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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from to
COMMISSION FILE NUMBER 1-12625
PREMIER BANCSHARES, INC.
(Exact name of Registrant as specified in its Charter)
GEORGIA 58-1793778
(State of Incorporation) (I.R.S. Employer Identification No.)
2180 Atlanta Plaza
950 E. Paces Ferry Road
Atlanta, Georgia 30326
(Address of principal office, including zip code)
(404) 814-3090
Registrant's telephone number, including area code)
Securities Registered pursuant to Section 12(b) of the Act: NONE
Securities Registered pursuant to Section 12(g) of the Act: COMMON STOCK, PAR
VALUE $1.00
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[ ]
The aggregate market value of the voting stock and non-voting common equity held
by nonaffiliates of the Registrant at March 3, 1998, was $239,053,012 based on
$25 11/16 per share, the closing price of the Common Stock as quoted on the
American Stock Exchange.
The number of shares of the Registrant's Common Stock outstanding at March 3,
1998, was 15,238,439 shares. Portions of the Annual Report to Shareholders for
the year ended December 31, 1997, are incorporated by reference into Parts I and
II of this report. Portions of the Proxy Statement for the 1998 Annual Meeting
of Shareholders to be filed with the Securities and Exchange Commission within
120 days of the Registrant's 1997 fiscal year end are incorporated by reference
into Part III of this report. Such Proxy Statement is contained in the
Registrant's Form S-4 Registration Statement to be filed with the Securities and
Exchange Commission within 120 days of December 31, 1997.
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TABLE OF CONTENTS
Item No. Caption Page No.
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No.
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Part I
1. Business 1
2. Properties 13
3. Legal Proceedings 13
4. Submission of Matters to a Vote of Security Holders 13
Part II
5. Market for Registrant's Common Equity and Related Stockholder Matters 14
6. Selected Financial Data 15
7. Management's Discussion and Analysis
Of Financial Condition and Results of Operations 16
7A. Quantitative and Qualitative Disclosures
About Market Risk 32
8. Financial Statements and Supplementary Data 33
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures 67
Part III
10. Directors and Executive Officers of the Registrant 67
11. Executive Compensation 67
12. Security Ownership of Certain Beneficial Owners and Management 67
13. Certain Relationships and Related Transactions 67
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 68
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PART I
ITEM 1. BUSINESS
GENERAL
Premier Bancshares, Inc. (the "Company") is a bank and thrift holding
company organized and existing under the laws of the State of Georgia and
headquartered in Atlanta, Georgia. The Company has five subsidiaries: Premier
Bank ("Premier Bank"), Premier Lending Corporation ("Premier Lending"), The
Central and Southern Bank of Georgia ("Central and Southern Bank"), The Central
and Southern Bank of North Georgia F.S.B. ("North Georgia") and Citizens Bank of
Gwinnett ("Citizens Bank") that offer a broad range of banking and bank-related
services. The Company was incorporated in 1988 under the laws of the State of
Georgia.
The Company is a locally-focused, community-oriented financial services
holding company which offers various traditional banking services. Among these
services are commercial finance (including asset-based loans), Small Business
Administration ("SBA") lending, residential construction lending, residential
mortgage loan origination and commercial real estate mortgage loan origination.
The Company's knowledge of both its product lines and local markets allows it to
compete effectively with larger institutions by offering a wide range of
products while maintaining strong community relationships and name recognition
within its markets. In addition, management believes that there continue to be
increased opportunities in the retail and small commercial loan product market
as larger competitors focus on the higher dollar and volume loan product
markets.
Through its four wholly-owned financial institution subsidiaries,
Premier Bank, The Central and Southern Bank, North Georgia, and Citizens Bank
(collectively, the "Banking Subsidiaries"), the Company operates 20 banking
offices located in the Atlanta metropolitan area and in northern and central
Georgia. In these markets, the Banking Subsidiaries provide a broad array of
community banking services, including: loans to small and medium-sized
businesses; residential, construction and development loans; commercial real
estate loans; consumer loans and a variety of commercial and consumer deposit
accounts.
In addition, through its wholly-owned mortgage banking subsidiary,
Premier Lending, the Company operates eight mortgage loan production offices in
the Atlanta metropolitan area and one in each of Jacksonville, Florida,
Charleston, South Carolina, and Mobile, Alabama. Premier Lending is a retail
originator of residential mortgage loans which are sold to correspondent
mortgage investors and is an approved Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") seller-servicer of
mortgage loans and an approved Department of Housing and Urban Development
("HUD") and Veterans Administration ("VA") mortgage originator.
Acquisitions of unaffiliated financial institutions during the past two
years have been a principal source of the Company's growth. On August 31, 1996,
the Company acquired a thrift holding company then named Premier Bancshares,
Inc.; on June 23, 1997, the Company acquired Central and Southern Holding
Company, a bank and thrift holding company; and on December 12, 1997, the
Company acquired Citizens Gwinnett Bankshares, Inc., a bank holding company. As
a result of these three transactions, the Company added seven banking offices
and approximately $490 million in assets and approximately $385 million in
deposits to its existing franchise. The historical financial statements of the
Company have been restated to give effect to these acquisitions which were
accounted for as poolings of interests.
On October 17, 1997, the Company acquired Traditional Mortgage
Corporation ("Traditional"), a Georgia corporation specializing in mortgage
banking, and merged Traditional with and into Premier Lending, adding five loan
production offices to Premier Lending's existing franchise. With the
consummation of the
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Traditional acquisition, the Company is one of the largest volume residential
mortgage lenders based in the State of Georgia, averaging approximately $55
million in loan closings per month for the year ended December 31, 1997.
The Company's principal executive offices are located at 2180 Atlanta
Plaza, 950 East Paces Ferry Road, Atlanta, Georgia 30326, and its telephone
number at that address is (404) 814-3090.
RECENT DEVELOPMENTS
Reorganization. The Company is in the process of reorganizing certain
of its Banking Subsidiaries, the result of which will be the current main office
of North Georgia located in Greensboro, Georgia becoming a branch of Central and
Southern Bank. Central and Southern Bank and North Georgia have entered into a
Purchase and Assumption Agreement dated August 11, 1997, whereby Central and
Southern Bank will purchase and assume all of the assets and liabilities,
respectively, of the Greensboro branch of North Georgia. Immediately following
consummation of the purchase and assumption transaction, North Georgia will
merge with and into Premier Bank pursuant to an Agreement and Plan of Merger by
and between the Company, Premier Bank and North Georgia dated August 11, 1997.
Premier Bank will be the resulting institution following the merger.
Immediately following consummation of the merger, North Georgia's federal stock
association charter shall be deemed to be canceled and will be surrendered to
the OTS. In addition to the above-referenced reorganization, the Company also
plans to merge Citizens Bank with and into Premier Bank. Premier Bank will be
the resulting institution following the merger. Management anticipates that all
of the above-referenced transactions will be consummated during the first
quarter of 1998.
Premier Capital Trust I. In order to increase its Tier 1 capital and
thereby increase its lending capabilities, the Company sold $29,639,175 in
subordinated debentures to Premier Capital Trust I in connection with a public
offering by Premier Capital Trust I of its preferred securities. Premier
Capital Trust I is a recently formed Delaware statutory business trust. Premier
Capital Trust I issued $28,750,000 in preferred securities in an underwritten
public offering on November 10, 1997 (the "Offering"). The Company acquired all
of the common securities of Premier Capital Trust I which represents an
aggregate liquidation amount equal to 3% of the total capital of Premier Capital
Trust I. Premier Capital Trust I invested the gross proceeds of the Offering
(including the proceeds from the sale of the common securities to the Company)
in $29,639,175 of 9.00% subordinated debentures issued by the Company. The
Company added the proceeds from the sale of the subordinated debentures to its
general funds to be used for general corporate purposes, including the repayment
of certain short-term borrowings. For financial reporting purposes, Premier
Capital Trust I is treated as a subsidiary of the Company and, accordingly, the
accounts of Premier Capital Trust I are included in the consolidated financial
statements of the Company.
Acquisition of Lanier Bank & Trust Company. On December 16, 1997,
Premier entered into an Agreement and Plan of Reorganization with Lanier Bank &
Trust Company ("Lanier") a Georgia bank located in Cumming, Georgia. Pursuant
to the agreement, as amended, Lanier will merge with and into Premier Bank and
each issued and outstanding share of Lanier common stock will be converted into
1.98 shares of the Company's common stock. The consummation of the merger with
Lanier is subject to approval by the Lanier shareholders, regulatory approval
and other customary closing conditions. The merger with Lanier is expected to
close in the second quarter of 1998, and is expected to be accounted for as a
pooling of interests.
Acquisition of The Bank Holding Company. On December 3, 1997, Premier
entered into an Agreement and Plan of Reorganization with The Bank Holding
Company ("BHC"), a Georgia bank holding company located in Griffin, Georgia. In
connection with the agreement, as amended, each issued and outstanding share of
BHC common stock will be exchanged for the right to receive 3.90 shares of the
Company's common stock, and each outstanding share of BHC preferred stock will
be exchanged for the right to receive one share of the Company's preferred
stock. Following consummation of this transaction, the two banking subsidiaries
of BHC, First Community Bank of Henry County and The Bank of Spalding County,
will become subsidiaries of the Company. However, as soon as practicable
following the merger with BHC (which is expected to close in May, 1998), the
Company intends to merge First Community Bank of Henry County and The Bank of
Spalding County with and into Premier Bank. The acquisition is expected to be
accounted for as a pooling of interests. The consummation of
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the merger with BHC is subject to approval by the BHC shareholders, approval by
the Company's shareholders of an increase in the Company's authorized shares of
common stock, regulatory approval and other customary closing conditions.
Acquisition of Button Gwinnett Financial Corporation. On February 5,
1998, Premier entered into an Agreement and Plan of Reorganization with Button
Gwinnett Financial Corporation ("Button Gwinnett"), a Georgia bank holding
company located in Lawrenceville, Georgia. In connection with the agreement,
each issued and outstanding share of Button Gwinnett common stock will be
exchanged for the right to receive 3.885 shares of the Company's common stock.
Following consummation of this merger (which is expected to occur in May, 1998),
the sole subsidiary of Button Gwinnett, The Bank of Gwinnett County will become
a subsidiary of the Company. As soon as practicable following the merger with
Button Gwinnett, the Company intends to merge The Bank of Gwinnett County with
and into Premier Bank. The acquisition is expected to be accounted for as a
pooling of interests.
Stock Split. On January 7, 1998, the Board of Directors of the Company
declared a three-for-two split of the Company's common stock, effective January
23, 1998.
PREMIER BANK, CENTRAL AND SOUTHERN BANK, NORTH GEORGIA AND CITIZENS BANK
Premier Bank, Central and Southern Bank and Citizens Bank are all
organized under the laws of the State of Georgia and operate full-service
commercial banking businesses based in Cobb, DeKalb, Fulton and Gwinnett
Counties, for Premier Bank, Baldwin County for Central and Southern Bank, and
Gwinnett and Hall Counties for Citizens Bank. North Georgia is organized under
the laws of the United States and operates a full service savings association
business based in Greene, Barrow and Hall Counties. All of the Banking
Subsidiaries provide customary banking services such as checking and savings
accounts, various types of time deposits, money transfers, safe deposit
facilities, credit and debit cards, and individual retirement accounts. Premier
Bank, Central and Southern Bank and Citizens Bank also finance short- and
medium-term commercial transactions, make secured and unsecured loans, perform
commercial cash management services and provide other ancillary financial
services to their customers. In addition, Premier Bank, Central and Southern
Bank and Citizens Bank provide a traditional first mortgage product to their
customers providing financing for single-family homes on a permanent basis.
North Georgia makes both secured and unsecured loans to individuals, firms and
corporations. Secured loans by North Georgia include first and second priority
real estate mortgage loans. North Georgia also makes direct installment loans
to consumers on both a secured and unsecured basis.
PREMIER LENDING CORPORATION
Premier Lending, a corporation organized and existing under the laws of
the State of Georgia, is primarily a mortgage banker and acts as an intermediary
between purchasers of residential real estate or homeowners refinancing their
residences and correspondent or institutional investors seeking to purchase
mortgage loan investments. Premier Lending is a retail originator of
residential mortgage loans, which loans are then sold to correspondent mortgage
investors.
Premier Lending is an approved FNMA and FHLMC seller-servicer of
mortgage loans. Premier Lending is also an approved HUD and 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.
COMPETITION
Premier Bank, Central and Southern Bank, North Georgia and Citizens
Bank experience 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 their respective primary service areas. 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
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competing for loans are interest rates, loan origination fees and the range of
lending services offered. The competition for origination of loans normally
comes from other savings institutions, commercial banks, credit unions and
mortgage banking firms. Such entities may have competitive advantages as a
result of greater resources and higher lending limits (by virtue of greater
capitalization) and may offer their customers certain services which the
Company's Banking Subsidiaries may not presently provide.
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.
EMPLOYEES
As of December 31, 1997, the Company's subsidiaries had an aggregate of
492 full-time equivalent employees. The Company has no salaried employees.
Supervision and Regulation
General The Company is a bank holding company registered with the
Board of Governors of the Federal Reserve System (the "Federal Reserve") and the
Georgia Department of Banking and Finance (the "Georgia Department") under the
Bank Holding Company Act of 1956, as amended (the "BHC Act") and the Georgia
Bank Holding Company Act (the "Georgia BHC Act"), respectively. As such, the
Company is subject to the supervision, examination and reporting requirements of
the BHC Act and the regulations of the Federal Reserve, and the Georgia BHC Act.
The Company is also a thrift holding company registered with the Office of
Thrift Supervision (the "OTS") under the Federal Home Owners' Loan Act and the
Georgia BHC Act. As a thrift holding company, the Company is subject to the
regulation, supervision, examination and reporting requirements of the OTS and
the Georgia Department.
The BHC Act requires every bank holding company to obtain the prior
approval of the Federal Reserve before: (i) it may acquire direct or indirect
ownership or control of any voting shares of any bank if, after such
acquisition, the bank holding company will directly or indirectly own or control
more than 5% of the voting shares of the bank; (ii) it or any of its
subsidiaries, other than a bank, may acquire all or substantially all of the
assets of any bank; or (iii) it may merge or consolidate with any other bank
holding company. Similar federal statutes require thrift holding companies and
other companies to obtain the prior approval of the OTS before acquiring direct
or indirect ownership or control of a savings association.
The BHC Act further provides that the Federal Reserve may not approve
any transaction that would result in a monopoly or would be in furtherance of
any combination or conspiracy to monopolize or attempt to monopolize the
business of banking in any section of the United States, or the effect of which
may be substantially to lessen competition or to tend to create a monopoly in
any section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the 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 involved and the convenience and needs of the
communities to be served. Consideration of financial resources generally
focuses on capital adequacy, and consideration of convenience and needs issues
generally focuses on the parties' performance under the Community Reinvestment
Act of 1977.
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 the Company, 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 of 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, as of
June 1, 1997, national and state-chartered banks may now branch interstate
through acquisitions of banks in other states.
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In response to the Interstate Banking Act, the Georgia General Assembly
adopted the Georgia Interstate Banking Act which became effective on July 1,
1995. The Georgia Interstate Banking Act provides that (i) interstate
acquisitions by institutions located in Georgia will be permitted in states
which also allow national interstate acquisitions, and (ii) interstate
acquisitions of institutions located in Georgia will be permitted by
institutions located in states which allow national interstate acquisitions.
Additionally, on January 26, 1996, the Georgia General Assembly adopted
the Georgia Interstate Branching Act which permits Georgia-based banks and bank
holding companies owning or acquiring banks outside of Georgia and all non-
Georgia banks and bank holding companies owning or acquiring banks in Georgia
the right to merge any lawfully acquired bank into an interstate branch network.
The Georgia Interstate Branching Act also allows banks to establish de novo
branches on a limited basis beginning July 1, 1996. Beginning July 1, 1998, the
number of de novo branches which may be established will no longer be limited.
The BHC Act generally prohibits a bank holding company from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve to be so closely related to banking or
managing or controlling banks as to be a proper incident thereto. In
determining whether a particular activity is permissible, the Federal Reserve
must consider whether the performance of such an activity reasonably can be
expected to produce benefits to the public, such as greater convenience,
increased competition, or gains in efficiency, that outweigh possible adverse
effects, such as undue concentration of resources, decreased or unfair
competition, conflicts of interest, or unsound banking practices. For example,
factoring accounts receivable, acquiring or servicing loans, leasing personal
property, conducting discount securities brokerage activities, performing
certain data processing services, acting as agent or broker in selling credit
life insurance and certain other types of insurance in connection with credit
transactions, and performing certain insurance underwriting activities all have
been determined by the Federal Reserve to be permissible activities of bank
holding companies. The BHC Act does not place territorial limitations on
permissible non-banking activities of bank holding companies. Despite prior
approval, the Federal Reserve has the power to order a bank holding company or
its subsidiaries to terminate any activity or to terminate its ownership or
control of any subsidiary when it has reasonable cause to believe that
continuation of such activity or such ownership or control constitutes a serious
risk to the financial safety, soundness, or stability of any bank subsidiary of
that bank holding company.
Each bank and savings association subsidiary of the Company is a member
of the Federal Deposit Insurance Corporation ("FDIC"), and as such, their
deposits are insured by the FDIC to the maximum extent provided by law. Each
bank and thrift subsidiary of the Company is also subject to numerous state and
federal statutes and regulations that affect their business, activities, and
operations, and each is supervised and examined by one or more state or federal
bank regulatory agencies.
The wholly-owned banking subsidiaries of the Company are Premier Bank,
Citizens Bank and Central and Southern Bank. The wholly-owned savings
association subsidiary of the Company is North Georgia. Premier Bank, Central
and Southern Bank, and Citizens Bank are subject to regulation, supervision, and
examination by the FDIC and the Georgia Department. North Georgia is subject to
regulation, supervision, and examination by the OTS and the FDIC. The FDIC and
the Georgia Department regularly examine the operations of Premier Bank,
Citizens Bank, and Central and Southern Bank and are given authority to approve
or disapprove mergers, consolidations, the establishment of branches, and
similar corporate actions. The FDIC 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. North Georgia is similarly examined by
the FDIC and the OTS, and is subject to the prior approval requirements of the
FDIC and the OTS with respect to mergers, consolidations, the establishment of
branches, and similar corporate actions.
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Payment of Dividends
The Company is a legal entity separate and distinct from its banking
and other subsidiaries. The principal sources of cash flow of the Company,
Central & Southern Bank, including cash flow to pay dividends to its
shareholders, are dividends from Premier Bank, Premier Lending, North Georgia
and Citizens Bank. There are statutory and regulatory limitations on the
payment of dividends by these subsidiary depository institutions to the Company,
as well as by the Company to its shareholders.
If, in the opinion of the federal banking regulators, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such authority
may require, after notice and hearing, that such institution cease and desist
from such practice. The federal banking agencies have indicated 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, 1997, under dividend restrictions imposed under federal
and state laws, Premier Bank, Central and Southern Bank, North Georgia, Citizens
Bank and Premier Lending, a wholly-owned mortgage banking subsidiary of the
Company, without obtaining governmental approvals, could declare aggregate
dividends to the Company of approximately $5.7 million. During 1997, the
Company declared cash dividends to shareholders of approximately 23.1% of net
earnings.
The payment of dividends by the Company and its subsidiaries may also
be affected or limited by other factors, such as the requirement to maintain
adequate capital above regulatory guidelines.
