant to a qualified domestic
relations order, except as may be permitted by the Committee in a manner
consistent with the registration provisions of the Securities Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
For a discussion of certain federal income tax consequences of both
incentive options and nonqualified options, see "Adoption of the 1997 Stock
Option Plan--Proposal 3--Certain Federal Income Tax Consequences."
The number of options to be received under the Directors' Plan by Directors
for the current fiscal year is not yet determinable. The Committee anticipates
that options will be granted under this Plan for several years.
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
DIRECTORS' PLAN. THE BOARD OF PREMIER RECOMMENDS THAT THE SHAREHOLDERS VOTE
FOR THE PROPOSAL TO ADOPT THE 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.
100
<PAGE>
PROPOSALS BY PREMIER SHAREHOLDERS FOR 1998 ANNUAL MEETING
Premier expects to hold its next annual meeting of shareholders during May
1998. Proposals by Premier shareholders intended to be presented at the 1998
annual shareholders meeting are eligible for inclusion in the Company's proxy
statement for the meeting under the applicable rules of the Securities and
Exchange Commission if received by the Secretary of Premier at its executive
offices no later than January , 1998. Any such proposal should be submitted
by certified mail, return receipt requested.
OTHER MATTERS
The Board of Directors of Premier and Central and Southern are not aware of
any matter to be presented for action at the Premier Annual Meeting or the
Central and Southern Special Meeting other than the approval and adoption of
the Merger and, with respect to Premier, the Premier Annual Meeting Proposals.
If any other matter comes before the Premier Annual Meeting or the Central and
Southern Special Meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matter in accordance with their best
judgment unless authority therefor is withheld on the enclosed proxy card.
Such discretionary matters may include motions to adjourn the meeting for the
purpose of further soliciting proxies in favor of the Merger and, with respect
to Premier, the Premier Annual Meeting Proposals.
101
<PAGE>
PREMIER BANCSHARES, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL REPORT
DECEMBER 31, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-------------
<S> <C>
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS......... 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 and F-6
Notes to consolidated financial statements....................... F-7 and F-27
INDEPENDENT AUDITOR'S REPORT ON THE SUPPLEMENTARY INFORMATION.... F-28
SUPPLEMENTARY INFORMATION
Consolidating balance sheet...................................... F-30 and F-31
Consolidating statement of income................................ F-32 and F-35
Note to consolidating financial statements....................... F-36
</TABLE>
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS
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 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 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
<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............................. $ 11,633,707 $ 9,545,638
Interest-bearing deposits in banks.................. 1,447,173 9,947,819
Federal funds sold.................................. 21,680,000 2,530,000
Securities available-for-sale....................... 35,153,641 45,796,237
Loans held for sale................................. 24,408,287 25,912,226
Loans............................................... 186,856,184 132,873,733
Less allowance for loan losses...................... 2,404,189 1,801,917
------------ ------------
Loans, net...................................... 184,451,995 131,071,816
Premises and equipment.............................. 6,634,633 5,644,655
Other real estate owned............................. 603,489 313,117
Goodwill and other intangibles...................... 2,276,728 2,686,233
Other assets........................................ 5,868,826 4,077,242
------------ ------------
Total assets.................................... $294,158,479 $237,524,983
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand........................ $ 30,184,254 $ 29,295,271
Interest-bearing demand........................... 57,562,280 40,938,564
Savings........................................... 8,302,341 9,049,907
Time, $100,000 and over........................... 35,103,940 31,003,923
Other time........................................ 105,580,365 68,165,694
------------ ------------
Total deposits.................................. 236,733,180 178,453,359
Securities sold under repurchase agreements......... 8,443,316 1,308,634
Federal Home Loan Bank advances..................... 4,625,000 11,125,000
Other borrowings.................................... 17,152,230 19,428,642
Other liabilities................................... 3,916,085 3,762,705
------------ ------------
Total liabilities............................... 270,869,811 214,078,340
------------ ------------
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; 2,353,779 and 2,351,529 issued and
outstanding, respectively........................ 2,353,779 11,757,645
Capital surplus................................... 20,449,502 11,023,136
Retained earnings................................. 640,485 542,730
Unrealized gains (losses) on securities available-
for-sale, net of tax............................. (168,716) 106,378
------------ ------------
Total stockholders' equity...................... 23,275,050 23,429,889
------------ ------------
Total liabilities and stockholders' equity...... $294,158,479 $237,524,983
============ ============
</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................................ $ 19,759,157 $ 13,886,775 $ 8,742,677
Taxable securities................... 2,264,378 2,723,768 1,731,311
Nontaxable securities................ 20,237 11,261 11,265
Deposits in banks.................... 380,551 119,049 17,616
Other short-term investments......... 591,458 559,739 450,891
------------ ------------ -----------
Total interest income.............. 23,015,781 17,300,592 10,953,760
------------ ------------ -----------
INTEREST EXPENSE
Deposits............................. 8,666,641 6,064,829 3,772,280
Other borrowings..................... 2,614,820 2,216,141 338,991
------------ ------------ -----------
Total interest expense............. 11,281,461 8,280,970 4,111,271
------------ ------------ -----------
Net interest income................ 11,734,320 9,019,622 6,842,489
PROVISION FOR LOAN LOSSES.............. 598,398 337,659 285,000
------------ ------------ -----------
Net interest income after provision
for loan losses................... 11,135,922 8,681,963 6,557,489
------------ ------------ -----------
OTHER INCOME
Service charges on deposit accounts.. 960,395 877,318 909,660
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
Gain on sale of SBA loans............ 279,061 -- --
Mortgage loan fees................... 4,180,748 3,638,835 1,183,601
Net realized gains (losses) on
securities available-for-sale....... 135,295 52,841 (28,568)
Net realized losses on securities
held-to-maturity.................... -- (30,778) --
Other operating income............... 203,573 393,964 346,496
------------ ------------ -----------
Total other income................. 11,855,235 8,152,930 2,962,115
------------ ------------ -----------
OTHER EXPENSES
Salaries and employee benefits....... $ 11,870,099 $ 8,183,327 $ 4,985,065
Equipment expenses................... 1,110,368 681,966 568,654
Occupancy expenses................... 1,297,448 958,622 607,859
Advertising expenses................. 249,054 166,186 191,132
Telephone expenses................... 353,892 190,316 159,672
Merger related expenses.............. 498,556 21,511 --
Stationery and supplies.............. 433,049 293,040 268,934
Legal expenses....................... 202,243 254,915 168,802
Director expenses.................... 307,584 249,247 150,349
Deposit insurance.................... 327,708 212,447 247,874
Collection expenses.................. 91,886 144,763 146,073
Goodwill amortization expense........ 190,813 149,197 --
Other operating expenses............. 2,438,357 2,190,127 1,165,461
------------ ------------ -----------
Total other expenses............... 19,371,057 13,695,664 8,659,875
------------ ------------ -----------
Income before income taxes and
minority interest in net income of
subsidiary........................ 3,620,100 3,139,229 859,729
Income tax expense..................... 1,068,534 1,137,571 568,581
------------ ------------ -----------
Net income before minority interest
in net income of subsidiary....... 2,551,566 2,001,658 291,148
Minority interest in net income of
subsidiary............................ 11,850 12,709 --
------------ ------------ -----------
Net income......................... $ 2,539,716 $ 1,988,949 $ 291,148
============ ============ ===========
Net income per share of common stock... $ 1.06 $ 0.87 $ 0.15
============ ============ ===========
Weighted average shares outstanding.... 2,385,397 2,290,922 1,977,541
============ ============ ===========
</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
COMMON STOCK RETAINED (LOSSES) ON TOTAL
--------------------- CAPITAL EARNINGS SECURITIES AVAILABLE- STOCKHOLDERS'
SHARES PAR VALUE SURPLUS (DEFICIT) FOR-SALE, NET OF TAX EQUITY
--------- ----------- ----------- ----------- --------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1993................... 1,956,962 $ 9,784,810 $ 8,489,317 $ (414,329) $ -- $ 17,859,798
Net income............ -- -- -- 291,148 -- 291,148
Cash dividends
declared............. -- -- -- (305,758) -- (305,758)
Stock issued.......... 33,588 167,940 207,072 -- -- 375,012
Net change in
unrealized gains
(losses) on
securities available-
for-sale, net of
tax.................. -- -- -- 50,483 (716,247) (665,764)
--------- ----------- ----------- ----------- ----------- ------------
BALANCE, DECEMBER 31,
1994................... 1,990,550 9,952,750 8,696,389 (378,456) (716,247) 17,554,436
Net income............ -- -- -- 1,988,949 -- 1,988,949
5% stock dividend..... 76,206 381,030 628,699 (1,012,822) -- (3,093)
Stock issued.......... 284,773 1,423,865 1,698,048 -- -- 3,121,913
Cash dividends
declared............. -- -- -- (54,941) -- (54,941)
Net change in
unrealized gains
(losses) on
securities available-
for-sale, net of
tax.................. -- -- -- -- 822,625 822,625
--------- ----------- ----------- ----------- ----------- ------------
BALANCE, DECEMBER 31,
1995................... 2,351,529 11,757,645 11,023,136 542,730 106,378 23,429,889
Net income............ -- -- -- 2,539,716 -- 2,539,716
Stock options
exercised............ 2,250 2,250 20,250 -- -- 22,500
Cash dividends
declared............. -- -- -- (2,441,961) -- (2,441,961)
Recapitalization...... -- (9,406,116) 9,406,116 -- -- --
Net change in
unrealized gains
(losses) on
securities available-
for-sale, net of
tax.................. -- -- -- -- (275,094) (275,094)
--------- ----------- ----------- ----------- ----------- ------------
BALANCE, DECEMBER 31,
1996................... 2,353,779 $ 2,353,779 $20,449,502 $ 640,485 $ (168,716) $23,275,050
========= =========== =========== =========== =========== ============
</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....... $ 2,551,566 $ 2,001,658 $ 291,148
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation..................... 798,761 522,115 484,319
Amortization of intangibles...... 190,813 149,197 --
Provision for loan losses........ 598,398 337,659 285,000
Deferred income taxes............ 11,752 107,200 (241,862)
Net (increase) decrease in loans
held for sale................... 1,672,026 (12,958,178) (679,265)
Net realized (gains) losses on
securities available-for-sale... (135,295) (52,841) 28,568
Net realized losses on securities
held-to-maturity................ -- 30,778 --
(Increase) decrease in interest
receivable...................... (111,054) (552,809) 23,742
Increase (decrease) in interest
payable......................... 180,059 231,394 (4,658)
Other operating activities....... (2,891,833) 1,738,549 1,280,934
------------ ------------ ------------
Net cash provided by (used in)
operating activities.......... 2,865,193 (8,445,278) 1,467,926
------------ ------------ ------------
INVESTING ACTIVITIES
Purchases of securities available-
for-sale.......................... (10,985,469) (22,918,884) (5,794,542)
Proceeds from sales of securities
available-for-sale................ 11,534,120 8,831,030 2,702,013
Proceeds from maturities of securi-
ties available-for-sale........... 9,798,510 3,578,536 429,038
Purchases of securities held-to-ma-
turity............................ -- (6,590,781) (9,302,235)
Proceeds from sales of securities
held-to-maturity.................. -- 4,560,718 --
Proceeds from maturities of securi-
ties held-to-maturity............. -- 2,817,235 4,823,195
Net (increase) decrease in Federal
funds sold........................ (19,150,000) 16,580,000 (8,230,000)
Net (increase) decrease in inter-
est-bearing deposits in banks..... 8,500,646 (9,931,730) (16,089)
Net (increase) decrease in loans... (54,207,952) (13,452,625) 2,146,808
Purchase of premises and equip-
ment.............................. (1,788,739) (788,429) (349,537)
Net cash acquired in business com-
binations......................... -- 678,430 --
Investment in subsidiary........... -- (5,894,871) --
------------ ------------ ------------
Net cash used in investing ac-
tivities...................... (56,298,884) (22,531,371) (13,591,349)
------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
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 in deposits............. $58,279,821 $ 29,256,260 $ 843,283
Net increase in repurchase agree-
ments............................... 7,134,682 1,308,634 0
Net increase (decrease) in other
borrowings.......................... (2,276,412) 3,025,506 10,029,263
Net decrease in Federal Home Loan
Bank advances....................... (6,500,000) (2,059,990) 0
Dividends paid....................... (1,123,845) (58,034) (305,758)
Dividends paid to minority sharehold-
er.................................. (14,986) -- --
Proceeds from exercise of stock op-
tions............................... 22,500 -- --
Proceeds from common stock issued.... -- 3,121,913 375,012
----------- ------------ -----------
Net cash provided by financing ac-
tivities.......................... 55,521,760 34,594,289 10,941,800
----------- ------------ -----------
Net increase (decrease) in cash and
due from banks...................... 2,088,069 3,617,640 (1,181,623)
Cash and due from banks at beginning
of year............................. 9,545,638 5,927,998 7,109,621
----------- ------------ -----------
Cash and due from banks at end of
year................................ $11,633,707 $ 9,545,638 $ 5,927,998
=========== ============ ===========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest........................... $11,101,402 $ 8,049,576 $ 4,115,929
Income taxes....................... $ 1,257,556 $ 1,272,504 $ 98,322
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 securi-
ties available-for-sale............. $ 430,730 $ (1,263,607) $ 1,085,220
Principal balances of loans trans-
ferred to other real estate......... $ 435,816 $ 657,190 $ 309,572
</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 (the "Bank")
located in Marietta, Georgia, Premier Bank (the "Thrift") located in Acworth,
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. The Bank provides a full range of banking services to
individual and corporate customers in its primary market area of Cobb County
and surrounding counties.
Premier Bank was acquired by the Company during 1995 in a business
combination accounted for as a purchase. The Thrift provides a full range of
banking services to individual and corporate customers in its primary market
area of Cobb County and surrounding counties.
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.
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.
F-7
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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
F-8
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
measured based on the present value of payments expected to be received, using
the contractual loan rate as the discount rate. Alternatively, measurement may
be based on observable market prices or, for loans that are solely dependent
on the collateral for repayment, measurement may be based on the fair value of
the collateral. If the recorded investment in the impaired loan exceeds the
measure of fair value, a valuation allowance is established as a component of
the allowance for loan losses. Changes to the valuation allowance are recorded
as a component of the provision for loan losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over the
estimated useful lives of the assets.
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.
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 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.
F-9
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
December 31, 1996:
U. S. Government and
agency securities........ $ 19,592,588 $ 38,756 $ (53,968) $ 19,577,376
State and municipal secu-
rities................... 101,145 3,546 -- 104,691
Mortgage backed securi-
ties..................... 13,909,362 39,378 (256,642) 13,692,098
Equity securities......... 1,834,545 -- (55,069) 1,779,476
------------ --------- ---------- ------------
$ 35,437,640 $ 81,680 $ (365,679) $ 35,153,641
============ ========= ========== ============
December 31, 1995:
U. S. Government and
agency securities........ $ 22,226,156 $ 238,490 $ (151,542) $ 22,313,104
State and municipal secu-
rities................... 291,803 12,038 -- 303,841
Mortgage backed securi-
ties..................... 21,691,002 260,327 (184,535) 21,766,794
Equity securities......... 1,440,545 -- (28,047) 1,412,498
------------ --------- ---------- ------------
$ 45,649,506 $ 510,855 $ (364,124) $ 45,796,237
============ ========= ========== ============
</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 equity securities are not included in the maturity categories
in the following summary.
<TABLE>
<CAPTION>
SECURITIES
-------------------------
AMORTIZED FAIR
COST VALUE
------------ ------------
<S> <C> <C>
Due from one year to five years................... $ 17,288,569 $ 17,280,585
Due from five to ten years........................ 2,026,196 2,018,440
Due after ten years............................... 378,968 383,042
Mortgage backed securities........................ 13,909,362 13,692,098
Equity securities................................. 1,834,545 1,779,476
------------ ------------
$ 35,437,640 $ 35,153,641
============ ============
</TABLE>
Securities with a carrying value of approximately $31,452,000 and
$38,224,000 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 AVAILABLE FOR SALE
---------------- -------------------------------
1995 1996 1995 1994
---------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Gross gains.............. $ 725 $ 148,325 $ 130,926 $ 1,431
Gross losses............. (31,503) (13,030) (78,085) (29,999)
--------- --------- --------- ---------
Net realized gains (loss-
es)..................... $ (30,778) $ 135,295 $ 52,841 $ (28,568)
========= ========= ========= =========
</TABLE>
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
F-10
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
management's evaluation of the securities portfolio. The circumstances leading
to the sale of these securities were identified as an isolated instance based
on prudent business decisions. On December 15, 1995, the Company transferred
its remaining held-to-maturity portfolio totaling $20,103,806 to available-
for-sale, resulting in a net unrealized loss of $23,815 which was included in
stockholders' equity at $15,718 net of related taxes of $8,097.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1995
------------ ------------
<S> <C> <C>
Commercial and financial............................ $ 28,599,233 $ 22,182,076
Real estate--construction........................... 67,410,541 37,157,871
Real estate--mortgage 73,272,062 58,463,177
Consumer............................................ 17,991,335 14,776,676
Other............................................... 81,094 912,432
------------ ------------
187,354,265 133,492,232
Unearned income..................................... (520,446) (447,306)
Net deferred loan (fees) costs...................... 22,365 (171,193)
Allowance for loan losses........................... (2,404,189) (1,801,917)
------------ ------------
Loans, net.......................................... $184,451,995 $131,071,816
============ ============
</TABLE>
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.................. $1,801,917 $1,301,582 $1,581,532
Allowance acquired in acquisitions........ -- 294,309 --
Provision for loan losses................. 598,398 337,659 285,000
Loans charged off......................... (152,326) (389,570) (735,324)
Recoveries................................ 156,200 257,937 170,374
---------- ---------- ----------
BALANCE, END OF YEAR........................ $2,404,189 $1,801,917 $1,301,582
========== ========== ==========
</TABLE>
The total recorded investment in impaired loans was $1,223,510 and $268,463
at December 31, 1996 and 1995, respectively. None of these loans 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 $1,038,284 and $692,500,
respectively. Interest income on impaired loans of $14,085 and $10,155 was
recognized for cash payments received for the years ended 1996 and 1995,
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....................................... $1,410,900
Advances....................................................... 223,601
Repayments..................................................... (407,081)
----------
BALANCE, END OF YEAR............................................. $1,227,420
==========
</TABLE>
F-11
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1996 1995
----------- -----------
<S> <C> <C>
Land............................................... $ 1,132,414 $ 1,132,414
Buildings.......................................... 3,607,228 3,469,036
Equipment.......................................... 5,835,742 4,471,926
----------- -----------
10,575,384 9,073,376
Accumulated depreciation........................... (3,940,751) (3,428,721)
----------- -----------
$ 6,634,633 $ 5,644,655
=========== ===========
</TABLE>
NOTE 5. OTHER BORROWINGS
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
The balance of securities sold under repurchase agreements was $8,443,316
and $1,308,634 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>
F-12
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 by all commercial finance
notes receivable, all stock of the Company's subsidi-
aries 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 all stock of the
Company's subsidiaries 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 subsidi-
aries and guaranteed by the Company................... 475,000 --
Treasury, tax and loan note option account with the
Federal Reserve Bank of Atlanta, due on demand, bear-
ing interest at 5.148% at December 31, 1996, collater-
alized by securities.................................. 828,259 --
Line of credit of $505,000 with a nonaffiliated insti-
tution, 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
---------- -----------
$7,298,259 $15,174,642
========== ===========
Long-term debt at December 31, 1996 and 1995 consisted of:
<CAPTION>
1996 1995
---------- -----------
<S> <C> <C>
Note payable in the amount of $4,000,000, due in eight
annual instalments of $500,000 beginning April 1, 1999
with interest due quarterly at prime less .50% (7.75%
at December 31, 1996), due April 1, 2006. Note payable
is secured by all stock of the Company's subsidiaries
and guaranteed by the Company......................... $4,000,000 $ --
Note payable in the amount of $3,000,000, due in annual
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................................. -- 3,000,000
---------- -----------
$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.
F-13
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 6. 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 interest
at 6.79%, due on August 1, 2001. Interest is payable
monthly.............................................. $ 1,000,000 $ --
Advance from the Federal Home Loan Bank with interest
at 6.99%, due on September 15, 1997. Interest is pay-
able monthly......................................... 1,000,000 1,000,000
Advance from the Federal Home Loan Bank with interest
at 8.27%, due on December 8, 1997. Interest is pay-
able monthly......................................... 1,750,000 1,750,000
Advance from the Federal Home Loan Bank with interest
at 8.41%, due on December 8, 1999. Interest is pay-
able monthly......................................... 875,000 875,000
Advance from the Federal Home Loan Bank with interest
at the one month LIBOR rate plus 20 basis points
(6.17% at December 31, 1995), due on
May 31, 2005......................................... -- 5,000,000
Advance from the Federal Home Loan Bank with interest
based on the Federal Home Loan Bank's cost of funds
plus .25% (5.85% at December 31, 1995), matured on
January 2, 1996...................................... -- 1,000,000
Variable rate advances from the Federal Home Loan Bank
with interest based on the Federal Home Loan Bank's
cost of funds plus .25% (6.10% December 31, 1995),
matured on October 12, 1996.......................... $ -- $ 1,000,000
Variable rate advances from the Federal Home Loan Bank
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.......................... -- 500,000
----------- ------------
$ 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 7. 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.
F-14
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
NOTE 8. EMPLOYEE BENEFIT PLANS
PROFIT SHARING PLAN
The Company has a 401(k) retirement plan covering all employees, subject to
certain minimum age requirements. Contributions to the plan charged to expense
were $73,252, $38,933 and $39,975 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.
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 150,000
shares of the Company's common stock at a price not less than the fair market
value of such shares on the date the option is granted. The option period will
not exceed ten years from date of grant.
The Company also has an employee and a director stock option plan whereby
40,000 and 32,500 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-15
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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 500 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................. 69,000 $10.33 32,500 $10.00 25,500 $10.00
Granted................ 10,000 16.00 41,000 10.55 7,000 10.00
Exercised.............. (2,250) 10.00 -- -- -- --
Expired................ (500) 10.00 (4,500) 10.00 -- --
------ ------ ------
Under option and exercis-
able, end of year....... 76,250 11.08 69,000 10.33 32,500 10.00
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED-
AVERAGE
WEIGHTED- REMAINING
AVERAGE CONTRACTUAL
EXERCISE LIFE IN
NUMBER PRICE PRICE YEARS
------ ------ --------- -----------
<S> <C> <C> <C> <C>
Options Outstanding and Exercisable, End
of Year.................................. 61,250 $10.00 $10.00 7.0
5,000 14.50 14.50 8.0
10,000 16.00 16.00 10.0
------
76,250
======
</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 INCOME NET INCOME
NET INCOME PER SHARE NET INCOME PER SHARE
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
As reported..................... $2,539,716 $1.06 $1,988,949 $0.87
Stock based compensation, net of
related tax effect............. (25,782) (0.01) (69,691) (0.03)
---------- ----- ---------- -----
As adjusted..................... $2,513,934 $1.05 $1,919,258 $0.84
========== ===== ========== =====
</TABLE>
The fair value of the options granted during the year was based upon the
discounted value of future cash flows of the options using the following
assumptions:
<TABLE>
<S> <C>
Risk free interest rate............................................ 6.45%
Expected life of the options....................................... 7-10 Years
Expected dividends (as a percent of the fair value of the stock)... 2.68%
Volatility......................................................... 9.80%
</TABLE>
F-16
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 9. 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 HOLDING BANKING MORTGAGE
DECEMBER 31, 1996 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED
------------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffili-
ated customers......... $ -- $ 23,201,562 $11,669,454 $ -- $ 34,871,016
Revenues from affili-
ates................... 3,164,034 236,953 -- (3,400,987) --
----------- ------------ ----------- ------------ ------------
Total revenue......... $ 3,164,034 $ 23,438,515 $11,669,454 $ (3,400,987) $ 34,871,016
=========== ============ =========== ============ ============
Income from continuing
operations before in-
come taxes............. $ 2,101,909 $ 4,060,370 $ 598,302 $ (3,140,481) $ 3,620,100
=========== ============ =========== ============ ============
Identifiable assets at
December 31, 1996...... $28,690,340 $286,781,318 $13,052,684 $(34,365,863) $294,158,479
=========== ============ =========== ============ ============
Depreciation expense.... $ -- $ 606,405 $ 192,356 $ 798,761
=========== ============ =========== ============
Premises and equipment
acquisitions........... $ -- $ 1,006,195 $ 782,544 $ 1,788,739
=========== ============ =========== ============
<CAPTION>
INDUSTRY SEGMENTS
----------------------------------------------------------------
FOR THE YEAR ENDED HOLDING BANKING MORTGAGE
DECEMBER 31, 1995 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED
------------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffili-
ated customers......... $ 848,513 $ 17,823,464 $ 6,781,545 $ -- $ 25,453,522
Revenues from affili-
ates................... 823,052 197,878 -- (1,020,930) --
----------- ------------ ----------- ------------ ------------
Total revenue......... $ 1,671,565 $ 18,021,342 $ 6,781,545 $ (1,020,930) $ 25,453,522
=========== ============ =========== ============ ============
Income (loss) from con-
tinuing operations be-
fore income taxes...... $ (92,001) $ 3,412,496 $ 629,454 $ (810,720) $ 3,139,229
=========== ============ =========== ============ ============
Identifiable assets at
December 31, 1995...... $26,648,602 $219,065,627 $21,690,588 $(29,879,834) $237,524,983
=========== ============ =========== ============ ============
Depreciation expense.... $ 7,030 $ 424,898 $ 90,187 $ 522,115
=========== ============ =========== ============
Premises and equipment
acquisitions........... $ -- $ 669,462 $ 118,967 $ 788,429
=========== ============ =========== ============
</TABLE>
F-17
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
<TABLE>
<CAPTION>
INDUSTRY SEGMENTS
----------------------------------------------------------------
FOR THE YEAR ENDED HOLDING BANKING MORTGAGE
DECEMBER 31, 1994 COMPANY SUBSIDIARIES BANKING ELIMINATIONS CONSOLIDATED
------------------ ----------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Revenues from unaffili-
ated customers......... $ -- $ 11,989,288 $ 1,914,958 $ -- $ 13,915,875
Revenues from affili-
ates................... 1,461,295 -- -- (1,461,295) --
----------- ------------ ----------- ------------ ------------
Total revenue......... $ 1,461,295 $ 11,989,288 $ 1,914,958 $ (1,461,295) $ 13,915,875
=========== ============ =========== ============ ============
Income (loss) from con-
tinuing operations be-
fore income taxes...... $ 1,272,260 $ 2,088,861 $(1,040,097) $ (1,461,295) $ 859,729
=========== ============ =========== ============ ============
Identifiable assets at
December 31, 1994...... $15,173,401 $143,555,410 $ 7,920,414 $(15,123,652) $151,525,573
=========== ============ =========== ============ ============
Depreciation expense.... $ 68,506 $ 415,813 $ -- $ 484,319
=========== ============ =========== ============
Premises and equipment
acquisitions........... $ 192,121 $ 157,416 $ -- $ 349,537
=========== ============ =========== ============
</TABLE>
NOTE 10. INCOME TAXES
Income tax expense consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1996 1995 1994
---------- ---------- ---------
<S> <C> <C> <C>
Current.................................. $1,561,724 $1,030,371 $ 456,810
Benefit of net operating loss
carryforward............................ (236,575) -- --
Valuation allowance adjustment........... (268,367) -- 353,633
Deferred................................. 11,752 107,200 (241,862)
---------- ---------- ---------
Income tax expense..................... $1,068,534 $1,137,571 $ 568,581
========== ========== =========
</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,
--------------------------------------------------------
1996 1995 1994
------------------- ------------------ -----------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
---------- ------- ---------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statu-
tory rate.............. $1,230,834 34% $1,067,337 34% $292,308 34%
Disallowed merger ex-
penses............... 142,021 4 36,462 1 6,257 1
Valuation allowance
adjustment........... (268,367) (7) -- -- 353,633 41
Alternative minimum
tax credit........... -- -- -- -- (37,135) (4)
Other items, net...... (35,954) (1) 33,772 1 (46,482) (6)
---------- --- ---------- --- -------- ---
Income tax expense...... $1,068,534 30% $1,137,571 36% $568,581 66%
========== === ========== === ======== ===
</TABLE>
The above reconciliation reflects the inability to utilize the net operating
losses generated by the Premier Bancshares, Inc. group prior to the business
combination with First Alliance Bancorp, Inc., as discussed in Note 15.
F-18
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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..................................... $ 425,865 $ 209,729
Deferred compensation.................................. 150,896 97,215
Other real estate...................................... 16,038 10,377
Securities available-for-sale.......................... 115,283 --
Write-down of mutual funds............................. 18,885 18,885
Net operating loss carryforward........................ 585,067 821,642
Georgia tax credits.................................... 72,423 72,423
Other.................................................. 44,824 --
Valuation allowance.................................... (374,294) (642,661)
---------- ---------
1,054,987 587,610
---------- ---------
Deferred tax liabilities:
Depreciation and amortization.......................... 273,439 273,568
Deferred loan fees, net of cost........................ 141,507 59,119
Securities available-for-sale.......................... -- 49,889
Cash method accounting on certain receivables.......... 144,250 131,030
---------- ---------
559,196 513,606
---------- ---------
Net deferred tax assets.................................. $ 495,791 $ 74,004
========== =========
</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.
NOTE 11. 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.
F-19
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In the normal course of business, the Company has entered into off-balance-
sheet financial instruments which are not reflected in the financial
statements. These financial instruments include commitments to extend credit
and standby letters of credit. Such financial instruments are included in the
financial statements when funds are disbursed or the instruments become
payable. These instruments involve, to varying degrees, elements of credit
risk in excess of the amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for unfunded mortgage loan
commitments, residential construction and commercial loan commitments,
commitments to extend credit and standby letters of credit is represented by
the contractual amount of those instruments. A summary of the Company's
commitments is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1996 1995
----------- -----------
<S> <C> <C>
Unfunded mortgage loan commitments.................... $20,000,000 $31,968,000
Residential construction and commercial loan commit-
ments................................................ 27,277,198 18,526,425
Commitments to extend credit.......................... 49,987,828 20,387,000
Standby letters of credit............................. 695,742 1,249,532
----------- -----------
$97,960,768 $72,130,957
=========== ===========
</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.
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.
F-20
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The future minimum lease commitments at December 31, 1996 are summarized as
follows:
<TABLE>
<S> <C>
Years Ending December 31,
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
$723,717, $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 12. 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-five percent (75%) of the Company's loan portfolio is concentrated
in loans secured by real estate of which 36% consists of construction loans. A
substantial portion of these loans are secured by real estate in the Company's
primary market area. In addition, a substantial portion of the other real
estate owned is located in those same markets. Accordingly, the ultimate
collectibility of the loan portfolio and the recovery of the carrying amount
of other real estate owned are susceptible to changes in market conditions in
the Company's primary market area. The other significant concentrations of
credit by type of loan are set forth in Note 3.
The Bank and Thrift, as a matter of policy, do not generally extend credit
to any single borrower or group of related borrowers in excess of $3,305,000
and $930,000, respectively.
NOTE 13. REGULATORY MATTERS
The Bank and Thrift are subject to certain restrictions on the amount of
dividends that may be declared without prior regulatory approval. At December
31, 1996, approximately $1,300,000 and $45,000, respectively, 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
F-21
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 and Premier Bank as well capitalized and 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.
The Company and Banks' actual capital amounts and ratios are presented in
the following table.
<TABLE>
<CAPTION>
TO BE WELL
FOR CAPITAL CAPITALIZED UNDER
ADEQUACY PROMPT CORRECTIVE
ACTUAL PURPOSES ACTION PROVISIONS
------------- ------------- ------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ------- ----- ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk
Weighted Assets):
Consolidated............... $23,526 10.79% $17,443 8% $ 21,804 10%
First Alliance Bank........ $18,716 14.02% $10,680 8% $ 13,350 10%
Premier Bank............... $ 6,221 8.57% $ 5,807 8% $ 7,259 10%
Tier I Capital (to Risk
Weighted Assets):
Consolidated............... $21,122 9.69% $ 8,719 4% $ 13,079 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%
Tier I Capital (to Average
Assets):
Consolidated............... $21,122 7.27% $11,621 4% $ 14,527 5%
First Alliance Bank........ $17,044 8.89% $ 7,669 4% $ 9,586 5%
Premier Bank............... $ 5,819 6.86% $ 3,393 4% $ 4,241 5%
Core Capital
Premier Bank............... $ 5,819 5.85% $ 2,984 3%
Tangible Capital
Premier Bank............... $ 5,819 5.85% $ 1,492 1.5%
</TABLE>
NOTE 14. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosures for financial instruments. In cases where quoted
market prices are not available, fair values are based on estimates using
discounted cash flow methods. Those methods are significantly affected by the
assumptions used, including the discount rates and estimates of future cash
flows. In that regard, the derived fair value estimates cannot be
substantiated by comparison to independent markets and, in many cases, could
not be realized in immediate settlement of the instrument. The use of
different methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 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.
F-22
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
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.
F-23
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1995
------------------------- -------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks, in-
terest-bearing deposits
in banks and Federal
funds sold.............. $ 34,760,880 $ 34,760,880 $ 22,023,457 $ 22,023,457
Securities available-for-
sale.................... 35,153,641 35,153,641 45,796,237 45,796,237
Loans.................... 208,860,282 211,261,541 156,984,042 158,862,597
Accrued interest receiv-
able.................... 1,742,269 1,742,269 1,631,215 1,631,215
Financial liabilities:
Deposits................. $236,733,180 $237,523,181 $178,453,359 $178,152,367
Securities sold under re-
purchase agreements..... 8,443,316 8,443,316 1,308,634 1,308,634
Federal Home Loan Bank
advances................ 4,625,000 4,722,254 11,125,000 11,292,000
Other borrowings......... 17,152,230 17,154,380 19,428,642 20,595,808
Accrued interest pay-
able.................... 1,062,978 1,062,978 882,918 882,918
</TABLE>
NOTE 15. BUSINESS COMBINATIONS
On February 3, 1997, the Company entered into an Agreement and Plan of
Reorganization with Central and Southern Holding Company ("Central and
Southern") of Milledgeville, Georgia. Under this agreement, Central and
Southern will merge with and into the Company. Upon consummation of the
merger, each share of Central and Southern's common stock issued and
outstanding will be converted into and exchanged for the right to receive one
share of the Company's common stock. Consummation of the merger is subject to
certain conditions, including approval of the agreement by the Boards of
Directors and the shareholders of both the Company and Central and Southern
and approval of the merger by various regulatory agencies.
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-24
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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 16. COMMON STOCK SPLIT
On February 24, 1997, the Company declared a 1.8055 stock split for shares
of record as of March 6, 1997. The number of shares to effect the stock split
times the par value of $1 will be transferred from capital surplus to common
stock on March 20, 1997. The net income per share of common stock and common
stock equivalents for December 31, 1996, 1995 and 1994 restated is $.59, $.48
and $.08, respectively.
