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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)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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)
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Georgia 58-1793778
(State of Incorporation) (I.R.S. Employer Identification No.)
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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
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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. [ X ]
The aggregate market value of the voting stock and non-voting common equity
held by nonaffiliates of the Registrant at March 3, 1999, was $307,244,000
based on $20.00 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, 1999, was 26,033,755 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the year ended December
31, 1998, are incorporated by reference into Parts I and II of this report.
Portions of the Proxy Statement for the 1999 Annual Meeting of
Shareholders to be filed with the Securities and Exchange Commission within 120
days of the Registrant's 1998 fiscal year end are incorporated by reference into
Part III of this report.
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Table of Contents
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Item No. Caption Page
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Part I
1. Business 1
2. Properties 13
3. Legal Proceedings 14
4. Submission of Matters to a Vote of Security Holders 14
Part II
5. Market for Registrant's Common Equity and Related Stockholder Matters 14
6. Selected Financial Data 16
7. Management's Discussion and Analysis
Of Financial Condition and Results of Operations 18
7A. Quantitative and Qualitative Disclosures
About Market Risk 38
8. Financial Statements and Supplementary Data 40
9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures 81
Part III
10. Directors and Executive Officers of the Registrant 81
11. Executive Compensation 81
12. Security Ownership of Certain Beneficial Owners and Management 81
13. Certain Relationships and Related Transactions 81
Part IV
14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 82
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PART I
ITEM 1. BUSINESS
General
Premier Bancshares, Inc. (the "Company") is a bank holding company
organized and existing under the laws of the State of Georgia and headquartered
in Atlanta, Georgia. At December 31, 1998, the Company had six subsidiaries:
Premier Bank ("Premier Bank") and Premier Lending Corporation ("Premier
Lending"), The Central and Southern Bank of Georgia ("Central and Southern
Bank"), First Community Bank of Henry County ("Henry"), The Bank of Spalding
County ("Spalding") and Frederica Bank and Trust ("Frederica") (collectively,
the "Subsidiaries"). The Company plans to merge Central and Southern, Henry,
Spalding, and Frederica with and into Premier Bank in the second quarter of
1999. 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 with several financial services industry products and services
such as 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 to middle market commercial loan
products as larger competitors focus on the higher dollar and volume loan
product markets.
Through its five wholly-owned financial institution subsidiaries, the
Company operates over 36 banking offices located in the Atlanta metropolitan
area and in northern, central and coastal Georgia. In these markets, the
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 10 mortgage loan production offices in the Atlanta
metropolitan area and one in each of Augusta, Georgia; Warner Robins, Georgia;
St. Simons Island, Georgia; Charlotte, North Carolina; Chattanooga, Tennessee;
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")
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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; on December 12, 1997, the Company
acquired Citizens Gwinnett Bankshares, Inc., a bank holding company; on June 9,
1998, the Company acquired Lanier Bank & Trust Company, a Georgia bank; on July
1, 1998, the Company acquired Button Gwinnett Financial Corporation, a bank
holding company; on July 2, 1998, the Company acquired The Bank Holding Company,
a bank holding company; and on December 7, 1998, the Company acquired Frederica
Bank & Trust, a Georgia bank. The historical financial statements of the
Company have been restated to give effect to these acquisitions which were
accounted for as poolings of interests.
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.
Premier Bank
Following the merger of Central and Southern, Henry, Spalding, and
Frederica with and into Premier Bank, Premier Bank will be the only banking
subsidiary of the Company. Premier Bank is organized under the laws of the
State of Georgia and operates full-service commercial banking businesses based
in Cobb, DeKalb, Fulton, Gwinnett, Baldwin, Hall, Glynn, Henry and Spalding
Counties. Premier Bank provides customary banking services such as checking and
savings accounts, various types of time deposits, money transfers, safe deposit
facilities, credit and debit cards, and individual retirement accounts. Premier
Bank also finances short- and medium-term commercial transactions, makes secured
and unsecured loans, performs commercial cash management services and provides
other ancillary financial services to its customers. In addition, Premier Bank
provides a traditional first mortgage loans to its customers providing financing
for single-family homes on a permanent 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 generally servicing released.
Premier Lending is an approved FNMA and FHLMC seller-servicer of mortgage
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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
The Company's financial institution subsidiaries 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
its 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
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 commercial banks, savings institutions, credit unions and
mortgage banking firms. Such entities may have competitive advantages as a
result of greater resources and higher lending limits (by virtue of greater
capitalization) and may offer their customers certain services which Premier
Bank may not presently provide.
The mortgage banking business is highly competitive and fragmented.
Premier Lending competes with other mortgage bankers, state and national banks,
savings institutions and insurance companies for loan originations. Many of its
competitors have substantially greater resources than Premier Lending.
Employees
As of February 28, 1999, the Subsidiaries had an aggregate of 693 full-time
equivalent 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 and the
regulations of the Georgia Department.
The BHC Act requires every bank holding company to obtain the prior
approval
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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.
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.
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
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beginning July 1, 1996. Beginning July 1, 1998, the number of de novo branches
which may be established is no longer 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 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 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 currently are Premier
Bank, Central and Southern, Henry, Spalding and Frederica. Premier Bank,
Central and Southern Bank, Henry, Spalding and Frederica are subject to
regulation, supervision, and examination by the FDIC and the Georgia Department.
The FDIC and the Georgia Department regularly examine the operations of these
subsidiaries 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.
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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,
including cash flow to pay dividends to its shareholders, are dividends from
Premier Bank, Premier Lending, Central and Southern Bank, Henry, Spalding and
Frederica. 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, 1998, under dividend restrictions imposed under federal and
state laws, Premier Bank, Central and Southern Bank, Henry, Spalding, Frederica
and Premier Lending, without obtaining governmental approvals, could declare
aggregate dividends to the Company of approximately $9.4 million. During 1998,
the Company declared cash dividends to shareholders of approximately 38.8% 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
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requirements more sensitive to differences in risk profiles 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 8.0%. 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, 1998, 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 15.36% and 14.13%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less goodwill
and certain other intangible assets, of 3.0% 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 3.0%, plus an additional cushion of 100 to 200 basis
points. The Company's Leverage Ratio at December 31, 1998 was 11.56%. 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, 1998. 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 bank holding
company 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
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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' methodology for evaluating interest rate risk requires
banks with excessive interest rate risk exposure to hold additional amounts of
capital against such exposures.
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 the
cross-guarantee provisions, the assessment of such estimated losses against the
depository institution's banking affiliates, and a potential loss of the
Company's investment in such other subsidiary depository institutions.
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Prompt Corrective Action
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions in
the three undercapitalized categories, the severity of which will depend upon
the capital category in which the institution is placed. Generally, subject to
a narrow exception, FDICIA requires the banking regulator to appoint a receiver
or conservator for an institution that is critically undercapitalized. The
federal banking agencies have specified by regulation the relevant capital level
for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of 10%
or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a Leverage
Ratio of 5.0% or greater and (ii) is not subject to any written agreement,
order, capital directive, or prompt corrective action directive issued by the
appropriate federal banking agency is deemed to be well capitalized. An
institution with a Total Risk-Based Capital Ratio of 8.0% or greater, a Tier 1
Risk-Based Capital Ratio of 4.0% or greater, and a Leverage Ratio of 4.0% or
greater is considered to be adequately capitalized. A depository institution
that has a Total Risk-Based Capital Ratio of less than 8.0%, a Tier 1 Risk-Based
Capital Ratio of less than 4.0%, or a Leverage Ratio of less than 4.0% is
considered to be undercapitalized. A depository institution that has a Total
Risk-Based Capital Ratio of less than 6.0%, a Tier 1 Risk-Based Capital Ratio of
less than 3.0%, or a Leverage Ratio of less than 3.0% is considered to be
significantly undercapitalized, and an institution that has a tangible equity
capital to assets ratio equal to or less than 2.0% is deemed to be critically
undercapitalized. For purposes of the regulation, the term "tangible equity"
includes core capital elements counted as Tier 1 Capital for purposes of the
risk-based capital standards, plus the amount of outstanding cumulative
perpetual preferred stock (including related surplus), minus intangible assets
with certain exceptions. A depository institution may be deemed to be in a
capitalization category that is lower than is indicated by its actual capital
position if it receives an unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary depository
institution 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
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branches, or engaging in any new line of business, except in accordance with an
accepted capital restoration plan or with the approval of the FDIC. In addition,
the appropriate federal banking regulator is given authority with respect to any
undercapitalized depository institution to take any of the actions it is
required to or may take with respect to a significantly undercapitalized
institution as described below if it determines "that those actions are
necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the appropriate
federal banking agency must require the institution to take one or more of the
following actions: (i) sell enough shares, including voting shares, to become
adequately capitalized; (ii) merge with (or be sold to) another institution (or
holding company), but only if grounds exist for appointing a conservator or
receiver; (iii) restrict certain transactions with banking affiliates as if the
"sister bank" exception to the requirements of Section 23A of the Federal
Reserve Act did not exist; (iv) otherwise restrict transactions with bank or
non-bank affiliates; (v) restrict interest rates that the institution pays on
deposits to "prevailing rates" in the institution's "region"; (vi) restrict
asset growth or reduce total assets; (vii) alter, reduce, or terminate
activities; (viii) hold a new election of directors; (ix) dismiss any director
or senior executive officer who held office for more than 180 days immediately
before the institution became undercapitalized, provided that in requiring
dismissal of a director or senior executive officer, the regulator must comply
with certain procedural requirements, including the opportunity for an appeal in
which the director or officer will have the burden of proving his or her value
to the institution; (x) employ "qualified" senior executive officers; (xi) cease
accepting deposits from correspondent depository institutions; (xii) divest
certain nondepository affiliates which pose a danger to the institution; or
(xiii) be divested by a parent holding company. In addition, without the prior
approval of the appropriate federal banking regulator, a significantly
undercapitalized institution may not pay any bonus to any senior executive
officer or increase the rate of compensation for such an officer, without
regulatory approval.
At December 31, 1998, 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
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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 had
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.
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
11
<PAGE>
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.
12
<PAGE>
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 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 investment record.
Proposed Legislation and Regulatory Action
New regulations and statutes are regularly proposed that contain wide-
ranging proposals for altering the structure, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or in what form any proposed regulation or statute will be adopted or
the extent to which the business of the Company may be affected by such
regulation or statute.
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.
The executive officers of the Company, and their ages, positions with the
Company and terms of office, as of January 1, 1999, are as follows:
<TABLE>
<CAPTION>
Year
Name First
Age Elected Position With the Company
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Jo S. Hill 50 1997 Executive Vice President and Chief Administrative Officer
Robert C. Oliver 50 1997 President and Chief Operating Officer
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C> <C>
George S. Phelps 46 1996 Executive Vice President
Darrell D. Pittard 50 1993 Chairman and Chief Executive Officer
Michael E. Ricketson 49 1997 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.
Robert C. Oliver has served as 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 from 1993 until its merger with Premier.
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 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.
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 from 1996 until its merger with Premier and Chief Financial
Officer of Central and Southern Bank of Georgia from 1993 until its merger with
Premier. 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 the Subsidiaries own, in some cases subject to mortgages or
14
<PAGE>
other security interests, or lease all of the real property and/or buildings in
which their offices are located. All of such buildings are in a good state of
repair and are appropriately designed for the purposes for which they are used.
Other than normal real estate and commercial lending activities of the
Subsidiaries, the Company generally does not invest in real estate, interests in
real estate, real estate mortgages, or securities of or interests in persons
primarily engaged in real estate activities.