Capital Adequacy
The Company and its subsidiary depository institutions are required to
comply with the capital adequacy standards established by the Federal Reserve in
the case of the Company, and the appropriate federal banking regulator in the
case of each of the Company's subsidiary depository institutions. 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, undivided
profits, minority interests in the equity accounts of consolidated subsidiaries
and noncumulative perpetual preferred stock, less goodwill and certain other
intangible assets ("Tier 1 Capital"). The remainder may consist of
subordinated debt, other preferred stock, and a limited amount of loan loss
reserves ("Tier 2 Capital"). At December 31, 1997, the Company'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 16.29% and 14.07%,
respectively.
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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. The Company's Leverage Ratio at December 31, 1997 was 11.37%.
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 indicators of capital strength in evaluating
proposals for expansion or new activities.
Each of the Company's subsidiary depository institutions is 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. Each of the subsidiary depository
institutions of the Company was in compliance with applicable minimum capital
requirements as of December 31, 1997. Neither the Company nor any of the
Company's subsidiary depository institutions has been advised by any federal
banking agency of any specific minimum capital ratio requirement applicable to
it.
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, recently adopted final regulations requiring regulators to consider
interest rate risk (when the interest rate sensitivity of an institution's
assets does not match the sensitivity of its liabilities or its off balance-
sheet position) in the evaluation of a bank's capital adequacy. The bank
regulatory agencies have concurrently proposed a methodology for evaluating
interest rate risk which 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, the Company is expected to act as a
source of financial strength for, and to commit resources to support, each of
its banking subsidiaries. This support may be required at times when, absent
such Federal Reserve policy, the Company may not be inclined to provide such
support. 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 a bank holding company to a federal bank
regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository
institution insured by the FDIC can be held liable for any loss incurred by, or
reasonably expected to be incurred by, the FDIC after August 9, 1989, in
connection with (i) the default of a commonly controlled FDIC-insured depository
institution or (ii) any assistance provided by the FDIC to any commonly
controlled FDIC-insured depository institution "in danger of default."
"Default" is defined generally as the appointment of a conservator or
receiver, and "in danger of default" is defined generally as the existence of
certain conditions indicating that a default is likely to occur in the absence
of regulatory assistance. The FDIC's claim for damages is superior to claims of
shareholders of the insured depository institution or its holding company, but
is subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. The subsidiary depository institutions of the Company
are subject to these cross-guarantee provisions. As a result, any loss suffered
by the FDIC in respect of any of the subsidiaries of the Company would likely
result in assertion of
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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 Company'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 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 will meet its capital restoration plan, subject to certain
limitations. The obligation of a controlling bank holding company under FDICIA
to fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of the
FDIC. In addition, the appropriate federal banking regulator is given authority
with respect to any undercapitalized depository institution to take any of the
actions it is required to or may take with respect to a significantly
undercapitalized institution as described below if it determines "that those
actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region"; (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors;
8
<PAGE>
(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, without regulatory approval.
At December 31, 1997, all of the subsidiary depository institutions of
the Company had the requisite capital levels to qualify as "well capitalized."
FDIC Insurance Assessments
Pursuant to FDICIA, the FDIC adopted a 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 risk-
based assessment system, which went into effect on January 1, 1994, assigns an
institution to one of three capital categories: (i) well capitalized; (ii)
adequately capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based on
a supervisory evaluation provided to the FDIC by the institution's primary
federal regulator and information which the FDIC determines to be relevant to
the institution's financial condition and the risk posed to the deposit
insurance funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to which
it is assigned. Under the final risk-based assessment system, 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 been during 1994, ranged from 23 basis points (0.23% of deposits) for an
institution in the highest category (i.e., "well capitalized" and "healthy")
to 31 basis points (0.31% of deposits) for an institution in the lowest category
(i.e., "undercapitalized" and "substantial supervisory concern"). These
rates were established for both funds to achieve a designated ratio of reserves
to insured deposits (i.e., 1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC
reduced the assessment rate applicable to BIF deposits in two stages, so that,
beginning in 1996, the deposit insurance premiums for 92% of all BIF members in
the highest capital and supervisory categories were set at $2,000 per year,
regardless of deposit size. The FDIC elected to retain the existing assessment
rate range of 23 to 31 basis points for SAIF members for the foreseeable future
given the undercapitalized nature of that insurance fund.
Recognizing that the disparity between the SAIF and BIF premium rates
have adverse consequences for the SAIF insured institutions and other banks with
SAIF assessed deposits, including reduced earnings and an impaired ability to
raise funds in capital markets and to attract deposits, in July 1995, the FDIC,
the Treasury Department, and the OTS released statements outlining a proposed
plan to recapitalize the SAIF, the principal feature of which was a special one-
time assessment on depository institutions holding SAIF-insured deposits, which
was intended to recapitalize the SAIF at a reserve ratio of 1.25%. This
proposal contemplated elimination of the disparity between the assessment rates
on BIF and SAIF deposits following recapitalization of the SAIF.
9
<PAGE>
A variation of this proposal designated the Deposit Insurance Funds Act
of 1996 ("DIFA") was enacted by Congress as part of the omnibus budget
legislation and signed into law on September 30, 1996. As directed by DIFA, the
FDIC implemented a special one-time assessment of approximately 65.7 basis
points (0.657%) on a depository institution's SAIF-insured deposits held as of
March 31, 1995 (or approximately 52.6 basis points on SAIF deposits acquired by
banks in certain qualifying transactions). In addition, the FDIC has
implemented a revision in the SAIF assessment rate schedule which effected, as
of October 1, 1996 (i) a widening in the assessment rate spread among
institutions in the different capital and risk assessment categories, (ii) an
overall reduction of the assessment rate range assessable on SAIF deposits of
from 0 to 27 basis points, and (iii) a special interim assessment rate range for
the last quarter of 1996 of from 18 to 27 basis points on institutions subject
to FICO assessments. Effective January 1, 1997, assessments to help pay off the
$780 million in annual interest payments on the $8 billion financing corporation
("FICO") bonds issued in the late 1980's as part of the government rescue of the
thrift industry are imposed on both BIF- and SAIF-insured deposits in annual
amounts presently estimated at 1.29 basis points and 6.44 basis points,
respectively. Beginning in January, 2000, BIF- and SAIF-insured institutions
will share the FICO interest costs at equal rates currently estimated at 2.43
basis points.
Under the FDIA, insurance of deposits may be terminated by the FDIC
upon a finding that the institution has engaged in unsafe and unsound practices,
is in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
Safety and Soundness Standards
The FDIA, as amended by the FDICIA and the Riegle Community Development
and Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines prescribing safety and soundness standards
pursuant to FDICIA, as amended. The guidelines establish general standards
relating to internal controls and information systems, internal audit systems,
loan documentation, credit underwriting, interest rate exposure, asset growth
and compensation and fees and benefits. In general, the guidelines require,
among other things, appropriate systems and practices to identify and manage the
risks and exposures specified in the guidelines. The guidelines prohibit
excessive compensation as an unsafe and unsound practice and describe
compensation as excessive when the amounts paid are unreasonable or
disproportionate to the services performed by an executive officer, employee,
director, or principal shareholder. In addition, the agencies adopted
regulations that authorize, but do not require, an agency to order an
institution that has been given notice by an agency that it is not satisfying
any of such safety and soundness standards to submit a compliance plan. If,
after being so notified, an institution fails to submit an acceptable compliance
plan or fails in any material respect to implement an acceptable compliance
plan, the agency must issue an order directing action to correct the deficiency
and may issue an order directing other actions of the types to which an
undercapitalized institution is subject under the "prompt corrective action"
provisions of FDICIA. See "--Prompt Corrective Action." If an institution
fails to comply with such an order, the agency may seek to enforce such order in
judicial proceedings and to impose civil money penalties. The federal
regulatory agencies also proposed guidelines for asset quality and earnings
standards.
Community Reinvestment Act
The Community Reinvestment Act of 1977 ("CRA") requires the federal
bank regulatory agencies to encourage financial institutions to meet the credit
needs of low- and moderate-income borrowers in their local communities. In May
1995, the federal bank regulatory agencies published final amended regulations
promulgated pursuant to the CRA. The final regulations eliminate the 12
assessment factors under the former regulation and replace them with performance
tests. Institutions are no longer required to prepare CRA Statements or
extensively document director participation, marketing efforts or the
ascertainment of community credit needs. Under the final rule, an institution's
size and business strategy determines the type of examination that it will
receive. Large, retail-oriented institutions will be examined using a
performance-based lending, investment and service test. Small institutions will
be examined using a streamlined approach. All institutions have the option of
being
10
<PAGE>
evaluated under a strategic plan formulated with community input and pre-
approved by the bank regulatory agency.
CRA regulations provide for certain disclosure obligations. In
accordance with the CRA, each institution must post a CRA notice advising the
public of the right to comment to the institution and its regulator on the
institution's CRA performance and to review the institution's CRA public file.
Each lending institution must maintain for public inspection a public file that
includes a listing of branch locations and services, a summary of lending
activity, a map of its communities, and any written comments from the public on
its performance in meeting community credit needs. Public disclosure of written
CRA evaluations of financial institutions made by regulatory agencies is
required by the CRA. This promotes enforcement of CRA requirements by providing
the public with the status of a particular institution's community reinvestment
record.
Certain Applicable Thrift Regulations
North Georgia, as a federal savings association, is subject to
extensive regulation by the OTS. The lending activities and other investments
of federal savings associations must comply with various regulatory
requirements.
Qualified Thrift Lender Test. One such set of requirements relates to
an institution's status as a "Qualified Thrift Lender." Unless an institution so
qualifies, its borrowing privileges from a Federal Home Loan Bank may be
restricted, and it may be subject to other operating limitations. To meet the
Qualified Thrift Lender Test ("QTL Test"), an institution must maintain at least
65% of its assets in "Qualified Thrift Investments," which under the regulations
consist of (i) loans made to purchase, refinance, construct, improve or repair
domestic residential or manufactured housing, (ii) home equity loans, (iii)
securities backed by or representing an interest in mortgages on domestic,
residential, or manufactured housing, and (iv) obligations issued by federal
deposit insurance agencies. Subject to a 15%-of-assets limitation, "Qualified
Thrift Investments" may also include consumer loans, investments in certain
subsidiaries, loans for construction of schools, churches, nursing homes and
hospitals, and 200% of investments in loans for low-to-moderate-income housing
and certain other community oriented investments.
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, 1997,
approximately 90.5% of North Georgia's assets were invested in Qualified Thrift
Investments as currently defined.
Liquidity Requirements. Savings associations, including North Georgia,
are required to maintain average daily balances of liquid assets sufficient to
meet the institution's foreseeable cash needs. Specifically, North Georgia must
maintain liquid assets (consisting of cash, certain time deposits, bankers
acceptance, highly rated corporate debt and commercial paper, securities of
certain mutual funds, and specific U.S. government, state or federal agency
obligations) of not less than 5% of the total amount of the institution's net
withdrawable savings deposits plus short-term borrowings, and to maintain
average daily balances of short-term liquid assets of not less than 1% of such
total amount. The liquidity ratio of North Georgia at December 31, 1997, was
11.05%.
EXECUTIVE OFFICERS OF THE COMPANY
Executive officers are elected by the Board of Directors annually in
January and hold office until the following January unless they sooner resign or
are removed from office by the Board of Directors.
11
<PAGE>
The executive officers of the Company, and their ages, positions with the
Company and terms of office, as of January 1, 1998, are as follows:
<TABLE>
<CAPTION>
YEAR
FIRST
NAME Age Elected Position With the Company
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jo S. Hill 49 1997 Executive Vice President and Chief Administrative Officer
Michael W. Lane 47 1996 Executive Vice President
Robert C. Oliver 49 1997 President and Chief Operating Officer
George S. Phelps 45 1996 Executive Vice President
Darrell D. Pittard 49 1993 Chairman and Chief Executive Officer
Michael E. Ricketson 48 1996 Executive Vice President and Chief Financial Officer
</TABLE>
Jo S. Hill has served as Executive Vice President and Chief Administrative
Officer of the Company since October 1997. From 1993 to 1997, she owned an
Atlanta based human resources consulting business and served as an outside
director of Premier Lending and Premier Bank. Ms. Hill served as Senior Vice
President of Prime Bank from April 1991 to February 1994, and Vice President of
Prime Bank from September 1989 to April 1991. Prior to 1991, she was employed
with Bank South as a Vice President.
Michael W. Lane has served as Executive Vice President of the Company since June
1996. From 1993 to February 1994, Mr. Lane served as Manager, Vice President---
Financing Health Care Claims for Millennium Healthcare Funding, Inc. From 1992
to March 1993, he was employed by Prime Bank, FSB as Manager, Vice President,
Commercial Banking Group---Commercial Lending, Asset-Based Lending and Private
Banking. Mr. Lane was employed from May 1983 to March 1992 by First American
Bank in various positions, his last being Manager, Group Vice President of
Asset-Based Lending.
Robert C. Oliver has served a President and Chief Operating Officer of the
Company since June 1997. Mr. Oliver was President and Chief Executive Officer
of Central and Southern Holding Company since 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.
George S. Phelps has served as Executive Vice President of the Company since
June 1997. Mr. Phelps has served as President of Premier Lending since April
1995. Mr. Phelps was Senior Vice President of Allatoona Federal Savings Bank
and was responsible for mortgage lending from 1991 to April 1995.
Darrell D. Pittard serves as the Chairman and Chief Executive Officer of the
Company. Mr. Pittard founded Premier Lending Corporation in March of 1993
before Premier Bancshares, Inc. was merged with and into First Alliance Bancorp,
Inc. (the Company'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 FSB, and
its holding company, Prime Bancshares, Inc., as President and Chief Executive
Officer (March 1990 to February 1993) and as Chief Operating Officer (August
1988 to March 1990). Prime Bancshares, Inc. was acquired in February 1993 by
SouthTrust Corporation.
12
<PAGE>
Michael E. Ricketson has served as Executive Vice President and Chief Financial
Officer of the Company since June 1997. Mr. Ricketson served as Executive Vice
President and Chief Financial Officer of Central and Southern Holding Company
since 1996 and Chief Financial Officer of Central and Southern Bank of Georgia
since 1993. Mr. Ricketson served as First Vice President and Financial Officer
of First National Bancorp from 1990 to 1993. Prior to 1990, he was controller
of the First National Bank of Gainesville.
ITEM 2. PROPERTIES.
The Company and its subsidiaries own, in some cases subject to mortgages or
other security interests, or lease all of the real property and/or buildings on
which it is located. All of such buildings are in a good state of repair and
are appropriately designed for the purposes for which they are used.
ITEM 3. LEGAL PROCEEDINGS.
On February 12, 1998, Rodney D. Gary, as representative plaintiff, filed a
class action lawsuit against Premier Lending Corporation in the United States
District Court for the Northern District of Georgia, Case No. 1 98-CV-0418. Mr.
Gary's Complaint, which was filed by the Jackson, Garrison & Sumral firm in
Birmingham, Alabama, alleges that Premier violated the provisions of the Real
Estate Settlement Procedures Act of 1974 ("RESPA") by charging Mr. Gary, and
other borrowers similarly situated, a "yield spread premium" in connection with
the closing of their residential mortgage loans. The lawsuit alleges that the
yield spread premium, which in Mr. Gary's case was payable to his broker, GBL
Financial Services, was an impermissible kickback that is prohibited by RESPA.
In Mr. Gary's case, the Complaint seeks damages equal to treble the amount of
Mr. Gary's yield spread premium of $1,222.00, plus reasonable attorneys' fees,
all as provided by 12 U.S.C. (S) 2607(d). As a class action, Plaintiff's
counsel will seek to recover similar damages on behalf of each similarly
situated borrower. Premier officials currently estimate that there are
approximately 300 loans outstanding similar to Mr. Gary's, where the borrower
was charged a yield spread premium at the time of closing that was ultimately
paid to a mortgage broker or other intermediary.
Other than the Gary Complaint, there are no material pending proceedings to
which the Company is a party or of which any of its properties are subject; nor
are there material proceedings known to the Company to be contemplated by any
governmental authority; nor are there material proceedings known to the Company,
pending or contemplated, in which any director, officer or affiliate or any
principal security holder of the Company, or any associate of any of the
foregoing, is a party or has an interest adverse to the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
A special meeting of the shareholders of the Company was held on November
20, 1997. The purpose of the meeting was to vote on two proposals:
1. The first item of business before the shareholders was the merger
between the Company and Citizens Gwinnett Bancshares. The shareholders
voted to approve the merger with 5,389,984 or 68% of the total
outstanding common stock voting in favor of the Merger.
2. The second item of business was the proposal to adopt the Premier
Bancshares, Inc. Amended and Restated Directors' Stock Option Plan. The
shareholders voted to approve the Plan with 5,992,394 or 76% of the
total outstanding common stock voting in favor of the Plan.
13
<PAGE>
PART II
ITEM 5. COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
STOCK. The Company's Common stock is traded on the American Stock Exchange
(AMEX) under the symbol "PMB". The following table sets forth quarterly high
and low sales prices per share of Common Stock as reported by AMEX. Stock
prices have been restated for the effect of stock splits payable to shareholders
of record on March 6, 1997, and January 23, 1998.
<TABLE>
<CAPTION>
SALES PRICES
HIGH LOW
------------------ --------------
<S> <C> <C>
Year ended December 31, 1996
First Quarter...................................... $6.55 $5.91
Second Quarter..................................... 7.20 6.19
Third Quarter...................................... 7.75 6.93
Fourth Quarter..................................... 7.85 6.93
YEAR ENDED DECEMBER 31, 1997
FIRST QUARTER...................................... $ 9.46 $ 7.66
SECOND QUARTER..................................... 11.67 9.17
THIRD QUARTER...................................... 14.17 9.83
FOURTH QUARTER..................................... 17.92 12.83
FIRST QUARTER 1998 (THROUGH MARCH 6, 1998) 26.44 18.08
</TABLE>
DIVIDENDS. Dividends per share for 1997 and 1996 have been restated for
the effect of stock splits payable to shareholders of record on March 6, 1997
and January 23, 1998. During fiscal 1997, the Company declared cash dividends of
$.17 per share of Common Stock. The Company declared cash dividends of $.23 per
share of Common Stock during fiscal 1996. The Company has also paid stock
dividends from time to time. The primary source of funds available to the
Company is the receipt of dividends from the Banks. The amount and frequency of
dividends will be determined by the Company in light of the earnings, capital
requirements and financial condition of the Company, and no assurances can be
given that dividends will be declared in the future.
SHAREHOLDERS. As of March 6, 1998, there were 1,305 record holders
of the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The following table presents consolidated selected financial data for the
Company for each of the five years in the period ended December 31, 1997. The
consolidated selected financial data for the Company has been restated for all
periods presented to reflect the business combinations of First Alliance
Bancorp, Inc. and Premier Bancshares, Inc. on August 31, 1996, of Central and
Southern and the Company on June 23, 1997 and of Citizens Gwinnett Bankshares,
Inc. and the Company on December 12, 1997, all of which were accounted for as
poolings of interests. In addition, the consolidated selected financial data
includes the results of operations of Traditional Mortgage Corporation,
Allatoona Federal Savings Bank and Interim Alliance Corporation, which were
accounted for as purchase business combinations, from the respective dates of
acquisition. Net income per share has been restated for all periods presented
to reflect stock splits payable to shareholders of record on January 23, 1998
and March 6, 1997 as well as to conform to the requirements of Financial
Accounting Standards Board ("FASB") Statement No. 128 "Earnings Per Share".