F-25
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 17. 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................................................. $ 1,196,494 $ 323,428
Investment in subsidiaries........................... 27,074,523 24,915,754
Other assets......................................... 419,323 1,409,420
----------- -----------
Total assets....................................... $28,690,340 $26,648,602
=========== ===========
LIABILITIES
Other borrowings..................................... $ 4,000,000 $ 3,000,000
Other liabilities.................................... 97,174 218,713
----------- -----------
4,097,174 3,218,713
----------- -----------
STOCKHOLDERS' EQUITY................................... 24,593,166 23,429,889
----------- -----------
Total liabilities and stockholders' equity......... $28,690,340 $26,648,602
=========== ===========
</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.............. 2,390,263 780,648 409,694
Other income............................. -- 385,995 1,262,306
---------- ---------- ----------
2,413,816 1,641,493 2,324,652
---------- ---------- ----------
EXPENSES
Salaries and employee benefits........... 55,742 910,896 1,939,227
Interest................................. 293,673 331,514 333,511
Merger related expenses.................. 468,449 -- --
Legal and professional................... 42,212 79,672 159,467
Other expenses........................... 202,049 441,484 711,885
---------- ---------- ----------
Total expenses......................... 1,062,125 1,763,566 3,144,090
---------- ---------- ----------
Income (loss) before income tax
benefits and equity in undistributed
income of subsidiary and minority
interest in net income of subsidiary.. 1,351,691 (122,073) (819,438)
INCOME TAX BENEFITS........................ (449,657) (286,992) (58,985)
---------- ---------- ----------
Income (loss) before equity in
undistributed income of subsidiary and
minority interest in net income of
subsidiary............................ 1,801,348 164,919 (760,453)
EQUITY IN UNDISTRIBUTED INCOME OF
SUBSIDIARY................................ 750,218 1,836,739 1,051,601
---------- ---------- ----------
Income before minority interest in net
income of subsidiary.................. 2,551,566 2,001,658 291,148
MINORITY INTEREST IN NET INCOME OF
SUBSIDIARY................................ 11,850 12,709 --
---------- ---------- ----------
Net income............................. $2,539,716 $1,988,949 $ 291,148
========== ========== ==========
</TABLE>
F-26
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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............. $ 2,551,566 $ 2,001,658 $ 291,148
Adjustments to reconcile net income to
net cash provided by (used in) oper-
ating activities:
Depreciation........................ -- 7,030 68,506
Amortization........................ 23,148 22,557 20,585
Undistributed income of subsidiar-
ies................................ (750,218) (1,836,739) (1,051,601)
Net increase in loans held for
sale............................... -- (456,640) (679,265)
Other operating activities.......... 833,561 468,816 (220,417)
----------- ----------- -----------
Net cash provided by (used in) op-
erating activities............... 2,658,057 206,682 (1,571,044)
----------- ----------- -----------
INVESTING ACTIVITIES
Net increase in loans................. -- (1,646,888) (810,759)
Purchase of premises and equipment.... -- -- (192,121)
Investment in subsidiaries............ (1,683,646) (7,739,452) --
Proceeds from sale of premises and
equipment............................ -- 19,893 --
----------- ----------- -----------
Net cash used in investing activi-
ties............................. (1,683,646) (9,366,447) (1,002,880)
----------- ----------- -----------
FINANCING ACTIVITIES
Net increase in borrowings............ 1,000,000 5,438,566 879,263
Dividends paid........................ (1,123,845) (58,034) (305,758)
Proceeds from exercise of stock op-
tions................................ 22,500 -- --
Proceeds from common stock issued..... -- 3,121,913 375,012
Proceeds from redemption of subsidiary
common stock......................... -- -- 2,000,000
----------- ----------- -----------
Net cash provided by (used in) fi-
nancing activities............... (101,345) 8,502,445 2,948,517
----------- ----------- -----------
Net increase (decrease) in cash......... 873,066 (657,320) 374,593
Cash at beginning of year............... 323,428 980,748 606,155
----------- ----------- -----------
Cash at end of year..................... $ 1,196,494 $ 323,428 $ 980,748
=========== =========== ===========
</TABLE>
F-27
<PAGE>
INDEPENDENT AUDITOR'S REPORT
ON THE SUPPLEMENTARY INFORMATION
To the Board of Directors
Premier Bancshares, Inc. and Subsidiaries
Atlanta, Georgia
Our audits were performed for the purpose of forming an opinion on the
consolidated financial statements taken as a whole. The consolidating and
other supplemental information for the year ended December 31, 1996 is
presented for purposes of additional analysis of the basic consolidated
financial statements rather than to present the financial position, results of
operations and cash flows of the individual companies. The consolidating and
other supplementary information has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in
our opinion, is fairly stated in all material respects in relation to the
basic consolidated financial statements taken as a whole.
Atlanta, Georgia
January 31, 1997
F-28
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
F-29
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIRST
ALLIANCE PREMIER ALLIANCE
BANK BANK FINANCE
------------ ----------- ----------
<S> <C> <C> <C>
ASSETS
Cash and due from banks.................. $ 8,881,683 $ 2,758,936 $ 176,003
Interest-bearing deposits in banks....... 623,045 824,128 --
Federal funds sold....................... 17,130,000 7,550,000 --
Investment in subsidiaries............... -- -- --
Securities available-for-sale............ 34,275,305 878,257 --
Loans held for sale...................... 476,893 23,185,118 --
Loans, net of unearned income............ 116,982,516 61,198,654 2,965,297
Less allowance for loan losses........... 1,899,284 402,749 67,796
------------ ----------- ----------
Loans, net........................... 115,083,232 60,795,905 2,897,501
Premises and equipment................... 3,798,225 1,557,181 239,364
Other real estate owned.................. 300,915 -- --
Goodwill and other intangibles........... 12,090 1,206,535 --
Other assets............................. 3,338,355 757,133 35,514
------------ ----------- ----------
Total assets......................... $183,919,743 $99,513,193 $3,348,382
============ =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand............. $ 25,289,496 $ 7,583,663 $ --
Interest-bearing demand................ 45,996,020 11,566,260 --
Savings................................ 6,663,668 1,638,673 --
Time, $100,000 and over................ 22,503,522 12,600,418 --
Other time............................. 53,478,321 52,102,044 --
------------ ----------- ----------
Total deposits....................... 153,931,027 85,491,058 --
Securities sold under repurchase agree-
ments................................... 9,865,374 -- --
Federal Home loan Bank advances.......... 1,000,000 3,625,000 --
Other borrowings......................... 828,259 3,000,000 3,246,000
Other liabilities........................ 1,351,704 373,227 34,290
------------ ----------- ----------
Total liabilities.................... 166,976,364 92,489,285 3,280,290
------------ ----------- ----------
Minority interest in subsidiary.......... -- -- --
------------ ----------- ----------
Stockholders' equity
Common stock........................... 1,760,000 2,564,400 12,750
Capital surplus........................ 11,459,609 4,045,431 12,750
Retained earnings...................... 3,891,352 415,211 42,592
Unrealized loss on securities
available-for-sale, net of tax........ (167,582) (1,134) --
------------ ----------- ----------
Total stockholders' equity........... 16,943,379 7,023,908 68,092
------------ ----------- ----------
Total liabilities and stockholders'
equity.............................. $183,919,743 $99,513,193 $3,348,382
============ =========== ==========
</TABLE>
F-30
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREMIER PREMIER ELIMINATIONS
LENDING BANCSHARES, --------------------------------
CORP. INC. DEBIT CREDIT CONSOLIDATED
------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
$ 1,309,496 $ 1,196,494 $ -- $ 2,688,905 $ 11,633,707
-- -- -- -- 1,447,173
1,422,058 -- -- 4,422,058 21,680,000
-- 27,074,523 -- 27,074,523 --
79 -- -- -- 35,153,641
746,276 -- -- -- 24,408,287
5,709,717 -- -- -- 186,856,184
34,360 -- -- -- 2,404,189
- ----------- ----------- ----------- ----------- ------------
5,675,357 -- -- -- 184,451,995
1,039,863 -- -- -- 6,634,633
302,574 -- -- -- 603,489
1,042,034 16,069 -- -- 2,276,728
1,514,947 403,254 -- 180,377 5,868,826
- ----------- ----------- ----------- ----------- ------------
$13,052,684 $28,690,340 $ -- $34,365,863 $294,158,479
=========== =========== =========== =========== ============
$ -- $ -- $ 2,688,905 $ -- $ 30,184,254
-- -- -- -- 57,562,280
-- -- -- -- 8,302,341
-- -- -- -- 35,103,940
-- -- -- -- 105,580,365
- ----------- ----------- ----------- ----------- ------------
-- -- 2,688,905 -- 236,733,180
-- -- 1,422,058 -- 8,443,316
-- -- -- -- 4,625,000
9,077,971 4,000,000 3,000,000 -- 17,152,230
935,569 1,401,672 180,377 -- 3,916,085
- ----------- ----------- ----------- ----------- ------------
10,013,540 5,401,672 7,291,340 -- 270,869,811
- ----------- ----------- ----------- ----------- ------------
-- 13,618 -- -- 13,618
- ----------- ----------- ----------- ----------- ------------
1,000,000 2,353,779 5,337,150 -- 2,353,779
1,800,253 20,449,502 17,318,043 -- 20,449,502
238,891 640,485 4,588,046 -- 640,485
-- (168,716) -- 168,716 (168,716)
- ----------- ----------- ----------- ----------- ------------
3,039,144 23,275,050 27,243,239 168,716 23,275,050
- ----------- ----------- ----------- ----------- ------------
$13,052,684 $28,690,340 $34,534,579 $ 168,716 $294,158,479
=========== =========== =========== =========== ============
</TABLE>
F-31
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIRST
ALLIANCE PREMIER ALLIANCE
BANK BANK FINANCE
----------- ---------- --------
<S> <C> <C> <C>
INTEREST INCOME
Loans........................................ $11,675,555 $5,745,611 $688,587
Taxable securities........................... 2,201,948 62,430 --
Nontaxable securities........................ 20,237 -- --
Deposits in banks............................ 36,905 343,646 --
Other short-term investments................. 545,198 57,937 --
----------- ---------- --------
TOTAL INTEREST INCOME...................... 14,479,843 6,209,624 688,587
----------- ---------- --------
INTEREST EXPENSE
Deposits..................................... 5,495,578 3,171,063 --
Other borrowings............................. 518,353 306,824 197,377
----------- ---------- --------
TOTAL INTEREST EXPENSE..................... 6,013,931 3,477,887 197,377
----------- ---------- --------
NET INTEREST INCOME (LOSS)................. 8,465,912 2,731,737 491,210
PROVISION FOR POSSIBLE LOAN LOSSES............. 375,000 142,885 20,513
----------- ---------- --------
NET INTEREST INCOME (LOSS) AFTER PROVISION
FOR POSSIBLE LOAN LOSSES.................. 8,090,912 2,588,852 470,697
----------- ---------- --------
NONINTEREST INCOME
Service charges on deposit accounts.......... 783,926 171,316 5,153
Other service charges and fees............... 417,051 160,697 87,782
Gain on sale of mortgage loans held-for-
sale........................................ -- -- --
Gain on sale of SBA loans.................... -- 279,061 --
Mortgage loan fees........................... 87,679 -- --
Net realized gains on securities available-
for-sale.................................... 135,295 -- --
Other operating income....................... 16,232 19,556 2,630
----------- ---------- --------
TOTAL NONINTEREST INCOME................... 1,440,183 630,630 95,565
=========== ========== ========
</TABLE>
F-32
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
PREMIER PREMIER ELIMINATIONS
LENDING BANCSHARES, ----------------------------------
CORP. INC. DEBIT CREDIT CONSOLIDATED
- ---------- ----------- ---------- -------- ------------
<S> <C> <C> <C> <C>
$1,717,683 $ -- $ 68,279 $ -- $19,759,157
-- -- -- -- 2,264,378
-- -- -- -- 20,237
-- 23,553 23,553 -- 380,551
25,961 -- 37,638 -- 591,458
- ---------- ---------- ---------- -------- -----------
1,743,644 23,553 129,470 -- 23,015,781
- ---------- ---------- ---------- -------- -----------
-- -- -- -- 8,666,641
1,428,063 293,673 -- 129,470 2,614,820
- ---------- ---------- ---------- -------- -----------
1,428,063 293,673 -- 129,470 11,281,461
- ---------- ---------- ---------- -------- -----------
315,581 (270,120) 129,470 129,470 11,734,320
60,000 -- -- -- 598,398
- ---------- ---------- ---------- -------- -----------
255,581 (270,120) 129,470 129,470 11,135,922
- ---------- ---------- ---------- -------- -----------
-- -- -- -- 960,395
947,319 -- 236,953 -- 1,375,896
4,720,267 -- -- -- 4,720,267
-- -- -- -- 279,061
4,093,069 -- -- -- 4,180,748
-- -- -- -- 135,295
165,155 3,140,481 3,140,481 -- 203,573
- ---------- ---------- ---------- -------- -----------
9,925,810 3,140,481 3,377,434 -- 11,855,235
========== ========== ========== ======== ===========
</TABLE>
F-33
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
FIRST
ALLIANCE PREMIER ALLIANCE
BANK BANK FINANCE
---------- ---------- --------
<S> <C> <C> <C>
OTHER EXPENSES
Salaries and employee benefits............... $3,195,343 $1,366,926 $282,770
Equipment expense............................ 489,047 196,668 23,830
Occupancy expense............................ 421,410 215,377 51,917
Advertising.................................. 131,092 38,818 6,512
Telephone.................................... 90,778 41,140 15,440
Merger related expenses...................... -- 559 --
Stationery and supplies...................... 130,363 102,995 7,151
Legal expenses............................... 24,074 36,610 2,362
Director expenses............................ 207,765 38,100 --
Deposit insurance............................ 2,000 325,708 --
Collection expenses.......................... 87,031 -- 4,422
Goodwill amortization expense................ 6,307 101,765 --
Other operating expenses..................... 876,329 659,509 76,351
---------- ---------- --------
Total other expenses....................... 5,661,539 3,124,175 470,755
---------- ---------- --------
Income before income taxes and minority inter-
est in net income of subsidiary............... 3,869,556 95,307 95,507
Income tax provision (benefit)................. 1,268,911 34,853 36,255
---------- ---------- --------
Net income before minority interest in net
income of subsidiary........................ 2,600,645 60,454 59,252
Minority interest in net income of subsidiary.. -- -- --
---------- ---------- --------
Net income................................... $2,600,645 $ 60,454 $ 59,252
========== ========== ========
</TABLE>
F-34
<PAGE>
<TABLE>
<CAPTION>
PREMIER PREMIER ELIMINATIONS
LENDING BANCSHARES, ----------------------------------
CORP. INC. DEBIT CREDIT CONSOLIDATED
- ---------- ----------- ---------- -------- ------------
<S> <C> <C> <C> <C>
$6,887,022 $ 55,742 $ 82,296 $ -- $11,870,099
400,180 643 -- -- 1,110,368
608,744 -- -- -- 1,297,448
72,632 -- -- -- 249,054
206,524 10 -- -- 353,892
29,548 468,449 -- -- 498,556
180,311 12,229 -- -- 433,049
96,985 42,212 -- -- 202,243
24,165 37,554 -- -- 307,584
-- -- -- -- 327,708
433 -- -- -- 91,886
59,593 23,148 -- -- 190,813
1,016,952 128,465 -- 319,249 2,438,357
- ---------- ---------- ---------- -------- -----------
9,583,089 768,452 82,296 319,249 19,371,057
- ---------- ---------- ---------- -------- -----------
598,302 2,101,909 3,589,200 448,719 3,620,100
178,172 (449,657) -- -- 1,068,534
- ---------- ---------- ---------- -------- -----------
420,130 2,551,566 3,589,200 448,719 2,551,566
-- 11,850 -- -- 11,850
- ---------- ---------- ---------- -------- -----------
$ 420,130 $2,539,716 $3,589,200 $448,719 $ 2,539,716
========== ========== ========== ======== ===========
</TABLE>
F-35
<PAGE>
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
NOTE TO CONSOLIDATING FINANCIAL STATEMENTS
(A) The following eliminations have been made in the consolidating financial
statements.
(a) Elimination of intercompany cash
(b) Elimination of investment in subsidiaries
(c) Elimination of intercompany receivables and investments
(d) Elimination of intercompany interest income and interest expense
(e) Elimination of intercompany management fees
(f) Elimination of equity in earnings of subsidiaries
F-36
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Central and Southern Holding Company and Subsidiaries
We have audited the accompanying consolidated balance sheets of Central and
Southern Holding Company and subsidiaries as of December 31, 1996 and 1995,
and the related 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 Central
and Southern Holding Company 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.
PORTER KEADLE MOORE, LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia January 23, 1997
F-1
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
ASSETS
Cash and due from banks, including reserve require-
ments of $569,000 and $645,000, respectively...... $ 7,906,871 8,564,294
Federal funds sold................................. 21,216,410 16,687,208
------------ -----------
Cash and cash equivalents........................ 29,123,281 25,251,502
Interest-bearing deposits with other banks......... 1,250,000 2,400,000
Investment securities available for sale........... 64,578,022 64,514,785
Loans, net......................................... 122,268,747 109,880,856
Premises and equipment, net........................ 5,930,004 2,878,118
Other assets....................................... 2,635,725 2,923,375
------------ -----------
$225,785,779 207,848,636
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand........................................... $ 18,087,985 16,668,652
Interest-bearing demand.......................... 40,982,045 35,239,329
Savings.......................................... 9,313,083 9,271,407
Time............................................. 126,781,456 119,294,850
------------ -----------
Total deposits................................. 195,164,569 180,474,238
Repurchase agreements.............................. 3,421,170 2,350,000
Note payable....................................... 1,600,000 250,000
Other liabilities.................................. 1,695,429 2,114,000
------------ -----------
Total liabilities.............................. 201,881,168 185,188,238
------------ -----------
Commitments
Stockholders' equity:
Preferred stock, 2,000,000 shares authorized, no
shares issued or outstanding.................... -- --
Common stock, $1 par value; 10,000,000 shares au-
thorized; 3,777,017 shares issued............... 3,777,017 3,777,017
Additional paid-in capital....................... 6,492,246 6,492,246
Unrealized gain on investment securities, net of
tax............................................. 278,250 599,454
Retained earnings................................ 14,490,538 12,339,119
------------ -----------
25,038,051 23,207,836
Treasury stock, at cost (123,494 and 59,528
shares) ........................................ (1,133,440) (547,438)
------------ -----------
Total stockholders' equity..................... 23,904,611 22,660,398
------------ -----------
$225,785,779 207,848,636
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
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.............. $11,975,517 11,189,778 11,125,466
Interest on deposits with other banks... 46,186 54,758 297
Interest on federal funds sold.......... 951,539 828,094 776,001
Interest on investment securities:
Taxable............................... 3,625,938 3,530,802 3,956,229
Tax-exempt............................ 637,180 671,062 910,844
----------- ---------- ----------
Total interest income............... 17,236,360 16,274,494 16,768,837
----------- ---------- ----------
Interest expense:
Deposits................................ 8,814,809 8,306,689 8,576,863
Other................................... 141,656 74,771 339,494
----------- ---------- ----------
Total interest expense.............. 8,956,465 8,381,460 8,916,357
----------- ---------- ----------
Net interest income................. 8,279,895 7,893,034 7,852,480
Provision for loan losses................. (1,016,000) (1,038,000) --
----------- ---------- ----------
Net interest income after provision
for loan losses.................... 9,295,895 8,931,034 7,852,480
----------- ---------- ----------
Other operating income:
Service charges......................... 758,488 700,827 742,819
Gains (losses) on sales of investment
securities............................. -- (227,635) 240,975
Other................................... 504,387 460,867 676,270
----------- ---------- ----------
Total other operating income........ 1,262,875 934,059 1,660,064
----------- ---------- ----------
Other operating expenses:
Salaries and employee benefits.......... 3,938,270 3,550,776 3,359,226
Occupancy and equipment................. 882,248 765,752 967,647
Miscellaneous........................... 2,154,354 2,366,224 3,172,295
----------- ---------- ----------
Total other operating expenses...... 6,974,872 6,682,752 7,499,168
----------- ---------- ----------
Earnings before income taxes........ 3,583,898 3,182,341 2,013,376
Income tax expense........................ 629,875 623,346 396,000
----------- ---------- ----------
Net earnings........................ 2,954,023 2,558,995 1,617,376
Preferred dividend requirements........... -- -- (117,525)
----------- ---------- ----------
Net earnings available to common
shareholders....................... $ 2,954,023 2,558,995 1,499,851
=========== ========== ==========
Earnings per common share:
Net earnings per common share........... $ 0.81 0.68 0.44
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
UNREALIZED
GAIN (LOSS) ON
ADDITIONAL INVESTMENT
PREFERRED COMMON PAID-IN SECURITIES, RETAINED TREASURY
STOCK STOCK CAPITAL NET OF TAX EARNINGS STOCK TOTAL
----------- --------- ---------- -------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1993................... $ 1,708,605 3,397,327 5,163,331 -- 9,104,294 -- 19,373,557
Cash dividends declared
of $.03 per common
share.................. -- -- -- -- (101,920) -- (101,920)
Cash dividends declared
of $4.71 per preferred
share.................. -- -- -- -- (178,913) -- (178,913)
Conversion of preferred
stock into common
stock.................. (1,708,605) 379,690 1,328,915 -- -- -- --
Effect of accounting
change related to
investment securities,
net of tax............. -- -- -- 576,679 -- -- 576,679
Change in unrealized
gain (loss) on
investment securities,
net of tax............. -- -- -- (1,803,407) -- -- (1,803,407)
Net earnings............ -- -- -- -- 1,617,376 -- 1,617,376
----------- --------- --------- ---------- ---------- ---------- ----------
Balance, December 31,
1994................... -- 3,777,017 6,492,246 (1,226,728) 10,440,837 -- 19,483,372
Cash dividends declared
of $.175 per common
share.................. -- -- -- -- (660,713) -- (660,713)
Acquisition of treasury
stock.................. -- -- -- -- -- (547,438) (547,438)
Change in unrealized
gain (loss) on
investment securities,
net of tax............. -- -- -- 1,826,182 -- -- 1,826,182
Net earnings............ -- -- -- -- 2,558,995 -- 2,558,995
----------- --------- --------- ---------- ---------- ---------- ----------
Balance, December 31,
1995................... -- 3,777,017 6,492,246 599,454 12,339,119 (547,438) 22,660,398
Cash dividends declared
of $.22 per common
share.................. -- -- -- -- (802,604) -- (802,604)
Acquisition of treasury
stock.................. -- -- -- -- -- (586,002) (586,002)
Change in unrealized
gain (loss) on
investment securities,
net of tax............. -- -- -- (321,204) -- -- (321,204)
Net earnings............ -- -- -- -- 2,954,023 -- 2,954,023
----------- --------- --------- ---------- ---------- ---------- ----------
Balance, December 31,
1996................... $ -- 3,777,017 6,492,246 278,250 14,490,538 (1,133,440) 23,904,611
=========== ========= ========= ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
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......................... $ 2,954,023 2,558,995 1,617,376
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Provision for loan losses.......... (1,016,000) (1,038,000) --
Depreciation, amortization and
accretion......................... 408,002 361,257 564,947
Deferred income tax provision
(benefit)......................... 129,666 106,589 174,598
Losses (gains) on sales of
investment securities............. -- 227,635 (240,975)
Gain on sale of branches........... -- -- (115,324)
Change in assets and liabilities:
Other assets..................... 228,786 796,708 1,140,048
Other liabilities................ (418,571) 689,157 900
------------ ----------- -----------
Net cash provided by operating
activities.................... 2,285,906 3,702,341 3,141,570
------------ ----------- -----------
Cash flows from investing activities:
Net change in interest-bearing
deposits............................ 1,150,000 (2,400,000) 100,000
Proceeds from maturities and calls of
investment securities available for
sale................................ 28,433,421 6,108,539 11,752,863
Proceeds from sales of investment
securities available for sale....... -- 3,761,490 --
Purchases of investment securities
available for sale.................. (29,003,787) (1,115,470) (3,499,862)
Proceeds from maturities and calls of
investment securities held to
maturity............................ -- 13,408,110 10,353,386
Proceeds from sales of investment
securities held to maturity......... -- -- 5,076,098
Purchases of investment securities
held to maturity.................... -- (12,903,593) (110,000)
Net change in loans.................. (11,277,225) (5,269,234) 14,182,183
Proceeds from sales of premises and
equipment........................... 26,673 13,830 31,616
Purchases of premises and equipment.. (3,466,104) (625,321) (413,527)
Sale of branches..................... -- -- (40,928,208)
------------ ----------- -----------
Net cash provided by (used in)
investing activities.......... (14,137,022) 978,351 (3,455,451)
------------ ----------- -----------
Cash flows from financing activities:
Net change in deposits............... 14,690,331 3,792,330 (4,567,223)
Net change in repurchase agreements.. 1,071,170 (4,365,000) 6,715,000
Borrowings under note payable........ 1,350,000 250,000 --
Cash dividends paid.................. (802,604) (660,713) (280,833)
Acquisition of treasury stock........ (586,002) (547,438) --
------------ ----------- -----------
Net cash provided by (used in)
financing activities.......... 15,722,895 (1,530,821) 1,866,944
------------ ----------- -----------
Net increase in cash and cash
equivalents........................... 3,871,779 3,149,871 1,553,063
Cash and cash equivalents at beginning
of year............................... 25,251,502 22,101,631 20,548,568
------------ ----------- -----------
Cash and cash equivalents at end of
year.................................. $ 29,123,281 25,251,502 22,101,631
============ =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Central and Southern Holding Company (the "Company") is a bank and thrift
holding company with two wholly owned subsidiaries, The Central and Southern
Bank of Georgia ("Milledgeville") and The Central and Southern Bank of North
Georgia, FSB ("North Georgia"), collectively referred to as "the bank
subsidiaries." The Company provides a full range of banking services in
central and north Georgia to individual and corporate customers through the
bank subsidiaries and branch offices. The subsidiary banks are subject to the
regulations of certain Federal and state agencies and undergo periodic
examinations by those regulatory authorities.
Basis of Presentation
The consolidated financial statements include the accounts of the Company
and the bank subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
The accounting principles followed by the Company 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
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 deferred tax assets
recognized in anticipation of future taxable income.
Investment Securities
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." Under SFAS No. 115, the Company
classifies its securities in one of three categories: trading, available for
sale, or held to maturity. Trading securities are bought and held principally
for sale in the near term. Held to maturity securities are those securities
for which the Company has the ability and intent to hold until maturity. All
other securities not included in the trading or held to maturity portfolios
are classified as available for sale. The Company does not hold any trading
securities.
Available for sale securities are recorded at fair value. Held to maturity
securities are recorded at amortized cost. 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. 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. The
unrealized holding gains or losses included in the separate component of
stockholders' equity for securities transferred from available for sale to
held to maturity are maintained and amortized into earnings over the remaining
life of the security as an adjustment to yield in a manner consistent with the
amortization or accretion of premium or discount on the associated security.
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.
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.
F-6
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loans and Allowance for Loan Losses
Loans are reported at the principal amount outstanding, net of unearned
interest and the allowance for loan losses. Interest income on installment
loans made on a discount basis is recognized using a method which approximates
the level yield method. Interest income on all other loans is recognized on
the level yield method.
Effective January 1, 1995, the Company adopted SFAS No. 114, "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118, "Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosures." 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 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 the fair value of the collateral if the
loan is collateral dependent. The adoption of these statements had no
significant impact on the consolidated financial statements.
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. Interest income, if
any, on impaired loans is recognized on the cash basis.
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 the collectibility of the principal is
unlikely. The allowance represents an amount which, in management's judgment,
will be adequate to absorb probable losses on existing loans that may become
uncollectible.
Management's judgment 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 the allowance for 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 Company's allowance for
loan losses. Such agencies may require the Company to recognize additions to
the allowance based on their judgments of information available to them at the
time of their examination.
Bank Premises and Equipment
Premises and equipment are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated
useful lives of the related assets. When assets are retired or otherwise
disposed, the cost and related accumulated depreciation are removed from the
accounts, and any resulting gain or loss is reflected in income for the
period. The cost of maintenance and repairs which do not improve or extend the
useful life of the respective asset is charged to income as incurred, whereas
significant renewals and improvements are capitalized. The range of estimated
useful lives for premises and equipment are generally as follows:
<TABLE>
<S> <C>
Buildings and improvements........................................ 7-40 years
Furniture and equipment........................................... 3-10 years
</TABLE>
F-7
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Goodwill
The excess of the purchase price over the fair value of net assets acquired
(goodwill) is being amortized using the straight-line method over 20 years for
North Georgia. The goodwill net of accumulated amortization is included in
other assets. 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 North Georgia to
determine that no impairment has occurred.
Income Taxes
The Company accounts for income taxes under the liability method which
requires the recognition of deferred tax assets and liabilities for the future
tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. 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 result in deferred tax assets, the Company evaluates the
probability of being able to realize the future benefits indicated by such
assets. 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 Common Share
The impact of outstanding stock options and preferred stock conversions has
no significant effect on net earnings per common share. Accordingly, net
earnings per common share are based on the weighted average number of common
shares outstanding during 1996, 1995 and 1994 of 3,664,604, 3,770,251 and
3,429,575, respectively.
(2) SALE OF BANK BRANCHES AND CONVERSION OF NORTH GEORGIA
Effective August 1, 1994, Milledgeville sold two of its bank branches
located in Douglas and McRae, Georgia, to an unrelated commercial bank. This
sale included 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, including unamortized
deposit premiums of approximately $535,000. Milledgeville was paid
approximately $40,700,000 in connection with the sale and recorded a gain of
approximately $115,000. The branch sale was financed through a combination of
borrowings under repurchase agreements and available cash and cash
equivalents.
Effective January 16, 1996, the Company received final regulatory approval
to convert North Georgia (formerly Central & Southern Bank of Greensboro) to a
federal savings bank charter. This conversion was completed in the first
quarter of 1996. The primary purpose of the conversion is to allow North
Georgia to branch into other markets in the north Georgia area.
F-8
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) CASH FLOW INFORMATION
Certain supplemental cash flow information for the years ended December 31,
1996, 1995 and 1994 is summarized as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid during the year for:
Interest.............................. $8,910,201 8,445,017 8,984,329
Income taxes.......................... $ 948,000 140,000 270,000
Noncash investing and financing
activities:
Transfer of investment securities from
held to maturity to available for
sale................................. $ -- 35,073,414 --
Real estate acquired through
foreclosure.......................... $ 92,834 160,913 833,293
Financed portion of sales of other
real estate.......................... $ 187,500 317,056 481,000
Conversion of preferred stock into
common stock......................... $ -- -- 1,708,605
Change in unrealized gain (loss) on
investment securities, net of tax.... $ (321,204) 1,826,182 (1,226,728)
</TABLE>
(4) INVESTMENT SECURITIES
Investment securities available for sale at December 31, 1996 and 1995 are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasuries and U.S.
government agencies......... $21,150,573 68,502 121,351 21,097,724
State and municipal.......... 9,735,184 490,448 21 10,225,611
Mortgage-backed securities... 32,625,874 222,180 238,167 32,609,887
Other investments............ 644,800 -- -- 644,800
----------- --------- ------- ----------
Total...................... $64,156,431 781,130 359,539 64,578,022
=========== ========= ======= ==========
<CAPTION>
DECEMBER 31, 1995
--------------------------------------------
GROSS GROSS ESTIMATED
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
U.S. Treasuries and U.S.
government agencies......... $23,996,053 148,175 84,198 24,060,030
State and municipal.......... 9,577,580 578,325 4,973 10,150,932
Mortgage-backed securities... 29,557,578 398,359 127,614 29,828,323
Other investments............ 475,500 -- -- 475,500
----------- --------- ------- ----------
Total...................... $63,606,711 1,124,859 216,785 64,514,785
=========== ========= ======= ==========
</TABLE>
F-9
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amortized cost and fair value of investment 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 certain obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
AMORTIZED ESTIMATED
COST FAIR VALUE
----------- ----------
<S> <C> <C>
Total securities:
Within 1 year....................................... $ 4,504,383 4,541,878
1 to 5 years........................................ 22,356,137 22,480,143
5 to 10 years....................................... 3,773,654 4,020,806
More than 10 years.................................. 251,583 280,508
Mortgage-backed securities.......................... 32,625,874 32,609,887
Other investments................................... 644,800 644,800
----------- ----------
$64,156,431 64,578,022
=========== ==========
</TABLE>
There were no sales of securities in 1996. In 1995, the Company received
proceeds of $3,761,490 from the sale of certain mortgage-backed securities and
recognized gross losses of $231,635. Additionally, one held to maturity
security was called by the issuer and the Company received a $4,000 call
premium.
In late 1995, the FASB issued an implementation guide relating to SFAS No.
115. Included in this implementation guide was a one-time opportunity to
reallocate investments between the categories without calling into question
the validity of the classifications. Accordingly, at year end, the Company
reclassified all held to maturity securities to the available for sale
category. As a result, an unrealized gain of approximately $637,000 was
recorded.
In 1994, the Company received proceeds from the sale of investments held to
maturity of $5,076,098 and recognized gross gains of $244,162 and gross losses
of $3,187. The 1994 sales occurred in connection with the sale of two of
Milledgeville's branch bank facilities which maintained approximately twenty
percent of the total deposits of the Company. The sale of the branches altered
the interest rate risk of Milledgeville's assets and liabilities and in
response the security sales were required to restructure the interest rate
risk to an acceptable level.
Securities with a carrying value of approximately $21,829,000 and
$15,801,000 at December 31, 1996 and 1995, respectively, were pledged against
U.S. government and other public deposits as required by law.
(5) LOANS
Major classifications of loans at December 31, 1996 and 1995 are summarized
as follows:
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
Commercial, financial and agricultural.............. $ 22,259,587 25,177,880
Real estate--construction........................... 27,695,706 21,746,596
Real estate--mortgage............................... 64,145,313 51,104,156
Consumer loans...................................... 12,405,366 16,376,878
------------ -----------
Total loans....................................... 126,505,972 114,405,510
Less: Unearned interest........................... 73,043 334,347
Allowance for loan losses...................... 4,164,182 4,190,307
------------ -----------
Loans, net.......................................... $122,268,747 109,880,856
============ ===========
</TABLE>
F-10
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's bank subsidiaries grant loans and extensions of credit to
individuals and a variety of firms and corporations located primarily in
central and north Georgia. Although the bank subsidiaries have diversified
loan portfolios, a substantial portion of the loan portfolios is
collateralized by improved and unimproved real estate and is dependent upon
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.......... $ 4,190,307 4,312,876 4,680,841
Provision for loan losses............. (1,016,000) (1,038,000) --
Loans charged off..................... (362,844) (1,236,091) (3,179,899)
Recoveries of loans previously charged
off.................................. 1,352,719 2,151,522 2,811,934
----------- ---------- ----------
Balance at end of year................ $ 4,164,182 4,190,307 4,312,876
=========== ========== ==========
</TABLE>
As a result of its ongoing evaluation of the adequacy of the bank
subsidiaries' allowance for loan losses, a decline in problem credits and
continued significant recoveries of loans previously charged off, management
decided to reduce the allowance for loan losses during 1996 and 1995.
(6) BANK PREMISES AND EQUIPMENT
Bank premises and equipment at December 31, 1996 and 1995 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Land and buildings...................................... $5,765,790 3,515,996
Furniture and equipment................................. 2,798,597 1,855,406
Construction in progress................................ 293,105 74,686
---------- ---------
8,857,492 5,446,088
Less accumulated depreciation........................... 2,927,488 2,567,970
---------- ---------
$5,930,004 2,878,118
========== =========
</TABLE>
Depreciation expense was approximately $388,000, $335,000 and $506,000 in
1996, 1995 and 1994, respectively.
(7) DEPOSITS
At December 31, 1996, maturities of time deposits are as follows:
<TABLE>
<S> <C>
Maturing In:
1997.......................................................... $ 94,236,401
1998.......................................................... 16,238,027
1999.......................................................... 4,333,441
2000.......................................................... 4,844,105
2001.......................................................... 7,113,505
Thereafter.................................................... 15,977
------------
$126,781,456
============
</TABLE>
The Bank subsidiaries had deposits from related parties totaling
approximately $4,051,000 and $3,681,000 at December 31, 1996 and 1995. Time
deposits of $100,000 or more were approximately $39,200,000 and $31,759,000 at
December 31, 1996 and 1995.
F-11
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) NOTE PAYABLE
The Company has a note payable to a bank under which it can borrow up to
$2,500,000. The note bears interest at prime less 0.75% and interest is
payable quarterly. The note, which is collateralized by the common stock of
Milledgeville, matures in June 1997.
(9) 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............................................. $500,209 516,757 221,402
Deferred............................................ 129,666 106,589 174,598
-------- ------- -------
$629,875 623,346 396,000
======== ======= =======
</TABLE>
The differences between income tax expense and the amount computed by
applying the statutory federal income tax rate to earnings before taxes are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- --------
<S> <C> <C> <C>
Pretax income at statutory rates........... $1,218,526 1,081,996 684,548
Tax-exempt interest income................. (195,837) (213,330) (311,323)
Change in beginning of year balance of the
valuation allowance for deferred tax
assets allocated to income tax expense.... (423,000) (262,000) (26,245)
Other, net................................. 30,186 16,680 49,020
---------- --------- --------
$ 629,875 623,346 396,000
========== ========= ========
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
December 31, 1996 and 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
Deferred tax assets:
Other real estate................................... $ 27,710 34,000
Pension............................................. 44,540 44,540
Postretirement benefits other than pensions......... 48,583 48,583
Alternative minimum tax credit carryforward......... 588,939 777,635
Other............................................... 206 143
--------- --------
Total gross deferred tax asset.................... 709,978 904,901
Less valuation allowance.............................. 41,000 464,000
--------- --------
668,978 440,901
--------- --------
Deferred tax liabilities:
Allowance for loan losses........................... 416,054 73,470
Unrealized gains on investment securities available
for sale........................................... 143,341 308,620
Premises and equipment.............................. 367,773 350,210
Change in accounting method......................... -- 33,892
Other............................................... 60,268 28,780
--------- --------
Total deferred tax liabilities.................... 987,436 794,972
--------- --------
Net deferred tax liability........................ $(318,458) (354,071)
========= ========
</TABLE>
The Company's Federal alternative minimum tax credits can be carried forward
indefinitely.
F-12
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(10) EMPLOYEE BENEFIT PLANS
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 obligation....... $ 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.
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>
F-13
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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.
The Company has a contributory profit sharing plan covering substantially
all employees who have one year of service. Participating employees may
contribute up to 15% of their salary to the plan. The Company makes certain
matching contributions to the plan and may make discretionary contributions to
the plan. The Company's contributions were approximately $85,000, $79,000 and
$52,000 in 1996, 1995 and 1994, respectively.