ITEM 3. LEGAL PROCEEDINGS
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
Not Applicable
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Company's common stock has been listed for quotation on the American
Stock Exchange under the symbol "PMB" since January 10, 1997. Prior to that
date, the Company's common stock was listed on the NASDAQ Small Cap Market under
the symbol "FABC." The following table sets forth, for the indicated periods,
the high and low closing sales prices for the Company's common stock as
reported by American Stock Exchange and on the NASDAQ Small Cap Market.
Historical stock prices and cash dividends paid have been adjusted to reflect a
three-for-two split of the common stock of the Company payable to stockholders
of record on January 23, 1998.
<TABLE>
<CAPTION>
Sales Price
-----------
Calendar Period High Low
- --------------- ---- ---
<S> <C> <C>
</TABLE>
15
<PAGE>
<TABLE>
<S> <C> <C>
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
1998
First Quarter $29.69 $14.00
Second Quarter 29.00 23.13
Third Quarter 28.50 20.00
Fourth Quarter 27.69 16.38
1999
First Quarter (through March 3, 1999) $ 26.25 $ 19.00
</TABLE>
Shareholders
As of March 1, 1999, there were 2,387 record holders of the Company's
common stock.
Dividends
The following table presents dividends and earnings per share by
quarter for each of the last two years. Stock Prices, dividends and earnings per
share have been restated for the effect of stock splits. In addition, earnings
per share have been restated to conform to the requirements of FASB Statement
No. 128 "Earnings Per Share."
<TABLE>
<CAPTION>
1998 1997
Dividends Earnings Dividends Earnings
----------------------------------------------------------------
<S> <C> <C> <C> <C>
First Quarter 0.13 $0.22 $0.05 $0.16
Second Quarter 0.05 0.25 0.04 0.19
Third Quarter 0.05 0.18 0.04 0.20
Fourth Quarter 0.08 0.14 0.02 0.17
</TABLE>
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.
16
<PAGE>
At December 31, 1998, under dividend restrictions imposed under federal and
state laws, the Company's Subsidiaries, without obtaining governmental
approvals, could declare aggregate dividends to the Company of approximately
$9.4 million.
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, 1998. 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 on August 31, 1996, of Central and Southern
and the Company on June 23, 1997, Citizens Gwinnett Bankshares, Inc. and the
Company on December 12, 1997, of Lanier Bank & Trust Company and the Company on
June 9, 1998, of Button Gwinnett Financial Corporation and the Company on July
1, 1998, of The Bank Holding Company and the Company on July 2, 1998 and of
Frederica Bank & Trust and the Company on December 12, 1998, 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 periods prior
to 1998 to reflect stock splits payable to shareholders of record on January 23,
1998 and March 6, 1997. This selected 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.
17
<PAGE>
<TABLE>
<CAPTION>
Years ended December 31 1998 1997 1996 1995 1994
----------------------------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Interest income $ 115,247 $ 101,076 $ 85,276 $ 72,803 $ 55,356
Interest expense 55,096 46,037 39,880 33,414 23,338
Net interest income 60,151 55,039 45,396 39,389 32,018
Provision for credit losses 605 1,767 473 173 758
Other income 39,431 24,197 17,003 12,910 7,044
Other expense 65,991 49,004 42,335 35,409 28,007
Net income 20,914 18,737 13,657 11,348 6,694
Per share data:
Net income $ .80 $ .73 $ .54 $ .45 $ .29
Net income diluted .78 .71 .52 .44 .28
Cash dividends declared .31 .15 .17 .06 .03
Book value 5.23 4.72 5.19 3.73 3.18
Average total equity $ 127,877 $ 109,149 $ 97,709 $ 88,412 $ 77,791
Average total assets 1,400,782 1,185,439 1,013,751 861,677 731,957
Total assets 1,520,618 1,280,499 1,115,290 937,078 763,524
Investment Securities $ 133,232 $ 161,872 $ 199,793 $ 188,894 $ 154,288
available for sale
Investment Securities held to maturity 46,003 32,467 26,376 31,675
Loans held for sale 124,900 62,738 26,550 27,304 27,602
Loans, net 1,019,481 836,774 657,567 537,401 447,487
Total deposits 1,179,962 1,074,199 959,193 787,910 644,156
Total borrowings 190,621 72,125 40,724 41,283 30,807
Total stockholders' equity 136,093 120,542 102,157 94,586 79,400
Ratios:
Net income to average assets 1.49% 1.58% 1.35% 1.32% .91%
Net income to average equity 16.35% 17.17% 13.98% 12.84% 8.61%
Dividend payout ratio 38.75% 20.55% 31.48% 13.33% 10.34%
Average equity to average assets 9.13% 9.21% 9.64% 10.26% 10.63%
</TABLE>
<TABLE>
<CAPTION>
1998 1997 % Change
--------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Statement of condition
Assets $1,520,618 $1,280,499 18.75%
Loans held for sale 124,900 62,738 99.08%
Loans, net 1,019,481 836,774 21.93%
Deposits 1,179,962 1,074,199 9.85%
Stockholders' equity 136,093 120,542 12.90%
Statement of earnings
Net interest income $ 60,151 $ 55,039 9.29%
Provision for credit losses 605 1,767 (65.76)%
Other income 39,431 24,197 62.96%
Other expense 65,991 49,004 34.66%
Net income 20,914 18,737 11.62%
</TABLE>
18
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
General
Premier Bancshares, Inc. (the "Company") is a bank holding company
organized and existing under the laws of the State of Georgia and headquartered
in Atlanta, Georgia. At December 31, 1998, the Company had six subsidiaries:
Premier Bank ("Premier Bank"), Premier Lending Corporation ("Premier Lending"),
The Central and Southern Bank of Georgia ("Central and Southern Bank"), First
Community Bank of Henry County ("Henry"), The Bank of Spalding County
("Spalding") and Frederica Bank & Trust ("Frederica"). The Company was
incorporated in 1988 under the laws of the State of Georgia.
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; on December 12, 1997, the Company
acquired Citizens Gwinnett Bankshares, Inc., a bank holding company; on June 9,
1998, the Company acquired Lanier Bank and Trust Company, a Georgia bank; on
July 1, 1998 the Company acquired Button Gwinnett Financial Corporation, a bank
holding company; and on July 2, 1998, the Company acquired The Bank Holding
Company, a bank holding company and on December 7, 1998 the Company acquired
Frederica Bank & Trust, a Georgia bank. The historical financial statements of
the Company have been restated to give effect to these acquisitions which were
accounted for as poolings of interests.
The following discussion should be read in conjunction with the
Consolidated Financial Statements, including the footnotes, and is qualified in
its entirety by the foregoing and other more detailed financial information
appearing elsewhere herein. Historical results of operations and the percentage
relationships among any amounts included in the Consolidated Statements of
Income, and any trends which may appear to be inferable therefrom, should not be
taken as being necessarily indicative of trends in operations or results of
operations for any future periods.
Comments in Management's Discussion and Analysis regarding the Company's
business which are not historical facts are forward-looking statements that
involve risks and uncertainties. Among these risks are that the Company is in a
highly competitive business and is pursuing a growth strategy that relies in
part on the completion of acquisitions of bank holding companies and other
financial institutions. There can be no assurance that in its highly
competitive business environment, the Company will successfully implement its
growth strategy.
19
<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, 1998.
Loan average balances include nonaccrual loans.
<TABLE>
<CAPTION>
1998 1997
--------------------------------------------------------------------------
Yield/ Yield/
Balance Interest Rate Balance Interest Rate
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
ASSETS
Loans, net of unearned
interest(1) $1,036,266 $ 98,768 9.53% $ 808,450 $83,189 10.29%
Short term investments 2,620 103 3.93% 1,979 200 10.11%
Investment securities:
Taxable 148,554 9,721 6.54% 196,743 12,635 6.42%
Non-taxable 22,000 1,653 7.51% 25,801 2,171 8.41%
Federal funds sold and
securities sold under
agreements to
repurchase 96,386 5,564 5.77% 70,530 3,619 5.13%
----------------------- ------------------
Total interest earning
assets 1,305,826 $115,809 8.87% 1,103,503 $ 101,814 9.23%
======== ==========
Allowance for credit
losses (13,931) (12,621)
Other assets 108,887 94,557
-----------
Total assets $1,400,782 $1,185,439
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
1996
-------------------------------------
Yield/
Balance Interest Rate
-------------------------------------
<S> <C> <C> <C>
ASSETS
Loans, net of unearned
interest(1) $630,091 $66,870 10.61%
Short term investments 9,501 446 4.69%
Investment securities:
Taxable 196,976 12,362 6.28%
Non-taxable 26,331 2,318 8.80%
Federal funds sold and
securities sold under
agreements to
repurchase 82,585 4,068 4.93%
---------------------
Total interest earning
assets 945,484 $86,064 9.10%
=======
Allowance for credit
losses (11,341)
Other assets 79,608
----------
Total assets $1,013,751
===========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing
demand, savings, and
money market deposits
$ 385,394 13,880 3.60% $ 291,007 $10,299 3.54% 251,067 8,342 3.32%
Time deposits 561,044 33,383 5.95% 560,022 32,474 5.80% 485,179 28,581 5.89%
Repurchase agreements
& advances 26,480 1,058 4.00% 33,142 2,531 7.64% 34,750 2,830 8.14%
Other borrowings 104,887 6,775 6.46% 20,853 733 3.52% 1,694 127 7.50%
-------------------- ---------------- ------------------
Total interest-bearing
liabilities 1,077,805 55,096 5.11% 905,024 $46,037 5.09% 772,690 39,880 5.16%
======== ======= ========
Demand deposits 180,644 157,004 131,210
Other liabilities 12,010 11,816 9,696
---------- ---------- -----------
Total liabilities 1,270,459 1,073,844 913,596
Redeemable preferred
stock 2,446 2,446 2,446
Common stockholders'
equity 127,877 109,149 97,709
---------- ---------- -----------
Total liabilities and
stockholders' equity $1,400,782 $1,185,439 $1,013,751
========== ========== ===========
Net interest income $60,713 $55,777 $46,184
Net interest margin 4.65% 5.05% 4.88%
Net interest spread 3.76% 4.14% 3.94%
</TABLE>
(1) Includes loan fees of $6,935,000, $5,501,000, and $4,210,000, for 1998,
1997, and 1996, respectively
20
<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 1998 compared to1997 and 1997 compared to1996.
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>
1998 versus 1997 1997 versus 1996
---------------------------------------- ------------------------------------------
Increase (decrease) Increase (decrease)
due to change in: due to change in:
Volume Yield/ Volume Yield/
Outstanding Rate Total Outstanding Rate Total
-------------------------------------- -------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
Interest income on:
Loans $23,455 $(7,876) $15,579 $18,409 $(2,090) $16,319
Short term investments 51 (148) (97) (353) 107 (246)
Investment securities:
Taxable (3,092) 178 (2,914) (15) 288 273
Non-taxable (300) (218) (518) (46) (101) (147)
Federal funds sold 1,450 495 1,945 (613) 164 (449)
------------------------------------- --------------------------------------------
Total interest income 21,564 (7,569) 13,995 17,382 (1,632) 15,750
Interest expense on:
Interest-bearing
demand, savings and
money market deposits 3,396 185 3,581 1,388 569 1,957
Time deposits 59 805 909 4,346 (453) 3,893
Repurchase agreements
and advances (509) (964) (1,473) (127) (175) (299)
Other borrowings 2,958 3,084 6,042 708 (102) 606
-------------------------------------- -------------------------------------------
Total interest expense 5,904 3,155 9,059 6,315 (158) 6,157
-------------------------------------- -------------------------------------------
Net interest income $15,660 $(4,414) $ 4,936 $11,067 $(1,474) $ 9,593
====================================== ===========================================
</TABLE>
21
<PAGE>
LOANS
A sound credit policy and careful, consistent credit review are vital to a
successful lending program. The Subsidiaries 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 Subsidiaries are located. Credit reviews and loan
examinations help confirm that the Subsidiaries are adhering to these loan
policies.