This financial data is derived in part from, and should be read in conjunction
with, the Consolidated Financial Statements and the related notes thereto
contained elsewhere in this report.
14
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31 1997 1996 1995 1994 1993
--------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Interest income 63,031 51,271 41,006 33,517 36,685
Interest expense 30,038 25,343 19,873 15,087 17,371
Net interest income 32,993 25,928 21,133 18,340 19,314
Provision for credit losses 644 (115) (582) 365 3,902
Other income 21,193 13,956 9,649 5,171 4,742
Other expense 36,930 30,800 23,623 18,763 19,267
Net income 11,194 7,005 5,553 2,913 599
Per share data:
Net income 0.75 0.47 0.38 0.21 0.05
Net income assuming dilution 0.73 0.46 0.37 0.21 0.05
Cash dividends declared 0.17 0.23 0.06 0.04 0.01
Book value 4.53 3.79 3.66 3.04 3.47
Average total equity 61,691 55,853 51,912 45,204 42,605
Average total assets 731,500 607,344 498,998 450,466 470,727
Total assets 794,197 677,273 553,584 430,375 461,211
Securities available for sale 115,801 151,055 146,608 123,776 140,673
Loans held for sale 59,363 24,408 25,912 26,047 4,446
Loans, net 530,181 393,030 304,087 232,351 246,549
Total deposits 652,977 577,212 456,012 360,604 408,671
Total borrowings 65,183 35,472 35,466 21,599 4,990
Total stockholders' equity 68,925 57,484 55,158 44,921 44,805
Ratios:
Net income to average assets 1.53% 1.15% 1.11% 0.65% 0.13%
Net income to average equity 18.15% 12.54% 10.70% 6.44% 1.41%
Dividend payout ratio 23.1% 48.8% 15.9% 19.2% 16.7%
Average equity to average assets 8.43% 9.20% 10.40% 10.03% 9.05%
</TABLE>
<TABLE>
<CAPTION>
1997 1996 % Change
-----------------------------------------------
(DOLLARS IN THOUSANDS)
Statement of condition
<S> <C> <C> <C>
Assets 794,197 677,273 17.26%
Loans held for sale 59,363 24,408 143.21%
Loans, net 530,181 393,030 34.90%
Deposits 652,977 577,212 13.13%
Stockholders' equity 68,925 57,484 19.90%
Statement of earnings
Net interest income 32,993 25,928 27.24%
Provision for credit losses 644 (115) N/A
Other income 21,194 13,956 51.86%
Other expense 36,930 30,800 19.90%
Net income 11,194 7,005 59.80%
</TABLE>
15
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The Company has pending three acquisitions which should be completed during
1998 provided regulatory and shareholder approvals are obtained. All three are
expected to be accounted for using pooling of interests. The following table
highlights the impact on loans, deposits, capital and assets these three
acquisitions would have had on the Company's financial statements as of December
31, 1997.
<TABLE>
<CAPTION>
LANIER BANK & TRUST THE BANK HOLDING BUTTON GWINNETT TOTAL
COMPANY CO FINANCIAL CORP. INCREASE
------------------- ---------------- ---------------- --------
(dollars in thousands)
<S> <C> <C> <C> <C>
Total loans, net $31,475 $ 92,606 143,534 267,615
Total deposits 57,049 116,965 191,615 365,629
Total capital 9,521 13,293 24,476 47,290
Total assets 71,357 134,000 220,436 425,793
</TABLE>
16
<PAGE>
AVERAGE BALANCES, INTEREST AND YIELDS
The following table details average balances of interest-earning assets and
interest-bearing liabilities, the fully taxable equivalent amount of interest
earned/paid, assuming a 34% effective tax rate and the fully taxable equivalent
yield/rate for each of the three years in the period ended December 31, 1997.
Loan average balances include nonaccrual loans.
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------------------------------------
YIELD/ YIELD/ YIELD/
AVG.BAL. INT. RATE AVG.BAL. INT. RATE AVG.BAL. INT. RATE
--------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Loans, net of unearned
interest(1) $520,844 $52,729 10.12% $375,456 $39,659 10.56% $295,009 $30,628 10.38%
Short term investments 1,492 170 11.39% 9,336 437 4.68% 4,170 186 4.46%
Investment securities:
Taxable 116,150 7,583 6.53% 125,085 7,802 6.24% 120,681 7,527 6.24%
Non-taxable 21,560 1,853 8.59% 21,568 1,973 9.15% 14,987 1,455 9.71%
Federal funds sold and
securities sold under
agreements to repurchase 24,405 1,326 5.43% 38,078 2,071 5.44% 28,705 1,705 5.94%
-------------------- -------------------- --------------------
Total interest earning
assets 684,451 $63,661 9.30% 569,523 $51,942 9.12% 463,552 $41,501 8.95%
========= ========= =========
Allowance for credit losses (8,371) (7,316) (6,807)
Other assets 55,420 45,137 42,253
---------- ---------- ----------
Total assets $731,500 $607,344 $498,998
========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing demand,
savings, and money
market deposits $171,504 $ 6,097 3.56% $154,913 $ 5,223 3.37% 119,599 $ 3,928 3 .28%
Time deposits 359,252 20,801 5.79% 292,793 17,344 5.92% 232,542 13,612 5 .85%
Repurchase agreements &
advances 27,237 2,413 8.86% 29,348 2,680 9.13% 34,093 2,255 6 .61%
Other borrowings 20,776 727 3.50% 1,352 96 7.10% 465 79 6 .99%
-------------------- -------------------- --------------------
Total interest-bearing
liabilities 578,769 $30,038 5.19% 478,406 $25,343 5.30% 386,699 $19,874 5 .14%
========= ========= =========
Demand deposits 83,816 67,902 55,753
Other liabilities 7,224 5,153 4,634
---------- ---------- ----------
Total liabilities 669,809 551,461 447,086
Total stockholders' equity 61,691 55,853 51,912
---------- ---------- ----------
Total liabilities and
stockholders' equity $731,500 $607,314 $498,998
========== ========== ==========
Net interest income $33,623 $26,599 $21,627
Net interest margin 4.91% 4.67% 4.67%
Net interest spread 4.11% 3.82% 3.81%
</TABLE>
(1) Includes loan fees of $3,095,000, $2,599,000, and $2,072,000, for 1997,
1996, and 1995, respectively.
17
<PAGE>
RATE - VOLUME ANALYSIS
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 1997/1996 and 1996/1995. 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>
1997 VERSUS 1996 1996 VERSUS 1995
---------------- ----------------
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:
Loans $14,781 $(1,711) $13,070 $ 8,489 $ 542 $ 9,031
Short term investments (562) 295 (267) 241 10 251
Investment securities:
Taxable (573) 354 (219) 275 275
Non-taxable (1) (119) (120) 607 (89) 518
Federal funds sold (743) (2) (745) 519 (153) 366
--------------------------------------------- ------------------------------------------
Total interest income 12,902 (1,183) 11,719 10,131 310 10,441
Interest expense on:
Interest-bearing
demand, savings and
money market deposits 578 296 874 1,189 106 1,295
Time deposits 3,856 (399) 3,457 3,567 165 3,732
Repurchase agreements
& advances (190) (77) (267) (346) 771 425
Other borrowings 704 (73) 631 83 (66) 17
--------------------------------------------- ------------------------------------------
Total interest expense 4,948 (253) 4,695 4,493 976 5,469
--------------------------------------------- ------------------------------------------
Net interest income $ 7,954 $ (930) $ 7,024 $ 5,638 $(666) $ 4,972
============================================= ==========================================
</TABLE>
18
<PAGE>
LOANS
A sound credit policy and careful, consistent credit review are vital to a
successful lending program. The 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 the banks are located. Credit reviews and loan examinations
help confirm that the Banks are adhering to these loan policies.
The 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 Banks' customers. Secured loans include first
and second real estate mortgage loans. The Banks also make direct installment
loans to consumers on both a secured and unsecured basis.
The amount of loans outstanding by loan type at the indicated dates are shown in
the following tables according to type of loan:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995 1994 1993
-----------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural $ 90,731 $104,230 $ 91,040 $ 65,377 $ 76,311
Real estate-construction 142,718 117,586 70,843 40,850 24,193
Real estate-mortgage 268,346 137,417 109,567 87,806 82,981
Consumer 38,256 41,971 40,365 45,359 70,018
-----------------------------------------------------------
$540,051 $401,204 $311,816 $239,392 $253,503
===========================================================
Loans held for sale $ 59,363 $ 24,408 $ 25,912 $ 26,047 $ 4,446
===========================================================
Percent of loans by category to total loans
Excluding loans held for sale
Commercial, financial and agriculture 17% 26% 29% 27% 30%
Consumer installment 7% 10% 13% 19% 28%
Real estate 76% 64% 58% 54% 42%
-----------------------------------------------------------
100% 100% 100% 100% 100%
===========================================================
</TABLE>
The maturity of real estate construction and commercial, financial and
agricultural loans outstanding at December 31, 1997 are as follows:
LOAN MATURITIES
<TABLE>
<CAPTION>
REAL ESTATE COMMERCIAL FINANCIAL
CONSTRUCTION AND AGRICULTURAL
------------------------------------------
(dollars in thousands)
<S> <C> <C>
In one year or less $109,880 $48,828
After one year but within five years 27,397 37,161
After five years 5,441 4,742
-------------------------------------------
Total $142,718 $90,731
===========================================
</TABLE>
19
<PAGE>
Of the real estate construction and commercial loans maturing after one
year, approximately $44,000,000 have fixed rates and approximately $31,000,000
have variable rates.
All loans carry some degree of risk. The risk is reflected in the
consolidated financial statements by the allowance for credit losses, the amount
of loans charged off and the provision for credit losses charged to operating
expense. It is the Company's policy that when a loss is identified, it is
charged against the credit 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.
The Company's provision for credit losses is a reflection of actual losses
experienced during the year and management's judgment as to the adequacy of the
allowance for credit 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) charge-offs and recoveries 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 nonaccruing 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 the Company.
20
<PAGE>
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES
The following table summarizes loan balances at the end of each year, average
loans outstanding during the year and activity in the allowance for credit
losses for each of the last five years.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
1997 1996 1995 1994 1993
---------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for credit losses at beginning of year $ 7,603 $ 6,776 $ 6,389 $ 6,954 $ 7,156
Loans charged off:
Commercial, financial, and agricultural 112 77 387 1,037 1,621
Real estate loans 92 49 464 1,228 925
Consumer installment 297 477 906 1,768 3,921
---------------------------------------------------------------------
Total charged off 501 603 1,757 4,033 6,467
---------------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial, and agricultural 406 205 457 587 224
Real estate loans 62 201 180 345 172
Consumer installment 707 1,139 1,795 2,171 1,967
---------------------------------------------------------------------
Total recoveries 1,175 1,545 2,432 3,103 2,363
---------------------------------------------------------------------
Net (recoveries) charge-offs (674) (942) (676) 930 4,104
---------------------------------------------------------------------
Allowance acquired (disposed of) in business
combinations (74) -- 294 -- --
Provision for credit losses 644 (115) (582) 365 3,902
---------------------------------------------------------------------
Allowance for credit losses at end of year $ 8,847 $ 7,603 $ 6,776 $ 6,389 $ 6,954
=====================================================================
Loans outstanding, net of unearned interest, excluding
held for sale, $539,028 $400,633 $304,087 $232,351 $246,549
=====================================================================
Average loans outstanding, including held for sale, net of
unearned interest $520,844 $375,456 $295,009 $251,424 $231,781
Ratio of net charge-offs (recoveries) to average net loans
outstanding (0.13%) (0.25%) (0.23%) 0.37% 1.77%
Ratio of allowance for credit losses to net loans
(excluding held for sale) outstanding 1.64% 1.90% 2.23% 2.75% 2.82%
</TABLE>
A coordinated effort is undertaken to identify risks in the loan portfolio
for management purposes and to establish the credit 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 the Company's internal audit program and the use of external loan review
firms. 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.
21
<PAGE>
If, as a result of the Company's loan review and evaluation procedures, it
is determined that payment of interest on a commercial or real estate loan is
questionable, it is the Company'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.
ALLOCATION OF ALLOWANCE FOR CREDIT LOSSES
The Company has allocated the allowance for credit losses according to the
amount deemed to be reasonably necessary at each year end to provide for losses
being 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 credit losses for each
of the past five years are presented below.
Allowance allocation by loan category
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
-----------------------------------------------------------------
<C> <C> <C> <C> <C>
<S> (dollars in thousands)
Commercial, financial and agriculture $1,130 $1,830 $1,617 $1,611 $1,520
Consumer installment 6,998 3,697 2,824 3,576 3,120
Real estate 719 2,076 2,335 1,200 2,313
-----------------------------------------------------------------
$8,847 $7,603 $6,776 $6,389 $6,953
=================================================================
</TABLE>
Although it is the Company's policy to immediately charge off all loan
amounts judged 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
credit losses is established by charging the provision for loan loss expense
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.
The following table presents nonperforming loans at December 31, 1997,
1996, 1995, 1994 and 1993. Nonperforming loans consist solely of loans which
are contractually past due 90 days or more as to interest or principal payments
and still accruing (past-due loans) and loans accounted for on a nonaccrual
basis (nonaccrual loans).
NONPERFORMING LOANS
<TABLE>
<CAPTION>
PAST-DUE LOANS NONACCRUAL LOANS
------------------------------------------
(dollars in thousands)
<S> <C> <C>
DECEMBER 31, 1997 $602 $2,674
December 31, 1996 316 1,532
December 31, 1995 685 1,118
December 31, 1994 326 1,667
December 31, 1993 650 3,710
</TABLE>
Total interest income recognized on nonperforming loans for the year ended
December 31, 1997 was $25,000. Additional interest income of $106,000 would have
been recorded in 1997 if all nonperforming loans had performed in accordance
with their original terms.
22
<PAGE>
NONPERFORMING ASSETS
The following table analyzes nonperforming assets for each of the past three
years.
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Loans past due 90 days or more $ 602 $ 316 $ 685
Non accrual loans 2,674 1,532 1,118
-----------------------------------------------
Total nonperforming loans 3,276 1,848 1,803
Other real estate 785 1,151 1,109
-----------------------------------------------
Total nonperforming assets $ 4,061 $ 2,699 $ 2,912
===============================================
Nonperforming loans/Total loans, net of unearned* 0.61% 0.46% 0.58%
Nonperforming assets/Total assets 0.51% 0.44% 0.53%
Loan loss allowance/Total loans, net of unearned* 1.64% 1.90% 2.17%
Loan loss allowance/Nonperforming loans 270.05% 411.42% 375.82%
</TABLE>
* Total loans excluding held for sale
The table above includes all loans which management considers being potential
problem loans.
The allowance for credit losses as a percentage of nonperforming loans
(including loans past due ninety days or more) was 270% at December 31, 1997,
compared to 411% at December 31, 1996. Management considers the current level of
the allowance for credit losses more than adequate to absorb losses from loans
in the portfolio. Management's determination of the adequacy of the allowance
for credit losses, which is based on the factors and risk identification
procedures previously discussed, 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 credit losses to be increased or
decreased in future periods.
Generally, the Company's market areas have not experienced rapid increases
in real estate property values or significant overbuilding. Therefore, in
management's opinion, collateral values for real estate loans in the Company's
market areas should not be vulnerable to significant deterioration, as would
other market areas that 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. The Company 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.
23
<PAGE>
INVESTMENT SECURITIES
The carrying values of investment securities at the indicated dates are
presented below:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995
-----------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
U.S. Treasury and U.S. Government
agencies $ 47,310 $ 71,386 $ 64,717
State and Municipals 21,010 23,478 19,415
Mortgage-backed securities 43,900 53,767 60,587
Other 3,581 2,424 1,888
-----------------------------------------------
Total $115,801 $151,055 $146,608
===============================================
</TABLE>
Investment portfolio policy stresses quality and liquidity. At December 31,
1997, the weighted average maturity of U. S. Treasury and government agency
securities was 5.1 years and the weighted average maturity of obligations of
states and political subdivisions was 11.9 years. Mortgage-backed securities
had a weighted average maturity of 15.8 years due to purchases of adjustable
rate mortgage securities that adjust annually. Overall, the weighted average
maturity of the portfolio was 10.6 years using contractual maturities and
slightly greater than 3.1 years using expected maturities. Expected maturities
differ from contractual maturities because security issuers have the right to
call or prepay obligations with or without call or prepayment penalties.
Securities purchased during the last several years have primarily short to
intermediate term maturities.
The following table shows the contractual maturities of investment
securities at December 31, 1997 and the average yields (for all obligations on a
fully taxable basis assuming a 34% tax rate) on such securities:
MATURITY DISTRIBUTION OF INVESTMENT SECURITIES
<TABLE>
<CAPTION>
DUE WITHIN ONE DUE AFTER ONE WITHIN DUE AFTER FIVE WITHIN
YEAR FIVE YEARS TEN YEARS DUE AFTER TEN YEARS
AMOUNT YIELD AMOUNT YEILD AMOUNT YIELD AMOUNT YIELD
-----------------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury and U.S. Government
agencies $2,275 6.11% $23,771 6.33% $19,946 7.12% $ 1,318 6.84%
State and Municipals 1,114 5.83% 4,896 5.91% 3,922 6.49% 11,078 5.41%
Mortgage-backed securities 2,568 7.45% 10,771 6.23% 6,358 6.04% 24,203 6.52%
---------- ---------- ---------- ----------
Total $5,957 6.64% $39,438 6.25% $30,226 6.81% $36,599 6.20%
========== ========== ========== ==========
</TABLE>
The estimated fair market value of the Company's investment portfolio at
December 31, 1997, was approximately $1,243,000 above amortized cost. Market
values vary significantly as interest rates change; however, 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., 93%
are rated "A" or better. 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.
24
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Liquidity is an important factor in the financial condition of the Company
and affects the Company'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, borrowed
funds, and retained earnings.
The investment portfolio is one of the Company's primary sources of
liquidity. Maturities of securities provide a constant flow of funds that are
available for cash needs. Contractual investment securities that mature within
one year total $6.0 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
Federal agency and state and municipals increase the forecasted cash flow from
the investment portfolio within one year to approximately $21 million.
Maturities in the loan portfolio also provide a steady flow of funds. The
Company's liquidity also continues to be enhanced by a relatively stable core
deposit base.
SELECTED STATISTICAL INFORMATION FOR DEPOSITS
The following table summarizes average deposits and related weighted
average rates for each of the three years in the period ended December 31, 1997.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
1997 1996 1995
AMOUNT RATE AMOUNT RATE AMOUNT RATE
--------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand deposits $ 83,816 $ 67,902 $ 55,753
Interest-bearing demand, savings, and
money market deposits 171,504 3.56% 154,943 3.37% 119,599 3.28%
Time deposits 359,252 5.79% 292,793 5.92% 232,542 5.85%
----------- ----------- ----------
Total average deposits $614,572 4.38% $515,638 4.38% $407,894 4.30%
=========== =========== ==========
</TABLE>
The maturities of time deposits of $100,000 or more as of December 31, 1997 are
presented below:
<TABLE>
<CAPTION>
(dollars in
thousands)
<S> <C>
3 months or less $23,551
Over 3 through 6 months 23,767
Over 6 through 12 months 30,816
Over 12 months 16,697
--------------
$94,831
==============
</TABLE>
BORROWINGS
For a detailed discussion of the borrowings of the Company, see note 7 to
the Consolidated Financial Statements included herein.