The Company has entered into an employment agreement with its chief
executive officer which provides for a full year's payment of compensation
upon a change in control of the Company and termination of employment, as
defined in the agreement. The terms of the agreement automatically extend the
agreement for a rolling two-year period unless the Company elects to cease the
automatic extension provision, which will cause the agreement to terminate two
years from the date of election.
F-14
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) STOCK OPTIONS
In August 1993, the Company adopted the Key Employee Stock Option Plan. This
plan provides for the issuance of stock options on up to 170,000 shares of the
Company's common stock. Options are granted at the discretion of the Company's
Board of Directors. Options granted under the plan are at an option price not
less than the fair value of the Company's common stock at the date of grant,
are exercisable any time after 90 days from the date of grant, and expire ten
years from the date of grant. The Board of Directors establishes vesting
periods at its discretion within the guidelines of the plan document.
Historically, vesting has ranged from 90 days to three years.
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, 1995 or 1994 related to the
stock option plan. 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>
Net earnings
As reported........................................... $2,954,023 2,558,995
Proforma.............................................. $2,928,356 2,551,469
Earnings per share
As reported........................................... $ 0.81 0.68
Proforma.............................................. $ 0.80 0.68
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes options-pricing model with the following weighted average
assumptions used for grants in 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Dividend yield................................................... 2.5% 2.0%
Expected volatility.............................................. 37.5% 35.3%
Risk free interest rate.......................................... 5.0% 5.0%
Expected life (in years)......................................... 10 10
</TABLE>
A summary of activity in the Company's stock option plan is presented below.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION OPTION PRICE
SHARES PER SHARE
------- ------------
<S> <C> <C>
Options outstanding at December 31, 1993................ 75,000 $4.25
Options granted in 1994................................. 23,500 $6.25
-------
Options outstanding at December 31, 1994................ 98,500 $4.73
Options granted in 1995................................. 22,000 $7.50
-------
Options outstanding at December 31, 1995................ 120,500 $5.23
Options granted in 1996................................. 32,500 $8.76
-------
Options outstanding at December 31, 1996................ 153,000 $5.98
=======
</TABLE>
F-15
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Options on 105,832, 92,625 and 67,750 shares were exercisable at December
31, 1996, 1995 and 1994, respectively. The weighted average grant-date fair
value of options granted in 1996 and 1995 was $3.49 and $3.11, respectively.
Options outstanding at December 31, 1996 are exercisable at option prices
ranging from $4.25 to $9.25 as presented in the table above. Such options have
a weighted average remaining contractual life of approximately 8 years.
(12) STOCKHOLDERS' EQUITY
On December 1, 1994, the Company converted the 37,969 shares of Series A
nonvoting preferred stock into 379,690 shares of its $1 par value common
stock. The preferred stock, which was issued in 1993 and had a stated
liquidation value of $45 per share, entitled the holders to cumulative annual
dividends at 7 1/2%. Prior to effecting the conversion, cumulative dividends
totaling $178,913 since the date of issuance were paid.
Dividends paid by the bank subsidiaries are the primary source of funds
available to the Company for payment of dividends to its shareholders and
other needs. Applicable Federal and state statutes and regulations impose
restrictions on the amount of dividends that may be declared by the bank
subsidiaries. In addition to the formal statutes and regulations, regulatory
authorities also consider the adequacy of each bank subsidiary's total capital
in relation to its assets, deposits and other such items. Capital adequacy
considerations could further limit the availability of dividends from the bank
subsidiaries. At December 31, 1996, the bank subsidiaries could pay
approximately $2,000,000 in dividends to the Parent without regulatory
approval.
During 1995, the Company's Board of Directors approved a stock repurchase
program that allows the purchase of up to 100,000 shares of the Company's
common stock. During 1996 the Board of Directors raised this amount to 170,000
shares. At December 31, 1996, the Company has repurchased 123,494 shares of
its common stock.
(13) RELATED PARTY TRANSACTIONS
The bank subsidiaries conduct transactions with directors and officers,
including companies in which they have beneficial interest, in the normal
course of business. It is the policy of the bank subsidiaries that loan
transactions with directors and 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................................................ $1,983,000
New loans........................................................ 965,000
Repayments....................................................... (793,000)
----------
Ending balance................................................... $2,155,000
==========
</TABLE>
(14) SUPPLEMENTARY STATEMENT OF EARNINGS INFORMATION
Components of miscellaneous operating expenses in excess of 1% of total
income for the respective years are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
-------- ------- -------
<S> <C> <C> <C>
Deposit insurance................................... $210,048 240,183 540,434
Legal fees.......................................... $108,669 128,173 233,962
Other professional services......................... $119,246 143,822 243,174
Other real estate................................... $ 34,732 165,263 299,127
Data processing..................................... $262,524 224,527 149,265
</TABLE>
F-16
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(15) COMMITMENTS
The bank subsidiaries are parties to financial instruments with off-balance-
sheet risk in the normal course of business to meet the financing needs of
their customers. These financial instruments include commitments to extend
credit, standby letters of credit and financial guarantees. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the balance sheets. The contract amounts of these instruments
reflect the extent of involvement the bank subsidiaries have 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 these instruments. The bank subsidiaries use the same
credit policies in making commitments and conditional obligations as for on-
balance-sheet instruments.
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 subsidiaries evaluate each
customer's creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary, 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. At December 31, 1996 and 1995, the
bank subsidiaries had commitments to extend credit of approximately
$21,530,000 and $13,295,000, respectively.
Standby letters of credit and financial guarantees written are conditional
commitments issued by the bank subsidiaries to guarantee the performance of a
customer to a third party. Those guarantees are primarily issued to local
businesses. The credit risk involved in issuing letters of credit is
essentially the same as that involved in extending loan facilities to
customers. At December 31, 1996 and 1995, the bank subsidiaries had standby
letters of credit of approximately $164,000 and $10,000.
F-17
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(16) CONDENSED FINANCIAL INFORMATION OF CENTRAL AND SOUTHERN HOLDING COMPANY
(PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
Cash.................................................. $ 8,536 28,158
Interest-earning deposits with bank subsidiary........ 21,251 39,252
Investment in bank subsidiaries....................... 23,838,045 22,830,597
Building, net......................................... 1,102,316 --
Other assets.......................................... 582,436 66,477
----------- ----------
$25,552,584 22,964,484
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Note payable.......................................... $ 1,600,000 250,000
Other liabilities..................................... 47,973 54,086
----------- ----------
1,647,973 304,086
Stockholders' equity.................................. 23,904,611 22,660,398
----------- ----------
$25,552,584 22,964,484
=========== ==========
</TABLE>
CONDENSED STATEMENTS OF EARNINGS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Income:
Dividends from bank subsidiaries.......... $1,408,000 860,000 --
Other..................................... 93,238 15,377 11,796
---------- --------- ---------
Total income............................ 1,501,238 875,377 11,796
---------- --------- ---------
Expenses:
Interest expense.......................... 65,328 1,090 --
Other expenses............................ 283,225 217,463 232,128
---------- --------- ---------
Total expenses.......................... 348,553 218,553 232,128
---------- --------- ---------
Earnings (loss) before income taxes and
equity in undistributed earnings of
bank subsidiaries...................... 1,152,685 656,824 (220,332)
Income tax benefit.......................... 312,730 115,653 93,330
Equity in undistributed earnings of bank
subsidiaries............................... 1,488,608 1,786,518 1,744,378
---------- --------- ---------
Net earnings............................ $2,954,023 2,558,995 1,617,376
========== ========= =========
</TABLE>
F-18
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ---------- ----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings........................ $ 2,954,023 2,558,995 1,617,376
Adjustments to reconcile net
earnings to net cash provided by
(used in) operating activities:
Depreciation...................... 10,200 -- --
Equity in undistributed earnings
of bank subsidiaries............. (1,488,608) (1,786,518) (1,744,378)
Change in other assets............ (356,003) (36,472) 112,470
Change in other liabilities....... (6,113) (114,562) (28,248)
----------- ---------- ----------
Net cash provided by (used in)
operating activities........... 1,113,499 621,443 (42,780)
----------- ---------- ----------
Cash flows from investing activities:
Net change in interest-bearing
deposits........................... 18,001 232,632 130,658
Purchase of building................ (1,112,516) -- --
----------- ---------- ----------
Net cash provided by (used in)
investing activities........... (1,094,515) 232,632 130,658
----------- ---------- ----------
Cash flows from financing activities:
Borrowings under note payable....... 1,350,000 250,000 --
Purchase of treasury stock.......... (586,002) (547,438) --
Cash dividends paid................. (802,604) (660,713) (280,833)
----------- ---------- ----------
Net cash used in financing
activities..................... (38,606) (958,151) (280,833)
----------- ---------- ----------
Net change in cash.............. (19,622) (104,076) (192,955)
Cash at beginning of year............. 28,158 132,234 325,189
----------- ---------- ----------
Cash at end of year................... $ 8,536 28,158 132,234
=========== ========== ==========
Noncash investing and financing
activities:
Conversion of preferred stock into
common stock....................... $ -- -- 1,708,605
Change in unrealized gain (loss) on
investment securities of
subsidiaries....................... $ (321,204) 1,826,182 (1,226,728)
</TABLE>
(17) FAIR VALUE OF FINANCIAL INSTRUMENTS
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 or its bank
subsidiaries, 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 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.
F-19
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Investment Securities
Fair values for investment securities are based on quoted market prices.
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, 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.
Repurchase Agreements
The fair value of repurchase agreements is approximately equal to the
carrying value as a result of their short remaining lives and their market
interest rates.
Note Payable
Since the note payable bears a variable, market rate of interest, its
carrying value approximates 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 the deferred income taxes,
premises and equipment, and goodwill. 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-20
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(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
------------------ -------------------
ESTIMATED
CARRYING FAIR CARRYING ESTIMATED
AMOUNT VALUE AMOUNT FAIR VALUE
-------- --------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Assets:
Cash and short-term investments... $ 30,373 30,373 27,652 27,652
Investment securities available
for sale......................... $ 64,578 64,578 64,515 64,515
Loans............................. $122,269 121,493 109,881 109,366
Liabilities:
Deposits.......................... $195,165 195,504 180,474 180,789
Repurchase agreements............. $ 3,421 3,421 2,350 2,350
Note payable...................... $ 1,600 1,600 250 250
Unrecognized financial instruments:
Commitments to extend credit...... $ 21,530 21,530 13,295 13,295
Standby letters of credit......... $ 164 164 10 10
</TABLE>
(18) REGULATORY MATTERS
The Company is subject to various regulatory capital requirements
administered by state and 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 Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the
Company must meet specific capital guidelines that involve quantitative
measures of the Company's assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company'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 Company to maintain minimum amounts and ratios (set forth in the
table below) of total and Tier I capital (as defined in the regulations) to
risk-weighted assets (as defined), and of Tier I capital (as defined) to
average assets (as defined). Additionally, under regulations from the Office
of Thrift Supervision, North Georgia must maintain a minimum ratio of tangible
capital (as defined) to tangible assets (as defined). Management believes, as
of December 31, 1996, that the Company meets all capital adequacy requirements
to which it is subject.
As of December 31, 1996 the most recent notification from the various
regulators categorized the Company and the bank subsidiaries as well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized the Company and the bank subsidiaries must
maintain minimum total risk-based, Tier I risk-based, Tier I 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.
F-21
<PAGE>
CENTRAL AND SOUTHERN HOLDING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company's actual capital amounts and ratios are also presented in the
following table:
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
------------- ------------------- -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------- ----- ---------- -------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital (to Risk
Weighted Assets):
Consolidated........ $24,923 16% ^12,095 ^8% N/A N/A
Milledgeville....... $19,064 20% ^7,805 ^8% ^9,757 ^10%
North Georgia....... $ 5,810 12% ^3,946 ^8% ^4,933 ^10%
Tier I Capital (to
Risk Weighted
Assets):
Consolidated........ $23,005 15% ^6,047 ^4% N/A N/A
Milledgeville....... $17,822 18% ^3,903 ^4% ^5,854 ^6%
North Georgia....... $ 5,187 11% ^1,973 ^4% ^2,960 ^6%
Tier I Capital (to
Average Assets):
Consolidated........ $23,005 11% ^8,673 ^4% N/A N/A
Milledgeville....... $17,822 12% ^6,004 ^4% ^7,505 ^5%
Tangible Capital (to
Tangible Assets):
North Georgia....... $ 5,187 7% ^1,070 ^1.5% N/A N/A
As of December 31, 1995
Total Capital (to Risk
Weighted Assets):
Consolidated........ $24,183 18% ^10,514 ^8% N/A N/A
Milledgeville....... $17,793 19% ^7,617 ^8% ^9,521 ^10%
North Georgia....... $ 5,056 14% ^2,916 ^8% ^3,645 ^10%
Tier I Capital (to
Risk Weighted
Assets):
Consolidated........ $22,540 17% ^5,257 ^4% N/A N/A
Milledgeville....... $16,603 17% ^3,808 ^4% ^5,713 ^6%
North Georgia....... $ 4,600 13% ^1,458 ^4% ^2,187 ^6%
Tier I Capital (to
Average Assets):
Consolidated........ $22,540 11% ^8,014 ^4% N/A N/A
Milledgeville....... $16,603 11% ^6,127 ^4% ^7,658 ^5%
North Georgia....... $ 4,600 9% ^2,007 ^4% ^2,508 ^5%
</TABLE>
(19) PROPOSED MERGER
On February 3, 1997, the Company executed a definitive agreement of
reorganization and plan of merger with First Alliance/Premier Bancshares, Inc.
("Premier"), a Marietta, Georgia-based bank holding company. This transaction
will be subject to regulatory and shareholder approval. Premier will be the
surviving corporation. In the transaction each of the Company's outstanding
common shares will be converted into one share of Premier common stock.
F-22
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
BY AND BETWEEN
FIRST ALLIANCE/PREMIER BANCSHARES, INC.
AND
CENTRAL AND SOUTHERN HOLDING COMPANY
DATED AS OF FEBRUARY 3, 1997
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Preamble................................................................ A-6
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER..................................... A-6
Merger............................................................... A-6
Time and Place of Closing............................................ A-7
Effective Time....................................................... A-7
ARTICLE 2
TERMS OF MERGER...................................................... A-7
Articles of Incorporation............................................ A-7
Bylaws............................................................... A-7
Directors and Officers............................................... A-7
Names................................................................ A-8
ARTICLE 3
MANNER OF CONVERTING SHARES.......................................... A-8
Conversion of Shares................................................. A-8
Anti-Dilution Provisions............................................. A-8
Shares Held by Premier or Central and Southern....................... A-8
Conversion of Stock Options; Restricted Stock........................ A-9
ARTICLE 4
EXCHANGE OF SHARES................................................... A-9
Exchange Procedures.................................................. A-9
Rights of Former Central and Southern Shareholders................... A-10
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
OF CENTRAL AND SOUTHERN............................................ A-11
Organization, Standing, and Power.................................... A-11
Authority; No Breach By Agreement.................................... A-11
Common Stock......................................................... A-12
Central and Southern Subsidiaries.................................... A-12
Financial Statements................................................. A-13
Absence of Undisclosed Liabilities................................... A-13
Absence of Certain Changes or Events................................. A-14
Tax Matters.......................................................... A-14
Allowance for Possible Loan Losses................................... A-15
Assets............................................................... A-15
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Environmental Matters................................................ A-16
Compliance with Laws................................................. A-16
Labor Relations...................................................... A-17
Employee Benefit Plans............................................... A-17
Material Contracts................................................... A-19
Legal Proceedings.................................................... A-19
Reports.............................................................. A-20
Statements True and Correct.......................................... A-20
Accounting, Tax and Regulatory Matters............................... A-21
Charter Provisions................................................... A-21
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PREMIER............................ A-21
Organization, Standing, and Power.................................... A-21
Authority; No Breach By Agreement.................................... A-21
Capital Stock........................................................ A-22
Premier Subsidiaries................................................. A-23
Financial Statements................................................. A-23
Absence of Undisclosed Liabilities................................... A-24
Absence of Certain Changes or Events................................. A-24
Tax Matters.......................................................... A-24
Allowance for Possible Loan Losses................................... A-25
Assets............................................................... A-25
Environmental Matters................................................ A-26
Compliance with Laws................................................. A-26
Labor Relations...................................................... A-27
Employee Benefit Plans............................................... A-27
Material Contracts................................................... A-29
Legal Proceedings.................................................... A-29
Reports.............................................................. A-30
Statements True and Correct.......................................... A-30
Accounting, Tax and Regulatory Matters............................... A-30
Charter Provisions................................................... A-31
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION............................. A-31
Affirmative Covenants of Central and Southern........................ A-31
Negative Covenants of Central and Southern........................... A-31
Affirmative Covenants of Premier..................................... A-33
Negative Covenants of Premier........................................ A-34
Adverse Changes in Condition......................................... A-36
Reports.............................................................. A-36
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 8
ADDITIONAL AGREEMENTS................................................ A-36
Registration Statement; Proxy Statement; Shareholder Approval........ A-36
Exchange Listing..................................................... A-37
Applications......................................................... A-37
Filings with State Offices........................................... A-37
Agreement as to Efforts to Consummate................................ A-37
Investigation and Confidentiality.................................... A-37
Press Releases....................................................... A-38
Acquisition Proposals................................................ A-38
Accounting and Tax Treatment......................................... A-38
Agreement of Affiliates.............................................. A-39
Employee Benefits and Contracts...................................... A-39
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE.................... A-40
Conditions to Obligations of Each Party.............................. A-40
Conditions to Obligations of Premier................................. A-41
Conditions to Obligations of Central and Southern.................... A-43
ARTICLE 10
TERMINATION.......................................................... A-44
Termination.......................................................... A-44
Effect of Termination................................................ A-46
Non-Survival of Representations and Covenants........................ A-46
ARTICLE 11
MISCELLANEOUS........................................................ A-46
Definitions.......................................................... A-46
Expenses............................................................. A-53
Brokers and Finders.................................................. A-54
Entire Agreement..................................................... A-54
Amendments........................................................... A-54
Waivers.............................................................. A-55
Assignment........................................................... A-55
Notices.............................................................. A-55
Governing Law........................................................ A-56
Counterparts......................................................... A-56
Captions............................................................. A-56
Enforcement of Agreement............................................. A-57
Severability......................................................... A-57
</TABLE>
A-4
<PAGE>
LIST OF EXHIBITS
- ----------------
Exhibit Number Description
- -------------- -----------
1. Form of Agreement of Affiliates of Central and Southern.
((S) 8.10).
2. Matters as to which Counsel for Central and Southern will
opine. ((S) 9.2(d)).
3. Form of Claims/Indemnification Letter ((S) 9.2(e)).
4. Matters as to which Counsel for Premier will opine.
((S) 9.3(d)).
5. Central and Southern Employment Agreements. ((S) 8.11(b)).
6. Premier Employment Agreement. ((S) 8.11(c)).
A-5
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
------------------------------------
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of February 3, 1997 by and between FIRST ALLIANCE/PREMIER
BANCSHARES, INC. ("Premier"), a corporation organized and existing under the
laws of the State of Georgia, with its principal office located in Marietta,
Georgia, and CENTRAL AND SOUTHERN HOLDING COMPANY ("Central and Southern"), a
corporation organized and existing under the laws of the State of Georgia, with
its principal office located in Milledgeville, Georgia.
PREAMBLE
---------
The Boards of Directors of Premier and Central and Southern are of the
opinion that the transactions described herein are in the best interests of the
parties and their respective shareholders. This Agreement provides for the
merger of Central and Southern with and into Premier, with Premier being the
surviving corporation of the merger. At the effective time of such merger, the
outstanding shares of capital stock of Central and Southern will be converted
into the right to receive shares of capital stock of the surviving corporation.
As a result, shareholders of Central and Southern will become shareholders of
the surviving corporation, and each of the subsidiaries of Central and Southern
will continue to conduct its business and operations as a wholly-owned
subsidiary of the surviving corporation. The transactions described in this
Agreement are subject to the approvals of the Boards of Directors and the
shareholders of both Central and Southern and Premier, the Board of Governors of
the Federal Reserve System, the Georgia Department of Banking and Finance and
the satisfaction of certain other conditions described in this Agreement. It is
the intention of the parties to this Agreement that the merger (i) for federal
income tax purposes shall qualify as a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code and (ii) for accounting purposes
shall be accounted for as a "pooling of interests."
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
NOW, THEREFORE, in consideration of the above and the mutual
warranties, representations, covenants and agreements set forth herein, the
parties agree as follows:
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 MERGER. Subject to the terms and conditions of this Agreement,
------
at the Effective Time, Central and Southern shall be merged with and into
Premier in accordance with the provisions of Section 14-2-1101 of the GBCC and
with the effect provided in Section 14-2-1106 of the GBCC (the "Merger").
Premier shall be the Surviving Corporation resulting from the Merger.
A-6
<PAGE>
The Merger shall be consummated pursuant to the terms of this Agreement, which
has been approved and adopted by the respective Boards of Directors of Premier
and Central and Southern.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 10:00
-------------------------
a.m. on the date that the Effective Time occurs (or the immediately preceding
day if the Effective Time is earlier than 10:00 a.m.), or at such other time as
the Parties, acting through their chief executive officers may mutually agree.
The place of Closing shall be at the offices of Womble Carlyle Sandridge & Rice,
PLLC, Atlanta, Georgia, or such other place as may be mutually agreed upon by
the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions contemplated
--------------
by this Agreement shall become effective on the date and at the time the
Articles of Merger reflecting the Merger shall become effective with the
Secretary of State of the State of Georgia (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officer of each Party, the Parties shall use
their reasonable efforts to cause the Effective Time to occur on the last
business day of the month in which occurs the last to occur of (a) the effective
date (including expiration of any applicable waiting period) of the last
required Consent of any Regulatory Authority having authority over and approving
or exempting the Merger, (b) the date on which the shareholders of Central and
Southern approve this Agreement to the extent such approval is required by
applicable Law, and (c) the date on which the shareholders of Premier approve
this Agreement to the extent such approval is required; or such later date as
may be mutually agreed upon in writing by the chief executive officer of each
Party.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
-------------------------
Premier in effect immediately prior to the Effective Time shall be the Articles
of Incorporation of the Surviving Corporation until otherwise amended or
repealed.
2.2 BYLAWS. The Bylaws of Premier in effect immediately prior to
------
the Effective Time shall be the Bylaws of the Surviving Corporation until
otherwise amended or repealed.
2.3 DIRECTORS AND OFFICERS. The directors of the Surviving
----------------------
Corporation from and after the Effective Time shall consist of six outside
directors of Premier to be specified to Central and Southern within fifteen (15)
days after the execution of this Agreement, six outside directors of Central and
Southern to be specified to Premier within fifteen (15) days after the execution
of this Agreement, and Darrell D. Pittard, Robert C. Oliver and J. Edward
Mulkey, Jr., as inside directors who shall serve in accordance with the Bylaws
of the Surviving Corporation. The officers of the Surviving Corporation shall
be as follows: Darrell D. Pittard shall be its Chairman of the Board and Chief
Executive Officer and Robert C. Oliver shall be its President and Chief
Operating Officer, J. Edward Mulkey, Jr., shall be its Vice Chairman and Michael
E. Ricketson and Frank H. Roach shall be its Executive Vice Presidents. Such
officers, together with such additional persons as may
A-7
<PAGE>
thereafter be elected, shall serve as the officers of the Surviving Corporation
from and after the Effective Time in accordance with the Bylaws of the Surviving
Corporation. At the Effective Time of the Merger, Mr. Pittard, Mr. Mulkey and
Mr. Oliver will be elected to the board of directors of all of the Subsidiaries
of the Surviving Corporation. Mr. Pittard will continue as Chairman and Chief
Executive Officer of Premier Lending Corporation. Mr. Oliver will continue as
President of The Central and Southern Bank of Georgia and on the Board of
Directors of The Central and Southern Bank of North Georgia, F.S.B. Mr. Mulkey
will continue as President and Chief Executive Officer of Premier Bank and on
the board of directors of Premier Bank, F.S.B. and Alliance Finance. Mr.
Ricketson will continue as Chief Financial Officer of The Central and Southern
Bank of Georgia and The Central and Southern Bank of North Georgia, F.S.B.
2.4 NAMES. At the Effective Time of the Merger, the Surviving
-----
Corporation will change its name to "Premier Bancshares, Inc." As soon as
practicable following the Effective Time, The Central and Southern Bank of North
Georgia, F.S.B. will change its name to "Premier Bank F.S.B."
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article
--------------------
3, at the Effective Time, by virtue of the Merger and without any action on the
part of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
Each share of Premier Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and after
the Effective Time.
Each share of Central and Southern Common Stock (excluding shares held
by Premier or Central and Southern or any of their respective Subsidiaries, in
each case other than in a fiduciary capacity or as a result of debts previously
contracted) issued and outstanding at the Effective Time shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
one share of Surviving Corporation Common Stock (the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event Premier or Central and
------------------------
Southern changes the number of shares of Premier Common Stock or Central and
Southern Common Stock, respectively, issued and outstanding prior to the
Effective Time as a result of a stock split, stock dividend or similar
recapitalization with respect to such stock and the record date therefor (in the
case of a stock dividend) or the effective date therefor (in the case of a stock
split or similar recapitalization) shall be prior to the Effective Time, the
Exchange Ratio shall be proportionately adjusted, provided, however, that the
Exchange Ratio shall not be adjusted for the Premier stock split described in
Section 9.3(e) herein.
3.3 SHARES HELD BY PREMIER OR CENTRAL AND SOUTHERN. Each of the
----------------------------------------------
shares of Premier Common Stock held by any Premier Company or by any Central and
Southern Company, in each
A-8
<PAGE>
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.4 CONVERSION OF STOCK OPTIONS; RESTRICTED STOCK.
---------------------------------------------
(a) At the Effective Time, all rights with respect to Central and
Southern Common Stock pursuant to stock options ("Central and Southern Options")
granted by Central and Southern under the Central and Southern Stock Plans,
which are outstanding at the Effective Time, whether or not exercisable, shall
be converted into and become rights with respect to Surviving Corporation Common
Stock, and the Surviving Corporation shall assume each Central and Southern
Option, in accordance with the terms of the Central and Southern Stock Plan and
stock option agreement by which it is evidenced. From and after the Effective
Time, (i) each Central and Southern Option assumed by the Surviving Corporation
may be exercised solely for shares of Surviving Corporation Common Stock, (ii)
the number of shares of Surviving Corporation Common Stock subject to such
Central and Southern Option shall be equal to the number of shares of Central
and Southern Common Stock subject to such Central and Southern Option
immediately prior to the Effective Time, and (iii) the per share exercise price
under each such Central and Southern Option shall not be changed. It is
intended that the foregoing assumption shall be undertaken in a manner that will
not constitute a "modification" as defined in Section 424 of the Internal
Revenue Code, as to any stock option which is an "incentive stock option."
Central and Southern and Premier agree to take all necessary steps to effect the
provisions of this Section 3.4.
(b) All restrictions or limitations on transfer with respect to
Central and Southern Common Stock awarded under the Central and Southern Stock
Plans or any other plan, program or arrangement of any Central and Southern
Company, to the extent that such restrictions or limitations shall not have
already lapsed, and except as otherwise expressly provided in such plan, program
or arrangement, shall remain in full force and effect with respect to shares of
Surviving Corporation Common Stock into which such restricted stock is converted
pursuant to Section 3.1 of this Agreement.
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 EXCHANGE PROCEDURES. Unless the parties otherwise agree,
-------------------
promptly after the Effective Time, the Surviving Corporation shall mail to the
former holders of Central and Southern Common Stock appropriate transmittal
materials which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of Central and
Southern Common Stock shall pass, only upon proper delivery of such certificates
to the Surviving Corporation. After the Effective Time, each holder of shares of
Central and Southern Common Stock (other than shares to be canceled pursuant to
Section 3.3 of this Agreement) issued and outstanding at the Effective Time
shall surrender the certificate or certificates representing such shares to the
Surviving Corporation and shall promptly upon surrender thereof receive in
exchange
A-9
<PAGE>
therefor the consideration provided in Section 3.1 of this Agreement, together
with all undelivered dividends or distributions in respect of such shares
(without interest thereon) pursuant to Section 4.2 of this Agreement. The
Surviving Corporation shall not be obligated to deliver the consideration to
which any former holder of Central and Southern Common Stock is entitled as a
result of the Merger until such holder surrenders his or her certificate or
certificates representing the shares of Central and Southern Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates of
Central and Southern Common Stock so surrendered shall be duly endorsed as the
Surviving Corporation may require. Any other provision of this Agreement
notwithstanding, the Surviving Corporation shall not be liable to a holder of
Central and Southern Common Stock for any amounts paid or property delivered in
good faith to a public official pursuant to any applicable abandoned property
Law.
4.2 RIGHTS OF FORMER CENTRAL AND SOUTHERN SHAREHOLDERS. The stock
--------------------------------------------------
transfer books of Central and Southern shall be closed as to holders of Central
and Southern Common Stock immediately prior to the Effective Time and no
transfer of Central and Southern Common Stock by any such holder shall
thereafter be made or recognized. Until surrendered for exchange in accordance
with the provisions of Section 4.1 of this Agreement, each certificate
theretofore representing shares of Central and Southern Common Stock (other than
shares to be canceled pursuant to Section 3.3) shall from and after the
Effective Time represent for all purposes only the right to receive the
consideration provided in Section 3.1 of this Agreement in exchange therefor.
To the extent permitted by Law, former holders of record of Central and Southern
Common Stock shall be entitled to vote after the Effective Time at any meeting
of Surviving Corporation shareholders the number of whole shares of Surviving
Corporation Common Stock into which their respective shares of Central and
Southern Common Stock are converted, regardless of whether such holders have
exchanged their certificates representing Central and Southern Common Stock for
certificates representing Surviving Corporation Common Stock in accordance with
the provisions of this Agreement. Whenever a dividend or other distribution is
declared by the Surviving Corporation on the Surviving Corporation Common Stock,
the record date for which is at or after the Effective Time, the declaration
shall include dividends or other distributions on all shares issuable pursuant
to this Agreement, but no dividend or other distribution payable to the holders
of record of Surviving Corporation Common Stock as of any time subsequent to the
Effective Time shall be delivered to the holder of any certificate representing
shares of Central and Southern Common Stock issued and outstanding at the
Effective Time until such holder surrenders such certificate for exchange as
provided in Section 4.1 of this Agreement. However, upon surrender of such
Central and Southern Common Stock certificate, the Surviving Corporation Common
Stock certificate and with all such undelivered dividends or other distributions
(without interest) shall be delivered and paid with respect to each share
represented by such certificate.
A-10
<PAGE>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
------------------------------
OF CENTRAL AND SOUTHERN
-----------------------
Central and Southern hereby represents and warrants to Premier as
follows:
5.1 ORGANIZATION, STANDING, AND POWER. Central and Southern is a
---------------------------------
corporation duly organized, validly existing, and in good standing under the
Laws of the State of Georgia and is duly registered as a bank holding company
under the BHC Act. Central and Southern has the corporate power and authority
to carry on its business as now conducted and to own, lease and operate its
Assets. Central and Southern is duly qualified or licensed to transact business
as a foreign corporation in good standing in the States of the United States and
foreign jurisdictions where the character of its Assets or the nature or conduct
of its business requires it to be so qualified or licensed, except for such
jurisdictions in which the failure to be so qualified or licensed is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Central and Southern.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
----------------------------------
(a) Central and Southern has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by all necessary corporate action in respect thereof on the part of Central and
Southern, subject to the approval of this Agreement by the holders of a majority
of the outstanding Central and Southern Common Stock, which is the only
shareholder vote required for approval of this Agreement and consummation of the
Merger by Central and Southern. Subject to such requisite shareholder approval,
this Agreement represents a legal, valid and binding obligation of Central and
Southern, enforceable against Central and Southern in accordance with its terms
(except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the availability
of the equitable remedy of specific performance or injunctive relief is subject
to the discretion of the court before which any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Central
and Southern, nor the consummation by Central and Southern of the transactions
contemplated hereby, nor compliance by Central and Southern with any of the
provisions hereof will (i) conflict with or result in a breach of any provision
of Central and Southern's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to, or
result in the creation of any Lien on any Asset of any Central and Southern
Company under, any Contract or Permit of any Central and Southern Company, where
such Default or Lien, or any failure to obtain such Consent, is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Central and Southern, or (iii) subject to receipt of the requisite approvals
referred to in Section 9.1 (b)
A-11
<PAGE>
of this Agreement, violate any Law or Order applicable to any Central and
Southern Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Central and Southern, no notice to, filing with, or
Consent of any public body or authority is necessary for the consummation by
Central and Southern of the Merger and the other transactions contemplated in
this Agreement.
5.3 COMMON STOCK.
------------
(a) The authorized Common stock of Central and Southern consists of
10,000,000 shares of Central and Southern Common Stock, of which 3,653,523
shares are issued and outstanding as of the date of this Agreement and not more
than 3,653,523 shares will be issued and outstanding at the Effective Time (as a
result of the exercise of outstanding options). All of the issued and
outstanding shares of capital stock of Central and Southern are duly and validly
issued and outstanding and are fully paid and nonassessable under the GBCC.
None of the outstanding shares of capital stock of Central and Southern has been
issued in violation of any preemptive rights of the current or past shareholders
of Central and Southern. Central and Southern has reserved 170,000 shares of
Central and Southern Common Stock for issuance under the Central and Southern
Stock Plans, pursuant to which options to purchase not more than 153,000 shares
of Central and Southern Common Stock are outstanding as of the date of this
Agreement and at the Effective Time.
(b) Except as set forth in Section 5.3(a) of this Agreement, or as
disclosed in Section 5.3 of the Central and Southern Disclosure Memorandum,
---------------------
there are no shares of capital stock or other equity securities of Central and
Southern outstanding and no outstanding Rights relating to the capital stock of
Central and Southern.
5.4 CENTRAL AND SOUTHERN SUBSIDIARIES. Central and Southern has
---------------------------------
disclosed in Section 5.4 of the Central and Southern Disclosure Memorandum all
---------------------
of the Central and Southern Subsidiaries as of the date of this Agreement.
Except as disclosed in Section 5.4 of the Central and Southern Disclosure
----------
Memorandum, Central and Southern or one of its Subsidiaries owns all of the
- ----------
issued and outstanding shares of capital stock of each Central and Southern
Subsidiary. No equity securities of any Central and Southern Subsidiary are or
may become required to be issued (other than to another Central and Southern
Company) by reason of any Rights, and there are no Contracts by which any
Central and Southern Subsidiary is bound to issue (other than to another Central
and Southern Company) additional shares of its capital stock or Rights, or by
which any Central and Southern Company is or may be bound to transfer any shares
of the capital stock of any Central and Southern Subsidiary (other than to
another Central and Southern Company), and there are no
A-12
<PAGE>
Contracts by which any Central and Southern Subsidiary is bound to issue (other
than to another Central and Southern Company) additional shares of its capital
stock. There are no Contracts relating to the rights of any Central and Southern
Company to vote or to dispose of any shares of the capital stock of any Central
and Southern Subsidiary. All of the shares of capital stock of each Central and
Southern Subsidiary held by a Central and Southern Company are fully paid and
nonassessable under the applicable Law of the jurisdiction in which such
Subsidiary is incorporated or organized and are owned by the Central and
Southern Company free and clear of any Lien. Each Central and Southern
Subsidiary is either a bank, a savings association or a corporation and is duly
organized, validly existing, and (as to corporations) in good standing under the
Laws of the jurisdiction in which it is organized and has the corporate power
and authority necessary for it to own, lease and operate its Assets and to carry
on its business as now conducted. Each Central and Southern Subsidiary is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Central and Southern. Each
Central and Southern Subsidiary that is a depository institution is an "insured
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder, and the deposits in which are insured by the Bank
Insurance Fund or the Savings Association Insurance Fund, as appropriate.
5.5 FINANCIAL STATEMENTS. Central and Southern has included in
--------------------
Section 5.5 of the Central and Southern Disclosure Memorandum copies of all
---------------------
Central and Southern Financial Statements for periods ended prior to the date
hereof and will deliver to Premier copies of all Central and Southern Financial
Statements prepared subsequent to the date hereof. The Central and Southern
Financial Statements (as of the dates thereof and for the periods covered
thereby) (a) are, or if dated after the date of this Agreement will be, in
accordance with the books and records of the Central and Southern Companies,
which are or will be, as the case may be, complete and correct and which have
been or will have been, as the case may be, maintained in accordance with good
business practices, and (b) present or will present, as the case may be, fairly
the consolidated financial position of the Central and Southern Companies as of
the dates indicated and the consolidated results of operations, changes in
shareholders' equity, and cash flows of Central and Southern Companies for the
periods indicated, in accordance with GAAP (subject to any exceptions as to
consistency specified therein or as may be indicated in the notes thereto or, in
the case of interim financial statements, to normal recurring year-end
adjustments that are not material in amount or effect).