The Subsidiaries 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 Subsidiaries' customers. Secured loans
include first and second real estate mortgage loans. The Subsidiaries 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
1998 1997 1996 1995 1994
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
(dollars in thousands)
Commercial, financial and
agricultural $ 256,465 $203,022 $188,757 $165,050 $126,897
Real estate-construction 202,188 207,229 186,982 134,084 98,984
Real estate-mortgage 492,715 379,258 231,271 195,067 174,868
Consumer and other 83,558 62,454 63,405 62,006 63,997
----------------------------------------------------------------
$1,034,926 $851,963 $670,415 $556,207 $464,746
================================================================
Loans held for sale $124,900 $ 62,738 $ 26,550 $ 27,304 $ 27,602
================================================================
Percent of loans by category to total loans
(Excluding loans held for sale):
Commercial, financial and agriculture 25% 24% 28% 30% 27%
Consumer installment 8% 7% 10% 11% 14%
Real estate 67% 69% 62% 59% 59%
----------------------------------------------------------------
100% 100% 100% 100% 100%
================================================================
</TABLE>
22
<PAGE>
The maturity of real estate construction and commercial, financial and
agricultural loans outstanding at December 31, 1998 are as follows.
<TABLE>
<CAPTION>
Commercial,
Real Estate Financial and
Construction Agricultural
---------------------------------------------
(dollars in thousands)
<S> <C> <C>
In one year or less $165,912 $ 83,165
After one year but within five years 36,276 126,234
After five years - 47,066
---------------------------------------------
Total $202,188 $256,465
=============================================
</TABLE>
Of the real estate construction and commercial loans maturing after one
year, approximately $151,308,000 have fixed rates and approximately $58,268,000
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 or becomes deceased. 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.
23
<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
1998 1997 1996 1995 1994
----------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Allowance for credit losses at beginning
of year $ 13,782 $ 11,877 $ 10,696 $ 9,872 $ 9,954
Loans charged off:
Commercial, financial, and agricultural 124 249 159 479 1,228
Real estate loans 409 229 208 690 1,384
Consumer installment 493 540 568 983 1,807
----------------------------------------------------------------
Total charged off 1,026 1,018 935 2,152 4,419
----------------------------------------------------------------
Recoveries of loans previously charged off:
Commercial, financial, and agricultural 71 420 217 462 594
Real estate loans 77 62 258 221 357
Consumer installment 571 748 1,168 1,826 2,204
----------------------------------------------------------------
Total recoveries 719 1,230 1,643 2,509 3,155
----------------------------------------------------------------
Net (recoveries) charge-offs 307 (212) (708) (357) 1,264
----------------------------------------------------------------
Allowance acquired (disposed of) in business
combinations - (74) - 294 424
Provision for credit losses 605 1,767 473 173 758
----------------------------------------------------------------
Allowance for credit losses at end of year $ 14,080 $ 13,782 $ 11,877 $ 10,696 $ 9,872
================================================================
Loans outstanding, net of unearned interest,
excluding held for sale $1,033,561 $850,556 $669,444 $648,097 $457,359
================================================================
Average loans outstanding, including held
for sale, net of unearned interest $1,036,266 $808,450 $630,091 $631,893 $435,401
Ratio of net charge-offs (recoveries) to average
net loans outstanding 0.03% (0.03)% (0.11)% (0.06)% 0.28%
Ratio of allowance for credit losses to net loans
(excluding held for sale) outstanding 1.36% 1.62% 1.77% 1.65% 2.16%
</TABLE>
24
<PAGE>
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 Subsidiaries. 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.
If, as a result of the Company's loan review and evaluation procedures, it
is determined that payment of principal or 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 current year's gross charge-offs in each category as a percentage
of total charge-offs. During 1998, the Company completed four mergers, all
accounted for as poolings of interests. Subsequent to each merger, the Company
conformed policies regarding the allocation of the allowance for credit loss in
existence at the pooled entities with the Company's policies. The components of
the allowance for credit losses for each of the past five years are presented
below.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Commercial, financial and agriculture $ 1,702 $ 2,747 $ 3,384 $ 3,016 $2,837
Consumer installment 5,613 8,138 4,561 3,611 4,310
Real estate 6,765 2,897 3,932 4,069 2,725
--------------------------------------------------------------------------
$14,080 $13,782 $11,877 $10,696 $9,872
==========================================================================
</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 credit loss expense
25
<PAGE>
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 credit losses.
The following table presents nonperforming loans at December 31, 1998,
1997, 1996, 1995 and 1994. 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).
<TABLE>
<CAPTION>
Past-due loans Nonaccrual loans
---------------------------------------------
(dollars in thousands)
<S> <C> <C>
December 31, 1998 $ 14 $3,843
December 31, 1997 780 3,530
December 31, 1996 551 2,023
December 31, 1995 862 2,024
December 31, 1994 748 3,083
</TABLE>
Total interest income recognized on nonperforming loans for the year ended
December 31, 1998 was $70,000. Additional interest income of $300,000 would have
been recorded in 1998 if all nonperforming loans had performed in accordance
with their original terms.
26
<PAGE>
NONPERFORMING ASSETS
The following table analyzes nonperforming assets for each of the past three
years.
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Loans past due 90 days or more $ 14 $ 780 $ 551
Non accrual loans 3,843 3,530 2,023
----------------------------------------------------
Total nonperforming loans 3,857 4,310 2,574
Other real estate 1,889 1,237 2,406
----------------------------------------------------
Total nonperforming assets $ 5,746 $ 5,547 $ 4,980
====================================================
Nonperforming loans/Total loans, net of
unearned* .37 .51 .38
Nonperforming assets/Total assets .38 .43 .45
Loan loss allowance/Total loans, net of unearned* 1.36 1.62 1.77
Loan loss allowance/Nonperforming loans 365.05 319.77 461.42
</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 365% at December 31, 1998,
compared to 320% at December 31, 1997. Management considers the current level
of the allowance for credit losses 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
higher risk associated with real estate lending by adhering to conservative loan
underwriting standards and by diversifying the portfolio within its market area
and within industry groups.
27
<PAGE>
INVESTMENT SECURITIES
The carrying values of investment securities at the indicated dates are
presented below.
<TABLE>
<CAPTION>
December 31,
1998 1997 1996
------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
U.S. Treasury and U.S. Government agencies $ 82,666 $116,961 $137,029
State and Municipals 11,187 27,502 28,286
Mortgage-backed securities 36,552 59,157 63,871
Other 2,827 4,255 3,074
------------------------------------------------------------
Total $133,232 $207,875 $232,260
============================================================
</TABLE>
Investment portfolio policy stresses quality and liquidity. 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 had
primarily short to intermediate term maturities.
The following table shows the contractual maturities of investment
securities at December 31, 1998 and the average yields (for all obligations on a
fully taxable basis assuming a 34% tax rate) on such securities.
<TABLE>
<CAPTION>
Due Within Due After One Due After Five Due After Ten
One Year Within Five Years Within Ten Years Years
Amount Yield Amount Yield Amount Yield Amount Yield
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(dollars in thousands)
U.S. Treasury and U.S.
Government agencies $26,273 6.42% $48,413 5.82% $ 7,980 5.93% $ - $ -
State and Municipals 2,267 7.46% 7,060 8.44% 1,860 7.50% - -
Mortgage-backed
securities 4,849 5.78% 24,477 6.24% 5,868 5.75% 1,358 4.74%
------- ------- ------- ------
Total $33,389 6.40% $79,950 6.18% $15,708 6.05% $1,358 4.74%
======= ======= ======= ======
</TABLE>
28
<PAGE>
The estimated fair market value of the Company's investment portfolio at
December 31, 1998, was approximately $888,000 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.
Seventy percent of the investment portfolio is rated "A" or better by
Moody's Investors Service, Inc. 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.
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 $33.4 million. However, mortgage-backed securities and securities
with call provisions create cash flows earlier than the contractual maturities.
Estimates of prepayments on mortgage-backed securities and call provisions on
Federal agency and state and municipals increase the forecasted cash flow from
the investment portfolio. 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, 1998.
<TABLE>
<CAPTION>
Years ended December 31
1998 1997 1996
Amount Rate Amount Rate Amount Rate
-----------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Noninterest-bearing demand
deposits $ 180,644 $ 157,004 $131,210
Interest-bearing demand, savings,
and money market deposits 385,394 3.60% 291,007 3.54% 251,067 3.32%
Time deposits 561,044 5.95% 560,022 5.80% 485,179 5.89%
---------- ---------- --------
Total average deposits $1,127,082 4.19% $1,008,033 4.24% $867,456 4.26%
========== ========== ========
</TABLE>
29
<PAGE>
The maturities of time deposits of $100,000 or more as of December 31, 1998 are
presented below.
<TABLE>
<CAPTION>
(dollars in
thousands)
-----------------
<S> <C>
3 months or less $ 45,422
Over 3 through 6 months 38,101
Over 6 through 9 months 26,604
Over 9 through 12 months 34,691
Over 12 months 27,305
-----------------
$172,123
=================
</TABLE>
BORROWINGS
The Company utilizes external funding sources to fund operations,
including FHLB advances and short term and warehouse lines of credit. The most
significant of these sources of funds in 1998 was the warehouse line of credit
which totaled $116.6 million at December 31, 1998 and matures on March 31, 1999.
The average borrowings outstanding during 1998 under the warehouse line of
credit was $82.2 million with an average interest rate of 5.98%. For a more
detailed discussion of the borrowings of the Company, see note 7 to the
Consolidated Financial Statements included herein.
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 8.95 % at December 31, 1998, compared to 9.41% at
December 31, 1997. 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: a risk-based
measure and a leverage measure.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profiles 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 8.0%. 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
30
<PAGE>
stock, mandatory convertible securities, subordinated debt and a limited amount
of the allowance for credit losses. The sum of Tier I capital and Tier II
capital is "total risk-based capital."
31
<PAGE>
The Federal Reserve and the FDIC also adopted regulations which supplement the
risk-based guidelines to include a minimum leverage ratio of 3.0% 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 1.0% to 2.0% higher than the minimum 3.0% level.
The following table summarizes the Company's capital ratios at December 31,
1998 and 1997.
<TABLE>
<CAPTION>
Minimum
1998 1997 Requirements
-----------------------------------------------------
<S> <C> <C> <C>
Tier 1 Capital leverage ratio 11.56% 12.28% 3.00%
Tier 1 Risk-based capital ratio 14.13% 15.81% 4.00%
Tier 2 Risk-based capital ratio 1.23% 1.50%
------------------------------
Total Risk-based capital ratio 15.36% 17.31% 8.00%
</TABLE>
The Company issued $28.8 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 in note 9 of the Company's Consolidated Financial Statements included
herein.
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>
1998 1997
------------------------------
<S> <C> <C>
Return on Average Equity 16.35% 17.17%
X
Retention Rate (1-dividend payout ratio) 61.25% 79.45%
------------------------------
=
Sustainable Internal Growth Rate 10.01% 13.64%
</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".