25
<PAGE>
STOCKHOLDERS' EQUITY
The Company maintains a ratio of stockholders' equity to total assets that
is adequate relative to industry standards. The Company's ratio of stockholders'
equity to total assets was 8.68% at December 31, 1997, compared to 8.49% at
December 31, 1996 and 9.96% at December 31, 1995.
The Company 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 1% to 2% higher than the minimum 3% level.
The following table summarizes the Company's capital ratios at December 31,
1997 and 1996.
<TABLE>
<CAPTION>
Minimum
1997 1996 Requirements
-------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital leverage ratio 11.37% 8.15% 3%
Tier 1 Risk-based capital ratio 14.07% 11.45% 4%
Tier 2 Risk-based capital ratio 2.22% 1.12%
--------------------------
Total Risk-based capital ratio 16.29% 12.57% 8%
</TABLE>
The Company issued $28.7 Million of Preferred Securities in November 1997.
The proceeds of the securities qualifies as Tier 1 capital with respect to the
risk-based capital guidelines established by the Federal Reserve. Federal
Reserve guidelines for calculation of Tier 1 capital limit the amount of
cumulative preferred stock which can be included in Tier 1 capital to 25% of
total Tier 1 capital. A more complete discussion of the preferred securities can
be found under note 8 of the Company's Consolidated Financial Statements
included herein.
26
<PAGE>
The Preferred Securities along with the Company's sustainable internal
growth rate have created the ability to take advantage of growth opportunities
that may exist in the southeast region banking markets. The sustainable internal
growth rate is computed by the following:
<TABLE>
<CAPTION>
1997 1996
-----------------------
<S> <C> <C>
Return on Average Equity 18.15% 12.54%
X
Retention Rate (1-dividend payout ratio) 76.90% 51.19%
-----------------------
=
Sustainable Internal Growth Rate 13.96% 6.42%
</TABLE>
The Company's common stock has been traded on the American Stock Exchange
(AMEX) since first quarter 1997 under the symbol "PMB". Prior to 1997, the stock
was traded on a limited basis in the over-the-counter market and was included in
the National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ") under the symbol "FABC".
The following table sets forth quarterly high and low sales prices per
share of common stock as reported by AMEX and NASDAQ for each of the last two
years. Stock prices have been restated for the effect of stock splits payable to
stockholders of record on March 6, 1997 and January 23, 1998.
<TABLE>
<CAPTION>
SALES PRICES
------------------------------------
HIGH LOW
---------------- --------------
<S> <C> <C>
Year ended December 31, 1996
First Quarter..................................... $ 6.55 $ 5.91
Second Quarter.................................... 7.20 6.19
Third Quarter..................................... 7.75 6.93
Fourth Quarter.................................... 7.85 6.93
YEAR ENDED DECEMBER 31, 1997
FIRST QUARTER..................................... $ 9.46 $ 7.66
SECOND QUARTER.................................... 11.67 9.17
THIRD QUARTER..................................... 14.17 9.83
FOURTH QUARTER.................................... 17.92 12.83
FIRST QUARTER 1998 (THROUGH MARCH 6, 1998) $26.44 $18.08
</TABLE>
As of March 6, 1998, the Company had approximately 1,305 shareholders of
record.
The following table presents dividends and earnings per share by quarter
for each of the last two years. Dividends and earnings per share have been
restated for the effect of stock splits payable. Stock prices have been restated
for the effect of stock splits payable to stockholders of record on March 6,
1997 and January 23, 1998. In addition, earnings per share have been restated
to conform to the requirements of FASB Statement No. 128 "Earnings Per Share."
<TABLE>
<CAPTION>
1997 1996
DIVIDENDS EARNINGS DIVIDENDS EARNINGS
---------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter .04 .16 .08 .12
Second Quarter .07 .19 .02 .12
Third Quarter .06 .21 .03 .08
Fourth Quarter -- .19 .10 .15
</TABLE>
27
<PAGE>
The board of directors has approved the Company's dividend policy of paying
out a portion of earnings to stockholders on a regular basis. It is the current
intent of the Company to increase the amount of dividends, given earnings
growth, to a level that will provide a reasonable return to the stockholders of
the Company.
At December 31, 1997, under dividend restrictions imposed under federal and
state laws, Premier Bank, Central and Southern Bank, North Georgia, Citizens
Bank and Premier Lending, a wholly-owned mortgage banking subsidiary of the
Company, without obtaining governmental approvals, could declare aggregate
dividends to the Company of approximately $5.7 million.
RESULTS OF OPERATIONS
NET INTEREST INCOME
TAX EQUIVALENT BASIS
Net interest income for 1997, on a tax equivalent basis increased $7.0
million, or 26% from 1996. This increase can be attributed to the $114.9 million
increase in average interest earning assets and especially to the $145.4 million
increase in average loans outstanding. The average balance sheet for 1997 grew
$124.2 million due to strong loan demand in the Company's markets. The net
interest margin increased by 24 basis points as the Company's yields on earning
assets increased while the cost of funds decreased. Management anticipates
continued improvement in the net interest margin for 1998 as loan demand
increases continue.
Net interest income for 1996, on a tax equivalent basis increased $5.0
million, or 23% from 1995. This increase can be attributed to the $106.0 million
increase in average interest earning assets. The average balance sheet for 1996
grew $108.3 million due to loan demand in the Company's markets. The net
interest margin was unchanged as the Company's yields on earning assets
increased while the cost of funds did the same.
The table below illustrates the changes in the net interest margin over the
past four years.
NET INTEREST MARGIN
<TABLE>
<CAPTION>
1997 1996 1995 1994
--------------------------------------------------------------------------------------
% OF % OF % OF % OF
EARNING EARNING EARNING EARNING
AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS AMOUNT ASSETS
--------------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Interest income $ 63,031 9.21% $ 51,271 9.00% $ 41,006 8.85% $ 33,518 7.94%
Tax-equivalent adjustment 630 0.09% 671 0.12% 495 0.11% 509 0.12%
--------------------------------------------------------------------------------------
Interest income, taxable equivalent 63,661 9.30% 51,942 9.12% 41,501 8.96% 34,027 8.06%
Interest expense 30,038 4.39% 25,343 4.45% 19,874 4.29% 15,087 3.57%
--------------------------------------------------------------------------------------
Net interest income, taxable
equivalent 33,623 4.91% 26,599 4.67% 21,627 4.67% 18,940 4.48%
======== ======== ======== ========
Average earning assets $684,451 $569,523 $463,552 $422,397
======== ======== ======== ========
</TABLE>
PROVISION FOR CREDIT LOSSES
The provision for credit losses is the charge to operating earnings
necessary to maintain an adequate allowance for credit losses. Through the
provision, the Company maintains an allowance for credit losses that management
believes is adequate to absorb losses inherent in the loan portfolio. However,
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 procedures, periodically review the Company's subsidiary
banks' allowance for credit losses. Based on their judgments about information
available to them at the time of their examination, such agencies may require
the Company's subsidiary banks to recognize additions to their allowance for
credit losses.
28
<PAGE>
Management's analysis of the allowance for credit losses, nonperforming
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 1.64%, nonperforming loans to total
loans are 0.61%, and net recoveries as a percent of average loans (net of
unearned interest) were 0.13% for the year 1997.
OTHER INCOME
Total other income increased $7.2 million in 1997, or 52% as compared to
1996. The majority of the increase was due to an increase in mortgage banking
income of $5.7 million, or 64%. The Company's mortgage operation continues to
expand as the market for mortgages grows and interest rates remain low as well
as through the Company's bank acquisition program. The operation is conducted
through Premier Lending, a mortgage-banking subsidiary. Premier Lending is an
approved Federal National Mortgage Association (Fannie Mae) and Federal Home
Loan Mortgage Corporation (Freddie Mac) seller-servicer of mortgages. Premier
Lending originates mortgages and simultaneously sells these loans under
specified guidelines to investors. This pass through operation mitigates the
potential interest rate risk normally associated with a mortgage lending
operation.
Total other income increased $4.3 million in 1996 as compared to 1995. The
majority of the increase was associated with the Company's mortgage lending
operation. Mortgage banking income increased $2.9 million during the period.
OTHER EXPENSE
Total other expense increased $6.1 million in 1997, or 20% compared to
1996. Management anticipates continued increases in other expense during 1998,
as the expansion into select markets will require additional expenses.
Several areas that registered significant changes for the year were:
. Salaries and employee benefits increased $4.0 million for the
year due to the Company hiring staff for new branches, staffing
increases necessary for the rapid growth of the Company's
franchise, and the commission nature of it's mortgage lending
operations.
. Net occupancy increased $1.0 million as three new branch banks
became operational during the year.
. Merger related expenses increase $0.8 million as the Company
closed three acquisitions and engaged three others to close in
early 1998.
Total other expense increased $7.2 million in 1996, or 30% compared to
1995.
Several areas, which registered significant changes for the 1996 year,
were:
. Salaries and employee benefits increased $4.6 million for the
year.
. Net occupancy increased $1.1 million for the year.
INCOME TAX
The Company experienced pre-tax operating earnings of $16.6 million for
1997, which resulted in a tax provision of $5.4 million. The effective rate of
33% increased from an effective rate of 24% in 1996 as prior period operating
losses and tax credits were no longer available during 1997. For more
information on income taxes, see note 11 of the Consolidated Financial
Statements included herein.
29
<PAGE>
OTHER INFORMATION
Fourth Quarter Results
The Company had a profit of $2.9 million for the fourth quarter 1997.
Return on average assets was 1.57%, return on average equity was 18.60%. The
net interest margin was 4.78%, which compared to fourth quarter 1996's 4.66%
resulting in an increase of 12 basis points.
Inflation
Inflation has an impact on financial assets that 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement 130"), which establishes standards for reporting and display
of comprehensive income and its components in a full set of general-purpose
financial statements. Statement 130 requires that all items that are required to
be recognized under accounting standards as components of comprehensive income
be reported in a financial statement that is displayed with the same prominence
as other financial statements. The Company will adopt the provisions of
Statement 130 beginning in 1998. Adoption of Statement 130 by the Company is not
expected to have a material impact on the Company's consolidated financial
position or consolidated results of operations.
In June 1997, the FASB issued Statement No. 131, "Disclosure About Segments of
an Enterprise and Related Information" ("Statement 131"), which establishes
standards for the way that public business enterprises report information about
operating segments in annual and interim financial statements. The Company will
adopt the provisions of Statement 131 beginning in 1998. The adoption is not
expected to have a material impact on the Company's consolidated financial
position or consolidated results of operations.
30
<PAGE>
QUARTERLY RESULTS
The quarterly information reported on Form 10-Q for the quarter ended March
31, 1997 has been restated above to reflect the merger of Central and Southern
and the Company on June 23, 1997. The quarterly information reported on Forms
10-Q for the quarters ended June 30, 1997 and September 30, 1997 has been
restated to reflect the merger of Citizens Gwinnett Bankshares, Inc. and the
Company on December 12, 1997. Both mergers were accounted for as poolings of
interests. Corresponding 1996 information has also been restated. Net income per
share has been restated for all periods presented to reflect stock splits
payable to stockholders of record on January 23, 1998 and March 6, 1997 as well
as to conform to the requirements of FASB Statement No. 128 "Earnings Per
Share".
<TABLE>
<CAPTION>
1997 QUARTER ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest income $14,236 $15,548 $16,283 $16,964
Interest expense 6,824 7,228 7,747 8,239
Net interest income 7,412 8,320 8,536 8,725
Provision for credit losses 136 48 510 (50)
Securities gains (losses) (36) (9) 15 1
Earnings before income taxes 2,902 4,275 4,818 4,617
Net income 2,347 2,834 3,133 2,880
Net income per share .16 .19 .21 .19
Net income per share assuming dilution .16 .19 .21 .19
</TABLE>
<TABLE>
<CAPTION>
1996 QUARTER ENDED
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $12,273 $12,617 $12,680 $13,701
Interest expense 5,936 6,099 6,407 6,901
Net interest income 6,337 6,518 6,273 6,800
Provision for credit losses (71) 32 (48) (28)
Securities gains (losses) 155 (8) - -
Earnings before income taxes 2,418 2,258 1,612 2,911
Net income 1,745 1,754 1,244 2,262
Net income per share .12 .12 .08 .15
Net income per share assuming dilution .11 .12 .08 .15
</TABLE>
CAPABILITY OF THE COMPANY'S DATA PROCESSING SOFTWARE TO ACCOMMODATE THE YEAR
2000
Like many financial institutions, the Company and its subsidiaries rely
upon computers for the daily conduct of their business and for data processing
generally. There is concern among industry experts that commencing on January 1,
2000, computers will be unable to "read" the New Year and there may be
widespread computer malfunctions. Management of the Company has assessed the
electronic systems, programs, applications and other electronic components used
in the operations of the Company and believes the it's hardware and software has
been programmed to be able to accurately recognize the year 2000, and that
significant additional costs will not be incurred in connection with the year
2000 issue, although there can be no assurances in this regard.
31
<PAGE>
FORWARD LOOKING STATEMENTS
The following appears in accordance with the Securities Litigation Reform
Act. These financial statements and financial review include forward looking
statements that involve inherent risks and uncertainties. A number of important
factors could cause actual results to differ materially from those in the
forward looking statements. Those factors include fluctuations in interest
rates, inflation, government regulations, economic conditions, and competition
in the geographic business areas in which the Company conducts its operations.
ITEM 7a. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is exposed only to U.S. dollar interest rate changes and
accordingly, the Company manages exposure by considering the possible changes in
the net interest margin. The Company does not have any trading instruments nor
does it classify any portion of the investment portfolio as held for trading.
The Company does not engage in any hedging activities or enter into any
derivative instruments with a higher degree of risk than mortgage backed
securities which are commonly pass through securities. Finally, the Company has
no exposure to foreign currency exchange rate risk, commodity price risk, and
other market risks.
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 the Company's
asset/liability management program, the timing of repriced assets and
liabilities is referred to as Gap management. It is the policy of the Company 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 experiences show these deposits
more stable over the course of one year. The management adjusted Gap indicates
the Company to be somewhat asset sensitive in relation to changes in market
interest rates. Being asset sensitive would result in net interest income
increasing in a rising rate environment and decreasing in a declining rate
environment.
The Company uses simulation analysis to monitor changes in net interest
income due to changes in market interest rates. The simulation of rising,
declining, and flat interest rate scenarios allow management to monitor and
adjust interest rate sensitivity to minimize the impact of market interest rate
swings. The analysis of the impact on net interest income over a twelve month
period is subjected to a gradual 200 basis point increase or decrease in market
rates on net interest income and is monitored on a quarterly basis. The most
recent simulation model projects net interest income would increase 2.42% if
rates rise gradually over the next year. On the other hand, the model projects
net interest income to decline .80% if rate decline over the next year. Company
policy states that net interest income cannot change over +/- 5% using this
analysis and presently, the Company is within policy guidelines.
32
<PAGE>
CUMULATIVE GAP ANALYSIS
<TABLE>
<CAPTION>
REGULATORY DEFINED
3-MONTH 6-MONTH 1-YEAR
(dollars in thousands)
<S> <C> <C> <C>
Rate Sensitive Assets (RSA) $376,681 $413,357 $466,996
Rate Sensitive Liabilities (RSL) 307,449 386,592 489,279
-----------------------------------------
RSA minus RSL (Gap) $ 69,232 $ 26,765 $(22,283)
=========================================
Gap Ratio (RSA/RSL) 1.23 1.07 .95
=========================================
</TABLE>
<TABLE>
<CAPTION>
MANAGEMENT ADJUSTED
3-MONTH 6-MONTH 1-YEAR
-----------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Rate Sensitive Assets (RSA) $382,485 $424,964 $483,883
Rate Sensitive Liabilities (RSL) 213,963 311,803 433,187
-----------------------------------------
RSA minus RSL (Gap) $168,522 $113,161 $ 50,696
=========================================
Gap Ratio (RSA/RSL) 1.79 1.36 1.12
=========================================
</TABLE>
33
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Report of Independent Auditors
Board of Directors
Premier Bancshares, Inc.
We have audited the accompanying consolidated statement of condition of Premier
Bancshares, Inc. and subsidiaries as of December 31, 1997, and the related
statements of income, stockholders' equity and cash flows for the year then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit. The consolidated financial statements of Premier
Bancshares, Inc. and subsidiaries for the two years in the period ended December
31, 1996 were audited by other auditors whose report dated January 31, 1997,
except for Note 2 as to which the date is June 23, 1997 and December 12, 1997,
expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1997 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Premier
Bancshares, Inc. and subsidiaries as of December 31, 1997, and the consolidated
results of their operations and their cash flows for the year ended December 31,
1997, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 5, 1998
34
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Premier Bancshares, Inc.
and Subsidiaries
Atlanta, Georgia
We have audited the accompanying consolidated balance sheets of Premier
Bancshares, Inc. and subsidiaries as of December 31, 1996 and 1995, and the
related statement of income, stockholders' equity and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the financial statements of Central and Southern Holding Company and
Citizens Gwinnett Bankshares, Inc., two companies which were pooled with Premier
Bancshares, Inc. in 1997, as explained in Note 2 to the consolidated financial
statements, which statements are included in the restated 1996 financial
statements and reflect total assets of $383.1 million and $316.1 million as of
December 31, 1996 and 1995, respectively, and total revenues of $30.4 million,
$25.2 million and $24.8 million for the three years in the period ended December
31, 1996. Those statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to data included for
Central and Southern Holding Company and Citizens Gwinnett Bankshares, Inc, is
based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Premier Bancshares, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
January 31, 1997, except for Note 2 as to
which the date is June 23, 1997 and December 12, 1997
35
<PAGE>
Premier Bancshares, Inc.
Consolidated Statements of Condition
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
<S> <C> <C>
ASSETS
Cash and due from banks $ 28,028 $ 23,419
Interest-bearing deposits with banks 6,477 2,797
Federal funds sold and repurchase agreements 17,847 51,397
Investment securities available-for-sale 115,801 151,055
Loans held for sale 59,363 24,408
Loans, net of unearned income 539,028 400,633
Allowance for credit losses (8,847) (7,603)
------------------------------------
Loans, net 530,181 393,030
Premises and equipment, net 20,649 17,729
Goodwill and other intangibles 2,817 2,827
Other real estate owned 785 1,152
Other assets 12,247 9,459
------------------------------------
Total assets $794,197 $677,273
====================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Noninterest-bearing demand $ 89,355 $ 73,653
Interest-bearing demand 87,484 94,615
Savings and money market 99,661 80,696
Time, $100,000 and over 94,831 95,323
Other time 281,646 232,925
------------------------------------
Total deposits 652,977 577,212
------------------------------------
Federal funds purchased and securities sold under repurchase
agreements 21,423 11,864
Federal Home Loan Bank advances 2,875 4,625
Guaranteed preferred beneficial interests in the Company's
subordinated debentures (trust preferred securities) 28,750 -
Other borrowings 12,135 18,983
Other liabilities 7,112 7,105
------------------------------------
Total liabilities 725,272 619,789
Stockholders' equity:
Common stock, $1 par value; 20,000,000 shares authorized;
15,217,046 issued and outstanding at December 31, 1997;
10,202,293 issued and 10,078,799 outstanding at
December 31, 1996 15,217 10,079
Capital surplus 28,841 32,961
Treasury stock, at cost (123,494 shares) - (1,133)
Retained earnings 24,127 15,519
Unrealized gains on securities available-for-sale, net of tax 740 58
------------------------------------
Total stockholders' equity 68,925 57,484
------------------------------------
Total liabilities and stockholders' equity $794,197 $677,273
====================================
</TABLE>
See accompanying notes.