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Central and Southern
----------------------------------
Company has any Liabilities that are reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Central and Southern except
Liabilities which are accrued or reserved against in the consolidated balance
sheets of Central and Southern as of December 30, 1995 and September 30, 1996,
included in Central and Southern Financial Statements or reflected in the notes
thereto. No Central and Southern Company has incurred or paid any Liability
since September 30, 1996, except for such Liabilities incurred or paid in the
ordinary course of business consistent with past business
A-13
<PAGE>
practice and which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Central and Southern.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1996,
------------------------------------
except as disclosed in SEC Documents filed by Central and Southern prior to the
date of this Agreement, and except as disclosed in Section 5.7 of the Central
and Southern Disclosure Memorandum, (a) there have been no events, changes or
---------------------
occurrences which have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Central and Southern, and (b) the
Central and Southern Companies have not taken any action, or failed to take any
action, prior to the date of this Agreement, which action or failure, if taken
after the date of this Agreement, would represent or result in a material breach
or violation of any of the covenants and agreements of Central and Southern
provided in Article 7 of this Agreement.
5.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
Central and Southern Companies have been timely filed or requests for extensions
have been timely filed, granted, and have not expired for periods ended on or
before September 30, 1996, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, except to the extent that all
such failures to file, taken together, are not reasonably likely to have a
Material Adverse Effect on Central and Southern and all returns filed are
complete and accurate to the Knowledge of Central and Southern. All Taxes shown
on filed returns have been paid. As of the date of this Agreement, there is no
audit examination, deficiency or refund Litigation with respect to any Taxes
that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on Central and
Southern, except as reserved against in the Central and Southern Financial
Statements delivered prior to the date of this Agreement or as disclosed in
Section 5.8(a) of the Central and Southern Disclosure Memorandum. All Taxes and
---------------------
other Liabilities due with respect to completed and settled examinations or
concluded Litigation have been paid.
(b) Except as disclosed in Section 5.8(b) of the Central and Southern
Disclosure Memorandum, none of the Central and Southern Companies has executed
- ---------------------
an extension or waiver of any statute of limitations on the assessment or
collection of any Tax due that is currently in effect, and no unpaid tax
deficiency has been asserted in writing against or with respect to any Central
and Southern Company, which deficiency is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Central and
Southern.
(c) Adequate provision for any Taxes due or to become due for any of
the Central and Southern Companies for the period or periods through and
including the date of the respective Central and Southern Financial Statements
has been made and is reflected on such Central and Southern Financial
Statements.
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<PAGE>
(d) Deferred Taxes of the Central and Southern Companies have been
provided for in accordance with GAAP.
(e) Each of the Central and Southern Companies is in compliance with,
and its records contain all information and documents (including, without
limitation, properly completed IRS Forms W-9) necessary to comply with, all
applicable information reporting and Tax withholding requirements under federal,
state and local Tax Laws, and such records identify with specificity all
accounts subject to backup withholding under Section 3406 of the Internal
Revenue Code, except for such instances of noncompliance and such omissions as
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Central and Southern.
5.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
----------------------------------
loan or credit losses (the "Allowance") shown on the consolidated balance sheets
of Central and Southern included in the most recent Central and Southern
Financial Statements dated prior to the date of this Agreement was, and the
Allowance shown on the consolidated balance sheets of Central and Southern
included in the Central and Southern Financial Statements as of dates subsequent
to the execution of this Agreement will be, as of the dates thereof, adequate
(within the meaning of GAAP and applicable regulatory requirements or
guidelines) to provide for losses relating to or inherent in the loan and lease
portfolios (including accrued interest receivables) of the Central and Southern
Companies and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the Central and Southern
Companies as of the dates thereof except where the failure of such Allowance to
be so adequate is not reasonably likely to have a Material Adverse Effect on
Central and Southern.
5.10 ASSETS. Except as disclosed in Section 5.10 of the Central and
------
Southern Disclosure Memorandum or as disclosed or reserved against in the
---------------------
Central and Southern Financial Statements, the Central and Southern Companies
have good and marketable title, free and clear of all Liens, to all of their
respective Assets. All material tangible properties used in the businesses of
the Central and Southern Companies are in good condition, reasonable wear and
tear excepted, and are usable in the ordinary course of business consistent with
Central and Southern's past practices. All Assets which are material to Central
and Southern's business on a consolidated basis, held under leases or subleases
by any of the Central and Southern Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceedings may be brought), and each such Contract is in full force and effect.
The policies of fire, theft, liability and other insurance maintained with
respect to the Assets or businesses of the Central and Southern Companies
provide adequate coverage under current industry practices against loss or
Liability, and the fidelity and blanket bonds in effect as to which any of the
Central and Southern Companies is a named insured are reasonably sufficient.
The Assets of the Central and Southern Companies include all assets required to
operate the business of the Central and Southern Companies as presently
conducted.
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<PAGE>
5.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Except as disclosed in Section 5.11(a) of the Central and Southern
Disclosure Memorandum, to the Knowledge of Central and Southern, each Central
- ---------------------
and Southern Company, its Participation Facilities and its Loan Properties are,
and have been, in compliance with all Environmental Laws, except for
noncompliance which is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Central and Southern.
(b) To the Knowledge of Central and Southern, there is no Litigation
pending or threatened before any court, governmental agency or authority or
other forum in which any Central and Southern Company or any of its Loan
Properties or Participation Facilities has been or, with respect to threatened
Litigation, may be named as a defendant or potentially responsible party (i) for
alleged noncompliance with any Environmental Law or (ii) relating to the Release
into the Environment of any Hazardous Material (as defined below), whether or
not occurring at, on, under or involving a site owned, leased or operated by any
Central and Southern Company or any of its Loan Properties or Participation
Facilities, except for such Litigation pending or threatened the resolution of
which is not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Central and Southern or to the Knowledge of Central
and Southern, there is no reasonable basis for any such Litigation.
(c) To the Knowledge of Central and Southern, there have been no
releases of Hazardous Material in, on, under or affecting any Participation
Facility or Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Central and
Southern.
5.12 COMPLIANCE WITH LAWS. Central and Southern is duly registered
--------------------
as a bank holding company and as a thrift holding company under the BHC Act and
HOLA, respectively. Each Central and Southern Company has in effect all Permits
necessary for it to own, lease or operate its Assets and to carry on its
business as now conducted, except for those Permits the absence of which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Central and Southern, and there has occurred no Default under any such
Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Central and
Southern. Except as disclosed in Section 5.12 of the Central and Southern
Disclosure Memorandum, no Central and Southern Company:
- ---------------------
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Central and Southern; and
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any Central and Southern Company is not in
compliance with any of the Laws or
A-16
<PAGE>
Orders which such governmental authority or Regulatory Authority enforces, where
such noncompliance is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Central and Southern, (ii) threatening
to revoke any Permits, the revocation of which is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Central and
Southern, or (iii) requiring any Central and Southern Company to enter into or
consent to the issuance of a cease and desist order, formal agreement,
directive, commitment or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, which restricts materially the conduct of its
business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
5.13 LABOR RELATIONS. No Central and Southern Company is the
---------------
subject of any Litigation asserting that it or any other Central and Southern
Company has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or comparable state law) or seeking to compel it or
any other Central and Southern Company to bargain with any labor organization as
to wages or conditions of employment, nor is there any strike or other labor
dispute involving any Central and Southern Company, pending or, to its
Knowledge, threatened, nor, to its Knowledge, is there any activity involving
any Central and Southern Company's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
5.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Central and Southern has disclosed in Section 5.14 of the Central
and Southern Disclosure Memorandum and delivered or made available to Premier
---------------------
prior to the execution of this Agreement copies in each case of all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plans, all other
written employee programs, arrangements, or agreements, all medical, vision,
dental, or other health plans, all life insurance plans, and all other employee
benefit plans or fringe benefit plans, including, without limitation, "employee
benefit plans" as that term is defined in Section 3(3) of ERISA, currently
adopted, maintained by, sponsored in whole or in part by, or contributed to by
any Central and Southern Company or Affiliate thereof for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors, or
other beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "Central and Southern Benefit Plans"). Any of
the Central and Southern Benefit Plans which is an "employee pension benefit
plan," as that term is defined in Section 3(2) of ERISA, is referred to herein
as a "Central and Southern ERISA Plan." Each Central and Southern ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "Central and Southern Pension
Plan." No Central and Southern Pension Plan is or has been a multi-employer
plan within the meaning of Section 3(37) of ERISA.
(b) All Central and Southern Benefit Plans are in compliance with the
applicable terms of ERISA, the Internal Revenue Code, and any other applicable
Laws the breach or violation of which are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect
A-17
<PAGE>
on Central and Southern. Each Central and Southern ERISA Plan which is intended
to be qualified under Section 401(a) of the Internal Revenue Code has received a
favorable determination letter from the Internal Revenue Service, and Central
and Southern is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. To the Knowledge of Central and
Southern, no Central and Southern Company nor any other party has engaged in a
transaction with respect to any Central and Southern Benefit Plan that, assuming
the taxable period of such transaction expired as of the date hereof, would
subject any Central and Southern Company to a tax or penalty imposed by either
Section 4975 of the Internal Revenue Code or Section 502(i) of ERISA in amounts
which are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Central and Southern.
(c) Central and Southern maintains an "employee pension benefit plan,"
within the meaning of Section 3(2) of ERISA that is or was subject to Title IV
of ERISA.
(d) Neither Central and Southern nor any ERISA Affiliate of Central
and Southern has any past, present or future obligation or liability to
contribute to any multi-employer plan, as defined in Section 3(37) of ERISA.
(e) Except as disclosed in Section 5.14(e) of the Central and Southern
Disclosure Memorandum, (i) no Central and Southern Company has any obligations
- ---------------------
for retiree health and life benefits under any of the Central and Southern
Benefit Plans, except as required by Section 6.01 of ERISA and Section 4980B of
the Code; (ii) there are no restrictions on the rights of any Central and
Southern Company to amend or terminate any such Plan; and (iii) any amendment or
termination of any such Plan will not cause any Central and Southern Company to
incur any Liability that is reasonably likely to have a Material Adverse Effect
on Central and Southern.
(f) Except as disclosed in Section 5.14(f) of the Central and Southern
Disclosure Memorandum, neither the execution and delivery of this Agreement nor
- ---------------------
the consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any Central and Southern Company from any Central and Southern Company under any
Central and Southern Benefit Plan or otherwise, (ii) increase any benefits
otherwise payable under any Central and Southern Benefit Plan, or (iii) result
in any acceleration of the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Central and Southern Company and their respective
beneficiaries have been fully reflected on the Central and Southern Financial
Statements to the extent required by and in accordance with GAAP.
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<PAGE>
(h) Central and Southern and each ERISA Affiliate of Central and
Southern has complied with the continuation of coverage requirements of Section
1001 of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended,
and ERISA Sections 601 through 608.
(i) Neither Central and Southern nor any ERISA Affiliate of Central
and Southern is obligated, contingently or otherwise, under any agreement to pay
any amount which would be treated as a "parachute payment," as defined in
Section 280G(b) of the Internal Revenue Code (determined without regard to
Section 280G(b)(2)(A)(ii) of the Internal Revenue Code).
(j) Other than routine claims for benefits, there are no actions,
audits, investigations, suits or claims pending, or threatened against any
Central and Southern Benefit Plan, any trust or other funding agency created
thereunder, or against any fiduciary of any Central and Southern Benefit Plan or
against the assets of any Central and Southern Benefit Plan.
5.15 MATERIAL CONTRACTS. Except as disclosed in Section 5.15 of the
------------------
Central and Southern Disclosure Memorandum or otherwise reflected in the Central
---------------------
and Southern Financial Statements, none of the Central and Southern Companies,
nor any of their respective Assets, businesses or operations, is a party to, or
is bound or affected by, or receives benefits under, (a) any employment,
severance, termination, consulting or retirement Contract providing for
aggregate payments to any Person in any calendar year in excess of $10,000,
excluding "at will" employment arrangements, (b) any Contract relating to the
borrowing of money by any Central and Southern Company or the guarantee by any
Central and Southern Company of any such obligation (other than Contracts
evidencing deposit liabilities, purchases of federal funds, Federal Home Loan
Bank advances, fully-secured repurchase agreements, trade payables, and
Contracts relating to borrowings or guarantees made in the ordinary course of
business), (c) any Contracts between or among Central and Southern Companies,
and (d) any other Contract (excluding this Agreement) or amendment thereto that
is required to be filed as an exhibit to a Form 10-KSB or Form 10-QSB filed by
Central and Southern with the SEC as of the date of this Agreement that has not
been filed as an exhibit to any Central and Southern Form 10-KSB or 10-QSB filed
with the SEC (together with all Contracts referred to in Sections 5.10 and
5.14(a) of this Agreement, the "Central and Southern Contracts"). None of the
Central and Southern Companies is in Default under any Central and Southern
Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Central and
Southern. All of the indebtedness of any Central and Southern Company for money
borrowed is prepayable at any time by such Central and Southern Company without
penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as disclosed in Section 5.16 of the
-----------------
Central and Southern Disclosure Memorandum, there is no Litigation instituted or
---------------------
pending, or, to the Knowledge of Central and Southern, threatened (or unasserted
but considered probable of assertion and which if asserted would have at least a
reasonable probability of an unfavorable outcome) against any Central and
Southern Company, or against any Asset, interest, or right of any of them, that
is reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Central and Southern, nor are there any Orders of any
Regulatory Authorities, other governmental authorities, or arbitrators
A-19
<PAGE>
outstanding against any Central and Southern Company, that are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Central
and Southern.
5.17 REPORTS. Since January 1, 1996, each Central and Southern
-------
Company has timely filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (a) the SEC, including, but not limited to, Forms 10-KSB,
Forms 10-QSB, Forms 8-KSB, and Proxy Statements, (b) other Regulatory
Authorities, and (c) any applicable state securities or banking authorities
(except, in the case of state securities authorities, failures to file which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Central and Southern). As of their respective dates, each of
such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all applicable Laws.
As of its respective date, each such report and document to Central and
Southern's Knowledge did not, in any material respects, contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
---------------------------
instrument or other writing furnished or to be furnished by any Central and
Southern Company or any Affiliate thereof to Premier pursuant to this Agreement
or any other document, agreement or instrument referred to herein contains or
will contain any untrue statement of material fact or will omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. None of the
information supplied or to be supplied by any Central and Southern Company or
any Affiliate thereof for inclusion in the Registration Statement to be filed by
Premier with the SEC will, when the Registration Statement becomes effective, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by any Central and Southern Company
or any Affiliate thereof for inclusion in the Proxy Statement to be mailed to
Central and Southern's shareholders in connection with the Central and Southern
Shareholders' Meeting, and any other documents to be filed by a Central and
Southern Company or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of Central and Southern, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or, in the case of the
Proxy Statement or any amendment thereof or supplement thereto, at the time of
the Central and Southern Shareholders' Meeting, be false or misleading with
respect to any material fact, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of any proxy for the Central and Southern Shareholders' Meeting.
All documents that any Central and Southern Company or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material respects
with the provisions of applicable Law.
A-20
<PAGE>
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No Central and
--------------------------------------
Southern Company or any Affiliate thereof has taken any action, or agreed to
take any action, or has any Knowledge of any fact or circumstance that is
reasonably likely to (a) prevent the transactions contemplated hereby, including
the Merger, from qualifying for pooling-of-interests accounting treatment or
treatment as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code, or (b) materially impede or delay receipt of any Consents
of Regulatory Authorities referred to in Section 9.1(b) of this Agreement or
result in the imposition of a condition or restriction of the type referred to
in the second sentence of such Section. To the Knowledge of Central and
Southern, there exists no fact, circumstance, or reason why the requisite
Consents referred to in Section 9.1(b) of this Agreement cannot be received in a
timely manner without the imposition of any condition or restriction of the type
described in the second sentence of such Section 9.1(b).
5.20 CHARTER PROVISIONS. Each Central and Southern Company has
------------------
taken all action so that the entering into of this Agreement and the
consummation of the Merger and the other transactions contemplated by this
Agreement do not and will not result in the grant of any rights to any Person
under the Articles of Incorporation, Bylaws or other governing instruments of
any Central and Southern Company or restrict or impair the ability of the
Surviving Corporation to vote, or otherwise to exercise the rights of a
shareholder with respect to, shares of any Central and Southern Company that may
be acquired or controlled by it.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF PREMIER
-----------------------------------------
Premier hereby represents and warrants to Central and Southern as
follows:
6.1 ORGANIZATION, STANDING, AND POWER. Premier is a corporation
---------------------------------
duly organized, validly existing, and in good standing under the Laws of the
State of Georgia, and is duly registered as a bank holding company under the BHC
Act. Premier has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets. Premier is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where the
character of its Assets or the nature or conduct of its business requires it to
be so qualified or licensed, except for such jurisdictions in which the failure
to be so qualified or licensed is not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Premier.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
---------------------------------
(a) Premier has the corporate power and authority necessary to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein, including the Merger, have been duly and validly authorized
by
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<PAGE>
all necessary corporate action in respect thereof on the part of Premier,
subject to the approval of this Agreement by the holders of a majority of the
outstanding Premier Common Stock, which is the only shareholder vote required
for approval of this Agreement and consummation of the Merger by Premier.
Subject to such requisite shareholder approval, this Agreement represents a
legal, valid and binding obligation of Premier, enforceable against Premier in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and except
that the availability of the equitable remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by Premier,
nor the consummation by Premier of the transactions contemplated hereby, nor
compliance by Premier with any of the provisions hereof will (i) conflict with
or result in a breach of any provision of Premier's Articles of Incorporation or
Bylaws, or (ii) constitute or result in a Default under, or require any Consent
pursuant to, or result in the creation of any Lien on any Asset of any Premier
Company under, any Contract or Permit of any Premier Company, where such Default
or Lien, or any failure to obtain such Consent, is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, or (iii)
subject to receipt of the requisite approvals referred to in Section 9.1(b) of
this Agreement, violate any Law or Order applicable to any Premier Company or
any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service or the
Pension Benefit Guaranty Corporation with respect to any employee benefit plans,
and other than Consents, filings or notifications which, if not obtained or
made, are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier, no notice to, filing with, or Consent of any
public body or authority is necessary for the consummation by Premier of the
Merger and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK.
-------------
(a) The authorized capital stock of Premier consists of 20,000,000
shares of Premier Common Stock, of which 2,353,779 shares were issued and
outstanding as of the date of this Agreement and not more than 2,353,779 shares
will be issued and outstanding at the Effective Time (as a result of the
exercise of outstanding options). All of the issued and outstanding shares of
Premier Common Stock are, and all of the shares of Surviving Corporation Common
Stock to be issued in exchange for shares of Central and Southern Common Stock
upon consummation of the Merger, when issued in accordance with the terms of
this Agreement, will be, duly and validly issued and outstanding and fully paid
and nonassessable under the GBCC. None of the outstanding shares of Premier
Common Stock has been, and none of the shares of Surviving Corporation Common
Stock to be issued in exchange for shares of Central and Southern Common Stock
upon consummation of the Merger will be, issued in violation of any preemptive
rights of the current or
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<PAGE>
past shareholders of Premier. Premier has reserved 210,000 shares of Premier
Common Stock for issuance under the Premier Stock Plans, pursuant to which
options to purchase not more than 136,250 shares of Premier Common Stock are
outstanding as of the date of this Agreement and at the Effective Time.
(b) Except as set forth in Section 6.3(a) of this Agreement, or as
disclosed in Section 6.3(b) of the Premier Disclosure Memorandum, there are no
---------------------
shares of capital stock or other equity securities of Premier outstanding and no
outstanding Rights relating to the capital stock of Premier.
6.4 PREMIER SUBSIDIARIES. Premier has disclosed in Section 6.4 of
--------------------
the Premier Disclosure Memorandum all of the Premier Subsidiaries as of the date
---------------------
of this Agreement. Except as disclosed in Section 6.4 of the Premier Disclosure
----------
Memorandum, Premier or one of its Subsidiaries owns all of the issued and
- ----------
outstanding shares of capital stock of each Premier Subsidiary. No equity
securities of any Premier Subsidiary are or may become required to be issued
(other than to another Premier Company) by reason of any Rights, and there are
no Contracts by which any Premier Subsidiary is bound to issue (other than to
another Premier Company) additional shares of its capital stock or Rights, or by
which any Premier Company is or may be bound to transfer any shares of the
capital stock of any Premier Subsidiary (other than to another Premier Company),
and there are no Contracts by which any Premier Company is bound to issue (other
than to another Premier Company) additional shares of its capital stock. There
are no Contracts relating to the rights of any Premier Company to vote or to
dispose of any shares of the capital stock of any Premier Subsidiary. All of the
shares of capital stock of each Premier Subsidiary held by a Premier Company are
fully paid and nonassessable under the applicable Law of the jurisdiction in
which such Subsidiary is incorporated or organized and are owned by the Premier
Company free and clear of any Lien. Each Premier Subsidiary is either a bank, a
savings association or a corporation and is duly organized, validly existing,
and (as to corporations) in good standing under the Laws of the jurisdiction in
which it is organized and has the corporate power and authority necessary for it
to own, lease and operate its Assets and to carry on its business as now
conducted. Each Premier Subsidiary is duly qualified or licensed to transact
business as a foreign corporation in good standing in the States of the United
States and foreign jurisdictions where the character of its Assets or the nature
or conduct of its business requires it to be so qualified or licensed, except
for such jurisdictions in which the failure to be so qualified or licensed is
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier. Each Premier Subsidiary that is a depository
institution is an "insured institution" as defined in the Federal Deposit
Insurance Act and applicable regulations thereunder, and the deposits in which
are insured by the Bank Insurance Fund or the Savings Association Insurance
Fund, as appropriate.
6.5 FINANCIAL STATEMENTS. Premier has included in Section 6.5 of
--------------------
the Premier Disclosure Memorandum copies of all Premier Financial Statements for
periods ended prior to the date hereof and will deliver to Central and Southern
copies of all Premier Financial Statements prepared subsequent to the date
hereof. The Premier Financial Statements (as of the dates thereof and for the
periods covered thereby) (a) are, or if dated after the date of this Agreement
will be, in accordance
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<PAGE>
with the books and records of the Premier Companies, which are or will be, as
the case may be, complete and correct and which have been or will have been, as
the case may be, maintained in accordance with good business practices, and (b)
present or will present, as the case may be, fairly the consolidated financial
position of the Premier Companies as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity, and cash flows of the
Premier Companies for the periods indicated, in accordance with GAAP (subject to
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material in amount or effect).
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No Premier Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on Premier, except Liabilities which are
accrued or reserved against in the consolidated balance sheets of Premier as of
December 31, 1995 and September 30, 1996, included in the Premier Financial
Statements or reflected in the notes thereto. No Premier Company has incurred
or paid any Liability since September 30, 1996, except for such Liabilities
incurred or paid in the ordinary course of business consistent with past
business practice and which are not reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on Premier.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Since September 30, 1996,
------------------------------------
except as disclosed in SEC Documents filed by Premier prior to the date of this
Agreement and except as disclosed in Section 6.7 of the Premier Disclosure
----------
Memorandum, (a) there have been no events, changes or occurrences which have
- ----------
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on Premier, and (b) the Premier Companies have not taken
any action, or failed to take any action, prior to the date of this Agreement,
which action or failure, if taken after the date of this Agreement, would
represent or result in a material breach or violation of any of the covenants
and agreements of Premier provided in Article 7 of this Agreement.
6.8 TAX MATTERS.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
Premier Companies have been timely filed or requests for extensions have been
timely filed, granted, and have not expired for periods ended on or before
September 30, 1996, and on or before the date of the most recent fiscal year end
immediately preceding the Effective Time, except to the extent that all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on Premier, and all returns filed are complete and accurate to
the Knowledge of Premier. All Taxes shown on filed returns have been paid. As
of the date of this Agreement, there is no audit examination, deficiency or
refund Litigation with respect to any Taxes that is reasonably likely to result
in a determination that would have, individually or in the aggregate, a Material
Adverse Effect on Premier, except as reserved against in the Premier Financial
Statements delivered prior to the date of this Agreement or as disclosed in
Section 6.8(a) of the Premier Disclosure Memorandum. All Taxes and other
---------------------
Liabilities due with respect to completed and settled examinations or concluded
Litigation have been paid.
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<PAGE>
(b) Except as disclosed in Section 6.8(b) of the Premier Disclosure
----------
Memorandum none of the Premier Companies has executed an extension or waiver of
- ----------
any statute of limitations on the assessment or collection of any Tax due that
is currently in effect, and no unpaid tax deficiency has been asserted in
writing against or with respect to any Premier Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on Premier.
(c) Adequate provision for any Taxes due or to become due for any of
the Premier Companies for the period or periods through and including the date
of the respective Premier Financial Statements has been made and is reflected on
such Premier Financial Statements.
(d) Deferred Taxes of the Premier Companies have been provided for in
accordance with GAAP.
(e) Each of the Premier Companies is in compliance with, and its
records contain all information and documents (including, without limitation,
properly completed IRS Forms W-9) necessary to comply with, all applicable
information reporting and Tax withholding requirements under federal, state and
local Tax Laws, and such records identify with specificity all accounts subject
to backup withholding under Section 3406 of the Internal Revenue Code, except
for such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier.
6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The Allowance shown on the
----------------------------------
consolidated balance sheets of Premier included in the most recent Premier
Financial Statements dated prior to the date of this Agreement was, and the
Allowance shown on the consolidated balance sheets of Premier included in the
Premier Financial Statements as of dates subsequent to the execution of this
Agreement will be, as of the dates thereof, adequate (within the meaning of GAAP
and applicable regulatory requirements or guidelines) to provide for losses
relating to or inherent in the loan and lease portfolios (including accrued
interest receivables) of the Premier Companies and other extensions of credit
(including letters of credit and commitments to make loans or extend credit) by
the Premier Companies as of the dates thereof except where the failure of such
Allowance to be so adequate is not reasonably likely to have a Material Adverse
Effect on Premier.
6.10 ASSETS. Except as disclosed in Section 6.10 of the Premier
------
Disclosure Memorandum or as disclosed or reserved against in the Premier
- ---------------------
Financial Statements, the Premier Companies have good and marketable title, free
and clear of all Liens, to all of their respective Assets. All material
tangible properties used in the businesses of the Premier Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with Premier's past practices. All Assets which
are material to Premier's business on a consolidated basis, held under leases or
subleases by any of the Premier Companies, are held under valid Contracts
enforceable in accordance with their respective terms (except as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy
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<PAGE>
of specific performance or injunctive relief is subject to the discretion of the
court before which any proceedings may be brought), and each such Contract is in
full force and effect. The policies of fire, theft, liability and other
insurance maintained with respect to the Assets or businesses of the Premier
Companies provide adequate coverage under current industry practices against
loss or Liability, and the fidelity and blanket bonds in effect as to which any
of the Premier Companies is a named insured are reasonably sufficient. The
Assets of the Premier Companies include all assets required to operate the
business of the Premier Companies as presently conducted.
6.11 ENVIRONMENTAL MATTERS.
---------------------
(a) Except as disclosed in Section 6.11(a) of the Premier Disclosure
----------
Memorandum, to the Knowledge of Premier, each Premier Company, its Participation
- ----------
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for noncompliance which is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on Premier.
(b) To the Knowledge of Premier, there is no Litigation pending or
threatened before any court, governmental agency or authority or other forum in
which any Premier Company or any of its Loan Properties or Participation
Facilities has been or, with respect to threatened Litigation, may be named as a
defendant or potentially responsible party (i) for alleged noncompliance with
any Environmental Law or (ii) relating to the Release into the Environment of
any Hazardous Material (as defined below), whether or not occurring at, on,
under or involving a site owned, leased or operated by any Premier Company or
any of its Loan Properties or Participation Facilities, except for such
Litigation pending or threatened the resolution of which is not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
Premier or to the Knowledge of Premier, there is no reasonable basis for any
such Litigation.
(c) To the Knowledge of Premier, there have been no releases of
Hazardous Material in, on, under or affecting any Participation Facility or Loan
Property, except such as are not reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Premier.
6.12 COMPLIANCE WITH LAWS. Premier is duly registered as a bank
--------------------
holding and thrift holding company under the BHC Act and HOLA, respectively.
Each Premier Company has in effect all Permits necessary for it to own, lease or
operate its Assets and to carry on its business as now conducted, except for
those Permits the absence of which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, and
there has occurred no Default under any such Permit, other than Defaults which
are not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier. Except as disclosed in Section 6.12 of the Premier
Disclosure Memorandum, no Premier Company:
- ---------------------
(a) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier; and
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<PAGE>
(b) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory Authority or
the staff thereof (i) asserting that any Premier Company is not in compliance
with any of the Laws or Orders which such governmental authority or Regulatory
Authority enforces, where such noncompliance is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Premier,
or (iii) requiring any Premier Company to enter into or consent to the issuance
of a cease and desist order, formal agreement, directive, commitment or
memorandum of understanding, or to adopt any Board resolution or similar
undertaking, which restricts materially the conduct of its business, or in any
manner relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
6.13 LABOR RELATIONS. No Premier Company is the subject of any
---------------
Litigation asserting that it or any other Premier Company has committed an
unfair labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other Premier Company to
bargain with any labor organization as to wages or conditions of employment, nor
is there any strike or other labor dispute involving any Premier Company,
pending or, to its Knowledge, threatened, nor, to its Knowledge, is there any
activity involving any Premier Company's employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
6.14 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Premier has disclosed in Section 6.14 of the Premier Disclosure
----------
Memorandum and delivered or made available to Central and Southern prior to the
- ----------
execution of this Agreement copies in each case of all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock ownership,
severance pay, vacation, bonus, or other incentive plans, all other written
employee programs, arrangements, or agreements, all medical, vision, dental, or
other health plans, all life insurance plans, and all other employee benefit
plans or fringe benefit plans, including, without limitation, "employee benefit
plans" as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by any
Premier Company or Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other beneficiaries
and under which employees, retirees, dependents, spouses, directors, independent
contractors, or other beneficiaries are eligible to participate (collectively,
the "Premier Benefit Plans"). Any of the Premier Benefit Plans which is an
"employee pension benefit plan," as that term is defined in Section 3(2) of
ERISA, is referred to herein as a "Premier ERISA Plan." Each Premier ERISA Plan
which is also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code) is referred to herein as a "Premier Pension Plan." No
Premier Pension Plan is or has been a multi-employer plan within the meaning of
Section 3(37) of ERISA.
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<PAGE>
(b) All Premier Benefit Plans are in compliance with the applicable
terms of ERISA, the Internal Revenue Code, and any other applicable Laws the
breach or violation of which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on Premier. Each Premier ERISA Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code has received a favorable determination letter from the Internal Revenue
Service, and Premier is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. To the Knowledge of
Premier, no Premier Company nor any other party has engaged in a transaction
with respect to any Premier Benefit Plan that, assuming the taxable period of
such transaction expired as of the date hereof, would subject any Premier
Company to a tax or penalty imposed by either Section 4975 of the Internal
Revenue Code or Section 502(i) of ERISA in amounts which are reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on Premier.
(c) Neither Premier nor any ERISA Affiliate of Premier maintains or
has maintained an "employee pension benefit plan," within the meaning of Section
3(2) of ERISA that is or was subject to Title IV of ERISA.
(d) Neither Premier nor any ERISA Affiliate of Premier has any past,
present or future obligation or liability to contribute to any multi-employer
plan, as defined in Section 3(37) of ERISA.
(e) Except as disclosed in Section 6.14(e) of the Premier Disclosure
----------
Memorandum, (i) no Premier Company has any obligations for retiree health and
- ----------
life benefits under any of the Premier Benefit Plans, except as required by
Section 6.01 of ERISA and Section 4980B of the Code; (ii) there are no
restrictions on the rights of any Premier Company to amend or terminate any such
Plan; and (iii) any amendment or termination of any such Plan will not cause any
Premier Company to incur any Liability that is reasonably likely to have a
Material Adverse Effect on Premier.
(f) Except as disclosed in Section 6.14(f) of the Premier Disclosure
----------
Memorandum, neither the execution and delivery of this Agreement nor the
- ----------
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any Premier Company from any Premier Company under any Premier Benefit Plan or
otherwise, (ii) increase any benefits otherwise payable under any Premier
Benefit Plan, or (iii) result in any acceleration of the time of payment or
vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees and
former employees of any Premier Company and their respective beneficiaries have
been fully reflected on the Premier Financial Statements to the extent required
by and in accordance with GAAP.
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<PAGE>
(h) Premier and each ERISA Affiliate of Premier has complied with the
continuation of coverage requirements of Section 1001 of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended, and ERISA Sections 601
through 608.
(i) Except as disclosed in Section 6.14(i) of the Premier Disclosure
----------
Memorandum, neither Premier nor any ERISA Affiliate of Premier is obligated,
- ----------
contingently or otherwise, under any agreement to pay any amount which would be
treated as a "parachute payment," as defined in Section 280G(b) of the Internal
Revenue Code (determined without regard to Section 280G(b)(2)(A)(ii) of the
Internal Revenue Code).
(j) Other than routine claims for benefits, there are no actions,
audits, investigations, suits or claims pending, or threatened against any
Premier Benefit Plan, any trust or other funding agency created thereunder, or
against any fiduciary of any Premier Benefit Plan or against the assets of any
Premier Benefit Plan.
6.15 MATERIAL CONTRACTS. Except as disclosed in Section 6.15 of the
------------------
Premier Disclosure Memorandum or otherwise reflected in the Premier Financial
---------------------
Statements, none of the Premier Companies, nor any of their respective Assets,
businesses or operations, is a party to, or is bound or affected by, or receives
benefits under, (a) any employment, severance, termination, consulting or
retirement Contract providing for aggregate payments to any Person in any
calendar year in excess of $10,000, excluding "at will" employment arrangements,
(b) any Contract relating to the borrowing of money by any Premier Company or
the guarantee by any Premier Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds, Federal
Home Loan Bank advances, fully-secured repurchase agreements, trade payables,
and Contracts relating to borrowings or guarantees made in the ordinary course
of business), (c) any Contracts between or among Premier Companies, and (d) any
other Contract (excluding this Agreement) or amendment thereto that is required
to be filed as an exhibit to a Form 10-KSB or Form 10-QSB filed by Premier with
the SEC as of the date of this Agreement that has not been filed as an exhibit
to any Premier Form 10-KSB filed with the SEC (together with all Contracts
referred to in Sections 6.10 and 6.14(a) of this Agreement, the "Premier
Contracts"). None of the Premier Companies is in Default under any Premier
Contract, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier. All of
the indebtedness of any Premier Company for money borrowed is prepayable at any
time by such Premier Company without penalty or premium.
6.16 LEGAL PROCEEDINGS. Except as disclosed in Section 6.16 of the
-----------------
Premier Disclosure Memorandum, there is no Litigation instituted or pending, or,
---------------------
to the Knowledge of Premier, threatened (or unasserted but considered probable
of assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any Premier Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier, nor are
there any Orders of any Regulatory Authorities, other governmental authorities,
or arbitrators outstanding against any Premier Company,
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<PAGE>
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on Premier.
6.17 REPORTS. Since January 1, 1996, each Premier Company has
-------
timely filed all reports and statements, together with any amendments required
to be made with respect thereto, that it was required to file with (a) the SEC,
including, but not limited to, Forms 10-KSB, Forms 10-QSB, Forms 8-KSB, and
Proxy Statements, (b) other Regulatory Authorities, and (c) any applicable state
securities or banking authorities (except, in the case of state securities
authorities, failures to file which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on Premier). As of
their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document to Premier's Knowledge did not, in any material respects, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
---------------------------
instrument or other writing furnished or to be furnished by any Premier Company
or any Affiliate thereof to Central and Southern pursuant to this Agreement or
any other document, agreement or instrument referred to herein contains or will
contain any untrue statement of material fact or will omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading. None of the information supplied or
to be supplied by any Premier Company or any Affiliate thereof for inclusion in
the Registration Statement to be filed by Premier with the SEC, will, when the
Registration Statement becomes effective, be false or misleading with respect to
any material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any Premier Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to Premier's shareholders in connection with the
Premier Shareholders' Meeting, and any other documents to be filed by any
Premier Company or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at the
respective time such documents are filed, and with respect to the Proxy
Statement, when first mailed to the shareholders of Premier, be false or
misleading with respect to any material fact, or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, or, in the case of the Proxy Statement or
any amendment thereof or supplement thereto, at the time of the Premier
Shareholders' Meeting, be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the
Premier Shareholders' Meeting. All documents that any Premier Company or any
Affiliate thereof is responsible for filing with any Regulatory Authority in
connection with the transactions contemplated hereby will comply as to form in
all material respects with the provisions of applicable Law.