32
<PAGE>
RESULTS OF OPERATIONS
NET INTEREST INCOME
Tax Equivalent Basis
Net interest income for 1998, on a tax equivalent basis increased $4.9
million, or 8.8% from 1997. This increase can be attributed to the $202.3
million increase in average interest earning assets and especially to the $227.8
million increase in average loans outstanding. The average balance sheet for
1998 grew $215.3 million due to strong loan demand in the Company's markets. The
net interest margin decreased by 40 basis points as the Company's yields on
earning assets decreased while the cost of funds increased.
Net interest income for 1997, on a tax equivalent basis increased $9.5
million, or 21% from 1996. This increase can be attributed to the $158 million
increase in average interest earning assets. The average balance sheet for 1997
grew $172 million due to loan demand in the Company's markets. The net interest
margin increased as the Company's yields on earning assets increased while the
cost of funds decreased.
NET INTEREST MARGIN
The table below illustrates the changes in the net interest margin over the
past four years.
<TABLE>
<CAPTION>
1998 1997 1996 1995
------------------------------------------------------------------------------------------------------
% 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 $ 115,247 8.83% $ 101,076 9.16% $ 85,276 9.02% $ 72,803 9.13%
Tax-equivalent
adjustment 562 0.04% 738 0.07% 788 0.08% 632 0.07%
------------------------------------------------------------------------------------------------------
Interest income,
taxable equivalent 115,809 8.87% 101,814 9.23% 86,064 9.10% 73,435 9.20%
Interest expense 55,096 4.22% 46,037 4.17% 39,880 4.22% 33,414 4.19%
------------------------------------------------------------------------------------------------------
Net interest income,
taxable equivalent $ 60,713 4.65% $ 55,777 5.05% $ 46,184 4.88% $ 40,021 5.02%
========== ========== ========= ========
Average earning
assets $1,305,826 $1,103,503 $945,484 $797,825
========== ========== ========= ========
</TABLE>
33
<PAGE>
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 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 Banks to recognize
additions to their allowance for credit losses.
Management's analysis of the allowance for credit losses, nonperforming
assets, and net chargeoffs on a monthly basis concluded that the allowance was
adequate given the risk resident within the loan portfolio. The allowance as a
percent of total loans is 1.36%, nonperforming loans to total loans (net of
unearned interest) is 0.37% and net chargeoffs as a percent of average loans
(net of unearned interest) were 0.03% for the year ended December 31, 1998.
OTHER INCOME
Total other income increased $15.2 million in 1998, or 63.0% as compared to
1997. The majority of the increase was due to an increase in mortgage banking
income of $11.3 million, or 77.3%. The Company's mortgage operation continues to
expand as the market for mortgages grows and interest rates remain low and also
as a result the Company's bank acquisition program. The mortgage 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 a significant portion of the potential interest rate risk normally
associated with a mortgage lending operation.
Total other income increased $7.2 million in 1997 as compared to 1996. The
majority of the increase was associated with the Company's mortgage lending
operation. Mortgage banking income increased $5.7 million during that period.
OTHER EXPENSE
Total other expense increased $17.0 million in 1998, or 34.7% compared to
1997. Management anticipates continued increases in other expense during 1999,
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 $8.6 million for the year
due to the Company hiring staff for new branches, staffing
increases necessary for the
34
<PAGE>
significant growth of the Company's franchise, and the commission
nature of the mortgage lending operations.
. Net occupancy increased $1.5 million as three new branch banks became
operational during the year.
. Merger related expenses increased $1.7 million as the Company
completed four mergers during the year.
. Reorganization expenses were $1.4 million and are discussed below.
Total other expense increased $6.7 million in 1997, or 15.8% compared to
1996. This increase was due primarily to the significant growth of the Company.
Several areas, which registered significant changes for the 1997 year, were:
. Salaries and employee benefits increased $4.4 million for the year.
. Net occupancy increased $1.1 million for the year.
INCOME TAXES
The Company experienced pre-tax operating earnings of $33.0 million for
1998, which resulted in a tax provision of $12.1 million. The effective rate of
36.6% increased from an effective rate of 34.2% in 1997 as tax free income from
municipal securities declined as compared to 1997. For more information on
income taxes, see note 12 of the Consolidated Financial Statements included
herein.
35
<PAGE>
OTHER INFORMATION
Fourth Quarter Results
The Company had net income of $3.8 million for the fourth quarter of 1998.
Return on average assets was 1.0%, and the return on average equity was 10.9%.
The net interest margin was 4.44%, which compared to fourth quarter 1997's
4.99%, resulting in a decrease of 55 basis points.
Restructuring Charges
The Company recorded approximately $1.4 million in
restructuring/reorganization charges during the fourth quarter of 1998. A
portion of these charges were related to the process of consolidating all bank
subsidiary charters into one banking charter. In doing so, redundant banking
operations will be eliminated during the first and second quarters of 1999,
which will result in greater operating efficiencies for the Company. In addition
to the consolidation of banks, branches which have been acquired as the Company
acquired banks in and around the metro Atlanta area are being consolidated due
to overlapping markets. A total of four branches will be combined to improve the
operational efficiences of the branch network. The restructuring charges
recognized in the fourth quarter of 1998 are expected to reduce on-going
operating costs by approximately $2.8 million per year.
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 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("Statement 133"). Statement 133 establishes new accounting and reporting
activities. The standard requires all derivatives to be measured at fair value
and recognized as either assets or liabilities in the statement of condition.
Under certain conditions, a derivative may be specifically designated as a
hedge. Accounting for the changes in fair value of a derivative depends on the
intended use of the derivative and the resulting designation. Adoption of the
standard is required for the Company's December 31, 2000 financial statements
with early adoption allowed as of the beginning of any quarter after June 30,
1998. Adoption is not expected to result in a material financial impact on the
Company's financial position or results of operations.
36
<PAGE>
QUARTERLY RESULTS
The quarterly information reported previously on Form 10-Q for the quarters
indicated below has been restated to reflect the 1998 mergers which were
accounted for as poolings of interests. Net income per share has been restated
for 1997 to reflect stock splits payable to stockholders of record on March 6,
1998 as well as to conform to the requirements of FASB Statement No. 128
"Earnings Per Share".
<TABLE>
<CAPTION>
1998 Quarter ended
March 31 June 30 September 30 December 31
-----------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Interest income $26,763 $28,756 $29,939 $29,789
Interest expense 12,655 13,547 14,228 14,666
Net interest income 14,108 15,210 15,711 15,122
Provision for credit losses 45 165 185 210
Securities gains 13 640 1,110 372
Earnings before income taxes 8,519 9,329 8,221 6,917
Net income 5,689 6,443 4,947 3,835
Net income per share 0.22 0.25 0.19 0.15
Net income per share diluted 0.22 0.25 0.18 0.14
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 $23,252 $24,717 $26,028 $27,079
Interest expense 10,659 11,021 11,850 12,507
Net interest income 12,593 13,696 14,178 14,572
Provision for credit losses 244 133 595 795
Securities (losses) gains (36) (9) 24 20
Earnings before income taxes 5,763 7,300 8,086 7,316
Net income 4,171 4,763 5,214 4,589
Net income per share 0.17 0.19 0.21 0.18
Net income per share diluted 0.16 0.19 0.20 0.17
</TABLE>
Capability of the Company's Data Processing Software to Accommodate the Year
2000
With respect to its internal systems, the Company is taking steps to
prepare both its information technology systems and its other equipment and
machinery for the Year 2000 date change. The Company is currently in the
process of consolidating the recently acquired banks. Current data processing
conversion schedules provide for all currently owned banks to be processed by a
common Year 2000 certified processor by April 1999. The data processing service
provider for the banking subsidiaries has given the Company guarantees of Year
2000 compliance on core loan, deposit and accounting related programming.
Testing of the service provider was completed during the third quarter of 1998
with test results proving that accurate calculations will continue through the
year 2000 and beyond. With these test results, the
37
<PAGE>
company's Year 2000 efforts are considered to be substantially complete for core
banking applications. Year 2000 upgrades to the ATM machines are under contract
and will be completed by the first quarter of 1999 as further versions of
compliant software are released. Testing of file servers and personal computers
and networks is in process for recent acquisitions with replacement and upgrades
of mission critical components complete and non-mission critical computers
scheduled to be replaced or upgraded during the first quarter of 1999.
Customer mailings promoting awareness of the potential Year 2000 problem
were mailed during the third quarter of 1998. Larger credit relationships have
been reviewed and surveyed for Year 2000 issues assessing their readiness and
preparations related to the coming of the new millenium and findings indicate
minimal additional risks because of the Year 2000.The Company determined during
the first quarter of 1999 that it was necessary for the Company to reassess and
validate the Year 2000 readiness of its non-bank subsidiary, Premier Lending,
and to improve the documentation relating to such readiness. The Company is in
the process of revising and updating the Year 2000 plan for Premier Lending and
has engaged an outside consultant to assist in documenting the level of
readiness. The testing of internal systems, the review of third parties with
whom a material relationship may exist, and the development of Year 2000
business resumption contingency plans have been undertaken at Premier Lending
and will be completed during the second quarter of 1999. However, further
testing, assessment of third party risks, and modification of contingency plans
will continue to be undertaken during 1999 with respect to Premier Lending to
the extent deemed necessary by the Company.
Costs associated with Year 2000 have been minimized due to the necessary
upgrades of our acquired banking offices prior to the merging of data processing
systems. Estimated costs for Year 2000 preparation including personnel costs are
$150,000. Management believes that all systems will be Year 2000 ready. Failure
of mission critical systems is not likely because of Year 2000 preparations.
Contingency plans continue to be developed and focus on manual processes and
backup procedures needed for temporary operations should there be temporary
malfunctions of utility providers. Contingency plans will be modified on an
ongoing basis as information dictates.
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.
38
<PAGE>
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 held 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 is 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 150 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 1.2% if
rates rise gradually over the next year. On the other hand, the model projects
net interest income to decrease 1.8% if rates 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.
Due to the Company's 1998 mergers, which were accounted for as poolings of
interests, the Company's financial statements have been restated for periods
prior to the mergers. However, it is impractical to restate the December 31,
1997 Gap analysis due to the differences in the market risk analysis performed
by each of the pooled entities prior to the merger with the Company.
Accordingly, the Gap analysis which follows is for December 31, 1998 only.
39
<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) $715,762 $783,731 $ 881,025
Rate Sensitive Liabilities (RSL) 739,504 864,010 1,038,137
RSA minus RSL (Gap) $(23,742) $(80,279) $ (157,112)
====================================================================
Gap Ratio (RSA/RSL) 0.97 0.91 0.85
====================================================================
</TABLE>
<TABLE>
<CAPTION>
Management Adjusted
3-MONTH 6-MONTH 1-YEAR
------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Rate Sensitive Assets (RSA) $728,915 $805,972 $907,124
Rate Sensitive Liabilities (RSL) 524,072 691,665 908,878
RSA minus RSL (Gap) $204,843 $114,307 $ (1,754)
==================================================================
Gap Ratio (RSA/RSL) 1.39 1.17 1.00
==================================================================
</TABLE>
40
<PAGE>
Report of Independent Auditors
Board of Directors
Premier Bancshares, Inc.
We have audited the accompanying consolidated statements of condition of Premier
Bancshares, Inc. and Subsidiaries as of December 31, 1998, and 1997 and the
related consolidated statements of income, stockholders' equity and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. We did not audit the financial
statements of Lanier Bank and Trust Company, Button Gwinnett Financial
Corporation and The Bank Holding Company, which statements reflect total assets
of $420,137,000 as of December 31, 1997, and net interest income of $20,081,000
and $17,711,000, for each of the two years in the period ended December 31,
1997. Those statements were audited by other auditors whose reports have been
furnished to us, and our opinion, insofar as it relates to data included for
Lanier Bank and Trust Company, Button Gwinnett Financial Corporation and The
Bank Holding Company, is based solely on the reports of the other auditors. The
consolidated financial statements of Premier Bancshares, Inc. and subsidiaries
for the year 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,
December 12, 1997, June 9, 1998, July 1, 1998 and July 2, 1998, expressed an
unqualified opinion on those statements.