36
<PAGE>
Premier Bancshares, Inc.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $52,729 $39,659 $30,628
Interest on investment securities:
Taxable 7,583 7,802 7,527
Nontaxable 1,223 1,302 960
Interest on deposits in banks 170 437 186
Interest on Federal Funds sold and repurchase
agreements 1,326 2,071 1,705
--------------------------------------------------------------
Total interest income 63,031 51,271 41,006
Interest expense:
Interest on deposits 26,898 22,567 17,540
Interest on Federal Home Loan Bank advances 680 416 200
Interest on short-term borrowings 1,733 1,982 2,055
Interest on long-term debt 727 378 79
--------------------------------------------------------------
Total interest expense 30,038 25,343 19,874
Net interest income 32,993 25,928 21,132
Provision for credit losses 644 (115) (582)
--------------------------------------------------------------
Net interest income after provision for credit 32,349 26,043 21,714
losses
Other income:
Service charges on deposit accounts 2,586 2,334 2,051
Other service charges, commissions, and fees 2,063 1,376 893
Security transactions, net (29) 147 (235)
Mortgage banking activities 14,558 8,901 5,967
Gain on sale of loans 416 - -
Other operating income 1,599 1,198 974
--------------------------------------------------------------
Total other income 21,193 13,956 9,650
Other expenses:
Salaries and employee benefits 22,291 18,309 13,690
Net occupancy and equipment 4,944 3,902 2,786
Merger expenses 1,264 499 -
Stationery and supplies 762 725 535
Other operating expenses 7,669 7,365 6,612
--------------------------------------------------------------
Total other expenses 36,930 30,800 23,623
--------------------------------------------------------------
Income before income taxes 16,612 9,199 7,741
Income tax expense 5,418 2,194 2,188
--------------------------------------------------------------
Net income $11,194 $ 7,005 $ 5,553
==============================================================
Net income per share of common stock (1) $.75 $.47 $.38
==============================================================
Net income per share of common stock, diluted (1) $.73 $.46 $.37
==============================================================
</TABLE>
(1) After giving effect to stock splits payable to stockholders of record on
January 23, 1998 and March 6, 1997.
See accompanying notes.
37
<PAGE>
PREMIER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
COMMON STOCK CAPITAL RETAINED AVAILABLE-FOR-
SHARES PAR VALUE SURPLUS EARNINGS SALE, NET OF TAX
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1995 7,827,251 $ 39,136 $ 17 $ 8,275 $(2,508)
Net income - - - 5,553 -
Stock issued 284,773 1,424 1,698 - -
5% stock dividend 76,206 381 629 (1,013) -
Cash paid to dissenting shareholders (7,650) (38) (230) - -
Cash dividends declared ($0.06 per share) - - - (882) -
Purchase of treasury stock - - - - -
Net change in unrealized gains on securities
available-for-sale, net of tax - - - - 3,263
----------------------------------------------------------------------------
Balance, December 31, 1995 8,180,580 40,903 2,114 11,933 755
Net income - - - 7,005 -
Recapitalization - (32,722) 32,722 - -
Stock options exercised 2,250 2 21 - -
Cash dividends declared ($0.23 per share) - - - (3,419) -
Purchase of treasury stock - - - - -
Net change in unrealized gains on securities
available-for-sale, net of tax - - - - (697)
Stock split 1,895,969 1,896 (1,896) - -
----------------------------------------------------------------------------
Balance, December 31, 1996 10,078,799 10,079 32,961 15,519 58
<CAPTION>
TOTAL
TREASURY STOCK STOCKHOLDERS'
SHARES PAR VALUE EQUITY
---------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1995 - $ - $44,920
Net income - - 5,553
Stock issued - - 3,122
5% stock dividend - - (3)
Cash paid to dissenting shareholders - - (268)
Cash dividends declared ($0.06 per share) - - (882)
Purchase of treasury stock 59,528 (547) (547)
Net change in unrealized gains on securities
available-for-sale, net of tax - - 3,263
---------------------------------------------
Balance, December 31, 1995 59,528 (547) 55,158
Net income - - 7,005
Recapitalization - - -
Stock options exercised - - 23
Cash dividends declared ($0.23 per share) - - (3,419)
Purchase of treasury stock 63,966 (586) (586)
Net change in unrealized gains on securities
available-for-sale, net of tax - - (697)
Stock split - - -
---------------------------------------------
Balance, December 31, 1996 123,494 (1,133) 57,484
</TABLE>
38
<PAGE>
PREMIER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (CONTINUED)
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
(Dollars in thousands)
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
COMMON STOCK CAPITAL RETAINED AVAILABLE-FOR-
SHARES PAR VALUE SURPLUS EARNINGS SALE, NET OF TAX
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net income - - - 11,194 -
Cash dividends declared ($0.17 per share) - - - (2,586) -
Shares issued in business combination 114,598 114 1,719 - -
Stock options exercised 87,741 88 423 - -
Treasury stock purchased - - - - -
Treasury stock retired (136,094) (136) (1,190) - -
Net change in unrealized gains on securities
available-for-sale, net of tax - - - - 682
Stock split 5,072,002 5,072 (5,072)
----------------------------------------------------------------------------
Balance, December 31, 1997 15,217,046 $15,217 $28,841 $24,127 $ 740
============================================================================
<CAPTION>
TOTAL
TREASURY STOCK STOCKHOLDERS'
SHARES PAR VALUE EQUITY
---------------------------------------------
<S> <C> <C> <C>
Net income - - 11,194
Cash dividends declared ($0.17 per share) - - (2,586)
Shares issued in business combination - - 1,833
Stock options exercised - - 511
Treasury stock purchased 12,600 (193) (193)
Treasury stock retired (136,094) 1,326 -
Net change in unrealized gains on securities
available-for-sale, net of tax - - 682
Stock split - - -
---------------------------------------------
Balance, December 31, 1997 - $ - $68,925
=============================================
</TABLE>
See accompanying notes.
39
<PAGE>
PREMIER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 11,194 $ 7,005 $ 5,553
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 2,051 1,371 1,069
Amortization of intangibles 239 191 149
Provision for credit losses 644 (115) (582)
Deferred income taxes (1,857) (213) 218
Net (increase) decrease in loans held for sale (26,935) 1,672 (12,958)
Net realized (gains) losses on securities
available-for-sale 29 (147) 235
Gain on sale of subsidiary (757) - -
Gain on sale of thrift charter (297) - -
Increase in interest receivable (1,110) (457) (881)
Increase in interest payable 826 513 712
Other 543 (2,857) 2,870
-------------------------------------------------------------
Net cash (used in) provided by operating (15,430) 6,963 (3,615)
activities
INVESTING ACTIVITIES
Purchases of securities available-for-sale (28,886) (76,349) (46,266)
Proceeds from sales of securities 27,434 19,320 16,059
available-for-sale
Proceeds from maturities of securities
available-for-sale 38,390 51,771 13,972
Purchases of securities held-to-maturity - - (20,352)
Proceeds from sales of securities - - 4,561
held-to-maturity
Proceeds from maturities of securities
held-to-maturity - - 16,275
Net decrease (increase) in federal funds sold 33,548 (32,115) 15,851
Net (increase) decrease in interest-bearing
deposits in banks (3,682) 9,651 (12,035)
Net increase in loans (141,102) (88,963) (34,070)
Purchase of premises and equipment (4,338) (7,018) (2,634)
Investment in subsidiary, net of cash acquired 694 - (5,217)
Proceeds from sale of subsidiary 800 - -
-------------------------------------------------------------
Net cash used in investing activities (77,142) (123,703) (53,856)
</TABLE>
40
<PAGE>
PREMIER BANCSHARES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
-------------------------------------------------------------
<S> <C> <C> <C>
FINANCING ACTIVITIES
Net increase in deposits 75,767 121,200 64,377
Net increase (decrease) in repurchase agreements 9,559 8,206 (3,056)
Net (decrease) increase in other borrowings (11,560) (1,700) 3,825
Net decrease in Federal Home Loan Bank advances (1,750) (6,500) (2,060)
Dividends paid (3,903) (2,101) (885)
Payments to dissenting shareholders - - (268)
Proceeds from exercise of stock options 511 23 -
Proceeds from issuance of guaranteed preferred
beneficial interests in the Company's
subordinated debentures 28,750 - -
Purchase of treasury stock (193) (586) (547)
Proceeds from issuance of common stock - - 3,122
-------------------------------------------------------------
Net cash provided by financing activities 97,181 118,542 64,508
Net increase in cash and due from banks 4,609 1,802 7,037
Cash and due from banks at beginning of year 23,419 21,617 14,580
-------------------------------------------------------------
Cash and due from banks at end of year $ 28,028 $ 23,419 $ 21,617
=============================================================
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $ 29,212 $ 24,783 $ 19,225
=============================================================
Income taxes $ 4,872 $ 2,661 $ 2,075
=============================================================
Principal balances of loans transferred to other
real estate $ 691 $ 529 $ 1,007
=============================================================
BUSINESS COMBINATIONS
Net cash and due from banks acquired $ 694 $ - $ 678
=============================================================
Securities available-for-sale - - 1,564
Loans held for sale 8,020 - 7,829
Loans - 37,518
Premises and equipment 413 - 1,402
Other assets 741 - 1,241
Goodwill 367 - 2,548
Deposits - - (31,031)
Advances from Federal Home Loan Bank - - (13,185)
Subordinated debentures - - (1,974)
Other liabilities (8,402) - (695)
-------------------------------------------------------------
Net assets acquired, net of cash and due from
banks $ 1,139 $ - $ 5,217
=============================================================
</TABLE>
See accompanying notes.
41
<PAGE>
PREMIER BANCSHARES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Premier Bancshares, Inc., (the "Company") is a bank and thrift holding company
whose business is conducted by its wholly owned subsidiaries, Premier Bank,
Central and Southern Bank of Georgia, Central and Southern Bank of North
Georgia, Citizens Bank of Gwinnett, and Premier Lending Corporation. In January
1997, the Company changed its name from First Alliance/Premier Bancshares, Inc.
to Premier Bancshares, Inc.
Premier Bank ("Premier") is a commercial bank with operations in Atlanta,
Marietta, Acworth, and Kennesaw, Georgia. Premier provides a full range of
banking services to individual and corporate customers in metropolitan Atlanta,
Georgia. Premier was formed by the combination of First Alliance Bank and
Premier Bank during mid 1997. First Alliance was a commercial bank with
operations in Marietta and Kennesaw, Georgia. Premier Bank was acquired by the
Company during 1995 in a business combination accounted for as a purchase.
Premier Bank was a federally chartered thrift located in Acworth, Georgia.
Central and Southern Bank of Georgia and Central and Southern Bank of North
Georgia, FSB were acquired by the Company on June 23, 1997 in a business
combination accounted for as a pooling of interests. They provide a full range
of banking services to individuals and corporate customers in their primary
market areas of central and north Georgia, respectively.
Citizens Bank of Gwinnett was acquired on December 12, 1997 and is a commercial
bank that serves Gwinnett, Fulton, and Forsyth counties and provides traditional
banking services to customers in those and surrounding counties.
Premier Lending Corporation 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. A significant
portion of the construction and commercial finance loans are participated to
affiliated and non-affiliated financial institutions.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company and
its subsidiaries. All significant intercompany transactions and accounts have
been 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. The
most significant estimates relate to the determination of the adequacy of the
allowance for credit losses.
RECLASSIFICATIONS
Certain reclassifications have been made in prior year financial statements to
conform to current presentation.
42
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection and amounts due from banks are
included in cash and due from banks.
INVESTMENT SECURITIES
Investment securities are classified based on management's intention on the date
of purchase. Such classification is reevaluated at the date of each statement
of condition. 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 securities are classified as available-for-sale and carried at fair value
with net unrealized gains and losses included as a component of stockholders'
equity, net of tax.
Interest and dividends on investment 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 estimated market value. The determination of market
value includes consideration of outstanding commitments from investors, related
origination fees and costs, and commitment fees paid. Gains and losses on the
sale of loans are recognized at settlement date and are determined by the
difference between the selling price and the carrying value of the loans sold.
The Company sells mortgage loans on a servicing released basis.
LOANS
Loans are carried at their principal amounts outstanding less unearned income,
net of deferred loan fees and costs and the allowance for credit losses.
Interest income on loans is credited to income based on the principal amount
outstanding and is accrued as earned.
Loan origination fees and certain direct costs incurred in originating loans are
deferred and recognized as income over the life of the loan.
The allowance for credit losses is maintained at a level that management
believes to be adequate to absorb losses inherent 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.
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 on such loans is subsequently recognized only to the extent cash
payments are received, the full recovery of principal is anticipated, or after
full principal has been recovered when collection of principal is in question.
Management considers a loan as impaired when it is probable the Company will be
unable to collect all principal and interest payments due in accordance with the
original terms of the loan agreement. Individually identified impaired loans
are measured based on the present value of payments expected to be received,
using the contractual loan rate as the discount rate. Alternatively,
measurement may be based on observable market prices or, for loans
43
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
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 credit losses. Changes to the
valuation allowance are recorded as a component of the provision for credit
losses. The Company has not separately evaluated smaller-balance homogeneous
loans such as consumer and smaller balance commercial loans as they are
collectively evaluated for impairment.
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles are being amortized principally on the straight-
line method over periods of from 5 to 15 years. Accumulated amortization was
$1,207,000 and $968,000 at December 31, 1997 and 1996, respectively.
Amortization expense totaled $239,000, $191,000 and $149,000 for 1997, 1996 and
1995, respectively.
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 credit losses. Subsequent
gains or losses on sale and any subsequent adjustment to the value are recorded
as other income or expense.
INCOME TAXES
Income tax expense consists of current and deferred taxes. The current income
tax provision approximates 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 its subsidiaries file a consolidated income tax return. Each
entity provides for income taxes based on its contribution to income taxes
(benefits) of the consolidated group.
44
<PAGE>
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME PER COMMON SHARE
Effective December 15, 1997, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") Statement No. 128, "Earnings per Share"
("Statement 128"). Statement 128 replaced the calculation of primary and fully
diluted earnings per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any dilutive
effects of options, warrants and convertible securities. Diluted earnings per
share is very similar to the previously reported fully diluted earnings per
share. All earnings per share amounts for all periods presented have been
restated to conform to the requirements of Statement 128.
Earnings per share for periods prior to 1997 have been restated to reflect the
effect of business combinations accounted for as poolings of interests and stock
splits. Net income per common share and net income per common share, diluted,
have been adjusted $0.05 and $0.03 in 1996 and 1995, respectively, for business
combinations accounted for as poolings of interests and $(0.17) and $(0.13) in
1996 and 1995, respectively, for stock splits.
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996 1995
--------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
NUMERATOR:
Net income $11,194 $ 7,005 $ 5,553
==================================================
DENOMINATOR:
Denominator for basic earnings per share - weighted
average shares 15,012 14,979 14,805
Effect of dilutive securities - stock options 284 293 229
--------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and assumed
conversions 15,296 15,272 15,033
==================================================
Net income per share of common stock (1) $ 0.75 $ 0.47 $ .38
--------------------------------------------------
Net income per share of common stock, assuming
dilution (1) $ 0.73 $ 0.46 $ .37
==================================================
</TABLE>
(1) After giving effect to stock splits payable to shareholders of record on
January 23, 1998 and March 6, 1997.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued Statement No. 130, "Reporting Comprehensive
Income" ("Statement 130"), which establishes standards for reporting and display
of comprehensive income and its components in a full set of general-purpose
financial statements. Statement 130 requires that all items that are required
to be recognized under accounting standards as components of comprehensive
income be reported in a financial statement that is displayed with the same
prominence as other financial statements. The Company will adopt the provisions
of Statement 130 beginning in 1998. Adoption of Statement 130 by the Company
is not expected to have a material impact on the Company's consolidated
financial position or consolidated results of operations.
In June 1997, the FASB issued Statement No. 131, "Disclosure About Segments of
an Enterprise and Related Information" ("Statement 131"), which establishes
standards for the way that public business enterprises report information about
operating segments in annual and interim financial statements. The Company will
adopt the provisions of Statement 131 beginning in 1998. The adoption is not
expected to have a material impact on the Company's consolidated financial
position or consolidated results of operations.
45
<PAGE>
2. BUSINESS COMBINATIONS
On December 12, 1997, the Company completed a business combination with Citizens
Gwinnett Bancshares, Inc. ("Citizens") by exchanging 2,066,834 shares of the
Company's common stock for all of the outstanding common stock of Citizens. The
combination was accounted for as a pooling of interests and, accordingly, the
current period financial statements reflect the combination as if it took place
on January 1, 1997, and all prior period consolidated financial statements have
been restated to include the results of Citizens.
On June 23, 1997, the Company completed a business combination with Central and
Southern Holding Company ("Central and Southern") by exchanging 3,653,523 shares
of the Company's common stock for all of the outstanding common stock of Central
and Southern. The combination was accounted for as a pooling of interests and,
accordingly, the current period financial statements reflect the combination as
if it took place on January 1, 1997, and all prior period consolidated financial
statements have been restated to include the results of Central and Southern.
On August 31, 1996, First Alliance Bancorp, Inc. ("First Alliance") completed a
business combination with the Company by exchanging 746,530 shares of its common
stock for all the outstanding common stock of the Company. 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 interests
and, accordingly, all prior period consolidated financial statements have been
restated to include the results of the former Premier Bancshares, Inc.
On December 16, 1997, the Company announced that a definitive merger agreement
had been entered into with Lanier Bank and Trust Company ("Lanier"). As of
December 31, 1997, Lanier had total assets of $71,357,000, and for the year
ended December 31, 1997 had revenue and net income of $5,477,000 and $800,000,
respectively. The merger is expected to be accounted for as a pooling of
interests.
On December 3, 1997, the Company announced that a definitive merger agreement
had been entered into with the Bank Holding Company ("BHC"). As of December 31,
1997, BHC had total assets of 134,000,000, and for the year ended December 31,
1997 had revenue and net income of 12,455,000 and 1,219,000, respectively. The
merger is expected to be accounted for as a pooling of interests.
On February 5, 1998, the Company announced that a definitive merger agreement
had been signed with Button Gwinnett Financial Corporation ("BGFC"). As of
December 31, 1997, BGFC had total assets of $215,191,000, and for the year ended
December 31, 1997, had revenue and net income of $17,768,000 and $4,864,000,
respectively. The merger is expected to be accounted for as a pooling of
interests.
46
<PAGE>
2. BUSINESS COMBINATIONS (CONTINUED)
The following table illustrates the Company's net interest income and net income
on a consolidated basis for periods prior to the business combinations discussed
above:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Net interest income:
Premier Bancshares, Inc., exclusive of
pre-acquisition amounts $20,498 $ 9,765 $ 7,463
Citizens (1) 7,796 5,914 4,219
Central and Southern (2) 4,699 8,280 7,893
former Premier Bancshares, Inc. (3) - 1,969 1,557
------------------------------------------------------
Total $32,993 $25,928 $21,132
======================================================
Net income:
Premier Bancshares, Inc. exclusive of
pre-acquisition amounts $ 7,744 $ 2,425 $ 1,850
Citizens (1) 1,935 1,511 1,005
Central and Southern (2) 1,515 2,954 2,559
former Premier Bancshares, Inc. (3) - 115 139
------------------------------------------------------
Total $11,194 $ 7,005 $ 5,553
======================================================
</TABLE>
(1) 1997 amounts reflect the results of operations from January 1, 1997 through
the effective merger date of December 12, 1997. Results of operations for
the period from December 13, 1997 through December 31, 1997 are included in
Premier Bancshares, Inc. amounts.