6.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No Premier Company or
--------------------------------------
any Affiliate thereof has taken any action, or agreed to take any action, or has
any Knowledge of any fact or
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<PAGE>
circumstance that is reasonably likely to (a) prevent the transactions
contemplated hereby, including the Merger, from qualifying for pooling-of-
interests accounting treatment or treatment as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (b) materially impede
or delay receipt of any Consents of Regulatory Authorities referred to in
Section 9.1(b) of this Agreement. To the Knowledge of Premier, there exists no
fact, circumstance, or reason why the requisite Consents referred to in Section
9.1(b) of this Agreement cannot be received in a timely manner without the
imposition of any condition or restriction of the type described in the second
sentence of such Section 9.1(b).
6.20 CHARTER PROVISIONS. Each Premier Company has taken all action
------------------
so that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement do not and will not
result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any Premier Company or
restrict or impair the ability of the Surviving Corporation to vote, or
otherwise to exercise the rights of a shareholder with respect to, shares of any
Premier Company that may be acquired or controlled by it.
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 AFFIRMATIVE COVENANTS OF CENTRAL AND SOUTHERN. Unless the prior
---------------------------------------------
written consent of Premier shall have been obtained, and except as otherwise
contemplated herein or disclosed in the Central and Southern Disclosure
----------
Memorandum, Central and Southern shall, and shall cause each of its
- ----------
Subsidiaries, from the date of this Agreement until the Effective Time or
termination of this Agreement: (a) to operate its business in the usual, regular
and ordinary course; (b) to preserve intact its business organization and Assets
and maintain its rights and franchises; (c) to use its reasonable efforts to
cause its representations and warranties to be correct at all times; and (d) to
take no action which would (i) adversely affect the ability of any Party to
obtain any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the last
sentence of Section 9.1(b) or 9.1(c) of this Agreement or (ii) adversely affect
in any material respect the ability of either Party to perform its covenants and
agreements under this Agreement.
7.2 NEGATIVE COVENANTS OF CENTRAL AND SOUTHERN. Except as disclosed
------------------------------------------
in the Central and Southern Disclosure Memorandum, from the date of this
---------------------
Agreement until the earlier of the Effective Time or the termination of this
Agreement, Central and Southern covenants and agrees that it will not do or
agree or commit to do, or permit any of its Subsidiaries to do or agree or
commit to do, any of the following without the prior written consent of the
chief executive officer of Premier, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any Central and Southern Company, or
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<PAGE>
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a Central and Southern Company to
another Central and Southern Company) in excess of an aggregate of $100,000 (for
the Central and Southern Companies on a consolidated basis) except in the
ordinary course of the business of Central and Southern Companies consistent
with past practices (which shall include, for any of its Subsidiaries, creation
of deposit liabilities, purchases of federal funds, advances from the Federal
Reserve Bank or Federal Home Loan Bank, and entry into repurchase agreements
fully secured by U.S. government or agency securities), or impose, or suffer the
imposition, on any Asset of any Central and Southern Company of any Lien or
permit any such Lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, Federal Home Loan Bank advances,
"treasury tax and loan" accounts established in the ordinary course of business,
the satisfaction of legal requirements in the exercise of trust powers, and
Liens in effect as of the date hereof that are disclosed in the Central and
Southern Disclosure Memorandum); or
---------------------
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any Central and Southern Company, or declare or pay any
dividend or make any other distribution in respect of Central and Southern's
capital stock; provided, however, that Central and Southern may (to the extent
legally and contractually permitted to do so) pay an annual cash dividend of up
to $.27 per share on the shares of Central and Southern Common Stock in
quarterly installments during 1997; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereof, or as disclosed in Section 7.2(d) of the Central
and Southern Disclosure Memorandum, issue, sell, pledge, encumber, authorize the
---------------------
issuance of or enter into any Contract to issue, sell, pledge, encumber, or
authorize the issuance of or otherwise permit to become outstanding, any
additional shares of Central and Southern Common Stock or any other capital
stock of any Central and Southern Company, or any stock appreciation rights, or
any option, warrant, conversion, or other right to acquire any such stock, or
any security convertible into any such stock; or
(e) except as disclosed in Section 7.2(e) of the Central and Southern
Disclosure Memorandum, adjust, split, combine or reclassify any capital stock of
- ---------------------
any Central and Southern Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of Central and Southern
Common Stock or sell, lease, mortgage or otherwise dispose of or otherwise
encumber (i) any shares of capital stock of any Central and Southern Subsidiary
(unless any such shares of stock are sold or otherwise transferred to another
Central and Southern Company) or (ii) any Asset having a book value in excess of
$50,000 other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities or securities of like maturity or grade or general
obligations of states and municipalities, purchase any securities or make any
material investment, either by purchase of stock or securities,
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<PAGE>
contributions to capital, Asset transfers, or purchase of any Assets, in any
Person other than a wholly-owned Central and Southern Subsidiary; or otherwise
acquire direct or indirect control over any Person, other than in connection
with (i) foreclosures in the ordinary course of business, or (ii) acquisitions
of control by Central and Southern Bank in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to any employees
whose annual salary exceeds $50,000 of any Central and Southern Company
(including such discretionary increases as may be contemplated by existing
employment agreements), except in accordance with past practice or previously
approved by the Board of Directors of Central and Southern, in each case as
disclosed in Section 7.2(g) of the Central and Southern Disclosure Memorandum or
---------------------
as required by Law; pay any severance or termination pay or any bonus other than
pursuant to written policies or written Contracts in effect on the date of this
Agreement and disclosed in Section 7.2(g) of the Central and Southern Disclosure
----------
Memorandum; enter into or amend any severance agreements with officers of any
- ----------
Central and Southern Company; grant any general increase in compensation to all
employees; grant any increase in fees or other increases in compensation or
other benefits to directors of any Central and Southern Company; or voluntarily
accelerate the vesting of any stock options or other stock-based compensation or
employee benefits; or
(h) enter into or amend any employment Contract between any Central
and Southern Company and any Person (unless such amendment is required by Law)
that the Central and Southern Company does not have the unconditional right to
terminate without Liability (other than Liability for services already
rendered), at any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any Central and Southern
Company or make any material change in or to any existing employee benefit
plans of any Central and Southern Company other than any such change that is
required by Law or that, in the opinion of counsel, is necessary or advisable to
maintain the tax qualified status of any such plan; or
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Central and
Southern Company for money damages in excess of $50,000 or which imposes
material restrictions upon the operations of any Central and Southern Company;
or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.3 AFFIRMATIVE COVENANTS OF PREMIER. Unless the prior written
--------------------------------
consent of Central and Southern shall have been obtained, and except as
otherwise contemplated herein or as disclosed in the Premier Disclosure
----------
Memorandum, Premier shall, and shall cause each of its Subsidiaries, from
- ----------
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<PAGE>
the date of this Agreement until the Effective Time or termination of this
Agreement: (a) to operate its business in the usual, regular and ordinary
course; (b) to preserve intact its business organization and Assets and maintain
its rights and franchises; (c) to use its reasonable efforts to cause its
representations and warranties to be correct at all times; and (d) to take no
action which would (i) adversely affect the ability of any Party to obtain any
Consents required for the transactions contemplated hereby without imposition of
a condition or restriction of the type referred to in the last sentence of
Section 9.1(b) or 9.1(c) of this Agreement or (ii) adversely affect in any
material respect the ability of either Party to perform its covenants and
agreements under this Agreement.
7.4 NEGATIVE COVENANTS OF PREMIER. Except as disclosed in the
-----------------------------
Premier Disclosure Memorandum, from the date of this Agreement until the earlier
---------------------
of the Effective Time or the termination of this Agreement, Premier covenants
and agrees that it will not do or agree or commit to do, or permit any of its
Subsidiaries to do or agree or commit to do, any of the following without the
prior written consent of the chief executive officer of Central and Southern,
which consent shall not be unreasonably withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any Premier Company, or
(b) incur any additional debt obligation or other obligation for
borrowed money (other than indebtedness of a Premier Company to another Premier
Company) in excess of an aggregate of $100,000 (for the Premier Companies on a
consolidated basis) except in the ordinary course of the business of Premier
Companies consistent with past practices (which shall include, for Premier Bank,
creation of deposit liabilities, purchases of federal funds, advances from the
Federal Reserve Bank or Federal Home Loan Bank, and entry into repurchase
agreements fully secured by U.S. government or agency securities), or impose, or
suffer the imposition, on any Asset of any Premier Company of any Lien or
permit any such Lien to exist (other than in connection with deposits,
repurchase agreements, bankers acceptances, Federal Home Loan Bank advances,
"treasury tax and loan" accounts established in the ordinary course of business,
the satisfaction of legal requirements in the exercise of trust powers, and
Liens in effect as of the date hereof that are disclosed in the Premier
Disclosure Memorandum); or
- ---------------------
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of the
capital stock of any Premier Company, or declare or pay any dividend or make any
other distribution in respect of Premier's capital stock; provided, however,
that Premier may (to the extent legally and contractually permitted to do so)
pay a cash dividend of up to $.56 per share on the shares of Premier Common
Stock in January or February of 1997; or
(d) except for this Agreement, or pursuant to the exercise of stock
options outstanding as of the date hereof and pursuant to the terms thereof in
existence on the date hereof, or as disclosed in Section 7.4(d) of the Premier
Disclosure Memorandum, issue, sell, pledge,
- ---------------------
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<PAGE>
encumber, authorize the issuance of or enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of or otherwise permit to become
outstanding, any additional shares of Premier Common Stock or any other capital
stock of any Premier Company, or any stock appreciation rights, or any option,
warrant, conversion, or other right to acquire any such stock, or any security
convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any
Premier Company (other than the stock split contemplated in Section 9.3(e)
hereof) or issue or authorize the issuance of any other securities in respect of
or in substitution for shares of Premier Common Stock or sell, lease, mortgage
or otherwise dispose of or otherwise encumber (i) any shares of capital stock of
any Premier Subsidiary (unless any such shares of stock are sold or otherwise
transferred to another Premier Company) or (ii) any Asset having a book value in
excess of $50,000 other than in the ordinary course of business for reasonable
and adequate consideration; or
(f) except for purchases of U.S. Treasury securities or U.S.
Government agency securities or securities of like maturity or grade or general
obligations of states and municipalities, purchase any securities or make any
material investment, either by purchase of stock or securities, contributions to
capital, Asset transfers, or purchase of any Assets, in any Person other than a
wholly-owned Premier Subsidiary; or otherwise acquire direct or indirect control
over any Person, other than in connection with (i) foreclosures in the ordinary
course of business, or (ii) acquisitions of control by Premier Bank in its
fiduciary capacity; or
(g) grant any increase in compensation or benefits to any employees
whose annual salary exceeds $50,000 of any Premier Company (including such
discretionary increases as may be contemplated by existing employment
agreements), except in accordance with past practice or previously approved by
the Board of Directors of Premier, in each case as disclosed in Section 7.4(g)
of the Premier Disclosure Memorandum or as required by Law; pay any severance
---------------------
or termination pay or any bonus other than pursuant to written policies or
written Contracts in effect on the date of this Agreement and disclosed in
Section 7.4(g) of the Premier Disclosure Memorandum; enter into or amend any
---------------------
severance agreements with officers of any Premier Company; grant any general
increase in compensation to all employees; grant any increase in fees or other
increases in compensation or other benefits to directors of any Premier
Company; or voluntarily accelerate the vesting of any stock options or other
stock-based compensation or employee benefits; or
(h) enter into or amend any employment Contract between any Premier
Company and any Person (unless such amendment is required by Law) that the
Premier Company does not have the unconditional right to terminate without
Liability (other than Liability for services already rendered), at any time on
or after the Effective Time; or
(i) adopt any new employee benefit plan of any Premier Company or make
any material change in or to any existing employee benefit plans of any Premier
Company other than any such change that is required by Law or that, in the
opinion of counsel, is necessary or advisable to maintain the tax qualified
status of any such plan; or
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<PAGE>
(j) make any significant change in any Tax or accounting methods or
systems of internal accounting controls, except as may be appropriate to conform
to changes in Tax Laws or regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past
practice, settle any Litigation involving any Liability of any Premier Company
for money damages in excess of $50,000 or which imposes material restrictions
upon the operations of any Premier Company; or
(l) except in the ordinary course of business, modify, amend or
terminate any material Contract or waive, release, compromise or assign any
material rights or claims.
7.5 ADVERSE CHANGES IN CONDITION. Each Party agrees to give written
----------------------------
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (a) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (b) is reasonably likely to cause
or constitute a material breach of any of its representations, warranties, or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.6 REPORTS. Each Party and its Subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies of
all such reports promptly after the same are filed.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 REGISTRATION STATEMENT; PROXY STATEMENT; SHAREHOLDER APPROVAL.
-------------------------------------------------------------
(a) As soon as practicable after execution of this Agreement, Premier
shall file the Registration Statement with the SEC, and shall use its reasonable
efforts to cause the Registration Statement to become effective under the 1933
Act and take any action required to be taken under the applicable state Blue Sky
or securities Laws in connection with the issuance of the shares of Surviving
Corporation Common Stock upon consummation of the Merger. Central and Southern
shall furnish all information concerning it and the holders of its capital stock
as Premier may reasonably request in connection with such action.
(b) Central and Southern shall call a Shareholders' Meeting, to be
held as soon as reasonably practicable after the Registration Statement is
declared effective by the SEC, for the purpose of voting upon approval of this
Agreement and such other related matters as Central and Southern deems
appropriate.
(c) In connection with the Central and Southern Shareholders' Meeting,
(i) Premier shall prepare and file with the SEC on Central and Southern's behalf
a Proxy Statement
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(which shall be included in the Registration Statement) and mail it to Central
and Southern's shareholders, (ii) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection with
such Proxy Statement, (iii) the Board of Directors of Central and Southern shall
recommend (subject to compliance with the fiduciary duties of the members of the
Board of Directors as advised by counsel) to its shareholders the approval of
this Agreement and (iv) the Board of Directors and officers of Central and
Southern shall use their reasonable efforts to obtain such shareholders'
approval (subject to compliance with their fiduciary duties as advised by
counsel).
8.2 EXCHANGE LISTING. Premier shall use its reasonable efforts to
----------------
list, prior to the Effective Time, on the American Stock Exchange the Premier
Common Stock and the shares of Surviving Corporation Common Stock to be issued
to the holders of Central and Southern Common Stock pursuant to the Merger.
8.3 APPLICATIONS. Premier shall promptly prepare and file, and
------------
Central and Southern shall cooperate in the preparation and, where appropriate,
filing of, applications with the Board of Governors of the Federal Reserve
System and the Georgia Department of Banking and Finance seeking the requisite
Consents necessary to consummate the transactions contemplated by this
Agreement.
8.4 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
--------------------------
conditions of this Agreement, Premier shall execute and file the Certificate of
Merger with the Secretary of State of the State of Georgia in connection with
the Closing.
8.5 AGREEMENT AS TO EFFORTS TO CONSUMMATE. Subject to the terms and
-------------------------------------
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its reasonable efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise enable
consummation of the transactions contemplated hereby and shall cooperate fully
with the other Party hereto to that end (it being understood that any amendments
to the Registration Statement filed by Premier in connection with the Surviving
Corporation Common Stock to be issued in the Merger shall not violate this
covenant), including, without limitation, using its reasonable efforts to lift
or rescind any Order adversely affecting its ability to consummate the
transactions contemplated herein and to cause to be satisfied the conditions
referred to in Article 9 of this Agreement. Each Party shall use, and shall
cause each of its Subsidiaries to use, its reasonable efforts to obtain all
Consents necessary or desirable for the consummation of the transactions
contemplated by this Agreement.
8.6 INVESTIGATION AND CONFIDENTIALITY.
---------------------------------
(a) Prior to the Effective Time, each Party will keep the other Party
advised of all material developments relevant to its business and to
consummation of the Merger and shall permit the other Party to make or cause to
be made such investigation of the business and properties
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<PAGE>
of it and its Subsidiaries and of their respective financial and legal
conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and warranties of the
other Party.
(b) Each Party shall, and shall cause its advisers and agents to,
maintain the confidentiality of all confidential information furnished to it by
the other Party concerning its and its Subsidiaries' businesses, operations, and
financial positions and shall not use such information for any purpose except in
furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof and all work papers containing
confidential information received from the other Party, except for one copy of
any materials prepared by that Party or any attorney for or other representative
of that Party based upon such confidential information.
(c) Each Party agrees to give the other Party notice as soon as
practicable after any determination by it of any fact or occurrence relating to
the other Party which it has discovered through the course of its investigation
and which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other Party
or which has had or is reasonably likely to have a Material Adverse Effect on
the other Party.
8.7 PRESS RELEASES. Prior to the Effective Time, Premier and Central
--------------
and Southern shall agree with each other as to the form and substance of any
press release or other public disclosure materially related to this Agreement or
any other transaction contemplated hereby; provided, however, that nothing in
this Section 8.7 shall be deemed to prohibit any Party from making any
disclosure which its counsel deems necessary or advisable in order to satisfy
such Party's disclosure obligations imposed by Law.
8.8 ACQUISITION PROPOSALS. Except with respect to this Agreement
---------------------
and the transactions contemplated hereby, no Party nor any Affiliate thereof nor
any investment banker, attorney, accountant or other representative
(collectively, "Representatives") retained by any Party shall directly or
indirectly solicit any Acquisition Proposal by any Person. Except to the extent
necessary to comply with the fiduciary duties of a Party's Board of Directors as
advised by counsel, no Party or any Affiliate or Representative thereof shall
furnish any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal, but a Party may communicate information about such an
Acquisition Proposal to its shareholders if and to the extent that it is
required to do so in order to comply with its legal obligations as advised by
counsel. Each Party shall promptly notify the other orally and in writing in
the event that it receives any inquiry or proposal relating to any such
transaction. Unless the prior written consent of the other Party is obtained,
each Party shall (a) immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any Persons conducted heretofore
with respect to any of the foregoing, and (b) direct and use its reasonable
efforts to cause all of its Representatives not to engage in any of the
foregoing.
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<PAGE>
8.9 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes
----------------------------
and agrees to use its reasonable efforts 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 for federal income tax purposes. Each of the Parties further undertakes
and agrees to use its reasonable best efforts 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."
8.10 AGREEMENT OF AFFILIATES. Central and Southern has disclosed in
-----------------------
Section 8.10 of the Central and Southern Disclosure Memorandum all Persons whom
---------------------
it reasonably believes is an "affiliate" of Central and Southern for purposes of
Rule 145 under the 1933 Act. Central and Southern shall use its reasonable
efforts to cause each such Person to deliver to Premier and Central and
Southern, not later than thirty (30) days after the date of this Agreement, a
written agreement, substantially in the form of Exhibit 1, providing that such
---------
Person will not sell, pledge, transfer or otherwise dispose of the shares of
Central and Southern Common Stock held by such Person except as contemplated by
such agreement or by this Agreement and will not sell, pledge, transfer or
otherwise dispose of the shares of Surviving Corporation Common Stock to be
received by such Person upon consummation of the Merger except in compliance
with applicable provisions of the 1933 Act and the rules and regulations
thereunder. The Surviving Corporation shall be entitled to place restrictive
legends upon certificates for shares of Surviving Corporation Common Stock
issued to Affiliates of Central and Southern pursuant to this Agreement to
enforce the provisions of this Section 8.10. The Surviving Corporation shall not
be required to maintain the effectiveness of the Registration Statement under
the 1933 Act for the purposes of resale of Surviving Corporation Common Stock by
such Affiliates.
8.11 EMPLOYEE BENEFITS AND CONTRACTS.
-------------------------------
(a) Following the Effective Time, the Surviving Corporation shall
provide generally to officers and employees of the Central and Southern
Companies who continue employment with the Surviving Corporation or its
Subsidiaries following the Effective Time employee benefits under employee
benefit plans, on terms and conditions which when taken as a whole are
substantially similar to those currently provided by the Premier Companies to
their similarly situated officers and employees. For purposes of participation
under such employee benefit plans, the service of the employees of the Central
and Southern Companies prior to the Effective Time shall be treated as service
with a Premier Company participating in such employee benefit plans, provided
that, with respect to any employee benefit plan where the benefits are funded
through insurance, the granting of such service shall be subject to the consent
of the appropriate insurer and may be conditioned upon an employee's
participation in a Central and Southern Benefit Plan of the same type
immediately prior to the Effective Time.
(b) The Surviving Corporation and its Subsidiaries also shall honor in
accordance with their terms all employment, severance, consulting and other
compensation Contracts disclosed in Section 8.11 of the Central and Southern
Disclosure Memorandum to Premier between any Central and Southern Company and
- ---------------------
any current or former director, officer, or employee thereof and
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<PAGE>
all provisions for vested benefits accrued through the Effective Time under the
Central and Southern Benefit Plans. The Surviving Corporation shall enter into
three year employment agreements with each of Robert C. Oliver and Michael E.
Ricketson and shall enter into one year employment agreements with each of
George D. Henderson and Tren B. Watson in substantially the forms attached
hereto as Exhibit 5.
---------
(c) At the Effective Time the Surviving Corporation shall enter into a
three year employment agreement with Darrell D. Pittard in substantially the
form attached hereto as Exhibit 6.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
-------------------------------------------------
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
---------------------------------------
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions contemplated hereby are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.6 of this Agreement:
(a) Shareholder Approval. The shareholders of Premier and Central and
--------------------
Southern shall have approved this Agreement, and the consummation of the
transactions contemplated hereby, including the Merger, as and to the extent
required by Law, the American Stock Exchange or by the provisions of any
governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
--------------------
with, and notifications to all Regulatory Authorities required for consummation
of the Merger shall have been obtained or made and shall be in full force and
effect and all waiting periods required by Law shall have expired. No Consent
obtained from any Regulatory Authority which is necessary to consummate the
transactions contemplated hereby shall be conditioned or restricted in a manner
(including, without limitation, requirements relating to the raising of
additional capital or the disposition of Assets) which in the reasonable
judgment of the Board of Directors of either Party would so materially adversely
impact the economic or business benefits of the transactions contemplated by
this Agreement as to render inadvisable the consummation of the Merger.
(c) Consents and Approvals. Each Party shall have obtained any and
----------------------
all Consents required for consummation of the Merger (other than those referred
to in Section 9.1(b) of this Agreement) or for the preventing of any Default
under any Contract or Permit of such Party which, if not obtained or made, is
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on such Party. No Consent so obtained which is necessary to consummate
the transactions contemplated hereby shall be conditioned or restricted in a
manner which in the reasonable judgment of the Board of Directors of either
Party would so materially adversely impact the economic or business benefits of
the transactions contemplated by this Agreement as to render inadvisable the
consummation of the Merger.
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<PAGE>
(d) Registration Statement. The Registration Statement shall be
----------------------
effective under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding or
investigation by the SEC to suspend the effectiveness thereof shall have been
initiated and be continuing, and all necessary approvals under state securities
Laws or the 1933 Act or 1934 Act relating to the issuance or trading of the
shares of the Surviving Corporation Common Stock issuable pursuant to the Merger
shall have been received.
(e) Exchange Listing. The shares of Surviving Corporation Common
----------------
Stock issuable pursuant to the Merger shall have been approved for listing on
the American Stock Exchange.
(f) Tax Matters. Premier and Central and Southern shall have received
-----------
a written opinion of counsel from Womble Carlyle Sandridge & Rice, PLLC, in form
reasonably satisfactory to them (the "Tax Opinion"), to the effect that for
federal income tax purposes (i) the Merger will constitute a reorganization
within the meaning of Section 368(a) of the Internal Revenue Code, (ii) the
exchange in the Merger of Central and Southern Common Stock for Surviving
Corporation Common Stock will not give rise to gain or loss to the shareholders
of Central and Southern with respect to such exchange (except to the extent of
any cash received), and (iii) neither Premier nor Central and Southern will
recognize gain or loss as a consequence of the Merger (except for income and
deferred gain recognized pursuant to Treasury regulations issued under Section
1502 of the Internal Revenue Code). In rendering such Tax Opinion, counsel
shall be entitled to rely upon representations of officers of Premier and
Central and Southern reasonably satisfactory in form and substance to such
counsel.
(g) Affiliate Agreements. The Parties shall have received from each
--------------------
affiliate of Central and Southern the affiliates letter referred to in Section
8.10 hereof.
(h) Pooling Letter. The Parties shall have received a letter from
--------------
Mauldin & Jenkins, LLC, and from Porter Keadle Moore, LLP dated as of the
Effective Time, to the effect that the Merger will qualify for pooling-of-
interests accounting treatment under Accounting Principles Board Opinion No. 16
if closed and consummated in accordance with this Agreement.
9.2 CONDITIONS TO OBLIGATIONS OF PREMIER. The obligations of Premier
------------------------------------
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following conditions,
unless waived by Premier pursuant to Section 11.6(a) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
------------------------------
9.2(a), the accuracy of the representations and warranties of Central and
Southern set forth or referred to in this Agreement shall be assessed as of the
date of this Agreement and as of the Effective Time with the same effect as
though all such representations and warranties had been made on and as of the
Effective Time (provided that representations and warranties which are confined
to a specified date
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<PAGE>
shall speak only as of such date). The representations and warranties of Central
and Southern set forth in Section 5.3 of this Agreement shall be true and
correct (except for inaccuracies which are de minimis in amount). The
representations and warranties of Central and Southern set forth in Section 5.19
of this Agreement shall be true and correct in all material respects. There
shall not exist inaccuracies in the representations and warranties of Central
and Southern set forth in this Agreement (excluding the representations and
warranties set forth in Sections 5.3 and 5.19) such that the aggregate effect of
such inaccuracies would have, or is reasonably likely to have, a Material
Adverse Effect on Central and Southern; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
references to "material" or "Material Adverse Effect" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Central and Southern to be performed and complied
with pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied with in
all material respects.
(c) Certificates. Central and Southern shall have delivered to
------------
Premier (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Sections 9.2(a) and
9.2(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Central and Southern's Board of Directors and
shareholders evidencing the taking of all corporate action necessary to
authorize the execution, delivery and performance of this Agreement, and the
consummation of the transactions contemplated hereby, all in such reasonable
detail as Premier and its counsel shall request.
(d) Opinion of Counsel. Central and Southern shall have delivered to
------------------
Premier an opinion of Kilpatrick & Cody, LLP, counsel to Central and Southern,
dated as of the Effective Time, in form reasonably satisfactory to Premier, as
to the matters set forth in Exhibit 2 hereto.
---------
(e) Claims/Indemnification Letters. Each of the directors and
------------------------------
officers of Central and Southern shall have executed and delivered to Premier
letters in substantially the form of Exhibit 3 hereto.
---------
(f) 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 Central and Southern
shareholders in connection with the Merger is fair, from a financial point of
view, to the shareholders of Premier.
(g) Litigation. No preliminary or permanent injunction or other order
----------
by any federal or state court which prevents the consummation of the Merger
shall have been issued and shall remain in effect, nor any action therefor
initiated which, in the good faith judgment of the Board of Directors of
Premier, it is not in the best interests of the shareholders of Premier to
contest;
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and there shall not have been instituted or be pending any action or proceeding
by any United States federal or state government or governmental agency or
instrumentality (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or seeking material damages in connection with the
Merger; or (ii) seeking to prohibit Premier's or the Surviving Corporation's
ownership or operation of all or a material portion of Premier's or Central and
Southern's business or assets, or compel Premier or the Surviving Corporation to
dispose of or hold separate all or a material portion of Premier's or Central
and Southern's business or assets as a result of the Merger, which, in any case,
in the reasonable judgment of Premier based upon a legal opinion from legal
counsel, could result in the relief sought being obtained.
9.3 CONDITIONS TO OBLIGATIONS OF CENTRAL AND SOUTHERN. The
-------------------------------------------------
obligations of Central and Southern to perform this Agreement and consummate the
Merger and the other transactions contemplated hereby are subject to the
satisfaction of the following conditions, unless waived by Central and Southern
pursuant to Section 11.6(b) of this Agreement:
(a) Representations and Warranties. For purposes of this Section
------------------------------
9.3(a), the accuracy of the representations and warranties of Premier set forth
or referred to in this Agreement shall be assessed as of the date of this
Agreement and as of the Effective Time with the same effect as though all such
representations and warranties had been made on and as of the Effective Time
(provided that representations and warranties which are confined to a specified
date shall speak only as of such date). The representations and warranties of
Premier set forth in Section 6.3 of this Agreement shall be true and correct
(except for inaccuracies which are de minimis in amount). The representations
and warranties of Premier set forth in Section 6.19 of this Agreement shall be
true and correct in all material respects. There shall not exist inaccuracies
in the representations and warranties set forth in this Agreement (excluding the
representations and warranties set forth in Sections 6.3 and 6.19) such that the
aggregate effect of such inaccuracies would have, or is reasonably likely to
have a Material Adverse Effect on Premier; provided that, for purposes of this
sentence only, those representations and warranties which are qualified by
reference to "material" or "Material Adverse Effect" shall be deemed not to
include such qualifications.
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of Premier to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(c) Certificates. Premier shall have delivered to Central and
------------
Southern (i) a certificate, dated as of the Effective Time and signed on its
behalf by its chief executive officer and its chief financial officer, to the
effect that the conditions of its obligations set forth in Section 9.3(a) and
9.3(b) of this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by Premier's Board of Directors evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as Central and Southern and
its counsel shall request.
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<PAGE>
(d) Opinion of Counsel. Premier shall have delivered to Central and
------------------
Southern an opinion of Womble Carlyle Sandridge & Rice, PLLC, counsel to
Premier, dated as of the Effective Time, in form reasonably acceptable to
Central and Southern, as to matters set forth in Exhibit 4 hereto.
---------
(e) Premier Stock Split. Immediately prior to the Effective Time,
-------------------
Premier shall have effected a 1.8055 for one split of the Premier Common Stock,
so that Premier shall have 4,495,747 shares of common stock outstanding and
issuable upon the exercise of outstanding stock options immediately prior to the
Effective Time.
(f) Central and Southern Fairness Opinion. Central and Southern shall
-------------------------------------
have received from Alex Sheshunoff & Co. Investment Banking a letter, dated not
more than five (5) business days prior to the date of the Proxy Statement, to
the effect that, in the opinion of such firm, the consideration to be paid to
Central and Southern shareholders in connection with the Merger is fair, from a
financial point of view, to the shareholders of Central and Southern.
(g) Litigation. No preliminary or permanent injunction or other order
----------
by any federal or state court which prevents the consummation of the Merger
shall have been issued and shall remain in effect, nor any action therefor
initiated which, in the good faith judgment of the Board of Directors of Central
and Southern, it is not in the best interests of the shareholders of Central and
Southern to contest; and there shall not have been instituted or be pending any
action or proceeding by any United States federal or state government or
governmental agency or instrumentality (i) challenging or seeking to restrain or
prohibit the consummation of the Merger or seeking material damages in
connection with the Merger; or (ii) seeking to prohibit Premier's or the
Surviving Corporation's ownership or operation of all or a material portion of
Premier's or Central and Southern's business or assets, or compel Premier or the
Surviving Corporation to dispose of or hold separate all or a material portion
of Premier's or Central and Southern's business or assets as a result of the
Merger, which, in any case, in the reasonable judgment of Central and Southern
based upon a legal opinion from legal counsel, could result in the relief sought
being obtained.
ARTICLE 10
TERMINATION
-----------
10.1 TERMINATION. Notwithstanding any other provision of this
-----------
Agreement, and notwithstanding the approval of this Agreement by the
shareholders of Premier and Central and Southern, this Agreement may be
terminated and the Merger abandoned at any time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of Central and
Southern and the Board of Directors of Premier; or
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(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Central and Southern and Section 9.3(a)
in the case of Premier or in the material breach of any covenant or agreement
contained in this Agreement) in the event of a material breach by the other
Party of any representation or warranty contained in this Agreement which cannot
be or has not been cured within thirty (30) days after the giving of written
notice to the breaching Party of such breach and which breach would provide the
non-breaching Party the ability to refuse to consummate the Merger under the
standard set forth in Section 9.2(a) of this Agreement in the case of Premier
and Section 9.3(a) of this Agreement in the case of Central and Southern; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Central and Southern and Section 9.3(a)
in the case of Premier or in the material breach of any covenant or other
agreement contained in this Agreement) in the event of a material breach by the
other Party of any covenant or agreement contained in this Agreement which
cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching Party of such breach; or
(d) By the Board of Directors of either Party in the event (provided
that the terminating Party is not then in breach of any representation or
warranty contained in this Agreement under the applicable standard set forth in
Section 9.2(a) of this Agreement in the case of Central and Southern and Section
9.3(a) in the case of Premier or in the material breach of any covenant or
agreement contained in this Agreement) (i) any Consent of any Regulatory
Authority required for consummation of the Merger and the other transactions
contemplated hereby shall have been denied by final nonappealable action of such
authority or if any action taken by such authority is not appealed within the
time limit for appeal, or (ii) if the shareholders of Central and Southern fail
to vote their approval of this Agreement and the transactions contemplated
hereby as required by the GBCC at the Shareholders' Meeting where the
transactions were presented to such shareholders for approval and voted upon; or
(iii) if the shareholders of Premier fail to vote their approval of this
Agreement and the transactions contemplated hereby as required by the GBCC at
the Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon; or
(e) By the Board of Directors of either Party in the event that both
parties are in breach of any representation or warranty contained in the
Agreement under the applicable standard set forth in Section 9.2(a) or 9.3(a)
and only in the case of an event described in 10.1(d)(i)-(iii) above;
(f) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated on or before June 30, 1997, but only if
the failure to consummate the transactions contemplated hereby on or before such
date is not caused by any breach of this Agreement by the Party electing to
terminate pursuant to this Section 10.1(f); or
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(g) By the Board of Directors of either Party (provided that the
terminating Party is not then in breach of any representation or warranty
contained in this Agreement under the applicable standard set forth in Section
9.2(a) of this Agreement in the case of Central and Southern and Section 9.3(a)
in the case of Premier or in the material breach of any covenant or other
agreement contained in this Agreement) in the event that any of the conditions
precedent to the obligations of such Party to consummate the Merger (other than
as contemplated by Section 10.1(d) of this Agreement) cannot be satisfied or
fulfilled by the date specified in Section 10.1(f) of this Agreement; or
(h) By the Board of Directors of either Party, at any time prior to
the 15th day after execution of this Agreement without any Liability in the
event that the review of the Assets, business, financial condition, results of
operations, and prospects of the other Party undertaken by it or any of the
disclosures contained in the other Party's Disclosure Memorandum causes its
---------------------
Board of Directors to determine, in its reasonable good faith judgment, that a
fact or circumstance exists or is likely to exist or result which materially and
adversely impacts one or more of the economic benefits to it of the transactions
contemplated by this Agreement so as to render inadvisable the consummation of
the Merger.
10.2 EFFECT OF TERMINATION. In the event of the termination and
---------------------
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that the provisions of
this Section 10.2 and Article 11 and Section 8.6(b) of this Agreement shall
survive any such termination and abandonment.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
---------------------------------------------
representations, warranties, obligations, covenants, and agreements of the
Parties shall not survive the Effective Time except for this Section 10.3 and
Articles 2, 3, 4 and 11 and Section 8.10 of this Agreement.
ARTICLE 11
MISCELLANEOUS
-------------
11.1 DEFINITIONS. Except as otherwise provided herein, the
-----------
capitalized terms set forth below (in their singular and plural forms as
applicable) shall have the following meanings:
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any tender
offer or exchange offer or any proposal for a merger (other than the Merger),
acquisition of all of the stock or Assets of, or other business combination
involving such Party or any of its Subsidiaries or the acquisition
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of a substantial equity interest in, or a substantial portion of the Assets of
such Party or any of its Subsidiaries.
"AFFILIATE" of a Person shall mean: (i) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under common control with such Person; (ii) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity or
voting interest of such Person; or (iii) any other Person for which a Person
described in clause (ii) acts in such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger, including
the Exhibits delivered pursuant hereto and incorporated herein by reference.
"ALLOWANCE" shall have the meaning provided in Section 5.9 of this
Agreement.
"ASSETS" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the books
and records of such Person, and whether or not owned in the name of such Person
or any Affiliate of such Person and wherever located.
"BHC ACT" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"CENTRAL AND SOUTHERN BENEFIT PLANS" shall have the meaning set forth
in Section 5.14 of this Agreement.
"CENTRAL AND SOUTHERN COMMON STOCK" shall mean the $1.00 par value
common stock of Central and Southern.
"CENTRAL AND SOUTHERN COMPANIES" shall mean, collectively, Central and
Southern and all Central and Southern Subsidiaries.
"CENTRAL AND SOUTHERN DISCLOSURE MEMORANDUM" shall mean the written
---------------------
information entitled "Central and Southern Disclosure Memorandum" delivered on
---------------------
or prior to the date of this Agreement to Premier describing in reasonable
detail the matters contained therein, specifically referencing each Section of
this Agreement under which such disclosure is being made.