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 and the reports of other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
consolidated 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, 1998, and 1997 and the consolidated
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Atlanta, Georgia
February 5, 1999
41
<PAGE>
Premier Bancshares, Inc. and Subsidiaries
Consolidated Statements of Condition
(Dollars in thousands)
<TABLE>
<CAPTION>
December 31
1998 1997
-------------------------------------------------
<S> <C> <C>
Assets
Cash and due from banks $ 58,021 $ 51,882
Interest-bearing deposits with banks 8,262 6,977
Federal funds sold and repurchase agreements 123,740 59,032
Investment securities available for sale 133,232 161,872
Investment securities held to maturity - 46,003
Loans held for sale 124,900 62,738
Loans, net of unearned income 1,033,561 850,556
Allowance for credit losses (14,080) (13,782)
-------------------------------------------------
Loans, net 1,019,481 836,774
Premises and equipment, net 30,787 30,317
Goodwill and other intangibles 4,500 5,001
Other real estate owned 1,889 1,237
Other assets 15,806 18,666
-------------------------------------------------
Total assets $1,520,618 $1,280,499
=================================================
Liabilities, redeemable preferred stock and common stockholders'
equity
Deposits:
Noninterest-bearing demand $ 187,998 $ 173,290
Interest-bearing demand 150,723 204,102
Savings and money market 302,919 113,041
Time, $100,000 and over 172,123 167,077
Other time 366,199 416,689
-------------------------------------------------
Total deposits 1,179,962 1,074,199
Federal funds purchased and securities sold under repurchase
agreements 21,782 28,303
-
Federal Home Loan Bank advances 2,875
Lines of credit 138,608 10,160
Guaranteed preferred beneficial interests in the Company's
subordinated debentures (trust preferred securities) 28,750 28,750
Other borrowings 1,481 2,037
Other liabilities 11,496 11,187
-------------------------------------------------
Total liabilities 1,382,079 1,157,511
Redeemable preferred stock, par value $60, 2,000,000 shares
authorized, 40,770 shares issued and outstanding 2,446 2,446
Common stockholders' equity:
Common stock, $1 par value; 60,000,000 shares authorized;
26,000,409 issued and outstanding at December 31, 1998;
25,558,840 issued and outstanding at December 31, 1997 26,000 25,559
Capital surplus 54,730 51,900
Retained earnings 54,986 42,396
Accumulated other comprehensive income 377 687
-------------------------------------------------
Total common stockholders' equity 136,093 120,542
-------------------------------------------------
Total liabilities, redeemable preferred stock and common
stockholders' equity $1,520,618 $1,280,499
=================================================
</TABLE>
See accompanying notes.
42
<PAGE>
Premier Bancshares, Inc. and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
----------------------------------------------------------------
<S> <C> <C> <C>
Interest income:
Interest and fees on loans $ 98,768 $ 83,189 $66,870
Interest on investment securities:
Taxable 9,721 12,635 12,362
Nontaxable 1,091 1,433 1,530
Interest on deposits in banks 103 200 446
Interest on Federal Funds sold and repurchase
agreements 5,564 3,619 4,068
----------------------------------------------------------------
Total interest income 115,247 101,076 85,276
Interest expense:
Interest on deposits 47,263 42,773 36,923
Interest on Federal Home Loan Bank advances 189 680 416
Interest on short-term borrowings 4,790 1,851 2,131
Interest on long-term debt 2,854 733 410
----------------------------------------------------------------
Total interest expense 55,096 46,037 39,880
Net interest income 60,151 55,039 45,396
Provision for credit losses 605 1,767 473
----------------------------------------------------------------
Net interest income after provision for credit losses 59,546 53,272 44,923
Other income:
Service charges on deposit accounts 4,441 4,517 4,213
Other service charges, commissions, and fees 4,675 2,063 1,376
Securities transactions, net 2,135 (7) 197
Mortgage banking activities 25,813 14,558 8,901
Gain on sale of loans 767 888 545
Other operating income 1,600 2,178 1,771
----------------------------------------------------------------
Total other income 39,431 24,197 17,003
Other expenses:
Salaries and employee benefits 37,444 28,894 24,525
Net occupancy and equipment 8,068 6,531 5,469
Merger expenses 2,990 1,264 499
Stationery and supplies 1,193 762 725
Other operating expenses 16,296 11,553 11,117
----------------------------------------------------------------
Total other expenses 65,991 49,004 42,335
----------------------------------------------------------------
Income before income taxes 32,986 28,465 19,591
Income tax expense 12,072 9,728 5,934
----------------------------------------------------------------
Net income $ 20,914 $ 18,737 $13,657
================================================================
Net income per share of common stock (1) .80 .73 .54
================================================================
Net income per share of common stock, diluted (1) .78 .71 .52
================================================================
</TABLE>
(1) After giving effect to stock splits payable to stockholders of record on
January 23, 1998 and March 6, 1997.
See accompanying notes.
43
<PAGE>
Premier Bancshares, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock Capital Retained Conprehensive Stockholders'
Shares Par Value Surplus Earnings Income Equity
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 18,081,961 $ 92,900 $(19,314) $20,276 $ 733 $ 94,595
Comprehensive Income:
Net income - - - 13,657 - 13,657
Net change in unrealized gains on securities
available-for-sale, net of tax - - - - (934) (934)
---------
Total comprehensive income 12,723
---------
Recapitalization - (74,817) 74,817 - - -
Stock options exercised 10,057 10 43 - - 53
5% Stock dividend by Pooled Company 45,098 44 493 (537) - -
Cash dividends declared ($0.17 per share) (1) - - - (4,367) - (4,367)
Preferred stock dividends - - - (196) - (196)
Purchase of treasury stock by Pooled Company (79,083) (79) (564) - - (643)
Stock split 1,895,969 1,896 (1,896) - - -
------------------------------------------------------------------------------
Balance, December 31, 1996 19,954,002 19,954 53,579 28,833 (201) 102,165
Comprehensive Income:
Net income - - - 18,737 - 18,737
Net change in unrealized gains on securities
available-for-sale, net of tax - - - - 888 888
--------
Total comprehensive income 19,625
--------
Stock options exercised 483,187 483 1,519 - - 2,002
Cash dividends declared ($0.15 per share) (1) - - - (3,736) - (3,736)
Preferred stock dividends - - - (196) - (196)
Shares issued in business combination 114,598 115 1,709 - - 1,824
5% Stock dividend by Pooled Company 47,487 47 563 (610) - -
Purchase of treasury stock by Pooled Company (188,276) (188) (954) - - (1,142)
Stock split 5,147,842 5,148 (4,516) (632) - -
-------------------------------------------------------------------------------
Balance, December 31, 1997 25,558,840 25,559 51,900 42,396 687 120,542
</TABLE>
44
<PAGE>
Premier Bancshares, Inc. and Subsidiaries
Consolidated Statements of Stockholders' Equity (Continued)
Years ended December 31, 1998, 1997 and 1996
(Dollars in thousands)
<TABLE>
<CAPTION>
Accumulated
Other Total
Common Stock Capital Retained Comprehensive Stockholders'
Shares Par Value Surplus Earnings Income Equity
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Comprehensive Income:
Net income - - - $20,914 - $ 20,914
Net change in unrealized gains on securities
available-for-sale, net of tax - - - - (310) (310)
Total comprehensive income 20,604
-----------
Stock options exercised 441,569 441 2,830 - - 3,271
Cash dividends declared ($.31 per share) - - - (8,128) - (8,128)
Preferred stock dividends - - - (196) - (196)
----------------------------------------------------------------------------------
Balance, December 31, 1998 26,000,409 $26,000 $54,730 $54,986 $377 $136,093
==================================================================================
</TABLE>
See accompanying notes.
45
<PAGE>
Premier Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
--------------------------------------------------------------------
<S> <C> <C> <C>
Operating activities
Net income $ 20,914 $ 18,737 $ 13,657
Adjustments to reconcile net income to net cash (used
in) provided by operating activities:
Depreciation 2,982 2,699 2,064
Amortization of intangibles 563 423 384
Provision for credit losses 605 1,767 473
Deferred income taxes 971 (2,109) (494)
Net (increase) decrease in loans held for sale (62,162) (28,168) 923
Net realized (gains) losses on securities
available-for-sale (2,135) 7 (197)
Gain on sale of bank branches and subsidiary (657) (757) -
Gain on sale of thrift charter - (297) -
Decrease (increase) in interest receivable 1,398 (2,028) (617)
Increase in interest payable 355 1,141 745
Other 2,855 340 (3,505)
--------------------------------------------------------------------
Net cash (used in) provided by operating activities (34,311) (8,245) 13,433
Investing activities
Purchases of securities available-for-sale (56,855) (55,123) (97,065)
Proceeds from sales of securities available-for-sale 30,529 34,954 25,596
Proceeds from maturities of securities 91,613 60,124 60,067
available-for-sale
Purchases of securities held-to-maturity (10,085) (23,184) (16,500)
Proceeds from maturities of securities 18,885 9,648 10,407
held-to-maturity
Net (increase) decrease in federal funds sold (64,708) 43,970 (42,391)
Net (decrease) increase in interest bearing deposits
in banks (1,285) (4,180) 9,951
Net increase in loans (187,062) (184,677) (115,398)
Purchase of premises and equipment (4,103) (4,858) (7,282)
Proceeds from sales of OREO 2,576 1,039 1,013
Investment in subsidiary, net of cash acquired - 694 -
Proceeds from sale of subsidiary (7,122) 800 -
--------------------------------------------------------------------
Net cash used in investing activities (187,617) (120,793) (171,602)
</TABLE>
46
<PAGE>
Premier Bancshares, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
-----------------------------------------------------------------
<S> <C> <C> <C>
Financing activities
Net increase in deposits 114,624 115,006 171,280
Net (decrease) increase in repurchase agreements (6,521) 11,264 8,156
Net increase(decrease) in other borrowings 127,892 (11,575) (2,214)
Net decrease in Federal Home Loan Bank advances (2,875) (1,750) (6,500)
Dividends paid (8,324) (5,250) (3,245)
Proceeds from exercise of stock options 3,271 2,001 53
Proceeds from issuance of guaranteed preferred
beneficial interests in the Company's subordinated
debentures - 28,750 -
Purchase of treasury stock - (1,142) (643)
-----------------------------------------------------------------
Net cash provided by financing activities 228,067 137,304 166,887
Net increase in cash and due from banks 6,139 8,266 8,718
Cash and due from banks at beginning of year 51,882 43,616 34,898
Cash and due from banks at end of year $ 58,021 $ 51,882 $ 43,616
=================================================================
Supplemental disclosures
Cash paid for:
Interest $ 54,742 $ 41,551 $ 36,034
=================================================================
Income taxes $ 10,497 $ 8,882 $ 6,196
=================================================================
Principal balances of loans transferred to other real
estate $ 3,321 $ 1,067 $ 1,903
=================================================================
</TABLE>
See accompanying notes.