(2) 1997 amounts reflect the results of operations from January 1, 1997 through
the effective merger date of June 23, 1997. Results of operations for the
period from June 24, 1997 through December 31, 1997 are included in Premier
Bancshares, Inc. amounts.
(3) 1996 amounts reflect the results of operations from January 1, 1996 through
the effective merger date of August 31, 1996. Results of operations for the
period from September 1, 1996 through December 31, 1996 are included in
Premier Bancshares, Inc. amounts.
47
<PAGE>
2. BUSINESS COMBINATIONS (CONTINUED)
Effective October 17, 1997, the Company acquired Traditional Mortgage
Corporation ("Traditional") for 114,598 shares of the Company's common stock at
a fair market value of $1,833,000. Traditional originates residential mortgage
loans primarily for sale to independent third party investors. Traditional was
merged with Premier Lending Corporation. The acquisition was accounted for as a
purchase and the results of operations for Traditional from the date of
acquisition are included in the consolidated financial statements. The purchase
price was allocated to the acquired assets and liabilities based on the fair
value of those assets and liabilities as determined by the Company as set forth
below (in thousands):
<TABLE>
<S> <C>
Cash received $ 694
Loans held for sale 8,020
Premises and equipment 413
Other assets 741
Goodwill 367
Other liabilities (8,402)
---------
Purchase price $ 1,833
=========
</TABLE>
The excess of the total acquisition cost over the fair value of the assets and
liabilities acquired is being amortized on a straight-line basis over a period
of fifteen years.
The following unaudited pro forma results of operations give effect to the
operations of Traditional as if the acquisition had occurred as of the beginning
of the periods presented. The pro forma results of operations do not purport to
represent what the Company's results of operations would have been had the
acquisition in fact occurred at the beginning of the years presented or to
project the Company's results of operations in any future period.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1997 1996
----------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C>
Revenue $90,717 $73,520
Net income 11,459 7,054
Net income per share of common stock, as restated
for stock splits 0.76 0.47
</TABLE>
On May 1, 1995, Premier Bancshares, Inc. acquired all of the outstanding stock
of Allotoona 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 Allotoona Federal Savings Bank since the date of
acquisition are included in the consolidated financial statements.
On January 31, 1995, First Alliance 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. 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. On June 30, 1997, the Company disposed of Alliance Finance and
recognized a gain on the disposition of $757,000.
48
<PAGE>
3. INVESTMENT SECURITIES
The amortized cost and fair value of investment securities are summarized as
follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
December 31, 1997:
U.S. Treasury securities $ 3,393 $ 22 $ (2) $ 3,413
U.S. Government and agency
securities 43,630 308 (41) 43,897
State and municipal securities 20,046 964 - 21,010
Mortgage backed securities 43,822 333 (255) 43,900
Equity securities 3,667 - (86) 3,581
------------------------------------------------------------------
$114,558 $1,627 $ (384) $115,801
==================================================================
SECURITIES AVAILABLE FOR SALE
December 31, 1996:
U.S. Government and agency
securities $ 71,597 $ 137 $ (348) $ 71,386
State and municipal securities 22,815 712 (49) 23,478
Mortgage backed securities 54,111 302 (646) 53,767
Equity securities 2,479 - (55) 2,424
------------------------------------------------------------------
$151,002 $1,151 $(1,098) $151,055
==================================================================
</TABLE>
The amortized cost and fair value of securities as of December 31, 1997 by
contractual maturity are shown below. Maturities may differ from contractual
maturities in mortgage-backed securities because the mortgages underlying the
securities may be called or prepaid 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
---------------------------------------
(dollars in tousands)
<C> <C>
<S>
Due from one year to five years $ 31,801 $ 32,056
Due from five to ten years 23,423 23,868
Due after ten years 11,845 12,396
Mortgage-backed securities 43,822 43,900
Equity securities 3,667 3,581
---------------------------------------
$114,558 $115,801
=======================================
</TABLE>
Securities with a carrying value of approximately $66,237,000 and $57,564,000 at
December 31, 1997 and 1996, respectively, were pledged to secure public deposits
and for other purposes.
49
<PAGE>
3. INVESTMENT SECURITIES (CONTINUED)
Gains and losses on sales of securities consist of the following:
<TABLE>
<CAPTION>
HELD TO MATURITY
AVAILABLE FOR SALE
----------------------- ---------------------------------------------------
1995 1997 1996 1995
----------------------- ---------------------------------------------------
(dollars in thousands) (dollars in thousands)
<S> <C> <C> <C> <C>
Gross gains $ 1 $ 1 $ 195 $ 138
Gross losses (31) (30) (48) (343)
----------------------- ---------------------------------------------------
Net realized gains (losses) $ (30) $ (29) $ 147 $(205)
======================= ===================================================
</TABLE>
The related income tax expense (benefit) on sales of securities is $(9,000),
$35,000, and $(66,000) for 1997, 1996, and 1995, respectively.
In late 1995, the FASB issued an implementation guide relating to Statement No.
115. Included in this guide was a one-time opportunity to reallocate
investments between categories without calling into question the validity of the
classifications. Accordingly, in December 1995, the Company transferred all of
its held-to-maturity portfolio to available-for-sale. The transfer resulted in
a net unrealized gain of $539,000, net of tax of $212,000, which is included in
stockholders' equity.
4. LOANS
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------------------------
(dollars in thousands)
<S> <C> <C>
Commercial $ 90,731 $104,230
Real estate-construction 142,718 117,586
Real estate-mortgage 327,709 161,825
Consumer 36,834 41,890
Other 1,422 81
Less: loans held for sale (59,363) (24,408)
-----------------------------------------------
540,051 401,204
Less unearned income (2,294) (593)
Net deferred loan (fees) costs 1,271 22
Less allowance for credit losses (8,847) (7,603)
Loans, net $530,181 $393,030
===============================================
</TABLE>
The Company had loan participations sold in the amount of $21,020,000 and
$52,402,000 at December 31, 1997 and 1996, respectively.
50
<PAGE>
4. LOANS (CONTINUED)
Changes in the allowance for credit losses for the years ended December 31,
1997, 1996 and 1995 were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Balance, beginning of year $7,603 $6,776 $ 6,389
Allowance acquired (disposed)
in acquisitions and disposals (74) 294
Provision for credit losses 644 (115) (582)
Loans charged off (501) (603) (1,757)
Recoveries 1,175 1,545 2,432
--------------------------------------------------------
Balance, end of year $8,847 $7,603 $ 6,776
========================================================
</TABLE>
Loans in nonaccrual status at December 31, 1997 and 1996 totaled $2,674,000 and
$1,532,000, respectively. The total recorded investment in impaired loans was
$2,802,000 and $1,660,000 at December 31, 1997 and 1996, respectively. None of
these loans had a specific allowance for credit losses at December 31, 1997 and
1996. The average recorded investment in impaired loans for 1997, 1996 and 1995
was $1,343,000 $1,617,000 and $1,649,000, respectively. Interest income on
impaired loans of $25,000, $118,000 and $10,000 was recognized for cash payments
received for the years ended 1997, 1996 and 1995, respectively. Interest income
lost on impaired loans during 1997, 1996, and 1995 was $106,000, $168,000, and
$71,000, 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, 1997 are as
follows in thousands:
<TABLE>
<S> <C>
Balance, beginning of year $5,872
Advances 2,196
Repayments 1,854
-----------
Balance, end of year $6,214
===========
</TABLE>
5. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------------------------
(dollars in thousands)
<S> <C> <C>
Land $ 4,275 $ 3,546
Buildings and improvements 13,372 12,045
Furniture and equipment 14,380 10,728
-----------------------------------------------
32,027 26,319
Accumulated depreciation (11,378) (8,590)
-----------------------------------------------
Premises and equipment, net $ 20,649 $17,729
===============================================
</TABLE>
51
<PAGE>
6. DEPOSITS
Time deposits over $100,000 as of December 31, 1997 and 1996 were $94,831,000
and $95,323,000, respectively. Related interest expense was $5,626,000,
$4,227,000, and $3,527,000 for the years ended 1997, 1996, and 1995. Included
in demand and savings and money market deposits were NOW accounts totaling
$87,484,000, $68,991,000 and $54,188,000 at December 31, 1997, 1996 and 1995,
respectively. Time deposits of $297,299,000, $39,982,000, $17,520,000,
$10,681,000 and $10,995,000 mature in 1998, 1999, 2000, 2001 and 2002,
respectively.
7. BORROWINGS
The Company's borrowings are summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
-----------------------------------------------
(dollars in thousands)
<S> <C>
Federal funds purchased and securities sold <C>
under repurchase agreements $21,423 $11,864
FHLB advances 2,875 4,625
Other borrowings 12,135 18,983
-----------------------------------------------
Total borrowings $36,433 $35,472
===============================================
</TABLE>
As of December 31, 1997, the Company had entered into two repurchase agreements
totaling $21,423,000. Interest is payable monthly at 4.0% and 4.64%. The
Company has pledged various U.S. Government and agency securities as collateral.
Advances from the Federal Home Loan Bank totaled $2,875,000 at December 31,
1997. The advances have maturity dates ranging from January 2, 1998 through
August 1, 2001. Interest is payable monthly at rates ranging from 5.91% to
8.41%. Advances 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.
Included in other borrowings at December 31, 1997 are subordinated debentures, a
line of credit, and treasury, tax and loan deposits. The subordinated
debentures total $475,000 at December 31, 1997, are payable on demand, and may
be repaid by the Company at a price equal to 100% of the principal balance plus
accrued interest to date of redemption without penalty. The Company's line of
credit is with a nonaffiliated institution bearing interest at prime minus 75
basis points (7.75% at December 31, 1997), payable quarterly. The outstanding
balance at December 31, 1997 is $10,160,000 and the available balance is
$4,840,000. This line matures on June 30, 2008 and is secured by all stock of
the Company and its subsidiaries. Treasury, tax and loan deposits, which total
$1,500,000 at December 31, 1997, are made by local businesses to be remitted to
the government. Interest on these deposits is payable monthly at a rate of
5.28%.
In connection with the line of credit, the Company has agreed, among other
covenants, to maintain earnings, reserves for credit losses, and capital at
certain minimum levels. During 1997, the Company was in compliance with these
covenants.
The Company's weighted-average interest rate on short-term borrowings as of
December 31, 1997 and 1996 was 7.31% and 7.57%, respectively.
52
<PAGE>
7. BORROWINGS (CONTINUED)
Principal maturities of borrowings outstanding as of December 31, 1997 are
summarized as follows:
<TABLE>
<CAPTION>
AMOUNT
--------------------------
(dollars in thousands)
<S> <C>
1998 $34,558
1999 875
2000 -
2001 1,000
2002 -
Thereafter -
-------------------
Total $36,433
===================
</TABLE>
8. TRUST PREFERRED SECURITIES
In November 1997, the Company issued, through a wholly owned subsidiary, Premier
Capital Trust I (the "Trust"), 9.00% Cumulative Trust Preferred Securities
("Preferred Securities") with an aggregate liquidation amount of $28,750,000,
which are redeemable at the option of the Company on or after December 31, 2007
or upon the occurrence of certain regulatory events. Holders of Preferred
Securities are entitled to receive cumulative cash distributions, at the annual
rate of 9.00% of the liquidation amount of $25.00 per Preferred Security,
accruing from the date of original issuance and payable quarterly in arrears.
The Company has guaranteed the payment of distributions and payments on
liquidation of redemption of the Preferred Securities, but only in each case to
the extent of funds held by the Trust.
The Preferred Securities represent preferred undivided beneficial interests in
the assets of the Trust, which consist solely of 9.00% Subordinated Debentures
(the "Subordinated Debentures") issued by the Company to the Trust. The
Subordinated Debentures bear interest at 9.00%, payable quarterly. The
Subordinated Debentures are unsecured and are effectively subordinated to all
existing and future liabilities of the Company. The Company has the right, at
any time, so long as no event of default has occurred, to defer payments of
interest on the Subordinated Debentures for a period not to exceed 20
consecutive quarters. Exercise of this right by the Company will result in the
deferral of quarterly distributions on the Preferred Securities; however,
interest will continue to accrue on the Subordinated Debentures and unpaid
dividends accumulate on the Preferred Securities. The proceeds from the
Preferred Securities qualifies as tier i capital with respect to the company
under the risk-based capital guidelines established by the Federal Reserve.
Federal Reserve guidelines for calculation of tier i capital limit the amount of
cumulative preferred stock which can be included in tier i capital to 25% of
total tier i capital.
9. EMPLOYEE BENEFIT PLANS
The Company has defined-contribution employee benefit plans incorporating
provisions of section 401(k) of the Internal Revenue Code. Generally, employees
of the company must have from 60 days to one year of service to become eligible.
Under the plans' provisions, a plan member may make contributions, on a tax-
deferred basis, from 1% to 20% of total compensation not to exceed the maximum
established annually by the Internal Revenue Service. The Company makes
discretionary contributions and matching contributions in amounts ranging from
1% to 75% of total contributions by a plan member, to a maximum of between 4%
and 6% of the employee's total calendar year compensation. Contributions to the
plans charged to expense were $484,000, $158,000 and $118,000 for the years
ended December 31, 1997, 1996 and 1995, respectively.
53
<PAGE>
10. Stock Option Plans
Stock options to purchase shares of the Company's common stock are issued under
the following five plans:
The Company has a Directors' Deferred Stock Unit Plan ("Unit Plan") which
replaces the former Directors' Stock Option Plan. Under the Unit Plan, each
eligible director can elect to defer payment of directors fees to be received as
shares of the Company's common stock at 85% of the market price on the award
date. A total of 225,000 shares of common stock have been reserved for issuance
under the Unit Plan. Awards made under the Unit Plan are deemed to be
immediately vested but cannot be exercised until the date the Director is no
longer a board member.
The Company had a Directors' Stock Option Plan ("Directors' Plan") under which
the Company could grant options to purchase shares of common stock to eligible
directors. The purchase price of the stock was not less than the fair market
value of the stock on the date the option was granted. Under the Directors'
Plan, the number of shares issued did not to exceed an aggregate of 30,000
shares. The option period does not exceed ten years from the date of grant.
All available options under the Plan have been granted.
The Company has a 1997 Stock Option Plan ("Employee Plan") under which the
Company can grant options to purchase shares of common stock to certain key
employees. The purchase price of the stock will not be less than the fair
market value of such shares on the date the option is granted. Under the
Employee Plan, the number of shares issued is not to exceed an aggregate of
1,125,000 shares. The option period will not exceed ten years from the date of
grant.
The Company has a 1995 Stock Option Plan whereby the Company may grant incentive
stock options and nonqualified stock options to certain key employees to
purchase up to 112,500 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 the date of grant. All
available options under the Plan have been granted.
The Company has a 1993 Employee Stock Option Plan whereby the Company can grant
options to purchase an aggregate of 60,000 shares of common stock to certain key
employees at a price not less than the fair market value of the stock on the
date the option is granted. The option period will not exceed ten years from
the date of grant. All available options under the Plan have been granted.
54
<PAGE>
10. STOCK OPTION PLANS (CONTINUED)
Information related to the various option plans has been restated for stock
splits and is summarized as follows:
<TABLE>
<CAPTION>
December 31
1997 1996 1995
------------------------------------------------------------------------------------
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 436,005 $4.04 367,620 $3.65 235,769 $3.35
Granted 337,553 9.44 75,834 5.87 144,039 4.15
Exercised (148,266) 4.64 (6,093) 3.69 - -
Expired (3,000) 5.75 (1,356) 3.69 (12,188) 3.69
-------------------------------------------------------------------------------------
Under option, end of year 622,292 $5.63 436,005 $4.04 367,620 $3.65
=====================================================================================
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED
WEIGHTED AVERAGE
AVERAGE REMAINING
EXERCISE CONTRACTUAL
NUMBER PRICE PRICE LIFE IN YEARS
--------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding and
exercisable, end of year 250,587 $ 2.83-4.17 $3.46 7
30,198 4.18-5.51 5.00 8
53,241 5.52-6.85 5.90 9
-----------
334,026
===========
Options outstanding not
exercisable, end of year 288,266 $6.86-10.67 9.54 10
-----------
622,292
===========
</TABLE>
As permitted by FASB Statement No. 123, "Accounting for Stock-Based
Compensation" (Statement 123), the Company recognizes compensation cost for
stock-based employee compensation awards in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees".
The Company recognized no compensation for stock-based employee compensation
expense awards for the years ended December 31, 1997 and 1996.
55
<PAGE>
10. STOCK OPTION PLANS (CONTINUED)
If the Company had recognized compensation expense in accordance with Statement
123, net income and net income per share would have been as follows:
<TABLE>
<CAPTION>
NET NET INCOME PER NET INCOME PER
INCOME SHARE SHARE (DILUTED)
-------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
DECEMBER 31, 1997
As reported $11,194 $ 0.75 $ 0.73
Stock based compensation, net of
related tax effect (319) (0.03) (0.02)
-------------------------------------------------------
As adjusted $10,875 $ 0.72 $ 0.71
=======================================================
DECEMBER 31, 1996
As reported $ 7,005 $ 0.47 $ 0.46
Stock based compensation, net of
related tax effect (72) - -
-------------------------------------------------------
As adjusted $ 6,933 $ 0.47 $ 0.46
=======================================================
DECEMBER 31, 1995
As reported $ 5,553 $ 0.38 $ 0.37
Stock based compensation, net of
related tax effect (68) (0.01) (0.01)
-------------------------------------------------------
As adjusted $ 5,485 $ 0.37 $ 0.36
=======================================================
</TABLE>
The per share weighted-average fair value of stock options granted during 1997,
1996 and 1995 was $3.46, $1.43 and $0.72, respectively, using the Black Scholes
option-pricing model. 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>
<CAPTION>
1997 1996 1995
-----------------------------------------------------------
<S> <C> <C> <C>
Risk free interest rate 6.45% 6.45% 6.45%
Expected life of the options 10 YEARS 10 Years 10 Years
Expected dividends (as a percent of the
fair value of the stock) 1.00% 2.68% 3.85%
Volatility 32.20% 9.73% 10.03%
</TABLE>
56
<PAGE>
11. Income Taxes
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
-----------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
1997:
Federal $6,089 $(1,222) $4,867
State 1,186 (635) 551
-----------------------------------------------------
Total 7,275 (1,857) 5,418
1996:
Federal 2,046 (181) 1,865
State 361 (32) 329
-----------------------------------------------------
Total 2,407 (213) 2,194
1995:
Federal 1,675 185 1,860
State 29 33 328
-----------------------------------------------------
Total 1,970 218 2,188
</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 in thousands:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996 1995
------------------------------------------------
<S> <C> <C> <C>
Income taxes at statutory rate $5,814 $3,132 $2,636
State tax, net of federal benefit 357 - 46
Tax-exempt interest income (447) (383) (273)
Disallowed merger expenses 430 142 36
Valuation allowance adjustment (554) (691) (262)
Other items, net (182) (6) 5
------------------------------------------------
Income tax expense $5,418 $2,194 $2,188
================================================
</TABLE>
57
<PAGE>
11. Income Taxes (continued)
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
1997 1996
------------------------------------
(dollars in thousands)
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $1,004 $ 278
Deferred compensation 160 151
Deferred loan fees, net of costs 233 -
Other real estate 104 89
Investment securities available-for-sale - 6
Write-down of mutual funds 19 19
Net operating loss carryforward 713 585
Georgia tax credits carryforward 147 240
Pension 64 45
Post-retirement benefits other than pensions 70 48
Alternative minimum tax carryforwards 589 589
Valuation allowance - (554)
-------------------------------------
3,103 1,496
-------------------------------------
Deferred tax liabilities:
Depreciation and amortization 765 721
Deferred loan fees, net of cost - 142
Investment securities available-for-sale 489 -
Cash method accounting on certain receivables - 144
Other 21 23
-----------------------------------
1,275 1,030
-----------------------------------
Net deferred tax assets $1,828 $ 466
===================================
</TABLE>
Management has evaluated the need for a valuation allowance for all or a portion
of the deferred tax assets and believes that the deferred tax assets will be
more likely than not realized. Accordingly, no valuation allowance has been
recognized.