"CENTRAL AND SOUTHERN FINANCIAL STATEMENTS" shall mean (a) the
consolidated balance sheets (including related notes and schedules, if any) of
Central and Southern as of September 30, 1996 and December 31, 1996, and as of
December 31, 1995 and 1994, and the related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules, if
any) for the nine months ended September 30, 1996, and for each of the two
fiscal years ended December 31, 1995 and 1994, included in the Central and
Southern Disclosure Memorandum, and
---------------------
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(b) the consolidated balance sheets (including related notes and schedules, if
any) of Central and Southern and related statements of income, changes in
shareholders' equity, and cash flows (including related notes and schedules, if
any) included in any SEC Documents filed with respect to periods ended
subsequent to September 30, 1996.
"CENTRAL AND SOUTHERN OPTIONS" shall have the meaning set forth in
Section 3.4 of this Agreement.
"CENTRAL AND SOUTHERN STOCK PLANS" shall mean the existing stock
option and other stock-based compensation plans of Central and Southern
disclosed in Section 5.14 of the Central and Southern Disclosure Memorandum.
---------------------
"CENTRAL AND SOUTHERN SUBSIDIARIES" shall mean the subsidiaries of
Central and Southern.
"CLOSING" shall mean the closing of the transactions contemplated
hereby, as described in Section 1.2 of this Agreement.
"CLOSING DATE" shall mean the date on which the Closing occurs.
"CONSENT" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"CONTRACT" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
"DEFAULT" shall mean (a) any breach or violation of or default under
any Contract, Order or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (c) any
occurrence of any event that with or without the passage of time or the giving
of notice would give rise to a right to terminate or revoke, change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"EFFECTIVE TIME" shall mean the date and time at which the Merger
becomes effective as defined in Section 1.3 of this Agreement.
"ENVIRONMENT" shall have the meaning specified in the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601(8).
"ENVIRONMENTAL LAWS" shall mean all Laws pertaining to pollution or
protection of the environment and which are administered, interpreted or
enforced by the United States Environmental Protection Agency and state and
local agencies with primary jurisdiction over pollution or protection
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of the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, 42 U.S.C. (S) 9601
et. seq., the Resource, Conservation and Recovery Act, 42 U.S.C. (S) 6901
- -------
et. seq., the Toxic Substance Control Act, 15 U.S.C. (S) 2601, et. seq., and all
- ------- -------
implementing regulations and state counterparts of such acts.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"ERISA AFFILIATE" shall refer to a relationship between entities such
that the entities would, now or at any time in the past, constitute a "single
employer" within the meaning of Section 414 of the Internal Revenue Code.
"ERISA PLAN" shall have the meaning provided in Section 5.14 of this
Agreement.
"EXCHANGE RATIO" shall have the meaning provided in Section 3.1 of
this Agreement.
"EXHIBITS" 1 through 5, inclusive, shall mean the Exhibits so marked,
copies of which are attached to this Agreement. Such Exhibits are hereby
incorporated by reference herein and made a part hereof and may be referred to
in this Agreement and any other related instrument or document without being
attached hereto.
"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"GEORGIA CERTIFICATE OF MERGER" shall mean the Certificate of Merger
to be executed by the Surviving Corporation and filed with the Secretary of
State of the State of Georgia relating to the Merger as contemplated by Section
1.1 of this Agreement.
"HAZARDOUS MATERIAL" shall mean any substance which is a "hazardous
substance"or "toxic substance" as defined in the Comprehensive Environment
Response, Compensation, and Liability Act, 42 U.S.C. (S)9601 et seq., or any
------
other substance or material defined, designated, classified or regulated as
hazardous or toxic under any Environmental Law, specifically including asbestos
requiring abatement, removal or encapsulation pursuant to the requirements of
Environmental Laws of polychlorinated biphenyls, and petroleum and petroleum
products).
"HOLA" shall mean the Home Owners Loan Act of 1933, as amended.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"KNOWLEDGE" as used with respect to a Person shall mean the knowledge
after due inquiry of the Chairman, President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer,
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or any Senior or Executive Vice President of such Person, Steven S. Dunlevie, G.
Leighton Stradtman and Elizabeth O. Derrick with regard to Premier and Richard
R. Cheatham, F. Sheffield Hale and Neil D. Falis with regard to Central and
Southern.
"LAW" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"LIABILITY" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than endorsements
of notes, bills, checks, and drafts presented for collection or deposit in the
ordinary course of business) of any type, whether accrued, absolute or
contingent, liquidated or unliquidated, matured or unmatured, or otherwise.
"LIEN" shall mean any conditional sale agreement, easement,
encroachment, encumbrance, hypothecation, infringement, lien, mortgage, pledge,
reservation, restriction, security interest, title retention or other security
arrangement, or any adverse right or interest, charge, or claim of any nature
whatsoever on, or with respect to, any property or property interest, other than
(i) Liens for current property Taxes not yet due and payable; (ii) for
depository institution Subsidiaries of a Party, pledges to secure deposits and
(iii) other Liens incurred in the ordinary course of the banking business.
"LITIGATION" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities other than the violations of law section from such
reports.
"LOAN PROPERTY" shall mean any property owned by the Party in question
or by any of its Subsidiaries or in which such Party or Subsidiary holds a
security interest, and, where required by the context, includes the owner or
operator of such property, but only with respect to such property.
"MATERIAL" for purposes of this Agreement shall be determined in light
of the facts and circumstances of the matter in question; provided that any
specific monetary amount stated in this Agreement shall determine materiality in
that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries, taken as
a whole, or (b) the ability of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other transactions contemplated by
this
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Agreement, provided that "material adverse impact" shall not be deemed to
include the impact of (w) changes in banking and similar Laws of general
applicability or interpretations thereof by courts or governmental authorities,
(x) changes in GAAP or regulatory accounting principles generally applicable to
banks and their holding companies, (y) actions and omissions of a Party (or any
of its Subsidiaries) taken with the prior informed consent of the other Party in
contemplation of the transactions contemplated hereby, or (z) the Merger and
compliance with the provisions of this Agreement on the operating performance of
the Parties.
"MERGER" shall mean the merger of Central and Southern with and into
Premier referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"ORDER" shall mean any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial decision or award, ruling, or writ
of any federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"PARTICIPATION FACILITY" shall mean any facility or property in which
the Party in question or any of its Subsidiaries participates in the management
(including any property or facility held in a joint venture) and, where required
by the context, said term means the owner or operator of such facility or
property, but only with respect to such facility or property.
"PARTY" shall mean either Premier or Central and Southern, and
"Parties" shall mean both Premier and Central and Southern.
"PERMIT" shall mean any federal, state, local, and foreign
governmental approval, authorization, certificate, easement, filing, franchise,
license, notice, permit, or right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any Person or its securities,
Assets, Liabilities, or business.
"PERSON" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in a
representative capacity.
"PREMIER BANK" shall mean First Alliance Bank, a Georgia state-
chartered bank and a Premier Subsidiary.
"PREMIER BENEFIT PLANS" shall have the meaning set forth in Section
6.14 of this Agreement.
"PREMIER COMMON STOCK" shall mean the $1.00 par value common stock of
Premier.
"PREMIER COMPANIES" shall mean, collectively, Premier and all Premier
Subsidiaries.
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"PREMIER DISCLOSURE MEMORANDUM" shall mean the written information
---------------------
entitled "Premier Disclosure Memorandum" delivered on or prior to the date of
---------------------
this Agreement to Central and Southern describing in reasonable detail the
matters contained therein and, with respect to each disclosure made therein,
specifically referencing each Section of this Agreement under which such
disclosure is being made.
"PREMIER FINANCIAL STATEMENTS" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of Premier as of
September 30, 1996, and as of December 31, 1995 and 1994, and the related
statements of income, changes in shareholders' equity, and cash flows (including
related notes and schedules, if any) for the nine months ended September 30,
1996, and for each of the two years ended December 31, 1995 and 1994, as filed
by Premier in SEC Documents and (b) the consolidated balance sheets (including
related notes and schedules, if any) of Premier and related statements of
income, changes in shareholders' equity, and cash flows (including related notes
and schedules, if any) included in SEC Documents filed with respect to periods
ended subsequent to September 30, 1996.
"PREMIER STOCK PLANS" shall mean the existing stock option and other
stock-based compensation plans.
"PREMIER SUBSIDIARIES" shall mean the Subsidiaries of Premier at the
Effective Time.
"PROXY STATEMENT" shall mean (a) the proxy statement used by Central
and Southern to solicit the approval of its shareholders of the transactions
contemplated by this Agreement and (b) the proxy statement used by Premier to
solicit the approval of its shareholders of the transactions contemplated by
this Agreement, both of which shall be included in the prospectus of the
Surviving Corporation relating to shares of Surviving Corporation Common Stock
to be issued to the shareholders of Central and Southern.
"REGISTRATION STATEMENT" shall mean the Registration Statement on Form
S-4, or other appropriate form, filed with the SEC by Premier under the 1933 Act
with respect to the shares of Surviving Corporation Common Stock to be issued to
the shareholders of Central and Southern in connection with the transactions
contemplated by this Agreement and which shall include the Proxy Statements.
"REGULATORY AUTHORITIES" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the Governors
of the Federal Reserve System, the Office of Thrift Supervision (including its
predecessor, the Federal Home Loan Bank Board), the Office of the Comptroller of
the Currency, the Federal Deposit Insurance Corporation, all state regulatory
agencies having jurisdiction over the Parties and their respective Subsidiaries,
the NASD and the SEC.
"RIGHTS" shall mean all arrangements, calls, commitments, Contracts,
options, rights to subscribe to, scrip, understandings, warrants or other
binding obligations of any character
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whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of the capital stock of a Person or by which a Person is or may be
bound to issue additional shares of its capital stock or other Rights.
"SEC" shall mean the United States Securities and Exchange Commission.
"SEC DOCUMENTS" shall mean all forms, proxy statements, registration
statements, reports, schedules and other documents filed, or required to be
filed, by a Party or any of its Subsidiaries with any Regulatory Authority
pursuant to the Securities Laws.
"SECURITIES LAWS" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940, as amended, the Investment Advisors Act of 1940,
as amended, the Trust Indenture Act of 1939, as amended, and the rules and
regulations of any Regulatory Authority promulgated thereunder.
"SHAREHOLDERS' MEETING" shall mean the meeting of the shareholders of
Central and Southern or the meeting of the shareholders of Premier to be held
pursuant to Section 8.1 of this Agreement, including any adjournment or
adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, banks, associations
or other entities of which the entity in question owns or controls 50% or more
of the outstanding equity securities either directly or through an unbroken
chain of entities as to each of which 50% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, however,
there shall not be included any such entity acquired through foreclosure or any
such entity the equity securities of which are owned or controlled in a
fiduciary capacity.
"SURVIVING CORPORATION" shall mean Premier as the surviving
corporation resulting from the Merger to be known as Premier Bancshares, Inc.
"SURVIVING CORPORATION COMMON STOCK" shall mean the $1.00 par value
common stock of the Surviving Corporation.
"TAX" OR "TAXES" shall mean any federal, state, county, local or
foreign income, profits, franchise, gross receipts, payroll, sales, employment,
use, property, withholding, excise, occupancy and other taxes, assessments,
charges, fares or impositions, including interest, penalties and additions
imposed thereon or with respect thereto.
Any singular term in this Agreement shall be deemed to include the plural, and
any plural term the singular. Whenever the words "include," "includes," or
"including" are used in this Agreement, they shall be deemed followed by the
words "without limitation."
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11.2 EXPENSES.
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(a) Except as otherwise provided in this Section 11.2, each of the
Parties shall bear and pay all direct costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
filing, registration and application fees, printing fees, and fees and expenses
of its own financial or other consultants, investment bankers, accountants and
counsel, except that each of the Parties shall bear and pay (i) one-half of the
filing fees payable in connection with the Registration Statement and the
applications filed with other Regulatory Authorities, and (ii) one-half of the
costs incurred in connection with the printing or copying of the Proxy
Statements.
(b) Notwithstanding the provisions of Section 11.2(a) of this
Agreement, if for any reason this Agreement is terminated pursuant to Sections
10.1(b) or 10.1(c) of this Agreement, the breaching Party agrees to pay the non-
breaching Party (i) an amount equal to the reasonable and documented fees and
expenses incurred by such non-breaching Party in connection with the examination
and investigation of the breaching Party, the preparation and negotiation of
this Agreement and related agreements, regulatory filings and other documents
related to the transactions contemplated hereunder, including, without
limitation, fees and expenses of investment banking consultants, accountants,
attorneys and other agents and (ii) (x) $50,000 if the breach is not willful or
(y) $150,000 if the breach is willful or this Agreement is terminated in
contemplation of an Acquisition Proposal, which sums represent compensation for
the non-breaching Party's loss as a result of the transaction contemplated by
this Agreement not being consummated. Final settlement with respect to payment
of such fees and expenses shall be made within thirty (30) days after the
termination of this Agreement. This Section 11.2(b) shall be the non-breaching
Party's sole and exclusive remedy for actionable breach by the breaching Party
under this Agreement.
11.3 BROKERS AND FINDERS. Each of the Parties represents and
-------------------
warrants that neither it nor any of its officers, directors, employees or
Affiliates has employed any broker or finder or incurred any Liability for any
financial advisory fees, investment bankers' fees, brokerage fees, commissions,
or finders' fees in connection with this Agreement or the transactions
contemplated hereby, other than Brown, Burke Capital Partners, Inc. employed by
Premier. In the event of a claim by any broker or finder based upon his or its
representing or being retained by or allegedly representing or being retained by
Premier or Central and Southern, each of Premier and Central and Southern, as
the case may be, agrees to indemnify and hold the other Party harmless of and
from any Liability in respect of any such claim.
11.4 ENTIRE AGREEMENT. Except as otherwise expressly provided
----------------
herein, this Agreement (including the documents and instruments referred to
herein) constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this Agreement
expressed or implied, is intended to confer upon any Person, other than the
Parties or their respective successors, any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, other than as provided in
Section 8.10 and Section 8.13 of this Agreement.
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11.5 AMENDMENTS. To the extent permitted by Law, this Agreement may
----------
amended by a subsequent writing signed by each of the Parties upon the approval
of the Boards of Directors of each of the Parties; provided, however, that after
any such approval by the holders of Premier Common Stock or Central and Southern
Common Stock, there shall be made no amendment that pursuant to the GBCC
requires further approval by such shareholders without the further approval of
such shareholders.
11.6 WAIVERS.
-------
(a) Prior to or at the Effective Time, Premier, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by Central and Southern, to waive or extend the time for the
compliance or fulfillment by Central and Southern of any and all of its
obligations under this Agreement, and to waive any or all of the conditions
precedent to the obligations of Premier under this Agreement, except any
condition which, if not satisfied, would result in the violation of any Law. No
such waiver shall be effective unless in writing signed by a duly authorized
officer of Premier.
(b) Prior to or at the Effective Time, Central and Southern, acting
through its Board of Directors, chief executive officer or other authorized
officer, shall have the right to waive any Default in the performance of any
term of this Agreement by Premier, to waive or extend the time for the
compliance or fulfillment by Premier of any and all of its obligations under
this Agreement, and to waive any or all of the conditions precedent to the
obligations of Central and Southern under this Agreement, except any condition
which, if not satisfied, would result in the violation of any Law. No such
waiver shall be effective unless in writing signed by a duly authorized officer
of Central and Southern.
(c) The failure of any Party at any time or times to require
performance of any provision hereof shall in no manner affect the right of such
Party at a later time to enforce the same or any other provision of this
Agreement. No waiver of any condition or of the breach of any term contained in
this Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
11.7 ASSIGNMENT. Except as expressly contemplated hereby, neither
----------
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the Parties and their respective successors and assigns.
11.8 NOTICES. All notices or other communications which are
-------
required or permitted hereunder shall be in writing and sufficient if delivered
by hand, by facsimile transmission, or by
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courier or overnight carrier, to the persons at the addresses set forth below
(or at such other address as may be provided hereunder), and shall be deemed to
have been delivered as of the date so delivered:
Premier: First Alliance/Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Telecopy Number: (404) 814-3672
Attention: Darrell D. Pittard
Chairman and CEO
Copy to Counsel: Womble Carlyle Sandridge & Rice, PLLC
Suite 700
1275 Peachtree Street, N.E.
Atlanta, Georgia 30309
Telecopy Number: (404) 888-7490
Attention: Steven S. Dunlevie, Esq.
Central & Southern: Central and Southern Holding Company
150 West Greene Street
Milledgeville, Georgia 31061
Telecopy Number: (912) 452-3532
Attention: Robert C. Oliver
President and CEO
Copy to Counsel: Kilpatrick & Cody, LLC
1100 Peachtree Street, Suite 2800
Atlanta, Georgia 30309-4530
Telecopy Number: (404) 815-6555
Attention: Richard R. Cheatham, Esq.
11.9 GOVERNING LAW. This Agreement shall be governed by and
-------------
construed in accordance with the Laws of the State of Georgia, without regard to
any applicable conflicts of Laws, except to the extent that the federal laws of
the United States may apply to the Merger.
11.10 COUNTERPARTS. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
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11.11 CAPTIONS. The captions contained in this Agreement are for
--------
reference purposes only and are not part of this Agreement.
11.12 ENFORCEMENT OF AGREEMENT. The Parties hereto agree that
------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the Parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity.
11.13 SEVERABILITY. Any term or provision of this Agreement which
------------
is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction,
be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
[SIGNATURES ON NEXT PAGE]
A-57
<PAGE>
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to
be executed on its behalf and its corporate seal to be hereunto affixed and
attested by officers thereunto as of the day and year first above written.
ATTEST: FIRST ALLIANCE/PREMIER BANCSHARES, INC.
/s/ By: /s/ Darrell D. Pittard
- -------------------------- ----------------------------------------
Secretary Darrell D. Pittard
Chairman and CEO
[CORPORATE SEAL]
ATTEST: CENTRAL AND SOUTHERN HOLDING COMPANY
/s/ By: /s/ Robert C. Oliver
- -------------------------- ----------------------------------------
Secretary Robert C. Oliver
President and CEO
[CORPORATE SEAL]
A-58
<PAGE>
EXHIBIT 1
---------
AFFILIATE AGREEMENT
First Alliance/Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Central and Southern Holding Company
Post Office Box 748
Milledgeville, Georgia 31061
Gentlemen:
The undersigned is a shareholder of Central and Southern Holding
Company ("Central and Southern"), a corporation organized and existing under the
laws of the State of Georgia, and will become a shareholder of First
Alliance/Premier Bancshares, Inc. ("Premier" or the "Surviving Corporation")
pursuant to the transactions described in the Agreement and Plan of
Reorganization, dated as of February 3, 1997 (the "Agreement"), by and between
Central and Southern and Premier. Under the terms of the Agreement, Premier and
Central and Southern will be merged (the "Merger") and the shares of common
stock of Central and Southern ("Central and Southern Common Stock") will be
converted into shares of common stock of the Surviving Corporation ("Surviving
Corporation Common Stock"). This Affiliate Agreement represents an agreement
between the undersigned and the Surviving Corporation regarding certain rights
and obligations of the undersigned in connection with the shares of the
Surviving Corporation to be received by the undersigned as a result of the
Merger.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and the Surviving Corporation hereby agree as follows:
Affiliate Status. The undersigned understands and agrees that as to
----------------
Central and Southern the undersigned is an "affiliate" under Rule 145(c) as
defined in Rule 405 of the Rules and Regulations of the Securities and Exchange
Commission ("SEC") under the Securities Act of 1933, as amended ("1933 Act"),
and the undersigned anticipates that the undersigned will be such an "affiliate"
at the time of the Merger.
Initial Restriction on Disposition. The undersigned agrees that the
----------------------------------
undersigned will not, except by operation of law, by will or under the laws of
descent and distribution, sell, transfer, or otherwise dispose of the
undersigned's interests in, or reduce the undersigned's risk relative to,
A-59
<PAGE>
any of the shares of the Surviving Corporation Common Stock into which the
undersigned's shares of Central and Southern Common Stock are converted upon
consummation of the Merger until such time as the Surviving Corporation notifies
the undersigned that the requirements of SEC Accounting Series Release Nos. 130
and 135 ("ASR 130 and 135") have been met. The undersigned understands that ASR
130 and 135 relate to publication of financial results of post-Merger combined
operations of the Surviving Corporation and Central and Southern. The Surviving
Corporation agrees that it will publish such results within 45 days after the
end of the first fiscal quarter of the Surviving Corporation containing the
required period of post-Merger combined operations and that it will notify the
undersigned promptly following such publication.
Covenants and Warranties of Undersigned. The undersigned represents,
---------------------------------------
warrants and agrees that:
(a) During the 30 days immediately preceding the effective time of the
Merger, the undersigned will not, except by operation of law, by will, or under
the laws of descent and distribution, sell, transfer, or otherwise dispose of
the undersigned's interests in, or reduce the undersigned's risk relative to,
any of the shares of Central and Southern Common Stock beneficially owned by the
undersigned as of the date of the shareholders' meeting of Central and Southern
held to approve the merger.
(b) The Surviving Corporation Common Stock received by the undersigned
as a result of the Merger will be taken for the undersigned's own account and
not for others, directly or indirectly, in whole or in part.
(c) The undersigned understands that any distribution by the
undersigned of the Surviving Corporation Common Stock has not been registered
under the 1933 Act and that shares of the Surviving Corporation Common Stock
received pursuant to the Merger can only be sold by the undersigned (1)
following registration under the 1933 Act, or (2) in conformity with the volume
and other requirements of Rule 145(d) promulgated by the SEC as the same now
exist or may hereafter be amended, or (3) to the extent some other exemption
from registration under the 1933 Act might be available. The undersigned
---------------
understands that the Surviving Corporation is under no obligation to file a
- ---------------------------------------------------------------------------
registration statement with the SEC covering the disposition of the
- -------------------------------------------------------------------
undersigned's shares of the Surviving Corporation Common Stock.
- ---------------------------------------------------------------
(d) The undersigned is aware that the Merger is to be treated as a
tax-free reorganization under Section 368 of the Internal Revenue Code ("Code")
for federal income tax purposes. The undersigned agrees to treat the
transaction in the same manner for federal income tax purposes. The undersigned
acknowledges that Section 1.368-1(b) of the Income Tax Regulations requires
"continuity of interest" in order for the Merger to be treated as tax-free under
Section 368 of the Code. This requirement is satisfied if, taking into account
those who dissent from the Merger, there is no plan or intention on the part of
the Central and Southern shareholders to sell or otherwise dispose of the
Surviving Corporation
A-60
<PAGE>
Common Stock to be received in the Merger that will reduce such shareholders'
ownership to a number of shares having, in the aggregate, a value at the time of
the Merger of less than 50% of the total fair market value of the Central and
Southern Common Stock outstanding immediately prior to the Merger. The
undersigned has no prearrangement, plan or intention to sell or otherwise
dispose of an amount of the undersigned's Surviving Corporation Common Stock to
be received in the Merger which would cause the foregoing requirement not to be
satisfied.
4. Restrictions on Transfer. The undersigned understands and agrees
------------------------
that stop transfer instructions with respect to the shares of the Surviving
Corporation Common Stock received by the undersigned pursuant to the Merger will
be given to the Surviving Corporation's transfer agent and that there will be
placed on the certificates for such shares, or shares issued in substitution
thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant to a
business combination which is accounted for as a "pooling of interests" and
may not be sold, nor may the owner thereof reduce his risks relative
thereto in any way, until such time as the Surviving Corporation has
published the financial results covering at least 30 days of combined
operations after the effective date of the merger through which the
business combination was effected. In addition, the shares represented by
this certificate may not be sold, transferred or otherwise disposed of
except or unless (a) covered by an effective registration statement under
the Securities Act of 1933, as amended, (b) in accordance with (i) Rule
145(d) (in the case of shares issued to an individual who is not an
affiliate of the Surviving Corporation) or (ii) Rule 144 (in the case of
shares issued to an individual who is an affiliate of the Surviving
Corporation) of the Rules and Regulations of such Act, or (c) in accordance
with a legal opinion satisfactory to counsel for the Surviving Corporation
that such sale or transfer is otherwise exempt from the registration
requirements of such Act."
Such legend will also be placed on any certificate representing the Surviving
Corporation securities issued subsequent to the original issuance of the
Surviving Corporation Common Stock pursuant to the Merger as a result of any
stock dividend, stock split or other recapitalization as long as the Surviving
Corporation Common Stock issued to the undersigned pursuant to the Merger has
not been transferred in such manner to justify the removal of the legend
therefrom. If the provisions of Rules 144 and 145 are amended to eliminate
restrictions applicable to the Surviving Corporation Common Stock received by
the undersigned pursuant to the Merger, or at the expiration of the restrictive
period set forth in Rule 145(d), the Surviving Corporation, upon the request of
the undersigned, will cause the certificates representing the shares of the
Surviving Corporation Common Stock issued to the undersigned in connection with
the Merger to be reissued free of any legend relating to the restrictions set
forth in Rules 144 and 145(d) upon receipt by the Surviving Corporation of an
opinion of its counsel to the effect that such legend may be removed.
A-61
<PAGE>
5. Understanding of Restrictions on Dispositions. The undersigned
---------------------------------------------
has carefully read the Agreement and this Affiliate Agreement and discussed
their requirements and impact upon his or her ability to sell, transfer or
otherwise dispose of the shares of the Surviving Corporation Common Stock
received by the undersigned, to the extent the undersigned believes necessary,
with the undersigned's counsel or counsel for Central and Southern.
6. Filing of Reports by the Surviving Corporation. The Surviving
----------------------------------------------
Corporation agrees, for a period of three years after the effective date of the
Merger, to file on a timely basis all reports required to be filed by it
pursuant to Section 13 of the Securities Exchange Act of 1934, as amended, so
that the public information provisions of Rule 145(d) promulgated by the SEC as
the same are presently in effect will be available to the undersigned in the
event the undersigned desires to transfer any shares of the Surviving
Corporation Common Stock issued to the undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
--------------------------
otherwise transfer the shares of the Surviving Corporation Common Stock received
by the undersigned in connection with the Merger at any time during the
restrictive period set forth in Rule 145(d), the undersigned will provide the
necessary representation letter to the transfer agent for the Surviving
Corporation Common Stock together with such additional information as the
transfer agent may reasonably request. If the Surviving Corporation's counsel
concludes that such proposed sale or transfer complies with the requirements of
Rule 145(d), the Surviving Corporation shall cause such counsel to provide such
opinions as may be necessary to the Surviving Corporation's transfer agent so
that the undersigned may complete the proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
---------------
foregoing provisions also apply to (a) the undersigned's spouse, (b) any
relative of the undersigned or of the undersigned's spouse who has the same home
as the undersigned, (c) any trust or estate in which the undersigned, the
undersigned's spouse, and any such relative collectively own at least a 10%
beneficial interest or of which any of the foregoing serves as trustee, executor
or in any similar capacity and (d) any corporation or other organization in
which the undersigned, the undersigned's spouse and any such relative
collectively own at least 10% of any class of equity securities or of the equity
interest. The undersigned further recognizes that, in the event that the
undersigned is a director or officer of the Surviving Corporation or becomes a
director or officer of the Surviving Corporation upon consummation of the
Merger, among other things, any sale of the Surviving Corporation Common Stock
by the undersigned within a period of less than six months following the
effective time of the Merger may subject the undersigned to liability pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
-------------
between the Surviving Corporation and the undersigned concerning the subject
matter hereof. Any notice required to be sent to any party hereunder shall be
sent by registered or certified mail, return receipt requested, using the
addresses set forth herein or such other address as shall be furnished in
writing by the parties. This Affiliate Agreement shall be governed by the laws
of the State of Georgia.
A-62
<PAGE>
This Affiliate Agreement is executed as of the _____ day of
_______________, 1997.
Very truly yours,
___________________________________
Signature
___________________________________
Print Name
AGREED TO AND ACCEPTED as of
______________________, 1997
FIRST ALLIANCE/PREMIER BANCSHARES, INC.
By:_____________________________
AGREED TO AND ACCEPTED as of
______________________, 1997
CENTRAL AND SOUTHERN HOLDING COMPANY
By:_____________________________
A-63
<PAGE>
EXHIBIT 2
---------
MATTERS AS TO WHICH
COUNSEL TO CENTRAL AND SOUTHERN WILL OPINE*
1. Central and Southern is a corporation duly organized, existing and
in good standing under the laws of the State of Georgia with corporate power and
authority to conduct its business as now conducted and to own and use its
Assets.
2. Central and Southern's authorized capital stock consists of
____________ shares of Central and Southern Common Stock, of which ____________
shares were outstanding as of the date hereof. The outstanding shares of
Central and Southern Common Stock are duly authorized, validly issued, fully
paid and nonassessable. None of the outstanding shares of Central and Southern
Common Stock has been issued in violation of any statutory preemptive rights.
Except as disclosed in Central and Southern's Disclosure Memorandum dated
____________________, 1997, to our knowledge, there are no options,
subscriptions, warrants, calls, rights or commitments obligating Central and
Southern to issue equity securities or acquire its equity securities.
3. The execution and delivery by Central and Southern of the
Agreement do not, and if Central and Southern were now to perform its
obligations under the Agreement such performance would not, result in any
violation of the Articles of Incorporation or Bylaws of any Central and Southern
Company, or, to our knowledge, result in any breach of, or default or
acceleration under, any material Contract or Order to which a Central and
Southern Company is a party or by which a Central and Southern Company is bound.
4. Central and Southern has duly authorized the execution and
delivery of the Agreement and all performance by Central and Southern thereunder
and has duly executed and delivered the Agreement.
5. The Agreement is enforceable against Central and Southern.
______________________________
*Pursuant to the January 1, 1992 edition of the Interpretive Standards
Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted
by the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia.
A-64
<PAGE>
EXHIBIT 3
---------
CLAIMS/INDEMNIFICATION LETTER
_______________________, 1997
First Alliance/Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, Georgia 30326
Ladies and Gentlemen:
This letter is delivered pursuant to Section 9.2(e) of the Agreement
and Plan of Merger (the "Agreement"), dated as of February 3, 1997, by and
between Central and Southern Holding Company ("Central and Southern ") and First
Alliance/Premier Bancshares, Inc. ("Premier") which provides for the merger (the
"Merger") of Central and Southern and Premier.
Concerning claims which I may have against Central and Southern or its
wholly-owned subsidiaries, The Central and Southern Bank of Georgia and The
Central and Southern Bank of North Georgia, F.S.B., in my capacity as an officer
or director:
(a) Premier shall assume all liability (to the extent Central and
Southern was so liable) for claims for indemnification arising under Central and
Southern's Articles of Incorporation or Bylaws or under any indemnification
contract disclosed to Premier, as existing on February 3, 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 time of the Merger;
(b) The Central and Southern Bank of Georgia and The Central and
Southern Bank of North Georgia, F.S.B., shall retain all liability (to the
extent they were so liable) for claims for indemnification arising under their
respective Articles of Incorporation or Bylaws as existing on February 3, 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 time of the Merger;
(c) In my capacity as an officer or a director, I am not aware that I
have any claims (other than those referred to in paragraphs (a) or (b) above)
against Central and Southern, The Central and Southern Bank of Georgia or The
Central and Southern Bank of North Georgia, F.S.B. (other than routine deposit,
loan and other banking services conducted in the ordinary course of business
with Central and Southern, The Central and Southern Bank of Georgia or The
Central and Southern Bank of North Georgia, F.S.B.; and
A-65
<PAGE>
(d) I hereby release Central and Southern, The Central and Southern
Bank of Georgia and The Central and Southern Bank of North Georgia, F.S.B., from
any and all claims which I am aware that I have against any of them in my
capacity as an officer or a director, other than those referred to in paragraphs
(a) or (b) above.
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.
FIRST ALLIANCE/PREMIER BANCSHARES, INC.
By: ______________________________________
Darrell D. Pittard, Chairman and CEO
A-66
<PAGE>
EXHIBIT 4
---------
MATTERS AS TO WHICH
COUNSEL TO PREMIER WILL OPINE*
1. Premier is a corporation duly organized, existing and in good
standing under the laws of the State of Georgia with corporate power and
authority to conduct its business as now conducted and to own and use its
Assets.
2. Premier's authorized capital stock consists of 20,000,000 shares
of Premier Common Stock, of which ______ shares were outstanding as of the date
hereof. The outstanding shares of Premier Common Stock are, and all of the
shares of Surviving Corporation Common Stock to be issued in exchange for
Central and Southern Common Stock upon consummation of the Merger, when issued
in accordance with the terms of the Agreement, will be, duly authorized, validly
issued, fully paid and nonassessable. None of the outstanding shares of Premier
Common Stock has been, and none of the shares of Surviving Corporation Common
Stock to be issued in exchange for shares of Central and Southern Common Stock
upon consummation of the Merger will be, issued in violation of any statutory
preemptive rights. Except as disclosed in Premier's Disclosure Memorandum dated
_______________, 1997, to our knowledge, there are no options, subscriptions,
warrants, calls, rights or commitments obligating Premier to issue equity
securities or acquire its equity securities.
3. The execution and delivery by Premier of the Agreement do not,
and if Premier were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of Incorporation
or Bylaws of any Premier Company, or, to our knowledge, result in any breach of,
or default or acceleration under, any material Contract or Order to which a
Premier Company is a party or by which a Premier Company is bound.
4. Premier has duly authorized the execution and delivery of the
Agreement and all performance by Premier thereunder and has duly executed and
delivered the Agreement.
5. The Agreement is enforceable against Premier.
______________________________
*Pursuant to the January 1, 1992 edition of the Interpretive Standards
Applicable to Legal Opinions to Third Parties in Corporate Transactions adopted
by the Legal Opinion Committee of the Corporate and Banking Law Section of the
State Bar of Georgia.
A-67
<PAGE>
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
This First Amendment (the "Amendment") to Agreement and Plan of
Reorganization (the "Agreement") dated February 3, 1997, between Premier
Bancshares, Inc. ("Premier") and The Central and Southern Holding Company
("Central and Southern") is made and entered into as of the 26th day of March
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 reflect that the
Central and Southern Options which are outstanding as of the Effective Date may
be substituted for Premier stock options under the Premier Bancshares, Inc. 1997
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 Central and Southern agree as follows, subject to ratification of
this Amendment by their respective Board of Directors:
1. That the following paragraph (c) shall be added to the end of Section
3.4 of the Agreement:
"(c) Notwithstanding the foregoing provisions of this Section
3.4, Premier may at its election substitute as of the Effective Time stock
options under the Premier Bancshares, Inc. 1997 Stock Option Plan or a
predecessor plan (the "Premier Stock Option Plan") for all or a part of the
Central and Southern Options, subject to the following conditions: (i) the
requirements of 3.4(a) and (b) shall be met; (ii) such substitution shall
not constitute a modification, extension or renewal of any of the Central
and Southern 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 Central and Southern Stock Option
Plan or other document granting the Central and Southern 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
Time, 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."
<PAGE>
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/ Darrell D. Pittard
- -------------------------------------- ---------------------------------
Secretary Darrell D. Pittard, Chairman
[CORPORATE SEAL]
Attest: THE CENTRAL AND SOUTHERN HOLDING
COMPANY
/s/ Robert C. Oliver
- -------------------------------------- ---------------------------------
Secretary Robert C. Oliver, President
[CORPORATE SEAL]
<PAGE>
Appendix B
April ___, 1997
Board of Directors
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 East Paces Ferry Road
Atlanta, GA 30326
Dear Members of the Board:
You have asked us to advise you with respect to the fairness to 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 February 3,
1997 between Premier and Central and Southern Holding Company ("C&S") as amended
on March __, 1997. The Merger Agreement provides for a merger (the "Merger") of
Premier and C&S pursuant to which the common shareholders of C&S will receive,
after Premier has effected its announced 1.8055 for one stock split, one Premier
common share for every common share of C&S they hold.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to Premier and C&S. We have also
reviewed certain other information, including financial forecasts and budgets,
provided to us by Premier and C&S , and have discussed the business and
prospects of Premier and C&S with their respective managements.
We have also considered certain financial and stock market data of Premier
and C&S and we 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 they have been reasonably prepared on bases reflecting the
best currently available estimates and judgments of Premier's and C&S's
managements as to the future financial performance of Premier and C&S. We have
not made an independent evaluation or appraisal of the assets of Premier or C&S
and we have assumed that the aggregate allowances for loan losses for both
Premier and C&S are adequate to cover such losses.
<PAGE>
Board of Directors
Premier Bancshares, Inc.
April __, 1997
Page Two
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 C&S 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>
January 14, 1997
Board of Directors
Central and Southern Holding Company
P.O. Box 748
Milledgeville, GA 31061
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the outstanding shares of common stock of Central and
Southern Holding Company ("Central and Southern"), of the consideration (the
"Merger Consideration") to be received by such holders pursuant to the Agreement
and Plan of Reorganization dated on or about January 15, 1997 (the "Merger
Agreement") in the proposed affiliation which provides for the merger (the
"Merger") of Central and Southern with and into First Alliance/Premier
Bancshares, Inc. ("Premier"). Such a transaction of the type proposed is
characterized as a "merger-of-equals."