47
<PAGE>
Premier Bancshares, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
1. Summary of Significant Accounting Policies
Nature of Business
Premier Bancshares, Inc. (the "Company") is a bank holding company organized and
existing under the laws of the State of Georgia and headquartered in Atlanta,
Georgia. At December 31, 1998, the Company had six subsidiaries: Premier Bank
("Premier Bank"), Premier Lending Corporation ("Premier Lending"), The Central
and Southern Bank of Georgia ("Central and Southern Bank"), First Community Bank
of Henry County ("Henry County Bank"), The Bank of Spalding County ("Spalding
County Bank") and Frederica Bank & Trust ("Frederica"). The Company was
incorporated in 1988 under the laws of the State of Georgia.
As more fully discussed in Note 2, the Company merged with Lanier Bank and Trust
Company, Button Gwinnett Financial Corporation, The Bank Holding Company and
Frederica Bank & Trust on June 9, 1998, July 1, 1998 July 2, 1998 and December
17, 1998, respectively, in business combinations accounted for as poolings of
interests. The consolidated financial statements present financial information
restated for all periods presented.
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 consolidated financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance sheet
and revenues and expenses for the period. Actual results could differ from those
estimates. The 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.
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.
48
<PAGE>
1. Summary of Significant Accounting Policies (continued)
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 both the intent and the 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
comprehensive income, net of tax. During 1998, the Company completed four
mergers and subsequently conformed accounting policies and practices.
Accordingly, all securities previously classified by the acquired companies as
held-to-maturity were transferred to available-for-sale.
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 generally 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 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.
49
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Goodwill and Other Intangibles
Goodwill and other intangibles are being amortized principally on the straight-
line method over periods of 5 to 15 years. Accumulated amortization was
$2,213,000 and $1,792,000 at December 31, 1998 and 1997, respectively.
Amortization expense totaled $421,000, $423,000 and $384,000 for 1998, 1997 and
1996, 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.
Income Per Common Share
Effective December 15, 1997, the Company adopted the provisions of Financial
Accounting Standards Board ("FASB") Statement of Financial Accounting Standards
No. 128, "Earnings per Share" ("Statement 128"). 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 1998 have been restated to reflect the
effect of business combinations accounted for as poolings of interests. Net
income per common share and net income per common share, diluted, have been
adjusted $(.02) and $.07 in 1997 and 1996, respectively, for business
combinations accounted for as poolings of interests.
50
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Income Per Common Share (continued)
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
Year ended December 31
1998 1997 1996
------------------------------------------------------------
(In thousands, except per share data)
<S> <C> <C> <C>
Numerator:
Net income $20,914 $18,737 $13,657
Less: preferred stock dividends 196 196 196
------------------------------------------------------------
Net income attributable to common stockholders $20,718 $18,541 $13,461
============================================================
Denominator:
Denominator for basic earnings per share - weighted
average shares 25,811 25,442 25,028
Effect of dilutive securities - stock options 588 678 651
------------------------------------------------------------
Denominator for diluted earnings per share -
adjusted weighted average shares and assumed
conversions 26,399 26,120 25,679
============================================================
Net income per share of common stock (1) $ .80 $ .73 $ .54
------------------------------------------------------------
Net income per share of common stock, assuming
dilution (1) $ .78 $ .71 $ .52
============================================================
</TABLE>
(1) After giving effect to stock splits payable to shareholders of record on
January 23, 1997 and March 6, 1997.
51
<PAGE>
1. Summary of Significant Accounting Policies (continued)
Recent Accounting Pronouncements
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" ("Statement
133"). Statement 133 establishes new accounting and reporting activities. The
standard requires all derivatives to be measured at fair value and recognized as
either assets or liabilities in the statement of condition. Under certain
conditions, a derivative may be specifically designated as a hedge. Accounting
for the changes in fair value of a derivative depends on the intended use of the
derivative and the resulting designation. Adoption of the standard is required
for the Company's December 31, 2000 financial statements with early adoption
allowed as of the beginning of any quarter after June 30, 1998. Adoption is not
expected to result in a material financial impact on the Company's financial
position or results of operations.
2. Business Combinations
The following summarizes the Company's recent business combinations which have
been accounted for as poolings of interests. All prior period consolidated
financial statements have been restated to include the results of operations for
each of the following:
<TABLE>
<CAPTION>
Common Shares Preferred Shares
Company Acquired Merger Date Issued Issued
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Frederica Bank & Trust December 17, 1998 1,013,500 -
The Bank Holding Company July 2, 1998 2,170,447 40,770
Button Gwinnett Financial Corporation July 1, 1998 5,571,778 -
Lanier Bank & Trust Company June 9, 1998 1,702,748 -
Citizens Gwinnett Bancshares December 12, 1997 2,066,834 -
Central & Southern Holding Company June 23, 1997 3,653,523 -
First Alliance Bancorp, Inc. August 31, 1996 746,530 -
</TABLE>
52
<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>
1998 1997 1996
---------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Net interest income:
Premier Bancshares, Inc., exclusive of
pre-acquisition amounts $44,197 $20,498 $ 9,764
Frederica Bank & Trust (1) 5,695 1,964 1,757
The Bank Holding Company (2) 2,730 6,146 5,490
Button Gwinnett Financial Corporation (3) 6,042 10,982 9,483
Lanier Bank & Trust Company (4) 1,487 2,954 2,739
Citizens Gwinnett Bancshares (5) - 7,796 5,914
Central and Southern Holding Company (6) - 4,699 8,280
Former Premier Bancshares, Inc. (7) - - 1,969
---------------------------------------------------------------------
Total $60,151 $55,039 $45,396
=====================================================================
Net income:
Premier Bancshares, Inc. exclusive of
pre-acquisition amounts $15,914 $ 7,744 $ 2,425
Frederica Bank & Trust (1) 835 660 576
The Bank Holding Company (2) 870 1,219 1,442
Button Gwinnett Financial Corporation (3) 2,954 4,864 3,845
Lanier Bank & Trust Company (4) 341 800 789
Citizens Gwinnett Bancshares (5) - 1,935 1,511
Central and Southern Holding Company (6) - 1,515 2,954
Former Premier Bancshares, Inc. (7) - - 115
---------------------------------------------------------------------
Total $20,914 $18,737 $13,657
=====================================================================
</TABLE>
(1) 1998 amounts reflect the results of operations from January 1, 1998 through
the effective merger date of December 17, 1998. Results of operations from
December 18, 1998 through December 31, 1998, are included in Premier
Bancshares, Inc. amounts.
(2) 1998 amounts reflect the results of operations from January 1, 1998 through
the effective merger date of July 2, 1998. Results of operations for the
period from July 3, 1998 through December 31, 1998 are included in Premier
Bancshares, Inc. amounts.
(3) 1998 amounts reflect the results of operations from January 1, 1998 through
the effective merger date of July 1, 1998. Results of operations for the
period from July 2, 1998 through December 31, 1998 are included in Premier
Bancshares, Inc. amounts.
(4) 1998 amounts reflect the results of operations from January 1, 1998 through
the effective merger date of June 9, 1998. Results of operations for the
period from June 10, 1998 through December 31, 1998 are included in Premier
Bancshares, Inc. amounts.
(5) 1997 amounts reflect the results of operations from January 1, 1997 through
December 12, 1997. Results of operations for periods subsequent to December
12, 1997 are included in Premier Bancshares, Inc. amounts.
(6) 1997 amounts reflect the results of operations from January 1, 1997 through
the effective merger date of June 23, 1997. Results of operations for
periods subsequent to June 23, 1997 are included in Premier Bancshares,
Inc. amounts.
53
<PAGE>
2. Business Combinations (continued)
(7) 1996 amounts reflect the results of operations from January 1, 1996 through
the effective merger date of August 31, 1996. Results of operations for
periods subsequent to August 31, 1997 are included in Premier Bancshares,
Inc. amounts.
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. 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.
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, 1998:
U.S. Treasury and Government and
agency securities $ 82,206 $ 587 $(127) $ 82,666
State and municipal securities 10,718 469 - 11,187
Mortgage backed securities 36,545 286 (279) 36,552
Equity securities 2,875 - (48) 2,827
-------------------------------------------------------------------------------
$132,344 $1,342 $(454) $133,232
===============================================================================
</TABLE>
54
<PAGE>
3. Investment Securities (continued)
<TABLE>
<CAPTION>
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Loses Value
-------------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C> <C>
Securities available for sale
December 31, 1997:
U.S. Treasury and Government and
agency securities $ 83,942 408 (168) $ 84,182
State and municipal securities 20,852 967 (2) 21,817
Mortgage backed securities 51,580 405 (367) 51,618
Equity securities 4,341 - (86) 4,255
-------------------------------------------------------------------------------
$160,715 1,780 (623) $161,872
===============================================================================
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------------------------------------
(dollars in thousands)
Securities held to maturity
December 31, 1997:
U.S. Treasury and U.S. Government
and agency securities $ 32,779 $ 90 $ (29) $ 32,840
State and municipal securities 5,685 75 (1) 5,759
Mortgage backed securities 7,539 17 (8) 7,548
-------------------------------------------------------------------------------
$ 46,003 $ 182 $ (38) $ 46,147
===============================================================================
</TABLE>
The amortized cost and fair value of securities as of December 31, 1998 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 thousands)
<S> <C> <C>
Securities available for sale
Due in one year or less $ 28,304 $ 28,540
Due from one year to five years 54,894 55,473
Due from five to ten years 9,726 9,840
Mortgage-backed securities 36,545 36,552
Equity securities 2,875 2,827
--------------------------------------------
$132,344 $133,232
============================================
</TABLE>
55
<PAGE>
3. Investment Securities (continued)
Securities with a carrying value of approximately $87,796,000 and $84,723,000 at
December 31, 1998 and 1997, respectively, were pledged to secure public deposits
and for other purposes.
Gains and losses on sales of securities consist of the following:
<TABLE>
<CAPTION>
Available for Sale
----------------------------------------------
1998 1997 1996
----------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Gross gains $2,135 $ 23 $ 265
Gross losses - (30) (68)
----------------------------------------------
Net realized gains (losses) $2,135 $ (7) $ 197
==============================================
</TABLE>
The related income tax expense (benefit) on sales of securities was $781,000,
$(2,000) and $59,000 for 1998, 1997, and 1996, respectively.
4. Loans
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
December 31
1998 1997
-------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Commercial $ 256,465 $203,022
Real estate-construction 202,188 207,229
Real estate-mortgage 617,615 441,996
Consumer 79,162 60,915
Other 4,396 1,539
Less: loans held for sale (124,900) (62,738)
-------------------------------------------------
1,034,926 851,963
Less unearned income (1,190) (2,678)
Net deferred loan (fees) costs (175) 1,271
Less allowance for credit losses (14,080) (13,782)
-------------------------------------------------
Loans, net $1,019,481 $836,774
=================================================
</TABLE>
The Company had loan participations sold in the amount of $43,970,000 and
$73,802,000 at December 31, 1998 and 1997, respectively.