At December 31, 1997, the Company has available net operating loss carryforwards
of approximately $762,000 and $7,561,000 for Federal and State income tax
purposes, respectively. At December 31, 1997 the Company had AMT carryforwards
of $1,630,000 and state income tax credit carryforwards of $2,455,000. 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.
12. COMMITMENTS AND CONTINGENCIES
The Company enters into firm commitments to sell at agreed upon prices mortgage
loans which it has originated. 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.
58
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company sells mortgage loans to investors under various blanket agreements.
Under the agreements, investors generally have a limited right of recourse to
the Company for normal representations and warranties and, in some cases, for
delinquencies within the first three to six months which lead to loan default
and foreclosure. Management believes that the risk of loss to the Company as a
result of these provisions is insignificant.
The Company enters into residential construction and commercial loan commitments
in advance of closing to fund loans to its customers at locked-in interest rates
in the normal course of business. These instruments, to the extent they are not
covered by investor purchase commitments, involve credit and interest rate risk
in excess of the amount recognized in the financial statements.
In the normal course of business, the Company enters 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
1997 1996
----------------------------------------
(dollars in thousands)
<S> <C> <C>
Unfunded mortgage loan commitments $ 17,643 $ 20,000
Construction and commercial real estate commitments
135,807 117,399
Standby letters of credit 2,236 1,383
----------------------------------------
$155,686 $138,782
========================================
</TABLE>
Commitments to extend credit generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitments are expected to expire without being drawn upon, the total
commitment amounts do not necessarily represent future cash requirements. The
credit risk involved in issuing these financial instruments is essentially the
same as that involved in extending loans to customers. The Company evaluates
each customer's creditworthiness on a case-by-case basis. The amount of
collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements, marketable securities,
accounts receivable, 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.
At December 31, 1997, the Company had agreements with unaffiliated institutions
allowing it to sell participations in loans at the Company's option. The unused
participation amount was $8,741,000 at December 31, 1997.
59
<PAGE>
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
In the normal course of business, the Company is involved in various legal
proceedings. In the opinion of management of the Company, any liability
resulting from such proceedings would not have a material effect on the
Company's consolidated financial statements.
The Company leases office facilities and certain equipment under noncancelable
lease agreements. Future minimum lease commitments at December 31, 1997 are
summarized as follows:
<TABLE>
<S> <C>
Year ending December 31,
1998 $1,318,000
1999 1,150,000
2000 924,000
2001 665,000
2002 630,000
Thereafter 2,377,000
--------------
$7,064,000
==============
</TABLE>
Rental expense for the years ended December 31, 1997, 1996 and 1995 was
$1,018,000, $756,000 and $117,000, respectively.
The Federal Reserve Board requires that banks maintain cash on hand and reserves
in the form of average deposit balances at the Federal Reserve Bank based on
their average deposits. The Company's average reserve requirement was
$11,422,000 and $9,716,000 during 1997 and 1996, respectively.
13. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer loans to
customers in the greater metropolitan 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.
A substantial portion of the Company's loan portfolio is secured by real estate.
A substantial portion of these loans is secured by real estate in the Company's
primary market area.
14. REGULATORY MATTERS
The banking and thrift subsidiaries of the Company are subject to certain
restrictions on the amount of dividends that may be declared without prior
regulatory approval. At December 31, 1997, approximately $5,652,000 of retained
earnings were available for dividend declaration without supervisory approval.
The Company and its banking and thrift subsidiaries are subject to various
regulatory capital requirements administered by the federal banking agencies.
Failure to meet minimum capital requirements can initiate certain mandatory-and
possibly additional discretionary-actions by regulators that, if undertaken,
could have a direct material effect on the financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective action,
the Company and Banks must meet specific capital guidelines that involve
quantitative measures of the assets, liabilities, and certain off-balance-sheet
items as calculated under regulatory accounting practices. The Company and
Bank's capital amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings, and other
factors.
60
<PAGE>
14. REGULATORY MATTERS (CONTINUED)
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its banking subsidiaries to maintain minimum amounts of
capital. Management believes, as of December 31, 1997, the Company and its
subsidiaries meet all capital adequacy requirements to which they are subject.
As of December 31, 1997, the banking and thrift subsidiaries were all well
capitalized under the regulatory framework for prompt corrective action. To be
categorized as well capitalized, the Company and its subsidiaries must each
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 that
management believes have changed the Company's or its subsidiaries' category.
The Company and its banking and thrift subsidiaries' actual capital amounts and
ratios at December 31, 1997 and 1996 are as shown below:
.
<TABLE>
<CAPTION>
DECEMBER 31, 1997
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>
Total capital (to Risk Weighted
Assets):
Consolidated $101,852 16.29% $50,033 8.00% $62,541 10.00%
Premier 29,017 10.44% 22,229 8.00% 27,787 10.00%
Milledgeville 20,453 18.09% 9,039 8.00% 11,299 10.00%
North Georgia 7,377 8.97% 6,579 8.00% 8,223 10.00%
Citizens 13,768 10.20% 10,803 8.00% 13,504 10.00%
Tier I Capital (to Risk Weighted
Assets):
Consolidated 87,968 14.07% 25,017 4.00% 37,525 6.00%
Premier 26,370 9.47% 11,115 4.00% 16,672 6.00%
Milledgeville 19,021 16.59% 4,520 4.00% 6,779 6.00%
North Georgia 6,347 7.70% 3,289 4.00% 4,934 6.00%
Citizens 12,263 9.08% 5,401 4.00% 8,102 6.00%
Tier I Capital (to Average
Assets):
Consolidated 87,968 11.37% 30,941 4.00% 38,677 5.00%
Premier 26,320 7.43% 14,163 4.00% 17,702 5.00%
Milledgeville 19,021 12.27% 6,200 4.00% 7,750 5.00%
Citizens 12,263 7.41% 6,621 4.00% 8,276 5.00%
Core Capital
North Georgia 6,347 6.73% 2,829 3.00%
Tangible Capital
North Georgia 6,347 6.73% 1,414 1.50%
</TABLE>
61
<PAGE>
14. REGULATORY MATTERS (CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1996
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>
Total capital (to Risk Weighted
Assets):
Consolidated $59,787 12.57% $38,051 8.00% $47,563 10.00%
First Alliance Bank 18,716 14.02% 10,680 8.00% 13,350 10.00%
Premier 6,221 8.57% 5,807 8.00% 7,259 10.00%
Milledgeville 19,064 20.00% 7,805 8.00% 9,757 10.00%
North Georgia 5,810 12.00% 3,946 8.00% 4,933 10.00%
Citizens 11,338 10.90% 8,315 8.00% 10,394 10.00%
Tier I Capital (to Risk Weighted
Assets):
Consolidated 54,430 11.45% 19,015 4.00% 28,522 6.00%
First Alliance Bank 17,044 12.74% 5,351 4.00% 8,027 6.00%
Premier 5,819 8.02% 2,902 4.00% 4,353 6.00%
Milledgeville 17,822 18.00% 3,903 4.00% 5,854 6.00%
North Georgia 5,187 11.00% 1,973 4.00% 2,960 6.00%
Citizens 10,303 9.90% 4,158 4.00% 6,236 6.00%
Tier I Capital (to Average
Assets):
Consolidated 54,430 8.15% 26,714 4.00% 33,393 5.00%
First Alliance Bank 17,044 8.89% 7,669 4.00% 9,586 5.00%
Premier 5,819 6.86% 3,393 4.00% 4,241 5.00%
Milledgeville 17,822 12.00% 6,004 4.00% 7,505 5.00%
Citizens 10,303 6.70% 6,161 4.00% 7,702 5.00%
Core Capital
Premier 5,819 5.85% 2,984 3.00%
North Georgia 5,187 7.00% 2,140 3.00%
Tangible Capital
Premier 5,819 5.85% 1,492 1.50%
North Georgia 5,187 7.00% 1,070 1.50%
</TABLE>
15. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments. In cases where quoted market
prices are not available, fair values are based on estimates using discounted
cash flow methods. Those methods are significantly affected by the assumptions
used, including the discount rates and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. The use of different methodologies may have a
material effect on the estimated fair value amounts. Also, the fair value
estimates presented herein are based on pertinent information available to
management as of December 31, 1997 and 1996. Such amounts have not been
revalued for purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
62
<PAGE>
15. FAIR VALUE OF FINANCIAL INSTRUMENTS (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 such certificates.
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS, FEDERAL HOME LOAN BANK ADVANCES,
TRUST PREFERRED SECURITIES AND OTHER BORROWINGS
The fair values of Federal Home Loan Bank advances, Trust Preferred
Securities 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.
63
<PAGE>
15. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
----------------------------------------------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
----------------------------------------------------------------------
(dollar in thousands)
<S> <C> <C> <C> <C>
Financial assets:
Cash, due from banks,
interest-bearing deposits in banks
and Federal funds sold
$ 52,352 $ 52,352 $ 77,613 $ 77,613
Securities available-for-sale 115,801 115,801 151,055 151,055
Loans 589,544 589,275 417,439 418,113
Accrued interest receivable 5,652 5,652 4,510 4,510
Financial liabilities:
Deposits 652,977 653,685 577,212 578,864
Federal funds purchased and
securities sold under repurchase
agreements 21,423 21,423 11,864 11,864
Federal Home Loan Bank advances
2,875 2,920 4,625 4,722
Trust Preferred Securities 28,750 28,750 -- --
Other borrowings 12,135 12,135 18,983 18,985
Accrued interest payable 3,985 3,985 3,203 3,203
</TABLE>
16. STOCKHOLDERS' EQUITY
The Company declared a three for two stock split on January 8, 1998 for
stockholders of record as of January 23, 1998. All per share data presented for
1997, 1996 and 1995 has been restated to reflect the split.
On February 24, 1997, the Company declared a 1.8055 stock split for stockholders
of record as of March 6, 1997. All per share data has been restated to reflect
the split.
On August 31, 1996, the Company changed the par value of its common stock from
five dollars to one dollar per share.
64
<PAGE>
17. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets of Premier
Bancshares, Inc. at December 31, 1997 and 1996, and the statements of income and
cash flows for the years ended December 31, 1997, 1996 and 1995:
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
1997 1996
-----------------------------
(In Thousands)
<S> <C> <C>
ASSETS
Cash and cash equivalents $21,794 $ 1,231
Investment in subsidiaries 73,055 61,165
Securities available-for-sale 481 -
Other assets 3,307 2,200
-----------------------------
Total assets $98,637 $64,596
=============================
LIABILITIES
9.00% Subordinated debentures due 2027 $29,639 $ -
Other borrowings - 5,649
Other liabilities 73 1463
-----------------------------
29,711 7,112
Stockholders' equity 68,925 57,484
-----------------------------
Total liabilities and stockholders' equity $98,637 $64,596
=============================
</TABLE>
65
<PAGE>
17. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------------
(dollar in thousands)
<S> <C> <C> <C>
Income:
Interest on deposits $ 92 $ 24 $ 51
Interest and fees on loans - - 424
Dividends from subsidiaries 4,053 3,983 2,133
Other income 1,101 93 401
---------------------------------------------------------
5,246 4,100 3,009
---------------------------------------------------------
Expenses:
Salaries and employee benefits 284 56 911
Interest 737 360 336
Merger related expenses 859 468 -
Legal and professional 186 42 80
Other expenses 517 509 680
---------------------------------------------------------
Total expenses 2,583 1,435 2,007
---------------------------------------------------------
Income before income tax benefits
and equity in undistributed income
of subsidiaries 2,663 2,665 1,002
Benefit for income taxes (804) (766) (407)
---------------------------------------------------------
Income before equity in
undistributed income of subsidiary 3,467 3,431 1,409
Equity in undistributed income of
subsidiary 7,727 3,574 4,144
---------------------------------------------------------
Net income $11,194 $7,005 $5,553
=========================================================
</TABLE>
66
<PAGE>
17. PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------------------------------------
(dollar in thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $11,194 $ 7,005 $ 5,553
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 13 10 7
Amortization 10 33 30
Undistributed income of subsidiaries (7,727) (3,574) (4,144)
Gain on sale of subsidiary (757) - -
Gain on sale of thrift charter (297) - -
Net increase in loans held for sale - - (457)
Other (1,189) 425 275
--------------------------------------------------------
Net cash provided by operating activities 1,247 3,899 1,264
INVESTING ACTIVITIES
Net increase in loans - - (1,647)
Purchase of premises and equipment - (1,113) -
Investment in subsidiaries (1,889) (1,684) (7,739)
Proceeds from sale of subsidiary 800 - -
Proceeds from sale of premises and equipment - - 20
--------------------------------------------------------
Net cash used in investing activities (1,089) (2,797) (9,366)
FINANCING ACTIVITIES
Net (decrease) increase in other borrowings (5,649) 2,393 5,695
Dividends paid (3,903) (2,101) (885)
Proceeds from exercise of stock options 511 23 -
Purchase of treasury stock (193) (586) (547)
Proceeds from common stock issued - - 3,122
Proceeds from issuance of 9.00%
Subordinated Debentures 29,639 - -
Payments to dissenting shareholders - - (268)
--------------------------------------------------------
Net cash provided by (used in) financing
activities 20,405 (271) 7,117
Net increase (decrease) in cash 20,563 831 (985)
Cash at beginning of year 1,231 400 1,385
--------------------------------------------------------
Cash at end of year $21,794 $ 1,231 $ 400
========================================================
</TABLE>
67
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES
On December 29, 1997, Mauldin & Jenkins, LLC ("Mauldin & Jenkins"), the
Company's principal accountant was dismissed and Ernst & Young LLP was retained
as the Company's principal accountant. Mauldin & Jenkins' report on the
financial statements for 1996 and 1995 did not contain an adverse opinion or a
disclaimer of opinion, and was not qualified or modified as to uncertainty,
audit scope, or accounting principles. The decision to change accountants was
recommended by the Audit Committee of the Board of Directors of the Company and
approved by the Board of Directors. Prior to Mauldin & Jenkins' dismissal, there
were no disagreements with Mauldin & Jenkins on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Election of Directors" in the
Form S-4 Registration Statement filed by the Company which contains the Proxy
Statement used in connection with the Company's 1998 Annual Shareholders
Meeting, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in
the Form S-4 Registration Statement filed by the Company which contains the
Proxy Statement used in connection with the Company's 1998 Annual Shareholders
Meeting, is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth under the caption "Security Ownership of Certain
Beneficial Owners and Management" in the Form S-4 Registration Statement filed
by the Company which contains the Proxy Statement used in connection with the
Company's 1998 Annual Shareholders Meeting, is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth under the caption "Certain Relationships and
Related Transactions" in the Form S-4 Registration Statement filed by the
Company which contains the Proxy Statement used in connection with the Company's
1998 Annual Shareholders Meeting, is incorporated herein by reference.
68
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Financial Statements, Financial Statement Schedules and Exhibits
The following Consolidated Financial Statements of Premier Bancshares, Inc. are
included in Item 8:
Report of Independent Auditors
Consolidated Statements of Condition - December 31, 1997 and 1996
Consolidated Statements of Income - Years ended December 31, 1997, 1996 and 1995
Consolidated Statements of Stockholders' Equity - Years ended December 31, 1997,
1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31, 1997, 1996 and
1995
Notes to Consolidated Financial Statements
All Schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and therefore have been omitted.
Exhibits
Exhibit
Number Exhibit
- ------ -------
3.1 Articles of Incorporation, as amended February 4, 1997
(Incorporated by reference as Exhibit 3.1 from the Premier's Form
10-K for the year ended December 31, 1996).
3.2 Bylaws of Registrant, as amended (Incorporated by reference as
Exhibit 3.3 from the Premier's Form 10-QSB for the quarter ended
September 30, 1996).
3.3 Amendment to Bylaws
4.1 Form of Common Stock Certificate (Incorporated by reference as
Exhibit 4.1 to Premier's Form 10-K for the fiscal year ended
December 31, 1996).
10.1 Individual Director's Defined Benefit Plan Agreements, dated
January 1, 1994, between First Alliance Bank and each of its
directors (Incorporated by reference as Exhibit 10.6 to Premier's
Form 10-K for the year ended December 31, 1996).
10.2 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 Premier's Form 10-KSB for the fiscal
year ended December 31, 1995).
10.3 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 Premier's Form 10-KSB for the fiscal year
ended December 31, 1995).
10.4 Employment Agreement dated as of January 1, 1997 by and between
Premier Lending and George S. Phelps (Incorporated by reference
as Exhibit 10.5 to Premier's Form 10-K for the fiscal year ended
December 31, 1996).
10.5 Employment Agreement dated as of January 1, 1997 by and between
Premier Lending and Michael W. Lane (Incorporated by reference as
Exhibit 10.5 to Premier's Form 10-K for the fiscal year ended
December 31, 1996).
69
<PAGE>
10.6 Employment Agreement dated as of January 1, 1997 by and between
Premier Lending and Brian D. Schmitt (Incorporated by reference
as Exhibit 10.6 to Premier's Form 10-K for the fiscal year ended
December 31, 1996).
10.7 Amendment to Employment Agreement dated as of January 1, 1997 by
and between First Alliance/Premier Bancshares, Inc. and Darrell
D. Pittard (Incorporated by reference as Exhibit 10.7 to
Premier's Form 10-K for the fiscal year ended December 31, 1996).
10.8 Employment Agreement dated as of June 23, 1997 by and among
Premier Bancshares, Inc., Premier Lending and Darrell D. Pittard
(Incorporated by reference as Exhibit 10.8 to Premier'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
Premier's Form 10-K for the fiscal year ended December 31, 1996).
10.10 First Amendment to the Amended and Restated Stock Purchase
Agreement by and between Premier Bancshares, Inc. and Net.B@nk,
Inc. dated February 25, 1997 (Incorporated by reference as
Exhibit 10.10 to Premier's Form 10-K for the fiscal year ended
December 31, 1996).
10.11 Second Amendment to the Amended and Restated Stock Purchase
Agreement by and between Premier Bancshares, Inc. and Net.B@nk,
Inc. dated May 31, 1997 (Incorporated by reference as Exhibit
10.12 to Premier's Form 10-Q for the quarter ended June 30,
1997).
10.12 Purchase and Assumption Agreement by and between Premier bank,
FSB and First Alliance Bank dated December 19, 1996 (Incorporated
by reference as Exhibit 10.11 to Premier's Form 10-K for the
fiscal year ended December 31, 1996).
10.13 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 Premier's
Form 10-K for the fiscal year ended December 31, 1996).