Pursuant to the Merger Agreement, immediately preceding the Effective Time
("Effective Time" shall mean the date and time at which the Articles of Merger
reflecting the Merger shall become effective with the Secretary of State of the
State of Georgia), Premier will undertake a 1.8055 for one stock split. At the
Effective Time each share of Central and Southern Common Stock shall cease to be
outstanding and shall be converted into and exchanged for the right to receive
one share of Premier Common Stock (the "Exchange Ratio").
Alex Sheshunoff & Co. Investment Banking ("Sheshunoff") is regularly engaged in
the valuation of securities in connection with mergers and acquisitions, private
placements, and valuations for estate, corporate and other purposes.
In connection with our opinion set forth below, we have, among other things:
1. Evaluated the Exchange Ratio based on the relative contributions of each
of the companies to the combined company, including 1995 reported
earnings, estimated 1996 and 1997 earnings, tangible book value and
market value. The agreed upon Exchange Ratio was negotiated between the
managements of Central and Southern and Premier without the assistance
of Sheshunoff;
2. Determined the potential sensitivity of the Exchange Ratio to changes in
key assumptions such as merger cost savings and future earnings;
<PAGE>
3. Analyzed the potential earnings, dividend, asset growth, franchise and
future market value benefits to Central and Southern from the Merger, as
an alternative to continued operations as an independent company;
4. Reviewed Central and Southern's and Premier's most recent Annual Reports
as of December 31, 1993, 1994 and 1995 and Quarterly Report as of
September 30, 1996 as well as unaudited financial statements as of
December 31, 1996;
5. Reviewed certain internal financial reports and estimated 1997 budget
data for Central and Southern and Premier and held discussions with the
management of both companies concerning their recent operating
performance and expected 1997 operating performance;
6. Compared Central and Southern's and Premier's recent operating results
with those of certain other companies operating in the southeastern
United States that we deemed appropriate;
7. Reviewed the historical stock price and trading volumes of central and
Southern and Premier;
8. Reviewed a draft of the Merger Agreement between Central and Southern
and Premier regarding the reorganization;
9. Reviewed the terms, including exchange ratios, of merger-of-equals
transactions completed during the last several years;
10. Reviewed the appropriateness of the proposed final exchange ratio as
negotiated between Central and Southern and Premier; and
11. Performed such other analyses as we have deemed appropriate.
We have assumed and relied upon, without independent verification, the accuracy
and completeness of the information reviewed by us for the purposes of this
opinion. We have not made an independent evaluation of the assets or liabilities
of Central and Southern or Premier, nor have we been furnished with any such
appraisals. With respect to financial forecasts, we have assumed that they have
been reasonably prepared and reflect the best currently available estimates and
judgment of managements of Central and Southern and Premier as to the future
financial performance of the companies. We have assumed such forecasts and
projections will be realized in the amounts and at the times contemplated
thereby. We also relied upon the managements of Central and Southern as to the
reasonability and achievability of the expected cost savings and
<PAGE>
revenue enhancements resulting from the merger. We are not experts in the
evaluation of loan portfolios for the purposes of assessing the adequacy of the
allowance for losses with respect thereto and have assumed that such allowances
for each of the companies are in the aggregate, adequate to cover such losses.
We assume that no material change in the signed Agreement will occur when
compared to the last draft Agreement provided to us.
Our opinion is necessarily based on economic, market and other conditions as in
effect on, and the information made available to us as of, the date hereof.
Events occurring after the date hereof could materially affect the assumptions
used in preparing this opinion.
Our opinion is limited to the fairness, from a financial point of view, to the
holders of Central and Southern common stock of the Merger Consideration
received as stated in the Merger Agreement and does not address Central and
Southern's underlying business decision to undertake the Merger. Moreover, this
letter, and the opinion expressed herein, does not constitute a recommendation
to any shareholder as to any approval of the Merger or the Merger Agreement. It
is understood that this letter is for the information of the Board of Directors
of Central and Southern and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any regulatory filings made by Central and Southern with respect to the
Merger.
Based on the foregoing and such other matters we have deemed relevant, we are of
the opinion as of the date hereof that the Merger Consideration is fair, from a
financial point of view, to the holders of Central and Southern common stock.
Very truly yours,
ALEX SHESHUNOFF & CO.
INVESTMENT BANKING
<PAGE>
APPENDIX D
PREMIER BANCSHARES, INC.
1997 STOCK OPTION PLAN
<PAGE>
PREMIER BANCSHARES, INC.
1997 STOCK OPTION PLAN
1. PURPOSE
-------
The purpose of the Premier Bancshares, Inc. 1997 Stock Option Plan (the
"Plan") is to encourage and enable selected key employees, independent
contractors, consultants and advisors in the service of Premier Bancshares, Inc.
(the "Corporation") or its related corporations to acquire or to increase their
holdings of common stock of the Corporation (the "Common Stock") 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 incentive
stock options ("Incentive Options") intended to qualify under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), and nonqualified stock
options ("Nonqualified Options"). Incentive Options and Nonqualified Options
shall be referred to herein collectively as "Options." To the extent that any
Option is designated as an Incentive Option and such option does not qualify as
an Incentive Option, it shall constitute a Nonqualified Option.
2. ADMINISTRATION OF THE PLAN
--------------------------
(a) The Plan shall be administered by a committee (the "Committee")
appointed by the Board of Directors of the Corporation (the "Board") and
comprised solely of members of the Board. The Committee shall include no fewer
than the minimum number of "non-employee 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.
(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 held and called. Subject to the provisions of the
Plan, the Committee shall have full and final authority, in its discretion, to
take any action with respect to the Plan including, without limitation, the
following: (i) to determine the individuals to receive Options, the nature of
each Option as an Incentive Option or a Nonqualified Option, the times when
Options shall be granted, the number of shares to be subject to each Option, the
Option price (determined in accordance with Section 6), the Option period, the
time or times when each Option shall be exercisable and the other terms,
conditions, restrictions and limitations of an Option; (ii) to prescribe the
form or forms of the agreements evi dencing any Options granted under the Plan;
(iii) to establish, amend and rescind rules and regulations for the
administration of the Plan; and (iv) to construe and interpret the Plan, the
rules and regulations, and the agreements evidencing Options granted under the
Plan, and to make all other determinations deemed necessary or advisable for
administering the Plan. In addition, the Committee shall have complete
authority, in its discretion, to accelerate the date that any Option which is
not otherwise exercisable shall become exercisable in whole or in part, without
any obligation to accelerate such date with respect to any other Option granted
to any person.
<PAGE>
(c) Notwithstanding Section 2(b), and subject to the terms of the Plan
herein, the Committee may delegate to the Chief Executive Officer of the
Corporation the authority to grant Options, and to make any or all of the
determinations reserved for the Committee in the Plan and summarized in Section
2(b) with respect to Options that have been granted, to any individual who, at
the time of such grant or other determination, (i) is not an officer or director
of the Corporation subject to Section 16 of the Exchange Act and (ii) is
otherwise eligible to participate in the Plan under Section 5.
3. EFFECTIVE DATE
--------------
The effective date of the Plan shall be the June 15, 1997. Options may be
granted under the Plan on and after the effective date, but not after June 14,
2007.
4. OPTIONS; SHARES OF STOCK SUBJECT TO THE PLAN
--------------------------------------------
Both Incentive Options and Nonqualified Options, as designated by the
Committee, may be granted under the Plan. Subject to adjustment as provided in
Section 10, the shares of Common Stock that may be issued and sold pursuant to
Options shall not exceed in the aggregate 750,000 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 exercise of Options granted hereunder. Any shares of Common
Stock subject to an Option which, for any reason, expires or is terminated
unexercised as to such shares may again be subject to an Option granted under
the Plan. No Optionee may be granted Options in any calendar year for more than
75,000 shares of Common Stock (subject to adjustment as provided in Section 10).
5. ELIGIBILITY
-----------
An Option may be granted only to an individual who satisfies the following
eligibility requirements on the date the Option is granted:
(a) The individual is either (i) a key employee of the Corporation or a
related corporation or (ii) an independent contractor, consultant or advisor
(collectively, "independent contractors") providing services to the Corporation
or a related corporation. Directors of the Corporation or a related corporation
who are otherwise eligible to participate in the Plan may be granted Options
under the Plan. For this purpose, an individual shall be considered to be an
"employee" only if there exists between the individual and the Corporation or a
related corporation the legal and bona fide relationship of employer and
employee. In determining whether such a relationship exists, the regulations of
the United States Treasury Department relating to the determination of the
employment relationship for the purpose of collection of income tax on wages at
the source shall be applied.
Also, for this purpose, a "key employee" is an employee of the Corporation
or a related corporation whom the Committee determines qualifies as a key
employee based on the
2
<PAGE>
nature and extent of such employee's duties, responsibilities, personal
capabilities, performance and potential, or any combination of such factors.
(b) Notwithstanding the foregoing, the Committee shall also have authority,
in its discretion, to grant Options to non-employees or non-key employees in
connection with a merger, reorganization or other business combination involving
the Corporation or a related corporation.
(c) With respect to the grant of an Incentive Option, the individual is an
employee who does not own, immediately before the time that the Incentive Option
is granted, stock possessing more than ten percent of the total combined voting
power of all classes of stock of the Corporation or a related corporation;
provided, that an individual owning more than ten percent of the total combined
voting power of all classes of stock of the Corporation or a related corporation
may be granted an Incentive Option if the price at which such Option may be
exercised is greater than or equal to 110% of the fair market value of the
shares on the date the Option is granted and the Option period does not exceed
five years. For this purpose, an individual will be deemed to own stock which
is attributed to him under Section 424(d) of the Code.
(d) The individual, being otherwise eligible under this Section 5, is
selected by the Committee as an individual to whom an Option shall be granted
(an "Optionee").
6. OPTION PRICE
------------
The price per share at which an Option may be exercised (the "Option
price") shall be established by the Committee at the time the Option is granted
and shall be set forth in the terms of the agreement evidencing the grant of the
Option; provided, that in the case of an Incentive Option, the Option price
shall be equal to or greater than the fair market value per share of the Common
Stock on the date the Option is granted. In addition, the following rules
shall apply:
(a) An Incentive Option shall be considered to be granted on the date that
the Committee acts to grant the Option, or on any later date specified by the
Committee as the date of grant of the Option. A Nonqualified Option shall be
considered to be granted on the date the Committee acts to grant the Option or
any other date specified by the Committee as the date of grant of the Option.
(b) The fair market value of the shares shall be determined in good faith
by the Committee in accordance with the following provisions: (i) 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 Option is
granted, or, if there is no transaction on such date, then on the trading date
nearest preceding the date the Option is granted for which closing price
information is available; or (ii) 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 other manner
consistent with the Code and accompanying regulations.
3
<PAGE>
(c) In no event shall there first become exercisable by the Optionee in any
one calendar year incentive stock options granted by the Corporation or any
related corporation with respect to shares having an aggregate fair market value
(determined at the time an Option is granted) greater than $100,000.
7. OPTION PERIOD AND LIMITATIONS ON THE RIGHT TO
---------------------------------------------
EXERCISE OPTIONS
----------------
(a) The period during which an Option may be exercised (the "Option
period") shall be determined by the Committee when the Option is granted and
shall not extend more than ten years from the date on which the Option is
granted. An Option shall be exercisable on such date or dates, during such
period, for such number of shares, and subject to such conditions as shall be
determined by the Committee and set forth in the agreement evidencing such
Option, subject to the right of the Committee to accelerate the time when
Options may be exercised. Any Option or portion thereof not exercised before
the expiration of the Option period shall terminate.
(b) An Option may be exercised by giving written notice of at least ten
days to the Committee or its designee at such place as the Committee shall
direct. Such notice shall specify the number of shares to be purchased pursuant
to an Option and the aggregate purchase price to be paid therefor, and shall be
accompanied by the payment of such purchase price. Such payment shall be in the
form of (i) cash; (ii) shares of Common Stock owned by the Optionee at the time
of exercise; (iii) shares of Common Stock withheld upon exercise; (iv) delivery
of a properly executed written notice of exercise to the Corporation and
delivery to a broker of written notice of exercise and irrevocable instructions
to promptly deliver to the Corporation the amount of sale or loan proceeds to
pay the Option price; or (v) any combination of the foregoing methods. Shares
tendered or withheld in payment upon the exercise of an Option shall be valued
at their fair market value on the date of exercise, as determined by the
Committee by applying the provisions of Section 6(b).
(c) No Option granted to an Optionee who was an employee at the time of
grant shall be exercised unless the Optionee is, at the time of exercise, an
employee as described in Section 5(a), and has been an employee continuously
since the date the Option was granted, subject to the following:
(i) An Option shall not be affected by any change in the terms, conditions
or status of the Optionee's employment, provided that the Optionee continues to
be an employee of the Corporation or a related corporation.
(ii) The employment relationship of an Optionee shall be treated as
continuing intact for any period that the Optionee is on military or sick leave
or other bona fide leave of absence, provided that the period of such leave does
not exceed ninety days, or, if longer, as long as the Optionee's right to
reemployment is guaranteed either by statute or by contract. The employment
relationship of an Optionee shall also be treated as continuing intact while the
Optionee is not in active service because of disability. For purposes of this
Section 7(c)(ii), "disability" shall mean the inability of the Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
4
<PAGE>
death, or which has lasted or can be expected to last for a continuous period of
not less than twelve months. The Committee shall determine whether an Optionee
is disabled within the meaning of this paragraph.
(iii) If the employment of an Optionee is terminated because of disability
within the meaning of subparagraph (ii), or if the Optionee dies while he is an
employee or dies after the termination of his employment because of disability,
the Option may be exercised only to the extent exercisable on the date of the
Optionee's termination of employment or death while employed (the "termination
date"), except that the Committee may in its discretion accelerate the date for
exercising all or any part of the Option which was not otherwise exercisable on
the termination date. The Option must be exercised, if at all, prior to the
first to occur of the following, whichever shall be applicable: (A) the close
of the period of twelve months next succeeding the termination date; or (B) the
close of the Option period. In the event of the Optionee's death, such Option
shall be exercisable by such person or persons as shall have acquired the right
to exercise the Option by will or by the laws of intestate succession.
(iv) If the employment of the Optionee is terminated for any reason other
than disability (as defined in subparagraph (ii)) or death or for "cause," his
Option may be exercised to the extent exercisable on the date of such
termination of employment, except that the Committee may in its discretion
accelerate the date for exercising all or any part of the Option which was not
otherwise exercisable on the date of such termination of employment. The Option
must be exercised, if at all, prior to the first to occur of the following,
whichever shall be applicable: (A) the close of the period of 90 days next
succeeding the termination date; or (B) the close of the Option period. If the
Optionee dies following such termination of employment and prior to the earlier
of the dates specified in (A) or (B) of this subparagraph (iv), the Optionee
shall be treated as having died while employed under subparagraph (iii)
immediately preceding (treating for this purpose the Optionee's date of
termination of employment as the termination date). In the event of the
Optionee's death, such Option shall be exercisable by such person or persons as
shall have acquired the right to exercise the Option by will or by the laws of
intestate succession.
(v) If the employment of the Optionee is terminated for "cause," his Option
shall lapse and no longer be exercisable as of the effective time of his
termination of employment, as determined by the Committee. For purposes of this
subparagraph (v) and subparagraph (iv), the Optionee's termination shall be for
"cause" if such termination results from the Optionee's (A) dishonesty; (B)
refusal to perform his duties for the Corporation; or (C) engaging in conduct
that could be materially damaging to the Corporation without a reasonable good
faith belief that such conduct was in the best interest of the Corporation. The
determination of "cause" shall be made by the Committee and its determination
shall be final and conclusive.
(vi) Notwithstanding the foregoing, the Committee shall have authority, in
its discretion, to extend the period during which an Option may be exercised;
provided that, in the event that any such extension shall cause an Incentive
Option to be designated as a Nonqualified Option, no such extension shall be
made without the prior written request and consent of the Optionee.
(d) An Option granted to an Optionee who was an independent contractor of
the Corporation or a related corporation at the time of grant (and who does not
thereafter become an employee, in which case he shall be subject to the
provisions of Section 7(c) herein) may be exercised only to the extent
exercisable on the date of the Optionee's termination of service to the
Corporation or a related corporation (unless the termination was for cause), and
5
<PAGE>
must be exercised, if at all, prior to the first to occur of the following, as
applicable: (A) the close of the period of 90 days next succeeding the
termination date; or (B) the close of the Option period. If the services of such
an Optionee are terminated for cause (as defined in Section 7(c)(v) herein), his
Option shall lapse and no longer be exercisable as of the effective time of his
termination of services, as determined by the Committee. Notwithstanding the
foregoing, the Committee may in its discretion accelerate the date for
exercising all or any part of an Option which was not otherwise exercisable on
the termination date or extend the Option period, or both.
(e) An Optionee or his legal representative, legatees or distributees shall
not be deemed to be the holder of any shares subject to an Option unless and
until certificates for such shares are issued to him or them under the Plan.
(f) Nothing in the Plan shall confer upon the Optionee any right to
continue in the service of the Corporation or a related corporation as an
employee or independent contractor, as the case may be, or to interfere in any
way with the right of the Corporation or a related corporation to terminate the
Optionee's service at any time.
8. CHANGE OF CONTROL
-----------------
(a) Except as provided in Section 8(b) herein, in the event of a Change of
Control (as defined in Section 8(c) herein), all Options outstanding as of the
date of such Change of Control shall become fully exercisable, whether or not
then otherwise exercisable.
(b) Notwithstanding the foregoing, in the event of a merger, share
exchange, reorganization or other business combination affecting the Corporation
or a related corporation, the Committee may, in its sole and absolute
discretion, determine that any or all Options granted pursuant to the Plan shall
not become exercisable on an accelerated basis, if the Board of Directors or the
surviving or acquiring corporation, as the case may be, shall have taken such
action, including but not limited to the assumption of Options granted under the
Plan or the grant of substitute options or awards, as in the opinion of the
Committee is equitable or appropriate to protect the rights and interests of
participants under the Plan. For the purposes herein, the Committee authorized
to make the determinations provided for in this Section 8(b) shall be appointed
by the Board of Directors, two-thirds of the members of which shall have been
Directors of the Corporation prior to the merger, share exchange, reorganization
or other business combination affecting the Corporation or a related
corporation.
(c) 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
6
<PAGE>
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 all or 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 twelve-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 twelve-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.
9. NONTRANSFERABILITY OF OPTIONS AND SHARES
----------------------------------------
Incentive Options granted pursuant to the Plan shall not be transferable
(including by pledge or hypothecation) other than by will or the laws of
intestate succession or pursuant to a qualified domestic relations order, as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules thereunder. Nonqualified Options
granted pursuant to the Plan shall not be transferable (including by pledge or
hypothecation) other than by will or the laws of intestate succession or
pursuant to a qualified domestic relations order, as defined by the Code or
Title I of ERISA or the rules thereunder, except as may be permitted by the
Committee in a manner consistent with the registration provisions of the
Securities Act of 1933, as amended (the "Securities Act"). An Option shall be
exercisable during the Optionee's lifetime only by him. To the extent required
by Section 16 of the Exchange Act, shares acquired upon the exercise of an
Option shall not, without the consent of the Committee, be transferable
(including by pledge or hypothecation) until the expiration of six months after
the date the Option was granted.
10. DILUTION OR OTHER ADJUSTMENTS
-----------------------------
If there is any change in the outstanding shares of Common Stock of the
Corporation as a result of a merger, consolidation, reorganization, stock
dividend, stock split distributable in shares, or other change in the capital
stock structure of the Corporation, the Committee shall make such adjustments to
Options, to the number of shares reserved for issuance and issuable under the
Plan, and to any provisions of this Plan as the Committee deems equitable to
prevent dilution or enlargement of Options or otherwise advisable to reflect
such change.
11. WITHHOLDING
-----------
The Corporation shall require any recipient of shares pursuant to the
exercise of an Option 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 Optionee.
7
<PAGE>
Notwithstanding the foregoing, the Optionee may satisfy such obligation in whole
or in part, and any other local, state or federal income tax obligations
relating to the exercise of an Option, by electing (the "Election") to have the
Corporation withhold shares of Common Stock from the shares to which the
Optionee is entitled. The number of shares to be withheld shall have a fair
market value (determined in accordance with Section 6(b)) 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.
12. CERTAIN DEFINITIONS
-------------------
For purposes of the Plan, the following terms shall have the meaning
indicated:
(a) "Related corporation" means any parent, subsidiary or predecessor of
the Corporation.
(b) "Parent" or "parent corporation" shall mean any corporation (other than
the Corporation) in an unbroken chain of corporations ending with the
Corporation if, at the time that the Option is granted, each corporation other
than the Corporation owns stock possessing fifty percent or more of the total
combined voting power of all classes of stock in another corporation in the
chain.
(c) "Subsidiary" or "subsidiary corporation" means any corporation (other
than the Corporation) in an unbroken chain of corporations beginning with the
Corporation if, at the time that the Option is granted, each corporation other
than the last corporation in the unbroken chain owns stock possessing fifty
percent or more of the total combined voting power of all classes of stock in
another corporation in the chain.
(d) "Predecessor" or "predecessor corporation" means a corporation which
was a party to a transaction described in Section 424(a) of the Code (or which
would be so described if a substitution or assumption under that Section had
occurred) with the Corporation, or a corporation which is a parent or subsidiary
of the Corporation, or a predecessor of any such corporation.
In general, terms used in the Plan shall, where appropriate, be given the
meaning ascribed to them under the provisions of the Code applicable to
incentive stock Options.
13. STOCK OPTION AGREEMENT
----------------------
The grant of any Option under the Plan shall be evidenced by the execution
of an agreement (the "Agreement") between the Corporation and the Optionee.
Such Agreement shall set forth the date of grant of the Option, the Option
price, the Option period, the designation of the Option as an Incentive Option
or a Nonqualified Option, and the time or times when and the conditions upon the
happening of which the Option shall become exercisable. Such Agreement shall
also set forth the restrictions, if any, with respect to which the shares to be
purchased thereunder shall be subject, and such other terms and conditions as
the Committee shall determine which are consistent with the provisions of the
Plan and applicable law and regulations.
8
<PAGE>
14. RESTRICTIONS ON SHARES
----------------------
The Corporation may impose such restrictions on any shares acquired upon
exercise of Options 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 exercise of an Option 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.
15. AMENDMENT OR TERMINATION
------------------------
The Plan may be amended or terminated at any time by action of the Board;
provided, that:
(a) Any amendment which would (i) materially increase the aggregate number
of shares which may be issued under the Plan (other than changes as described in
Section 10), or (ii) materially change the requirements for eligibility to
receive Options under the Plan shall be made only with the approval of the
shareholders of the Corporation.
(b) No outstanding Option shall be amended or terminated (i) without the
consent of the Optionee if such amendment or termination would adversely affect
the Optionee's rights with respect to such Option; and (ii) if the Option is an
Incentive Option, without the opinion of legal counsel to the Corporation that
such amendment or termination will not constitute a "modification" within the
meaning of Section 424 of the Code if the Committee determines such an opinion
is necessary.
16. APPLICABLE LAW
--------------
Except as otherwise provided herein, the Plan shall be construed and
enforced according to the laws of the State of Georgia.
17. SECTION 16(B) COMPLIANCE
------------------------
To the extent that participants in the Plan are subject to Section 16(b) of
the Exchange Act, it is the intention of the Corporation that transactions under
the Plan shall comply with Rule 16b-3 under the Exchange Act and, if any Plan
provision is later found not to be in compliance with Section 16 of the Exchange
Act, the provision shall be deemed null and void, and in all events the Plan
shall be construed in favor of Plan transactions meeting the requirements of
Rule 16b-3 or successor rules applicable to the Plan.
18. SHAREHOLDER APPROVAL
--------------------
The Plan is subject to the approval of the shareholders of the Corporation,
which approval must occur, if at all, within twelve months of the effective date
of the Plan. All Incentive Options granted prior to shareholder approval shall
be conditioned upon such approval, and no Incentive Option shall be exercisable
prior to such approval.
9
<PAGE>
IN WITNESS WHEREOF, this Premier Bancshares, Inc. 1997 Stock Option Plan,
is, by the authority of the Board of Directors of the Corporation, executed in
behalf of the Corporation, the ___ day of ___________, 1997.
PREMIER BANCSHARES, INC.
By: /s/ Darrell D. Pittard
------------------------------
Darrell D. Pittard
Chairman of the Board and
Chief Executive Officer
Attest:
- -----------------------------
Secretary
[Corporate Seal]
10
<PAGE>
APPENDIX E
PREMIER BANCSHARES, INC.
DIRECTORS' STOCK OPTION PLAN
<PAGE>
PREMIER BANCSHARES, INC.
DIRECTORS' STOCK OPTION PLAN
1. PURPOSE
-------
The purpose of the Premier Bancshares, Inc. Directors' Stock Option Plan
(the "Plan") is to provide members of the Board of Directors (the "Board") of
Premier Bancshares, Inc. (the "Corporation") and members of the boards of
directors of its Subsidiaries with the opportunity to defer receipt of all or
part of their compensation as a Director (as defined below) and to acquire or
increase their holdings of the common stock of the Corporation (the "Common
Stock") 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 stock options ("Options") to acquire shares of the Common Stock.
Such Options may be incentive stock options ("Incentive Options") intended to
qualify under Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or nonqualified stock options ("Nonqualified Options").
2. ADMINISTRATION OF THE PLAN
--------------------------
(a) The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board and comprised solely of members of the Board. The
Committee shall include no fewer than the minimum number of "non-employee
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.
(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
Options 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 effective date of the Plan shall be June 15, 1997 (the "Effective
Date"). Options may be granted effective on or after the Effective Date but not
after June 14, 2007.
4. SHARES OF COMMON STOCK SUBJECT TO THE PLAN
------------------------------------------
Subject to adjustment as provided in Section 10, the shares of Common
Stock that may be issued and sold pursuant to Options granted under the Plan
shall not exceed 150,000 shares
<PAGE>
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 exercise of Options granted hereunder. Any
shares of Common Stock subject to an Option which, for any reason, expires or is
terminated unexercised as to such shares may again be subject to an Option
granted under the Plan. No Director may be granted Options in any calendar year
for more than 15,000 shares of Common Stock (subject to adjustment as provided
in Section 10).
5. ELIGIBILITY
-----------
(a) Options 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 referred to herein as a "Participant."
(b) Notwithstanding the foregoing, the following provisions apply with
respect to the grant of Incentive Options:
(i) An Incentive Option may only be granted to a person who is an
employee of the Corporation or a related corporation. For this purpose, an
individual shall be considered to be an "employee" only if there exists between
the individual and the Corporation or a related corporation the legal and bona
fide relationship of employer and employee. In determining whether such a
relationship exists, the regulations of the United States Treasury Department
relating to the determination of the employment relationship for the purpose of
collection of income tax on wages at the source shall be applied.
(ii) With respect to the grant of an Incentive Option, the individual
is an employee who does not own, immediately before the time that the Incentive
Option is granted, stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Corporation or a related
corporation; provided, that an individual owning more than ten percent of the
total combined voting power of all classes of stock of the Corporation or a
related corporation may be granted an Incentive Option if the price at which
such Option may be exercised is greater than or equal to 110% of the fair market
value of the shares on the date the Option is granted and the period of the
Option does not exceed five years. For this purpose, an individual will be
deemed to own stock which is attributed to him under Section 424(d) of the Code.
6. GRANT OF OPTIONS
----------------
(a) Both Nonqualified Options and Incentive Options may be granted under
the Plan. If a Director is an employee of the Corporation or a related
corporation on the date of grant of an Option, such Option shall be intended to
be designated as an Incentive Option. If a Director is not an employee of the
Corporation or a related corporation on the date of
-2-
<PAGE>
grant of an Option, such Option shall be treated as a Nonqualified Option. To
the extent that any Option is designated as an Incentive Option and such Option
does not qualify as an Incentive Option, it shall constitute a Nonqualified
Option.
(b) 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"). Each Participant may elect under the Plan to defer 0%, 50% or
100% of his Retainer Fee for each calendar year for the application of that
amount toward the grant of Options. In addition, each Participant may elect
under the Plan to defer 0%, 50% or 100% of his Meeting Fees for each calendar
year for the application of that amount towards the grant of Options.
(c) Each Participant shall make an irrevocable election in writing to
receive Options in lieu of all or a designated percentage of his Retainer Fee or
Meeting Fees, or both, on or before December 31 of the year preceding the
calendar year for which the Retainer Fees or Meeting Fees apply.
(d) On July 1 following the beginning of the calendar year for which an
election has been made pursuant to this Section 6, Options shall be granted to
any Participant for the elected portion of his Retainer Fee for that calendar
year. On that same date, Options shall be granted to any Participant who has so
elected for the elected portion of the Meeting Fees actually earned by the
Participant in the first six-month period of the applicable calendar year. For
the second six months of the applicable calendar year, Options shall be granted
to Participants for the elected portion of the Meeting Fees actually earned for
the second six months on December 31 of the applicable calendar year. For
purposes of this Section 6(d), the following rules shall apply in making the
above calculations:
(i) The elected portion of the Meeting Fees earned in the first six months
of the calendar year shall be defined as the fraction of the Meeting Fees that
the Participant elected to defer, multiplied by the cash attendance fee for each
Board, Subsidiary board and committee meeting, multiplied by the number of such
meetings actually attended by that director in the first six months of the
applicable calendar year; and
(ii) The elected portion of the Meeting Fees earned in the second six
months of the calendar year shall be defined as the fraction of the Meeting Fees
that the Participant elected to defer, multiplied by the cash attendance fee for
each Board, Subsidiary board and committee meeting, multiplied by the number of
such meetings actually attended in the second six months of the applicable
calendar year.
(e) For purposes of determining the number of shares to be the subject an
Option granted in accordance with the Plan, the number of shares will be equal
to that number of whole shares of Common Stock that has an aggregate fair market
value on the date of grant closest to, but not in excess of, the combined amount
of elected Retainer Fees and/or Meeting Fees that are applied to the grant of
Options at such time.
-3-
<PAGE>
(f) Fractional shares of Common Stock shall not be granted under the Plan,
and any remaining amount of elected Retainer Fees and Meeting Fees will be paid
to each Participant in cash as soon as possible after the date or dates Option
grants are made in accordance with the Plan, unless otherwise deferred pursuant
to a plan or arrangement between the Participant and the Corporation.
7. OPTION PRICE
------------
The price per share at which an Incentive Option may be exercised
shall be equal to the fair market value per share of the Common Stock on the
date the Option is granted. The price per share at which a Nonqualified Option
may be exercised shall be 85% of the fair market value of the Common Stock on
the date the Option is granted. The price per share at which an Incentive
Option or Nonqualified Option may be exercised is referred to herein as the
"Option price." In addition, the following rules shall apply:
(a) The "fair market value" of the shares shall mean: (i) 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 Option is
granted, or, if there is no transaction on such date, then on the trading date
nearest preceding the date the Option is granted for which closing price
information is available; or (ii) 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.
(b) In no event shall there first become exercisable by a Participant in
any one calendar year Incentive Options granted by the Corporation or any
related corporation with respect to shares having an aggregate fair market value
(determined at the time an option is granted) greater than $100,000.
8. OPTION PERIOD AND OPTION EXERCISE; LIMITATIONS ON THE RIGHT TO EXERCISE
-----------------------------------------------------------------------
OPTIONS
- -------
(a) The period during which an Option may be exercised (the "Option
period") shall be ten years from the date on which the Option is granted. An
Option shall be fully exercisable with respect to the total number of shares of
Common Stock subject to the Option as of the date of grant. An Option or
portion thereof not exercised before the expiration of the Option period shall
terminate.
(b) An Option may be exercised by giving written notice of at least ten
days to the Committee or its designee at such place as the Committee shall
direct. Such notice shall specify the number of shares to be purchased pursuant
to an Option and the aggregate purchase price to be paid therefor, and shall be
accompanied by the payment of such purchase price. Such payment shall be in the
form of (i) cash; (ii) shares owned by the Participant at the time of
-4-
<PAGE>
exercise; (iii) shares of common stock withheld upon exercise; (iv) delivery of
a properly executed written notice of exercise to the Corporation and delivery
to a broker of written notice of exercise and irrevocable instructions to
promptly deliver to the Corporation the amount of sale or loan proceeds to pay
the Option price; or (v) any combination of the foregoing methods. Shares
tendered or withheld in payment upon the exercise of an Option shall be valued
at their fair market value on the date of exercise, as determined by the
Committee by applying the provisions of Section 7(a).
(c) No Option granted to a Participant who was an employee at the time of
grant shall be exercised unless the Participant is, at the time of exercise, an
employee as described in Section 5, and has been an employee continuously since
the date the Option was granted, subject to the following:
(i) An Option shall not be affected by any change in the terms, conditions
or status of the Participant's employment, provided that the Participant
continues to be an employee of the Corporation or a related corporation.
(ii) The employment relationship of a Participant shall be treated as
continuing intact for any period that the Participant is on military or sick
leave or other bona fide leave of absence, provided that the period of such
leave does not exceed 90 days, or, if longer, as long as the Participant's right
to reemployment is guaranteed either by statute or by contract. The employment
relationship of a Participant shall also be treated as continuing intact while
the Participant is not in active service because of disability. For purposes of
this Section 8(c)(ii), "disability" shall mean the inability of the Participant
to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death, or which has lasted or can be expected to last for a continuous period of
not less than twelve months.
(iii) If the employment of a Participant is terminated because of
disability within the meaning of subparagraph (ii), or if the Participant dies
while he is an employee or dies after the termination of his employment because
of disability, the Option may be exercised only to the extent exercisable on the
date of the Participant's termination of employment or death while employed (the
"termination date"), except that the Committee may in its discretion accelerate
the date for exercising all or any part of the Option which was not otherwise
exercisable on the termination date. The Option must be exercised, if at all,
prior to the first to occur of the following, whichever shall be applicable:
(A) the close of the period of twelve months next succeeding the termination
date; or (B) the close of the Option period. In the event of the Participant's
death, such Option shall be exercisable by such person or persons as shall have
acquired the right to exercise the Option by will or by the laws of intestate
succession.
(iv) If the employment of the Participant is terminated for any reason
other than disability (as defined in subparagraph (ii)) or death or for "cause,"
his Option may be exercised to the extent exercisable on the date of such
termination of employment, except that the Committee may in its discretion
accelerate the date for exercising all or
-5-
<PAGE>
any part of the Option which was not otherwise exercisable on the date of such
termination of employment. The Option must be exercised, if at all, prior to
the first to occur of the following, whichever shall be applicable: (A) the
close of the period of 90 days next succeeding the termination date; or (B) the
close of the Option period. If the Participant dies following such termination
of employment and prior to the earlier of the dates specified in (A) or (B) of
this subparagraph (iv), the Participant shall be treated as having died while
employed under subparagraph (iii) immediately preceding (treating for this
purpose the Participant's date of termination of employment as the termination
date). In the event of the Participant's death, such Option shall be
exercisable by such person or persons as shall have acquired the right to
exercise the Option by will or by the laws of intestate succession.
(v) If the employment of the Participant is terminated for "cause," his
Option shall lapse and no longer be exercisable as of the effective time and
date of his termination of employment as determined by the Committee. For
purposes of this subparagraph (v) and subparagraph (iv), the Participant's
termination shall be for "cause" if such termination results from the
Participant's (A) dishonesty; (B) refusal to perform his duties for the
Corporation; or (C) engaging in conduct that could be materially damaging to the
Corporation without a reasonable good faith belief that such conduct was in the
best interest of the Corporation. The determination of "cause" shall be made by
the Committee and its determination shall be final and conclusive.
(vi) Notwithstanding the foregoing, the Committee shall have authority, in
its discretion, to extend the period during which an Option may be exercised;
provided that, in the event that any such extension shall cause an Incentive
Option to be designated as a Nonqualified Option, no such extension shall be
made without the prior written request and consent of the Optionee.
(d) No Option granted to a Participant who was not an employee of the
Corporation or a related corporation at the time of grant shall be exercised
unless the Participant either (i) is, at the time of exercise, a Director and
has been a Director continuously since the date the Option was granted, or (ii)
was, within 90 days prior to the time of exercise, a Director and, prior to such
termination of service as a Director, had been a Director continuously since the
date the Option was granted; provided, that if the Participant's service as a
Director is terminated because of death, such Option shall be exercisable by
such person or persons who shall have acquired the right to exercise the Option
by will or the laws of intestate succession, and such Option shall be
exercisable at any time prior to the earlier of (A) the close of the Option
period, or (B) the close of the period ending twelve months from the date of
death of the Participant. Notwithstanding the foregoing, the Committee may, in
its discretion, extend the period during which an Option may be exercised upon
written request of an Optionee.
(e) A Participant or his legal representative, legatees or distributees
shall not be deemed to be the holder of any shares subject to an Option unless
and until certificates for such shares are issued to him or them under the Plan.