56
<PAGE>
4. Loans (continued)
Changes in the allowance for credit losses for the years ended December 31,
1998, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
Balance, beginning of year $13,782 $11,877 $10,696
Allowance acquired (disposed)
in acquisitions and disposals - (74) -
Provision for credit losses 605 1,767 473
Loans charged off (1,026) (1,018) (935)
Recoveries 719 1,230 1,643
--------------------------------------------------------------------------
Balance, end of year $14,080 $13,782 $11,877
==========================================================================
</TABLE>
Loans in nonaccrual status at December 31, 1998 and 1997 totaled $3,843,000 and
$3,530,000, respectively. The total recorded investment in impaired loans was
$3,856,000 and $3,630,000 at December 31, 1998 and 1997, respectively. These
loans had a specific allowance for credit losses of $280,000 and $60,000 at
December 31, 1998 and 1997, respectively. The average recorded investment in
impaired loans for 1998, 1997 and 1996 was $4,491,000, $2,069,000 and $2,027,000
respectively. Interest income on impaired loans of $70,000, $36,000 and
$125,000 was recognized for cash payments received for the years ended December
31, 1998, 1997 and 1996, respectively. Interest income lost on impaired loans
during 1998, 1997, and 1996 was $300,000, $162,000 and $223,000, 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, 1998 are as
follows in thousands:
<TABLE>
<S> <C>
Balance, beginning of year $19,575
Advances 16,207
Repayments 15,436
----------------
Balance, end of year $20,346
================
</TABLE>
5. Premises and Equipment
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31
1998 1997
-------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Land $ 7,823 $ 7,708
Buildings and improvements 21,527 20,718
Furniture and equipment 21,126 19,266
-------------------------------------------------
50,476 47,692
Accumulated depreciation (19,689) (17,375)
-------------------------------------------------
Premises and equipment, net $ 30,787 $ 30,317
=================================================
</TABLE>
57
<PAGE>
6. Deposits
Time deposits over $100,000 as of December 31, 1998 and 1997 were $172,123,000
and $167,077,000, respectively. Related interest expense was $8,458,000,
$9,445,000 and $7,792,000 for the years ended 1998, 1997, and 1996,
respectively. Time deposits of $430,290,000, $61,632,000, $25,396,000,
$11,573,000 and $9,432,000 mature in 1999, 2000, 2001, 2002 and 2003,
respectively.
7. Borrowings
The Company's borrowings are summarized as follows:
<TABLE>
<CAPTION>
December 31
1998 1997
-------------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Federal funds purchased and securities sold
under repurchase agreements $ 21,782 $28,303
FHLB advances - 2,875
Revolving line of credit 22,004 -
Warehouse line of credit 116,604 10,160
Other borrowings 1,481 2,037
-------------------------------------------------------
Total borrowings $161,871 $43,375
=======================================================
</TABLE>
As of December 31, 1998, the Company had entered into 30 repurchase agreements
totaling $21,782,000. Interest is payable monthly at rates ranging from 2.00%
to 4.00%. The Company has pledged various U.S. Government and agency securities
as collateral.
The Company has a revolving line of credit with a nonaffiliated institution
bearing interest at 30 day LIBOR plus 85 basis points or 6.48% at December 31,
1998. This rate adjusts monthly and is payable quarterly. The outstanding
balance at December 31, 1998, was $22,004,000 and the available balance is
$2,996,000. This line matures on August 1, 1999 and is secured by 50% of the
stock of each banking subsidiary of the Company.
The Company's warehouse line of credit is with a nonaffiliated institution and
bears interest at the Fed Funds rate plus an index based on the Company's
various mortgage loan tranches. This rate is adjusted daily and is payable
monthly. At December 31, 1998 these rates ranged from 5.75% to 7.00%. The
outstanding balance at December 31, 1998 is $116,604,000 and the available
balance is $13,396,000. This line matures on March 31, 1999 and is secured by an
assignment of first security interest in certain mortgage loans. In connection
with its lines of credit, the Company has agreed, among other covenants, to
maintain earnings, reserves for credit losses, and capital at certain minimum
levels. The Company has been in violation of certain debt covenants throughout
1998 for which it has received waivers from the lender. The Company intends to
negotiate these debt covenants when the line matures in 1999.
Treasury, tax and loan deposits, which total $1,481,000 at December 31, 1998,
are made by local businesses to be remitted to the government. Interest on these
deposits is payable monthly at the average Fed Funds purchase rate or 4.92% at
December 31, 1998.
The Company's weighted-average interest rate on short-term borrowings as of
December 31, 1998 and 1997 was 5.91% and 7.31%, respectively. All of the of
borrowings outstanding at December 31, 1998 mature at various dates throughout
1999.
58
<PAGE>
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. Redeemable Preferred Stock
Redeemable Preferred stock pays an 8% annual dividend which is cumulative but
subordinate to the rights of trade creditors. Holders of the preferred shares
will be entitled to redeem the shares on or after October 3, 2004. The Company
has the right to redeem up to 20% of the preferred shares each year beginning on
October 3, 1999.
10. Employee Benefit Plans
The Company has various defined-contribution employee benefit plans
incorporating provisions of section 401(k) of the Internal Revenue Code.
Generally, employees of the company must have from 90 to 180 days of service to
become eligible. Under the plans' provisions, a plan member may make
contributions, on a tax-deferred basis, from 1% to 19% 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 6% of total contributions by a plan member, to a maximum of
6% of the employee's total calendar year compensation. Contributions to the
plans charged to expense were $1,222,000, $551,000 and $215,000 for the years
ended December 31, 1998, 1997 and 1996, respectively.
59
<PAGE>
11. Stock Option and Stock Purchase Plans
The Company has adopted or assumed obligations through acquitions under the
following stock option or stock incentive plans:
The Company has a Directors' Deferred Stock Unit Plan ("Unit Plan") which
replaced 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 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
3,000,000 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.
The Company has assumed obligations under the Frederica Directors Stock Option
Plan ("Frederica Directors Plan") under which an aggregate of 44,000 options are
available to be granted. The option period will not exceed ten years from date
of grant.
60
<PAGE>
11. Stock Option and Stock Purchase Plans (continued)
During 1998, the Company's stockholders approved an Employee Stock Purchase
Plan, ("Stock Purchase Plan"). Generally, employees of the company must have
from 90 to 120 days of service to become eligible. Under the plan's provisions,
a participant may be granted options to purchase Common Stock through payroll
deductions at a rate of not less than 1% and not greater than 10% of a
participant's annual compensation. The Company's Common Stock is acquired during
two "Purchase Periods". The first Purchase Period commences on January 1 and
ends on June 30 for a particular year. The second Purchase Period starts on July
1 and ends on December 31 for a particular year. The purchase price for the
Common Stock will be the lesser of: (1) 90% of the Fair Market Value of the
Common Stock on the "Offer Date", the first day of the Purchase Period, or (2)
90% of the Fair Market Value of a share of the Common Stock on the Purchase
Date, the last day for each Purchase Period. The Company contributes an amount
equal to the stock price, on the day the Company purchases the stock, in excess
of the lesser of 90% of the Fair Market of the Common Stock on the Offer Date or
90% of the Fair Market Value of the Common Stock on the Purchase Date.
Contributions to the plan charged to expense were $16,000 for the year ended
December 31, 1998. Under the Stock Purchase Plan, the number of shares issued is
not to exceed an aggregate of 2,000,000 shares.
Information related to the various option plans has been restated for stock
splits and business combinations accounted for as poolings of interests and is
summarized as follows:
<TABLE>
<CAPTION>
Years ended December 31
1998 1997 1996
---------------------------------------------------------------------------------------------
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 1,349,203 $ 4.92 1,241,610 $3.39 1,130,761 $3.07
Granted 798,652 20.74 520,552 7.39 126,495 6.27
Exercised (434,665) 5.56 (408,405) 3.69 (14,290) 3.67
Expired (42,600) 19.45 (4,554) 5.04 (1,356) 3.69
---------------------------------------------------------------------------------------------
Under option, end of year 1,670,590 $11.95 1,349,203 $4.92 1,241,610 $3.39
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
Weighted
Weighted Average
Average Remaining
Exercise Contractual
Number Price Price Life in Years
------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Options outstanding, end of year 507,075 $2.01 - $ 5.88 $ 3.17 4.78
331,445 5.89 - 14.69 10.11 8.68
832,070 14.70 - 29.38 21.34 9.22
------------
1,670,590
Options exercisable, end of year 507,075 $2.01 - $ 5.88 $ 3.17 4.78
229,820 5.89 - 14.69 9.42 8.44
198,327 14.70 - 29.38 23.46 9.41
------------------
935,222
==================
</TABLE>
61
<PAGE>
11. Stock Option and Stock Purchase Plans (continued)
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 $644,000, $-0- and $-0- in compensation expense for stock-
based employee compensation expense awards for the years ended December 31,
1998, 1997 and 1996, respectively.
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 Net Income Per
Income Per Share Share (Diluted)
------------------------------------------------------------
(dollars in thousands, except per share data)
<S> <C> <C> <C>
Year ended December 31, 1998
As reported $20,914 $ .80 $ .78
Stock based compensation, net of
related tax effect (1,160) (0.04) (0.04)
------------------------------------------------------------
As adjusted $19,754 .76 .74
============================================================
Year ended December 31, 1997
As reported $18,737 .73 .71
Stock based compensation, net of
related tax effect (397) (.02) (0.02)
------------------------------------------------------------
As adjusted $18,340 .71 .69
============================================================
Year ended December 31, 1996
As reported $13,657 .54 .52
Stock based compensation, net of
related tax effect (150) (.01)
------------------------------------------------------------
As adjusted $13,507 .53 .52
============================================================
</TABLE>
The per share weighted-average fair value of stock options granted during 1998,
1997 and 1996 was $3.90, $3.06 and $1.69, 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>
1998 1997 1996
--------------------------------------------------------------
<S> <C> <C> <C>
Risk free interest rate 4.76% 6.45% 6.45%
Expected life of the options 5-10 Years 7-10 Years 7-10 Years
Expected dividends (as a percent of the
fair value of the stock) 1.43% 1.00% 2.68%
Volatility 40.09% 32.20% 9.20%
</TABLE>
62
<PAGE>
12. Income Taxes
Income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
Current Deferred Total
-------------------------------------------------------------------
(dollars in thousands)
<S> <C> <C> <C>
1998:
Federal $ 9,440 $ 825 $10,265
State 1,661 146 1,807
-------------------------------------------------------------------
Total $11,101 $ 971 $12,072
===================================================================
1997:
Federal $ 9,908 $(1,379) $ 8,529
State 1,929 (730) 1,199
-------------------------------------------------------------------
Total $11,837 $(2,109) $ 9,728
===================================================================
1996:
Federal $ 5,464 $ (419) $ 5,045
State 964 (75) 889
-------------------------------------------------------------------
Total $ 6,428 $ (494) $ 5,934
===================================================================
</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
1998 1997 1996
------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Income taxes at statutory rate $11,545 35.0% $9,963 35.0% $6,857 35.0%
State tax, net of federal 1,175 3.6 584 2.1 188 1.0
benefit
Tax-exempt interest income (328) (1.0) (517) (1.8) (462) (2.4)
Disallowed merger expenses 692 2.1 430 1.5 142 0.7
Valuation allowance adjustment - - (554) (1.9) (691) (3.5)
Other items, net (1,012) (3.1) (178) (0.7) (100) (0.5)
------------------------------------------------------------------------------------------
Income tax expense $12,072 36.6% $9,728 34.2% $5,934 30.3%
==========================================================================================
</TABLE>
63
<PAGE>
12. Income Taxes (continued)
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31
1998 1997
------------------------------------------------
(dollars in thousands)
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $3,274 $2,549
Deferred compensation 247 239
Deferred loan fees, net of costs - 248
Other real estate 220 174
Non-accrual loans 34 31
Write-down of mutual funds 19 19
Net operating loss carryforward 157 713
Georgia tax credits carryforward 174 147
Pension 49 64
Post-retirement benefits other than pensions 77 70
Alternative minimum tax carryforwards - 589
------------------------------------------------
4,251 4,843
------------------------------------------------
Deferred tax liabilities:
Depreciation and amortization 1,350 1,165
Deferred loan fees, net of cost 119 -
Investment securities available-for-sale 285 444
Cash method accounting on certain receivables 73 -
Other 191 30
------------------------------------------------
2,018 1,639
------------------------------------------------
Net deferred tax assets $2,233 $3,204
================================================
</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 in 1998 or 1997.