10.14 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 Premier's
Form 10-K for the fiscal year ended December 31, 1996).
10.15 Third Amendment to purchase and Assumption Agreement by and
between Premier Bank, FSB and First Alliance Bank dated May 31,
1997 (Incorporated by reference as Exhibit 10.16 to Premier's
Form 10-Q for the quarter ended June 30, 1997).
10.16 Premier Bancshares, Inc. 1997 Stock Option Plan (Incorporated by
reference as Exhibit 10.14 to Premier's Form 10-K for the fiscal
year ended December 31, 1996).
10.17 Agreement and Plan of Reorganization, dated February 3, 1997,
between Premier and Central and Southern Holding Company
(Incorporated by reference from the Joint Proxy
Statement/Prospectus contained in Premier's Form S-4 Registration
Statement No. 333-24537).
10.18 Amendment to Agreement and Plan of Reorganization dated March 26,
1997, between Premier and Central and Southern Holding Company
(Incorporated by reference from the Joint Proxy
Statement/Prospectus contained in Premier's Form S-4 Registration
Statement No. 333-24537).
10.19 Agreement for Purchase of Certain Assets and Assumption of
Certain Liabilities by and between The Central and Southern Bank
of North Georgia, FSB and The Central and Southern Bank of
Georgia dated August 11, 1997 (Incorporated by reference as
Exhibit 10.21 to Premier's Form 10-Q for the quarter ended June
30, 1997).
10.20 Agreement and Plan of Merger by and among Premier Bancshares,
Inc., Premier Bank and The Central and Southern Bank of North
Georgia, FSB dated August 11, 1997 (Incorporated by reference as
Exhibit 10.22 to Premier's Form 10-Q for the quarter ended June
30, 1997).
10.21 Amended and Restated Premier Bancshares, Inc. Director's Deferred
Stock Unit Plan (Incorporated by reference from Appendix E to the
Joint Proxy Statement/Prospectus contained in Premier's Form S-4
Registration Statement No. 333-36775).
70
<PAGE>
10.22 Agreement and Plan of Reorganization dated June 24, 1997, between
Premier and Citizens Gwinnett (Incorporated by reference from
Appendix A to the Joint Proxy Statement/Prospectus contained in
Premier's Form S-4 Registration Statement No. 333-36775).
10.23 First Amendment to Agreement and Plan of Reorganization dated
July 24, 1997, between Premier and Citizens Gwinnett
(Incorporated by reference from Appendix A to the Joint Proxy
Statement/Prospectus contained in Premier's Form S-4 Registration
Statement No. 333-36775).
10.24 Second Amendment to Agreement and Plan of Reorganization dated
September 15, 1997 between Premier and Citizens Gwinnett
(Incorporated by reference from Appendix A of the Joint Proxy
Statement/Prospectus contained in Premier's Form S-4 Registration
Statement No. 333-36775).
10.25 Third Amendment to Agreement and Plan of Reorganization dated
September 19, 1997 between Premier and Citizens Gwinnett
(Incorporated by reference from Appendix A of the Joint Proxy
Statement/Prospectus contained in Premier's Form S-4 Registration
Statement No. 333-36775).
10.26 Loan and Security Agreement dated June 12, 1997 by and among
Premier, Premier Lending, Alliance Finance, Inc. and The Bankers
Bank (Incorporated by reference from Exhibit 10.27 of the Proxy
Statement/Prospectus contained in Premier's Form S-4 Registration
Statement 333-45601).
10.27 Employment Agreement dated as of December 11, 1990, as amended on
March 11, 1997 and December 12, 1997 by and among Citizens Bank
of Gwinnett and Thomas J. Martin (Incorporated by reference from
Exhibit 10.28 of the Proxy Statement/Prospectus contained in
Premier's Form S-4 Registration Statement 333-45601).
10.28 Agreement and Plan of Reorganization dated December 3, 1997 by
and between Premier and The Bank Holding Company (Incorporated by
reference from Exhibit 10.29 of the Proxy Statement/Prospectus
contained in Premier's Form S-4 Registration Statement 333-
45601).
10.29 First Amendment to Agreement and Plan of Reorganization dated
December 18, 1997 by and between Premier and BHC (Incorporated by
reference from Exhibit 10.30 of the Proxy Statement/Prospectus
contained in Premier's Form S-4 Registration Statement 333-
45601).
10.30 Second Amendment to Agreement and Plan of Reorganization dated
December 23, 1997 by and between Premier and BHC (Incorporated by
reference from Exhibit 10.31 of the Proxy Statement/Prospectus
contained in Premier's Form S-4 Registration Statement 333-
45601).
10.31 Third Amendment to Agreement and Plan of Reorganization dated
December 31, 1997 by and between Premier and BHC (Incorporated by
reference from Exhibit 10.32 of the Proxy Statement/Prospectus
contained in Premier's Form S-4 Registration Statement 333-
45601).
10.32 Fourth Amendment to Agreement and Plan of Reorganization dated
January 15, 1997 by and between Premier and BHC (Incorporated by
reference from Exhibit 10.33 of the Proxy Statement/Prospectus
contained in Premier's Form S-4 Registration Statement 333-
45601).
10.33 Agreement and Plan of Reorganization dated February 5, 1998, by
and between Premier and Button Gwinnett Financial Corporation
(Incorporated by reference from Exhibit 2.1 to Premier's Form 8-K
dated February 5, 1998).
10.34 Stock Option Plan for the Marketing and Development Board of
Gwinnett County.
21.1 Subsidiaries of Premier Bancshares, Inc. (Incorporated by
reference from Exhibit 21.1 of the Proxy Statement/Prospectus
contained in Premier's Form S-4 Registration Statement 333-
45601).
23.1 Consent of Ernst & Young LLP
23.2 Consent of Mauldin & Jenkins, LLC
27.1 Financial Data Schedule (for SEC use only).
Reports on Form 8-K filed in the fourth quarter of 1997.
71
<PAGE>
On October 21, 1997, the Company filed a Form 8-K to report (i) financial
statements of the Company for the fiscal years ended December 31, 1994, 1995 and
1996, restated to reflect the Company's merger with Central and Southern Holding
Company on June 23, 1997, which was accounted for as a pooling of interests, and
(ii) certain pro forma financial information for December 31, 1994, 1995 and
1996, and June 30, 1996 and June 30, 1997, which reflected the Company's
proposed merger with Citizens Gwinnett Bankshares, Inc. if such merger were
accounted for as a pooling of interests.
On November 5, 1997, the Company filed an amendment to its Form 8-K filed
on October 21, 1997 to report amended (i) financial statements of the Company
for the fiscal years ended December 31, 1994, 1995 and 1996, restated to reflect
the Company's merger with Central and Southern Holding Company on June 23, 1997,
which was accounted for as a pooling of interests, and (ii) certain pro forma
financial information for December 31, 1994, 1995 and 1996, and June 30, 1996
and June 30, 1997, which reflect the Company's proposed merger with Citizens
Gwinnett Bankshares, Inc. as if such merger was accounted for as a pooling of
interests.
On December 12, 1997, the Company filed a Form 8-K to report the closing
of the Company's merger with Citizens Gwinnett Bankshares, Inc.
On December 30, 1997, the Company filed a Form 8-K to report a change in
the Company's certifying accountant from Mauldin & Jenkins, LLC to Ernst & Young
LLP
72
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PREMIER BANCSHARES, INC.
Date: March 5, 1998
By: /s/ Darrell D. Pittard
----------------------
Darrell D. Pittard, Chairman and
Chief Executive Officer
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- -----------------------
<S> <C> <C>
/s/ N. Michael Anderson Director March 5, 1998
- ----------------------------
N. Michael Anderson
/s/ George S. Carpenter Director March 5, 1998
- ----------------------------
George S. Carpenter
/s/ James L. Coxwell, Sr. Director March 5, 1998
- ----------------------------
James L. Coxwell, Sr.
/s/ Donald N. Ellis Director March 5, 1998
- ----------------------------
Donald N. Ellis
/s/ William M. Evans, Jr. Director March 5, 1998
- ----------------------------
William M. Evans, Jr.
/s/ John H. Ferguson Director March 5, 1998
- ----------------------------
John H. Ferguson
/s/ Robert E. Flournoy III Director March 5, 1998
- ----------------------------
Robert E. Flournoy III
/s/ James E. Freeman Director March 5, 1998
- ----------------------------
James E. Freeman
/s/ Albert F. Gandy Director March 5, 1998
- ----------------------------
Albert F. Gandy
/s/ Robin R. Howell Director March 5, 1998
- ----------------------------
Robin R. Howell
/s/ Billy H. Martin Director March 5, 1998
- ----------------------------
Billy H. Martin
/s/ Thomas J. Martin Director March 5, 1998
- ----------------------------
Thomas J. Martin
/s/ C. Steve McQuaig Director March 5, 1998
- ----------------------------
C. Steve McQuaig
/s/ Robert C. Oliver Director, President and Chief March 5, 1998
- ----------------------------
Robert C. Oliver Operating Officer
/s/ Thomas E. Owen, Jr. Director March 5, 1998
- ----------------------------
Thomas E. Owen, Jr.
/s/ Darrell D. Pittard Chairman and Chief Executive Officer March 5, 1998
- ----------------------------
Darrell D. Pittard (Principal Executive Officer)
/s/ Michael E. Ricketson Executive Vice President and Chief March 5, 1998
- ----------------------------
Michael E. Ricketson Financial Officer (Principal Financial
and Accounting Officer)
</TABLE>
73
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Exhibit
- --------------------------------------------------------
74
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF AMENDMENT
OF
BYLAWS
OF
PREMIER BANCSHARES, INC.
The undersigned, Barbara J. Burtt, Secretary of PREMIER BANCSHARES,
INC. (the "Corporation"), hereby certifies that she has been duly elected,
qualified and is acting in such capacity and that, as such, she is familiar with
the facts herein certified and is duly authorized to certify the same, and
hereby further certifies, that:
FIRST: The name of the Corporation is Premier Bancshares, Inc.
SECOND: The By-Laws of the Corporation are hereby amended by adding
the following paragraph to replace paragraph 3.2:
3.2 NUMBER OF DIRECTORS. The Board of Directors shall consist
-------------------
of not less than four (4) or more than nineteen (19) members. The
number of directors may be fixed or changed from time to time, within
the minimum and maximum set forth above, by the shareholders or the
Board of Directors.
THIRD: The Amendment to the By-Laws herein certified has been duly
adopted in accordance with the provision of Article Thirteen of the By-Laws of
the Corporation.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this
10th day of March, 1998.
/s/ Barbara J. Burtt
-------------------------------------
Barbara J. Burtt, Secretary
[CORPORATE SEAL]
<PAGE>
EXHIBIT 10.34
PREMIER BANCSHARES, INC.
STOCK OPTION PLAN
FOR THE MARKETING AND DEVELOPMENT
BOARD OF GWINNETT COUNTY
(Formerly, Citizens Gwinnett Bankshares, Inc.
Directors Stock Option Plan)
1. Purpose.
-------
The Premier Bancshares, Inc. Stock Option Plan For The Marketing and
Development Board of Gwinnett County (the "Plan"), formerly the Citizens
Gwinnett Bankshares, Inc. Directors Stock Option Plan (the "Predecessor Plan"),
is intended to promote the best interests of Premier Bancshares, Inc. (the
"Company") and its shareholders by rewarding the continued active service of
individuals who serve on the Company's Marketing and Development Board of
Gwinnett County (the "Advisory Board"). This purpose will be carried out
through the granting of stock options ("options") to acquire shares of the
common stock of the Company (the "Common Stock") to eligible individuals. Such
options are not intended to qualify as incentive stock options under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code"). The Plan amends
and restates the Predecessor Plan. (Unless otherwise indicated by the context
herein, reference to the "Company" includes the Company and its related
corporations.)
2. Effective Date and Term of Plan.
-------------------------------
The Plan became effective on January 1, 1995 upon its approval by the
shareholders of Citizens Gwinnett Bankshares, Inc. ("Citizens") and was assumed
by the Company as of the effective time of the merger of Citizens with and into
the Company pursuant to the Agreement and Plan of Reorganization (the "Merger
Agreement") dated June 24, 1997, as amended, between the Company and Citizens.
The Plan shall remain in effect until April 31, 1999.
3. Administration of the Plan.
--------------------------
(a) The Plan shall be administered by the Board and, subject to the
provisions of this Plan, the Board shall have full and final authority to
interpret the Plan, adopt, amend and rescind rules and regulations relating
to the Plan, and make all other determinations and take all other actions
necessary and advisable for the administration of the Plan.
Notwithstanding the foregoing, the Board may, in its discretion, delegate
all or part of its authority to administer the Plan to the Compensation
Committee of the Company, or to such other committee to whom it deems
advisable to so delegate, and in the event of such delegation, references
to the Board shall (except for Section 10 herein), include the committee
authorized to administer the plan.
(b) The Board shall act by a majority of its members then in office.
Decisions and determinations of the Board on all matters relating to the
Plan shall be in its sole discretion
<PAGE>
and shall be conclusive. No member of the Board shall be liable for any
action taken or decision made in good faith relating to this Plan or any
grant hereunder.
4. Stock Subject to the Plan.
-------------------------
At the time of its adoption by Citizens, 112,000 shares (after giving
effect to the exchange ratio) of Citizens common stock were authorized for
issuance and delivery by exercise of options to be granted under the Predecessor
Plan, subject to adjustment as provided in this Plan. As of the date of the
Company's assumption of the Predecessor Plan pursuant to the terms of the Merger
Agreement, a total of 44,800 shares of the Company's common stock (the "Common
Stock") were available for issuance under the Plan. If any option issued under
this Plan shall expire, terminate or be canceled for any reason prior to its
exercise in full, then the shares of Common Stock subject to such option shall
be added to the shares of Common Stock otherwise available for issuance pursuant
to the exercise of options under the Plan.
5. Terms and Conditions of Stock Options.
-------------------------------------
Each option granted under the Plan shall be evidenced by an option
agreement in such form, not inconsistent with this Plan, as the Board shall
approve from time to time, which option agreement shall comply with and be
subject to the following terms and conditions.
(a) Eligibility. Options may be granted only to individuals who are,
-----------
at the time of grant, members of the Marketing and Development Board for
Gwinnett County (as previously defined, the "Advisory Board"). Such
individuals may be employees or non-employees of the Company or a related
corporation. Persons who are eligible to participate in the Plan are
referred to herein individually as a "Participant."
(b) Annual Option Grants. On each of April 1, 1998 and April 1, 1999,
--------------------
each Participant who, during the previous fiscal year (or portion thereof
after the effective time, as defined in the Merger Agreement), attended at
least 75% of the meetings of the Advisory Board (unless a majority of the
Board of the Company determines to excuse for good cause such lack of
attendance) shall be granted on such date an option to purchase 3,200
shares of Common Stock for such service on the Advisory Board.
(c) Option Exercise Price. The option exercise price for each option
---------------------
granted under the Plan shall be the book value per share as of December 31
of the fiscal year for which the option was granted. "Book Value" for
purposes of this Plan shall be determined by the Company's independent
certified public accountants and such calculations shall be deemed
conclusive for purposes of this Plan.
(d) Exercise of Option. Options may be exercised only by written
------------------
notice to the Company, accompanied by payment, in cash or check payable to
the Company, of the full exercise price for the shares as to which they are
exercised.
-2-
<PAGE>
(e) Term. An option granted under the Plan shall not be exercisable
----
after the expiration of ten years from the date of grant.
(f) Termination of Service. The options granted under this Plan shall
----------------------
not be subject to earlier termination in the event of the cessation for any
reason of a Participant's service on the Advisory Board.
(g) Nontransferability. An option granted under this Plan shall be
------------------
transferable only by will or by the laws of descent and distribution and
during a recipient's lifetime shall be exercisable only by the recipient to
whom the option is granted. Except as permitted by the preceding sentence,
each option granted under this Plan shall not be transferred, assigned,
pledged or hypothecated in any way (whether by operation of law or
otherwise) and the option shall not be subject to execution, attachment or
civil process. In the event of any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any option contrary to the provisions
of the Plan or upon the levy or any attachment or similar process upon such
option, the option shall immediately become null and void.
(h) Additional Terms. Each option agreement may contain such other
----------------
terms and conditions not inconsistent with the provisions of the Plan as
the Board may deem appropriate from time to time.
6. Stock Adjustments; Changes in Capitalization.
--------------------------------------------
If there is any change in the outstanding shares of Common Stock of the
Company 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 Company, the Board 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 Board deems equitable to prevent dilution or
enlargement of Options or otherwise advisable to reflect such change. No
fractional shares will be issued under the Plan on account of any such
adjustment.
7. Limitation of Rights.
--------------------
(a) No Right to Continue as Member of Advisory Board. Neither the
------------------------------------------------
Plan, nor the granting of any options, nor any other action taken pursuant
to the Plan, shall constitute evidence of any agreement or understanding,
express or implied, that the Company will retain a Participant as a member
of the Advisory Board for any period of time, or at any particular rate of
compensation.
(b) No Shareholder's Rights for Options. The holder of any options
-----------------------------------
granted under the Plan shall have no rights as a shareholder with respect
to the shares of Common Stock covered by such options until the date of the
issuance to such holder of a stock certificate therefor, and no adjustment
shall be made for dividends or other rights for which the record date is
prior to the date such certificate is issued.
-3-
<PAGE>
8. Withholding Taxes.
-----------------
Whatever shares of Common Stock are to be issued and delivered under the
Plan, the Company shall have the right, at or prior to the delivery of any
certificate or certificates for such shares, to require the recipient to remit
to the Company, in the form of cash or check payable to the order of the
Company, an amount sufficient to satisfy withholding requirements with respect
to federal, state and local income and employment taxes
9. Amendment, Modification and Termination.
---------------------------------------
The Board at any time may terminate and in any respect amend or modify the
Plan; provided, however, that no amendment, modification or termination of the
Plan shall adversely affect the rights of any recipient with respect to any
outstanding option without such recipient's written consent thereto.
10. Notices.
-------
All notices or other communications hereunder must be in writing and will
be deemed given on the date delivered if delivered in person, or on the third
business day after mailed by depositing the same postage prepaid in a post
office addressed to the Company at its principal office and to any other person
at their last known address furnished to the Company.
11. Restrictions on Shares.
----------------------
The Company may impose such restrictions on 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 Company 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
Company.
-4-
<PAGE>
IN WITNESS WHEREOF, this Premier Bancshares, Inc. Stock Option Plan
For The Marketing and Development Board of Gwinnett County has been executed in
behalf of the Company effective as of the 12th day of December, 1997.
PREMIER BANCSHARES, INC.
By: /s/ Darrell D. Pittard
------------------------------------
Darrell D. Pittard
Chairman of the Board and
Chief Executive Officer
Attest:
/s/ Barbara J. Burtt
- ---------------------------
Barbara Burtt, Secretary
-5-
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-4 No. 333-45601) of Premier Bancshares, Inc. and in the related Prospectus and
in the Registration Statement (Form S-8 No. 333-29941) pertaining to the Premier
Bancshares, Inc. Directors' Stock Option Plan and the Premier Bancshares, Inc.
1997 Stock Option Plan of our report dated February 5, 1998, with respect to the
consolidated financial statements of Premier Bancshares, Inc. included in this
Annual Report (Form 10-K) for the year ended December 31, 1997.
/s/ Ernst & Young LLP
March 12, 1998
Atlanta, Georgia
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<PAGE>
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<CIK> 0000836616
<NAME> PREMIER BANCSHARES, INC.
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
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