(f) Nothing in the Plan shall confer upon the Director any right to
continue in the service of the Corporation or a related corporation as an
employee or member of the Board or the board of a Subsidiary, or to interfere in
any way with the right of the Corporation or a related corporation to terminate
the Director's service or employment at any time.
9. NONTRANSFERABILITY OF OPTIONS AND SHARES
----------------------------------------
Incentive Options granted pursuant to the Plan shall not be transferable
(including by pledge or hypothecation) other than by will or the laws of
intestate succession or pursuant to a qualified domestic relations order, as
-6-
<PAGE>
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules thereunder. Nonqualified Options
granted pursuant to the Plan shall not be transferable (including by pledge or
hypothecation) other than by will or the laws of intestate succession or
pursuant to a qualified domestic relations order, as defined by the Code or
Title I of ERISA or the rules thereunder, except as may be permitted by the
Committee in a manner consistent with the registration provisions of the
Securities Act of 1933, as amended (the "Securities Act"). An Option shall be
exercisable during the Optionee's lifetime only by him. To the extent required
by Section 16 of the Exchange Act, shares acquired upon the exercise of an
Option shall not, without the consent of the Committee, be transferable
(including by pledge or hypothecation) until the expiration of six months after
the date the Option was granted.
10. DILUTION OR OTHER ADJUSTMENTS
-----------------------------
If there is any change in the outstanding shares of Common Stock of the
Corporation as a result of a merger, consolidation, reorganization, stock
dividend, stock split distributable in shares, or other change in the capital
stock structure of the Corporation, the Committee shall make such adjustments to
Options, to the number of shares reserved for issuance and issuable under the
Plan, and to any provisions of this Plan as the Committee deems equitable to
prevent dilution or enlargement of Options or otherwise advisable to reflect
such change.
11. WITHHOLDING
-----------
The Corporation shall require any recipient of shares pursuant to the
exercise of an Option 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
Optionee. Notwithstanding the foregoing, the Optionee may satisfy such
obligation in whole or in part, and any other local, state or federal income tax
obligations relating to the exercise of a Nonqualified Option, by electing (the
"Election") to have the Corporation withhold shares of Common Stock from the
shares to which the Optionee is entitled. The number of shares to be withheld
shall have a fair market value (determined in accordance with Section 7) 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.
12. CERTAIN DEFINITIONS
-------------------
For purposes of the Plan, the following terms shall have the meaning
indicated:
(a) "Related corporation" means any parent, subsidiary or predecessor of
the Corporation.
(b) "Parent" or "parent corporation" shall mean any corporation (other
than the Corporation) in an unbroken chain of corporations ending with the
Corporation if, at the time that the Option is granted, each corporation other
than the Corporation owns stock possessing fifty percent or more of the total
combined voting power of all classes of stock in another corporation in the
chain.
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<PAGE>
(c) "Subsidiary" or "subsidiary corporation" means any corporation (other
than the Corporation) in an unbroken chain of corporations beginning with the
Corporation if, at the time that the Option is granted, each corporation other
than the last corporation in the unbroken chain owns stock possessing fifty
percent or more of the total combined voting power of all classes of stock in
another corporation in the chain.
(d) "Predecessor" or "predecessor corporation" means a corporation which
was a party to a transaction described in Section 424(a) of the Code (or which
would be so described if a substitution or assumption under that Section had
occurred) with the Corporation, or a corporation which is a parent or subsidiary
of the Corporation, or a predecessor of any such corporation.
In general, terms used in the Plan shall, where appropriate, be given the
meaning ascribed to them under the provisions of the Code applicable to
incentive stock options.
13. STOCK OPTION AGREEMENT
----------------------
The grant of any Option under the Plan shall be evidenced by the execution
of an agreement (the "Agreement") between the Corporation and the Optionee.
Such Agreement shall set forth the date of grant of the Option, the Option
price, the Option period, the designation of the Option as an Incentive Option
or a Nonqualified Option, and the time or times when and the conditions upon the
happening of which the Option shall become exercisable. Such Agreement shall
also set forth the restrictions, if any, with respect to which the shares to be
purchased thereunder shall be subject, and such other terms and conditions as
the Committee shall determine which are consistent with the provisions of the
Plan and applicable law and regulations.
14. RESTRICTIONS ON SHARES
----------------------
The Corporation may impose such restrictions on any shares acquired upon
exercise of Options 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 exercise of an Option 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.
15. AMENDMENT OR TERMINATION
------------------------
The Plan may be amended or terminated at any time by action of the Board;
provided, that:
(a) Any amendment which would (i) materially increase the aggregate number
of shares which may be issued under the Plan (other than changes as described in
Section 10), or (ii) materially change the requirements for eligibility to
receive Options under the Plan shall be made only with the approval of the
shareholders of the Corporation.
-8-
<PAGE>
(b) No outstanding Option shall be amended or terminated (i) without the
consent of the Optionee if such amendment or termination would adversely affect
the Optionee's rights with respect to such Option; and (ii) if the Option is an
Incentive Option, without the opinion of legal counsel to the Corporation that
such amendment or termination will not constitute a "modification" within the
meaning of Section 424 of the Code if the Committee determines such an opinion
is necessary.
16. APPLICABLE LAW
--------------
Except as otherwise provided herein, the Plan shall be construed and
enforced according to the laws of the State of Georgia.
17. SECTION 16(B) COMPLIANCE
------------------------
To the extent that participants in the Plan are subject to Section 16(b) of
the Exchange Act, it is the intention of the Corporation that transactions under
the Plan shall comply with Rule 16b-3 under the Exchange Act and, if any Plan
provision is later found not to be in compliance with Section 16 of the Exchange
Act, the provision shall be deemed null and void, and in all events the Plan
shall be construed in favor of Plan transactions meeting the requirements of
Rule 16b-3 or any successor rules applicable to the Plan.
18. SHAREHOLDER APPROVAL
--------------------
The Plan is subject to the approval of the shareholders of the Corporation,
which approval must occur, if at all, within twelve months of the effective date
of the Plan. All Incentive Options granted prior to shareholder approval shall
be conditioned upon such approval, and no Incentive Option shall be exercisable
prior to such approval.
IN WITNESS WHEREOF, this Premier Bancshares, Inc. Directors' Stock
Option 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:
- --------------------------
Secretary
[Corporate Seal]
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The provisions of the Georgia Business Corporation Code (the "Georgia Code")
and the Registrant's Bylaws set forth the extent to which the Registrant's
directors and officers may be indemnified against liabilities they may incur
while serving in such capacities. Under the Registrant's Bylaws, the
Registrant is required to indemnify its officers and directors against
reasonable expenses (including attorneys' fees) incurred by them in the
defense of any action, suit or proceeding to which they were made a party, or
in defense of any claim, issue or matter therein, by reason of the fact that
they are or were officers, directors, employees or agents of the Registrant,
to the extent that they have been successful, on the merits or otherwise, in
such defense. The Registrant's Bylaws also permit indemnification of its
directors and officers against any liability incurred in connection with any
threatened, pending or completed action, suit or proceeding by reason of the
fact that they are or were directors or officers of the Registrant or who,
while directors or officers of the Registrant, are or were serving at the
Registrant's request as directors, officers, partners, trustees, employees or
agents of another entity, if they acted in a manner they believed in good
faith to be in, or not opposed to, the best interests of the Registrant, or,
with respect to any criminal proceeding, had no reasonable cause to believe
their conduct was unlawful, if a determination has been made that they have
met these standards of conduct. Such indemnification in connection with a
proceeding by or in the right of the Registrant, however, is limited to
reasonable expenses, including attorneys' fees, incurred in connection with
the proceeding. The Registrant must also provide advancement of expenses
incurred by any director or officer in defending any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such officer or
director to repay such advances unless it is ultimately determined that he or
she is not entitled to indemnification by the Registrant.
The Registrant may not indemnify a director or officer in connection with a
proceeding by or in the right of the Registrant in which the director or
officer was adjudged liable to the Registrant for appropriation of a business
opportunity or payment of unlawful dividends, in connection with a proceeding
in which he or she was adjudged liable on the basis that he or she improperly
received a personal benefit or for intentional misconduct or a knowing
violation of law.
The indemnification provisions of the Georgia Code are essentially identical
to those set forth above, except that the Georgia Code permits, but does not
require, a corporation to advance expenses under the circumstances for such
payments described above.
The Registrant maintains an insurance policy insuring the Registrant and its
directors and officers against certain liabilities, including liabilities
under the Securities Act of 1933.
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.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Reorganization, dated February 3, 1997, between
Premier and Central and Southern (included as Appendix A to the Joint
Proxy Statement/Prospectus contained herein).
2.2 Amendment to Agreement and Plan of Reorganization dated March 26,
1997, between Premier and Central and Southern (included as Appendix A
to the Joint Proxy Statement/Prospectus contained herein).
3.1 Articles of Incorporation (Incorporated by reference as Exhibit 3.1 to
the Registrant's Form 10-Q for the quarter ending September 30, 1996)
3.2 Articles of Amendment dated 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).
3.3 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 Womble Carlyle Sandridge & Rice, PLLC.
10.1 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).
10.2 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).
10.3 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).
10.4 Employment Agreement dated January 1, 1997, by and between Premier
Lending Corporation and George S. Phelps./1/ (Incorporated by
reference as Exhibit 10.4 to The Registrant's Form 10-K for the fiscal
year ended December 31, 1996).
10.5 Employment Agreement dated January 1, 1997, by and between Premier
Lending Corporation and Michael W. Lane./1/ (Incorporated by reference
as Exhibit 10.5 to The Registrant's Form 10-K for the fiscal year
ended December 31, 1996).
10.6 Employment Agreement dated January 1, 1997, by and between Premier
Lending Corporation and Brian D. Schmitt./1/ (Incorporated by
reference as Exhibit 10.6 to The Registrant's Form 10-K for the fiscal
year ended December 31, 1996).
10.7 Amendment to Employment Agreement dated January 1, 1997, by and
between First Alliance/Premier Bancshares, Inc. and Darrell D.
Pittard./1/ (Incorporated by reference as Exhibit 10.7 to The
Registrant's Form 10-K for the fiscal year ended December 31, 1996).
10.8 Form of Employment Agreement by and between 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).
10.9 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).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
10.10 First Amendment to the Amended and Restated Stock Purchase Agreement
by and between Premier Bancshares, Inc. and Net.B@nk, Inc. dated
December 19, 1996. (Incorporated by reference as Exhibit 10.10 to the
Registrant's Form 10-K for the fiscal year ended December 31, 1996).
10.11 Purchase and Assumption Agreement by and between Premier Bank, FSB and
First Alliance Bank dated December 19, 1996. (Incorporated by
reference as Exhibit 10.10 to the Registrant's Form 10-K for the
fiscal year ended December 31, 1996).
10.12 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).
10.13 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).
10.14 Form of 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).
10.15 Form of 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).
11.1 Statement of Per Share Earnings.
21.1 Subsidiaries of Registrant (incorporated by reference as Exhibit 21 to
the Registrant's Form 10-K for the fiscal year ended December 31,
1996).
23.1 Consent of Womble Carlyle Sandridge & Rice, PLLC (included in Exhibits
5 and 8).
23.2 Consent of Mauldin & Jenkins, L.L.P.
23.3 Consent of Porter Keadle Moore, L.L.P.
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 the Central and Southern Holding Company
</TABLE>
- --------
/1/ Registrant's plans, management contract 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.
II-3
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions
(see Item 20), or otherwise, the Registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-4
<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 March 28, 1997.
PREMIER BANCSHARES, INC.
/s/ Darrell D. Pittard
By: _________________________________
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 Frank H. Roach, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits hereto and other documents
in connection herewith with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents and each of them, full power and
authority to do so and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ N. Michael Anderson Director March 28, 1997
- -------------------------------------
N. MICHAEL ANDERSON
/s/ James L. Coxwell Director March 28, 1997
- -------------------------------------
JAMES L. COXWELL
/s/ William M. Evans, Jr. Director March 28, 1997
- -------------------------------------
WILLIAM M. EVANS, JR.
/s/ James E. Freeman Director March 28, 1997
- -------------------------------------
JAMES E. FREEMAN
/s/ Robin R. Howell Director March 28, 1997
- -------------------------------------
ROBIN R. HOWELL
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Billy H. Martin Director March 28, 1997
- -------------------------------------
BILLY H. MARTIN
/s/ J. Edward Mulkey, Jr. Director, President March 28, 1997
- ------------------------------------- and Chief Operating
J. EDWARD MULKEY, JR. Officer
/s/ Darrell D. Pittard Chairman and Chief March 28, 1997
- ------------------------------------- Executive Officer
DARRELL D. PITTARD (Principal
Executive Officer)
/s/ Frank H. Roach Executive Vice March 28, 1997
- ------------------------------------- President and Chief
FRANK H. ROACH Financial Officer
(Principal
Financial and
Accounting Officer)
II-6
<PAGE>
Elizabeth O. Derrick
Direct Dial: (404) 888-7433
Direct Fax: (404) 888-7490
E-mail: [email protected]
March 28, 1997
Board of Directors
Premier Bancshares, Inc.
2180 Atlanta Plaza
950 E. Paces Ferry Road
Altnata, Georgia 30326
RE: Premier Bancshares, Inc.
Registration Statement on Form S-4
3,653,523 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:
<PAGE>
(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.
(B) The 3,653,523 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 of 1933, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
EOD:klg
<PAGE>
Exhibit 8.1
Direct Dial: (404) 872-7000
Direct Fax: (404)888-7490
E-mail: wcsr.com
March 29, 1997
Central and Southern Holding Company
150 West Greene Street
Milledgeville, Georgia 31061
Premier Bancshares, Inc.
2180 Atlanta Place
950 East Paces Ferry Road
Atlanta, Georgia 30326
Ladies and Gentlemen:
You have requested our opinion with respect to certain federal income tax
consequences of the proposed merger of Central and Southern Holding Company, a
corporation organized and existing under the laws of the State of Georgia
("Central and Southern"), with and into Premier Bancshares, Inc., a corporation
organized and existing under the laws of the State of Georgia ("Premier"). For
purposes of rendering this opinion, we have reviewed and relied on the Agreement
and Plan of Reorganization by and between Central and Southern and Premier,
dated as of February 3, 1997 (the "Reorganization Agreement"); the Form S-4
Registration Statement filed with the Securities and Exchange Commission (the
"S-4") relating to the Premier securities to be issued pursuant to the
Reorganization Agreement, the certificates attached hereto, and such other
documents as we have considered appropriate. Unless otherwise indicated, terms
used in this opinion have the same meaning as in the Reorganization Agreement.
For purposes of this opinion, we have assumed that the Merger will be
consummated at the Effective Time pursuant to the terms and conditions set forth
in the Reorganization Agreement. We have assumed that there is no plan or
intention on the part of the shareholders of Central and Southern to sell,
exchange or otherwise dispose of a number of shares of Premier Common Stock
received in the Merger that would reduce the Central and Southern shareholders'
ownership of Premier Common Stock to a number of shares having a value,
determined as of the Effective Time, of less than fifty percent (50%) of the
value of all of the formerly outstanding shares of Central and Southern Common
Stock as of the Effective Time.
<PAGE>
In addition, we have assumed with your permission that the facts and
representations certified to us in writing by Central and Southern and Premier
which are set forth in the certificates attached hereto, will apply as of the
Effective Time. Copies of such certificates are attached hereto and
incorporated herein by reference. We have neither investigated nor verified the
accuracy of any of the facts which have been certified to us, upon which this
opinion is based.
This opinion is based also on the Internal Revenue Code, Treasury
Regulations, Internal Revenue Service rulings, judicial decisions, and other
applicable authority, all as in effect on the date of this opinion. The legal
authorities on which this opinion is based may change at any time. Any such
change may be applied retroactively and could modify the opinions expressed
herein. This opinion does not address any tax considerations under foreign,
state or local laws, or the tax considerations to certain Central and Southern
shareholders in light of their particular circumstances, including persons who
are not United States persons, dealers in securities, tax-exempt entities,
shareholders who do not hold Central and Southern Common Stock as "capital
assets" within the meaning of Section 1221 of the Internal Revenue Code, and
shareholders who acquired their shares of Central and Southern Common Stock
pursuant to the exercise of Central and Southern options or otherwise as
compensation.
Based upon and subject to the foregoing, we are of the opinion that
provided the Merger qualifies as a statutory merger under the GBCC, the Merger
will constitute a reorganization within the meaning of Section 368(a)(1)(A) of
the Internal Revenue Code, and that the following are certain federal income tax
consequences which will result:
(a) No gain or loss will be recognized for federal income tax purposes
by Central and Southern shareholders upon the exchange of their shares of
Central and Southern Common Stock for shares of Premier Common Stock. Each
Central and Southern shareholder's basis in the Premier Common Stock
received in the exchange will be equal to such shareholder's basis in the
Central and Southern Common Stock surrendered in the Merger. Each Central
and Southern shareholder's holding period of the Premier Common Stock (for
purposes of determining whether gain or loss on a subsequent sale of such
stock is long-term or short-term gain or loss) will include the period that
such shareholder held his or her Central and Southern Common Stock,
provided that the Central and Southern Common Stock was a capital asset in
the hands of such shareholder.
(b) Central and Southern shareholders who receive solely cash pursuant
to their statutory right to dissent will be treated as having received such
payment in redemption of their stock, as provided in Section 302(a) of the
Internal Revenue
<PAGE>
Code. Generally, any gain or loss recognized by any such Central and
Southern shareholder will be capital gain or loss, provided (i) the Central
and Southern Common Stock constitutes a capital asset in the hands of such
shareholder, and (ii) the requirements of Section 302(b)(1), (2) or (3) of
the Internal Revenue Code are met. Each affected Central and Southern
shareholder should consult such shareholder's own tax advisor for the tax
effect of such redemption (i.e., exchange treatment or dividend).
(c) No income, gain or loss will be recognized for federal income tax
purposes by Premier or Central and Southern as a consequence of the Merger,
except for deferred gain or loss recognized pursuant to Treasury
Regulations issued under Section 1502 of the Internal Revenue Code.
This opinion is being rendered solely to the parties to whom it is
addressed and may be relied upon by them and by the shareholders of Central and
Southern. This opinion may not be relied upon by any other party without the
express written permission of our Firm. We hereby consent to the reference to
our Firm in, and to the filing of this opinion as an exhibit to, the S-4.
Very truly yours,
WOMBLE CARLYLE SANDRIDGE & RICE, PLLC
<PAGE>
PREMIER BANCSHARES, INC.
TAX CERTIFICATE
This certificate is delivered to Womble Carlyle Sandridge & Rice, PLLC
("WCSR") regarding the Agreement and Plan of Reorganization dated as of February
3, 1997 by and between Premier Bancshares, Inc. ("Premier ") and The Central and
Southern Holding Company ("Central and Southern") (the "Agreement"). Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Agreement. "Control" within the meaning of Section 368(c) of the Code means
ownership of stock possessing at least 80 percent of the total combined voting
power of all classes of stock entitled to vote and at least 80 percent of the
total number of shares of each other class of stock of the corporation. The
"Merger" refers to the acquisition of Central and Southern by Premier pursuant
to the Agreement and encompasses any and all related events.
1. I am the Chief Executive Officer of Premier, and as such am authorized to
and do execute this Certificate on behalf of Premier. I make this certification
to WCSR with the intent and understanding that it will be relied upon by WCSR as
a basis for the tax opinion to be given by that firm for purposes of the tax
opinion to be filed as an exhibit to the Registration Statement on Form S-4
relating to the shares of Premier Common Stock to be issued pursuant to the
Agreement.
2. I certify in my capacity as an officer of Premier that I either have
personal knowledge of the facts set forth below or I have obtained information
as to these matters from officers or employees or other advisors in whom I have
confidence and whose duties require them to have personal knowledge thereof, and
on this basis I certify to the correctness of these facts.
3. The fair market value of the Premier stock and other consideration to be
received by each Central and Southern shareholder at the Effective Time will be
approximately equal to the fair market value of the Central and Southern stock
surrendered in the exchange.
4. Premier has no plan or intention to reacquire any of its stock issued in the
Merger or to make any extraordinary distributions with respect to such stock.
5. Following the Merger, Premier will continue the historic business of Central
and Southern or use a significant portion of Central and Southern's historic
business assets in a business.
6. Premier, Central and Southern, and the shareholders of Central and Southern
will pay their respective expenses, if any, incurred in connection with the
Merger or Premier will pay or assume only those expenses of Central and Southern
that are solely and directly related to the Merger in accordance with the
guidelines established in Rev. Rul. 73-54, 1973-1 C.B. 187.
7. There is no intercorporate indebtedness existing between Premier and Central
and Southern or any related corporation that was issued, acquired, or will be
settled at a discount.
<PAGE>
8. No two parties to the Merger are investment companies as defined in Section
368(a)(2)(F)(iii) and (iv) of the Code. [Section 368(a)(2)(F)(ii) defines an
investment company as a corporation 50 percent or more of the value of whose
total assets are stock and securities and 80 percent or more of the value of
whose total assets are assets held for investment. In making the 50-percent and
80-percent determinations under the preceding sentence, stock and securities in
any subsidiary corporation shall be disregarded and the parent corporation shall
be deemed to own its ratable share of the subsidiary's assets, and a corporation
shall be considered a subsidiary if the parent owns 50 percent or more of the
combined voting power of all classes of stock entitled to vote, or 50 percent or
more of the total value of all classes of stock outstanding. For this purpose
"total assets" shall not include cash and cash items (including receivables) and
Government securities.]
9. The fair market value of the assets of Central and Southern transferred to
Premier will equal or exceed the sum of the liabilities assumed by Premier plus
the amount of liabilities, if any, to which the transferred assets are subject.
10. No cash will be paid in lieu of fractional shares of Premier stock.
11. None of the compensation received after the Merger by any shareholder-
employees (which term includes independent contractors) of Central and Southern
will be separate consideration for, or allocable to, any of their shares of
Central and Southern stock; none of the shares of Premier stock received by any
shareholder-employees of Central and Southern will be separate consideration
for, or allocable to, any employment agreement or any services performed before
or after the Merger; and the compensation paid by Central and Southern or
Premier to any former shareholder-employees of Central and Southern will be for
services actually rendered, covenants not to compete, or damages for termination
of contractual rights and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services, covenants or damages in
similar circumstances.
12. Premier does not own directly or indirectly any stock of Central and
Southern and has not caused any other person to acquire stock of Central and
Southern on behalf of Premier. To the best of the knowledge of the management
of Premier, any purchase of Central and Southern Common Stock by Premier
shareholders prior to the Merger was made by such shareholder on its own behalf
and with its own funds and not as a representative, or for the benefit of
Premier.
13. The Merger is to be carried out for substantial business purposes.
14. Any shares of Premier Common Stock received in the Merger in exchange for
shares of Central and Southern Common Stock that (a) were acquired in connection
with the performance of services, including stock acquired through the exercise
of an option or warrant acquired in connection with the performance of services,
and (b) are subject to a substantial risk of forfeiture within the meaning of
Section 83(c) of the Code, will be subject to substantially the same risk of
forfeiture.
<PAGE>
15. The information contained in the Registration Statement referred to in the
first paragraph of this Certificate with respect to the Merger is accurate and
complete in all material respects as of the date hereof, and you may assume that
it will be so at the date on which the Joint Proxy Statement/Prospectus included
therein is sent to shareholders and at the Effective Time of the Merger.
16. Premier has not directly or indirectly transferred any cash or property to
Central and Southern or a related party for less than full and adequate
consideration and has not made any loan to Central and Southern or a related
party, in anticipation of the Merger.
17. Premier has no plan or intention to sell or otherwise dispose of the assets
of Central and Southern, except for dispositions made in the ordinary course of
business or transfers described in section 368(a)(2)(C) of the Code or
divestitures required by banking authorities. This Section allows retransfer of
assets of Central and Southern to a corporation directly controlled by Premier
within the meaning of Section 368(c). Merger of a wholly owned subsidiary of
Central and Southern into a wholly owned subsidiary of Premier is not a
disposition for purposes of this paragraph.
Signed this the __ day of March, 1997.
PREMIER BANCSHARES, INC.
By: /s/ Darrell D. Pittard
-------------------------------------
Darrell D. Pittard
Title: Chief Executive Officer
<PAGE>
THE CENTRAL AND SOUTHERN HOLDING COMPANY
TAX CERTIFICATE
This certificate is delivered to Womble Carlyle Sandridge & Rice, PLLC
("WCSR") regarding the Agreement and Plan of Reorganization dated as of February
3, 1997 by and between Premier Bancshares, Inc. ("Premier") and The Central and
Southern Holding Company ("Central and Southern") (the "Agreement"). Capitalized
terms not otherwise defined herein shall have the meanings ascribed to them in
the Agreement. "Control" within the meaning of Section 368(c) of the Code means
ownership of stock possessing at least 80 percent of the total combined voting
power of all classes of stock entitled to vote and at least 80 percent of the
total number of shares of each other class of stock of the corporation. The
"Merger" refers to the acquisition of Central and Southern by Premier pursuant
to the Agreement and encompasses any and all related events.
1. I am the Chief Financial Officer of Central and Southern, and as such am
authorized to and do execute this Certificate on behalf of Central and Southern.
I make this certification to WCSR with the intent and understanding that it will
be relied upon by WCSR as a basis for the tax opinion to be given by that firm
for purposes of the tax opinion to be filed as an exhibit to the Registration
Statement on Form S-4 relating to the shares of Premier Common Stock to be
issued pursuant to the Agreement. I have not relied upon WCSR for any
representation made herein.
2. I certify in my capacity as an officer of Central and Southern that I have
personal knowledge of the facts set forth below and I have obtained information
as to these matters from officers or employees or other advisors in whom I have
confidence and whose duties require them to have personal knowledge thereof, and
on this basis I certify to the correctness of these facts.
3. The fair market value of the Premier stock and any other consideration to be
received by each Central and Southern shareholder will be approximately equal to
the fair market value of the Central and Southern stock surrendered in the
exchange.
4. To the best of the knowledge of the management of Central and Southern there
is no plan or intention by (a) the shareholders of Central and Southern who own
5 percent or more of the Central and Southern stock;or (b) the remaining
shareholders of Central and Southern, to sell, exchange, engage in a transaction
that would result in a reduction in the risk of ownership or an indirect
disposition of the Premier shares received in the transaction, that would reduce
the Central and Southern shareholders' ownership of Premier stock to a number of
shares having a value, as of the date of the transaction, of less than 50
percent of the value of all of the formerly outstanding stock of Central and
Southern as of the same date. For purposes of this representation, shares of
Central and Southern stock exchanged for cash or other property, surrendered by
dissenters, or exchanged for cash in lieu of fractional shares of Premier stock
will be treated as outstanding Central and Southern stock on the date of the
transaction. Moreover, shares of Central and Southern stock and shares of
Premier stock held by Central and Southern shareholders and otherwise sold,
redeemed, or disposed of prior (under circumstances that could require those
shareholders to be treated as the pre-Merger Central and Southern shareholders
referred to above) or subsequent to the transaction will be considered in making
this representation.
<PAGE>
5. The liabilities of Central and Southern assumed by Premier and the
liabilities to which the transferred assets of Central and Southern are subject
were incurred by Central and Southern in the ordinary course of its business.
6. Central and Southern will pay only its expenses and not those of its
shareholders or Premier incurred in connection with the transaction.
7. There is no intercorporate indebtedness existing between Central and
Southern and Premier that was issued, acquired, or will be settled at a
discount.
8. Central and Southern is not an investment company as defined in Section
368(a)(2)(F)(iii) and (iv) of the Internal Revenue Code. [Section
368(a)(2)(F)(ii) defines an investment company as a corporation 50 percent or
more of the value of whose total assets are stock and securities and 80 percent
or more of the value of whose total assets are assets held for investment. In
making the 50-percent and 80-percent determinations under the preceding
sentence, stock and securities in any subsidiary corporation shall be
disregarded and the parent corporation shall be deemed to own its ratable share
of the subsidiary's assets, and a corporation shall be considered a subsidiary
if the parent owns 50 percent or more of the combined voting power of all
classes of stock entitled to vote, or 50 percent or more of the total value of
all classes of stock outstanding. For this purpose "total assets" shall not
include cash and cash items (including receivables) and Governments securities.]
9. Central and Southern is not under the jurisdiction of a court in a title 11
or similar case within the meaning of Section 368(a)(3)(A) of the Code as a
voluntary or involuntary petitioning debtor.
10. The fair market value of the assets of Central and Southern transferred to
Premier will equal or exceed the sum of the liabilities assumed by Premier plus
the amount of liabilities, if any, to which the transferred assets are subject.
11. No cash will be paid in lieu of fractional shares of Premier stock.
12. None of the compensation received before or after the Merger by any
shareholder-employees (which term includes independent contractors) of Central
and Southern will be separate consideration for, or allocable to, any of their
shares of Central and Southern stock; none of the shares of Premier stock
received in the Merger for Central and Southern stock (including Central and
Southern stock to be received pursuant to existing Central and Southern benefit
plans) by any shareholder-employees of Central and Southern will be separate
consideration for, or allocable to, any employment agreement or any services
performed before or after the Merger; and the compensation paid, pursuant to any
employment agreements becoming effective as of the Effective Time by Premier or
a related party to any former shareholder-employees of Central and Southern will
be for services actually rendered, covenants not to compete, or damages for
termination of contractual rights and will be commensurate with amounts paid to
third parties bargaining at arm's-length for similar services, covenants or
damages.
<PAGE>
13. Central and Southern does not own directly or indirectly any stock in
Premier (other than in a fiduciary capacity).
14. The Merger is to be carried out for substantial business purposes.
15. Dividends, if any, that Central and Southern has paid in anticipation of
the Merger or may pay to its shareholders prior to the Effective Date have been
and will be regular and normal distributions made in accordance with Central and
Southern's past practices and no share of Central and Southern Common Stock has
been or will be redeemed in anticipation of the Merger.
16. At all times during the five-year period ending on the Effective Time of
the Merger, the fair market value of all of Central and Southern's United States
real property interests was and will have been less than 50 percent of the total
fair market value of (a) its United States real property interests, (b) its
interests in real property located outside the United States, plus (c) any other
of its assets which are used or held for use in a trade or business. Central and
Southern's United States real property interests include all interests (other
than an interest solely as a creditor) in real property and associated personal
property (such as movable walls and furnishings) located in the United States or
the U.S. Virgin Islands and interests in any corporation (other than a
controlled corporation) owning any United States real property interest. Central
and Southern is treated as owning its proportionate share (based on the relative
fair market value of its ownership interest to all ownership interests) of the
assets owned by any controlled corporation or any partnership, trust, or estate
in which is a partner or beneficiary, and any such entity in turn is treated as
owning its proportionate share of the assets owned by any controlled corporation
or any partnership, trust, or estate in which the entity is a partner or
beneficiary. As used in this paragraph, "controlled corporation" means any
corporation at least 50 percent of the fair market value of the stock of which
is owned by, in the case of a first-tier subsidiary of Central and Southern, or
by a controlled corporation, in the case of a lower-tier subsidiary. The
foregoing representation is derived from Code Section 896, "Disposition of
Investment in United States Real Property."
17. Central and Southern has not filed, nor does it hold any asset subject to,
a consent pursuant to Section 341(f) of the Code and regulations thereunder.
Signed this the ____ day of March, 1997.
THE CENTRAL AND SOUTHERN HOLDING COMPANY
By /s/ Mike Ricketson
--------------------------------------
Mike Ricketson
Title: Chief Financial Officer
<PAGE>
EXHIBIT 11
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
Year Ended December 31,
1996 1995 1994
---------- ---------- ----------
Primary
Weighted average Premier common shares
outstanding during the year 2,351,535 2,262,520 1,966,308
Common shares issuable in connection
with assumed exercise of options under
the treasury stock method 33,862 28,402 11,234
---------- ---------- ----------
Total 2,385,397 2,290,922 1,977,542
========== ========== ==========
Net income $2,539,716 $1,988,949 $ 291,148
========== ========== ==========
Per share earnings $ 1.06 $ 0.87 $ 0.15
========== ========== ==========
<PAGE>
EXHIBIT 21
The following subsidiaries of Premier Bancshares, Inc. are all organized
and existing under the laws of the state of Georgia:
First Alliance Bank
Premier Bank F.S.B.
Premier Lending Corporation
Alliance Finance Corporation
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement of our report,
dated January 31, 1997, relating to the consolidated financial statements of
Premier Bancshares, Inc. and subsidiaries, and to the reference to our Firm
under the caption "Experts" in the Prospectus.
MAULDIN & JENKINS, LLC
Atlanta, Georgia
March 31, 1997
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 23, 1997, accompanying the consolidated
financial statements of Central and Southern Holding Company contained in this
Form S-4 Registration Statement and Prospectus. We consent to the use of the
aforementioned report in this Form S-4 Registration 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
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
March 28, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 11,634
<INT-BEARING-DEPOSITS> 1,447
<FED-FUNDS-SOLD> 21,680
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 35,154
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 211,264
<ALLOWANCE> 2,404
<TOTAL-ASSETS> 294,158
<DEPOSITS> 236,733
<SHORT-TERM> 26,221
<LIABILITIES-OTHER> 3,916
<LONG-TERM> 4,000
0
0
<COMMON> 2,354
<OTHER-SE> 20,921
<TOTAL-LIABILITIES-AND-EQUITY> 294,158
<INTEREST-LOAN> 19,759
<INTEREST-INVEST> 2,285
<INTEREST-OTHER> 972
<INTEREST-TOTAL> 23,016
<INTEREST-DEPOSIT> 8,667
<INTEREST-EXPENSE> 11,282
<INTEREST-INCOME-NET> 11,734
<LOAN-LOSSES> 598
<SECURITIES-GAINS> 135
<EXPENSE-OTHER> 19,371
<INCOME-PRETAX> 3,620
<INCOME-PRE-EXTRAORDINARY> 2,540
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,540
<EPS-PRIMARY> 1.06
<EPS-DILUTED> 1.06
<YIELD-ACTUAL> 4.91
<LOANS-NON> 1,224
<LOANS-PAST> 0
<LOANS-TROUBLED> 60
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,802
<CHARGE-OFFS> 152
<RECOVERIES> 156
<ALLOWANCE-CLOSE> 2,404
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 2,404
</TABLE>
<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 Annual
Meeting of Shareholders and Proxy Statement and does hereby appoint Darrell D.
Pittard and Frank H. Roach, 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. (the "Company") common stock which the
undersigned would be entitiled to vote if personally present at the Annual
Meeting of Shareholders of the Company, to be held at the executive offices of
the Company, 2180 Atlanta Plaza, 950 E. Paces Ferry Road, Atlanta, Georgia
30326, at 10:00 o'clock a.m. local time, on June 16, 1997 and at any
adjournment thereof.
PROPOSAL 1
Proposal to: approve the Agreement and Plan of Reorganization, dated February
3, 1997, as amended on March 26, 1997 (the "Agreement"), between the Company
and The Central and Southern Holding Company ("Central and Southern") and to
approve the merger (the "Merger") pursuant to which Central and Southern will
be merged with and into the Company, and in which each issued and outstanding
share of Central and Southern common stock will be converted into the right to
receive one share of the Company common stock.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL 2
Proposal to: elect the incumbent directors, namely, Darrell D. Pittard, J.
Edward Mulkey, Jr., N. Michael Anderson, James L. Coxwell, Sr., James E.
Freeman, Robin R. Howell, and Billy H. Martin to the Board of Directors of the
Company until the 1998 Annual Meeting of Shareholders or until their successors
are duly elected.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL 3
Proposal to: ratify and approve the Premier Bancshares, Inc. 1997 Stock
Option Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued, and to be signed on reverse side)
<PAGE>
PROPOSAL 4
Proposal to: ratify and approve the 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 thereof.
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
CENTRAL AND SOUTHERN HOLDING COMPANY
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 Robert C.
Oliver and Michael E. Ricketson, and either of them with full power of
substitution, as proxies of the undersigned to represent the undersigned and to
vote all shares of CENTRAL AND SOUTHERN HOLDING COMPANY (the "Company") common
stock which the undersigned would be entitiled to vote if personally present at
the Special Meeting of Shareholders of the Company, to be held at
, Milledgeville , Georgia 31061, at 11:00 o'clock a.m. local time,
on June 16, 1997 and at any adjournment thereof.
PROPOSAL 1
Proposal to approve the Agreement and Plan of Reorganization, dated February
3, 1997, as amended on March 26, 1997 (the "Agreement"), between Premier
Bancshares, Inc. ("Premier") and the Company and to approve the merger (the
"Merger") pursuant to which the Company will be merged with and into Premier,
and in which each issued and outstanding share of the Company commmon stock
will be converted into the right to receive one share of the Premier common
stock.
[_] FOR [_] AGAINST [_] ABSTAIN
(Continued, and to be signed on reverse side)
<PAGE>
LOGO
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 thereof.
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.