At December 31, 1998, the Company has available net operating loss carryforwards
of approximately $3,930,000 for state income tax purposes. At December 31, 1998
the Company had state income tax credit carryforwards of $174,000. If unused,
the carryforwards will expire beginning in 1999. Utilization of the net
operating loss carryforwards is subject to the separate return limitations and
change of ownership rules of the Internal Revenue Code.
13. 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.
64
<PAGE>
13. 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
1998 1997
------------------------------------------------
<S> <C> <C>
(dollars in thousands)
Unfunded mortgage loan commitments $ 26,457 $ 17,643
Construction and commercial real estate commitments 181,800 135,807
Standby letters of credit 7,482 10,364
Commitments to extend credit 83,442 74,893
------------------------------------------------
$299,181 $238,707
================================================
</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.
65
<PAGE>
13. 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, 1998 are
summarized as follows:
<TABLE>
<CAPTION>
Year ending December 31,
<S> <C>
1999 $1,727
2000 1,387
2001 1,076
2002 750
2003 310
Thereafter 1,777
----------------------
$7,027
======================
</TABLE>
Rental expense for the years ended December 31, 1998, 1997 and 1996 was
$1,574,000, $1,161,000 and $884,000 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
$10,558,000 and $18,080,000 during 1998 and 1997, respectively.
14. 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.
15. Regulatory Matters
The banking 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, 1998, approximately $9,369,000 of retained earnings were
available for dividend declaration without supervisory approval.
The Company and its banking subsidiaries are subject to various regulatory
capital requirements administered by the federal and state 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 its subsidiaries 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 its subsidiaries' capital amounts and classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company and its banking subsidiaries to maintain minimum amounts of
capital. Management believes, as of December 31, 1998, the Company and its
subsidiaries meet all capital adequacy requirements to which they are subject.
66
<PAGE>
15. Regulatory Matters (continued)
As of December 31, 1998 and 1997, all of the Company's banking subsidiaries were
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'
categories.
The Company and its significant banking subsidiaries' actual capital amounts and
ratios at December 31, 1998 and 1997 are as shown below:
<TABLE>
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------
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 $175,988 15.36% $91,666 8.00% $114,583 10.00%
Premier Bank 102,480 13.18% 62,218 8.00% 77,772 10.00%
Central and Southern Bank 23,404 16.39% 11,423 8.00% 14,279 10.00%
Tier I Capital (to Risk Weighted
Assets):
Consolidated 161,908 14.13% 45,834 4.00% 68,750 6.00%
Premier Bank 93,723 12.05% 31,109 4.00% 46,663 6.00%
Central and Southern Bank 21,619 15.14% 5,712 4.00% 8,567 6.00%
<CAPTION>
December 31, 1998
---------------------------------------------------------------------------
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 $159,391 17.31% $73,674 8.00% $92,092 10.00%
Premier Bank 29,017 10.44% 22,229 8.00% 27,787 10.00%
Central and Southern Bank 20,453 18.09% 9,039 8.00% 11,299 10.00%
Tier I Capital (to Risk Weighted
Assets):
Consolidated $145,609 15.81% $36,837 4.00% $55,255 6.00%
Premier Bank 26,370 9.47% 11,115 4.00% 16,672 6.00%
Central and Southern Bank 19,021 16.59% 4,520 4.00% 6,779 6.00%
Tier I Capital (to Average
Assets):
Consolidated $145,609 12.28% $47,418 4.00% $59,272 5.00%
Premier Bank 26,320 7.43% 14,163 4.00% 17,702 5.00%
Central and Southern Bank 19,021 12.27% 6,200 4.00% 7,750 5.00%
</TABLE>
67
<PAGE>
16. Fair Value of Financial Instruments
The following methods and assumptions were used by the Company in estimating its
fair value disclosures for financial instruments. In cases where quoted market
prices are not available, fair values are based on estimates using discounted
cash flow methods. Those methods are significantly affected by the assumptions
used, including the discount rates and estimates of future cash flows. In that
regard, the derived fair value estimates cannot be substantiated by comparison
to independent markets and, in many cases, could not be realized in immediate
settlement of the instrument. The use of different methodologies may have a
material effect on the estimated fair value amounts. Also, the fair value
estimates presented herein are based on pertinent information available to
management as of December 31, 1998 and 1997. Such amounts have not been
revalued for purposes of these financial statements since those dates and,
therefore, current estimates of fair value may differ significantly from the
amounts presented herein.
The following methods and assumptions were used by the Company in estimating
fair values of financial instruments as disclosed herein:
Cash, Due from Banks, and Federal Funds Sold
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
Securities Available-for-Sale
Fair values for securities are based on quoted market prices. The carrying
values of equity securities with no readily determinable fair value
approximate fair values.
Loans
For variable-rate loans that reprice frequently and have no significant
change in credit risk, fair values are based on carrying values. For other
loans, the fair values are estimated using discounted cash flow methods,
using interest rates currently being offered for loans with similar terms to
borrowers of similar credit quality. Fair values for impaired loans are
estimated using discounted cash flow methods or underlying collateral values.
The carrying amount of loans held for sale approximates fair value.
Deposits
The carrying amounts of demand deposits, savings deposits, and variable-rate
certificates of deposit approximate their fair values. Fair values for
fixed-rate certificates of deposit are estimated using discounted cash flow
methods, using interest rates currently being offered on such certificates.
Securities Sold Under Repurchase Agreements, Federal Home Loan Bank Advances,
Trust Preferred Securities, Lines of Credit and Other Borrowings
The fair values of Federal Home Loan Bank advances, Trust Preferred
Securities, lines of credit 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 approximates fair value.
68
<PAGE>
16. Fair Value of Financial Instruments (continued)
Off-Balance-Sheet Instruments
Fair values of the Company's off-balance sheet financial instruments are
based on fees charged to enter into similar agreements. However, commitments
to extend credit do not represent a significant value to the Company until
such commitments are funded or closed. The Company has determined that these
instruments do not have a distinguishable fair value and no fair value has
been assigned.
The estimated fair values of the Company's financial instruments were as
follows:
<TABLE>
<CAPTION>
December 31, 1998 December 31, 1997
---------------------------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------------------------------------------------------
<S> <C> <C> <C> <C>
(dollar in thousands)
Financial assets:
Cash, due from banks,
interest-bearing deposits in banks
and Federal funds sold $ 190,023 $ 190,023 $ 117,891 $ 117,891
Securities available-for-sale 133,232 133,232 161,872 161,872
Securities held-to-maturity - - 46,003 46,147
Loans 1,144,381 1,153,945 899,512 904,915
Accrued interest receivable 8,318 8,318 9,773 9,773
Financial liabilities:
Deposits 1,179,962 1,183,923 1,074,199 1,076,199
Federal funds purchased and
securities sold under repurchase
agreements 21,782 21,782 28,303 28,303
Federal Home Loan Bank advances - - 2,875 2,920
Trust preferred securities 28,750 28,750 28,750 28,750
Lines of credit 138,608 138,608 10,160 10,160
Other borrowings 1,481 1,481 2,037 2,037
Accrued interest payable 7,757 7,757 7,585 7,585
Preferred stock 2,446 2,446 2,446 2,446
</TABLE>
17. 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 and 1996 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.
18. Other Charges
During the fourth quarter of 1998, the Company completed its restructuring plans
to consolidate all of its banking subsidiaries' into one banking charter. The
Company has also begun the process of consolidating overlapping banking
operations resulting from recent acquisitions. As a result, the Company recorded
a charge of $1,400,000, during the fourth quarter of 1998, as follows: (1)
$895,000 in employee termination benefits and (2) $505,000 in lease buyout and
asset impairment expenses. The Company plans to eliminate 8% (53 employees) of
its workforce from various levels beginning in 1999. No employee termination
benefits were paid in 1998.
69
<PAGE>
19. Other Comprehensive Income
The components of other comprehensive income are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------------------------------------------------
<S> <C> <C> <C>
Unrealized holding gain (losses) arising during
the period:
Unrealized net gains (losses) $ 761 $1,380 $(1,327)
Related tax (expense) benefit (281) (497) 531
----------------------------------------------------
Net 480 883 (796)
----------------------------------------------------
Less: Reclassification adjustment
Related net gains 2,135 (7) 197
Related tax benefit (expense) (1,345) 2 (59)
----------------------------------------------------
Net 790 (5) 138
----------------------------------------------------
Total other comprehensive income $ (310) $ 888 $ (934)
====================================================
</TABLE>
20. Business Segment Information
On December 31, 1998, the Company adopted the provisions of FASB Statement No.
131, "Disclosures about Segments of an Enterprise and Related Information".
Statement 131 requires that financial and descriptive information be disclosed
for each reportable operating segment based on the management approach. The
management approach focuses on financial information used by management to
assess performance and make decisions about resource allocation. All
intercompany transactions are on terms comparable to similar transactions with
external parties. None of the Company's revenues or assets are attributable to
or located in foreign countries.
The Company's two major lines of business are Community Banking and Mortgage
Lending. Community Banking encompasses all of the Company's traditional banking
services, including: loans to small and medium-size businesses; residential,
construction and development loans; commercial real estate loans; consumer loans
and a variety of commercial and consumer deposit accounts. Included in
Community Banking are certain corporate overhead expenses which have not been
separately allocated. Mortgage Lending encompasses the retail origination of
residential mortgage loans which are sold to correspondent mortgage investors.
<TABLE>
<CAPTION>
Community Mortgage
Banking Lending Eliminations Total
--------------------------------------------------------------------
(dollars in thousands)
Year ended December 31, 1998:
- -----------------------------
<S> <C> <C> <C> <C>
Interest income $ 110,340 $5,004 $(97) $ 115,247
Interest expense 51,472 3,721 (97) 55,096
----------------------------------------------------------------------
Net interest income 58,868 1,283 - 60,151
Provision for credit losses 285 - - 605
Other income 12,310 27,446 (325) 39,431
Other expenses 46,162 20,154 (325) 65,991
----------------------------------------------------------------------
Income before income taxes 24,731 8,255 - 32,986
Income tax expense 8,794 3,278 - 12,072
----------------------------------------------------------------------
Net income $15,937 $4,977 $ - $20,914
======================================================================
Average total assets $1,333,808 $69,973 $ - $1,400,781
======================================================================
</TABLE>
70
<PAGE>
20. Business Segment Information (continued)
<TABLE>
<CAPTION>
Community Mortgage
Banking Lending Eliminations Total
-----------------------------------------------------------------------------
Year ended December 31, 1997:
- -----------------------------
<S> <C> <C> <C> <C>
Interest income $ 100,257 $ 1,295 $(476) $ 101,076
Interest expense 45,754 759 (476) 46,037
--------------------------------------------------------------------------------
Net interest margin 54,503 536 - 55,039
Provision for credit losses 1,322 445 - 1,767
Other income 8,399 16,265 (467) 24,197
Other expenses 37,395 12,076 (467) 49,004
---------------------------------------------------------------------------------
Income before income taxes 24,185 4,280 - 28,465
Income tax expense 8,031 1,697 - 9,728
---------------------------------------------------------------------------------
Net income $16,154 $2,583 $ - $ 18,737
================================================================================
Average total assets $1,170,589 $14,850 $1,185,439
================================================================================
<CAPTION>
Year ended December 31, 1996:
- -----------------------------
<S> <C> <C> <C> <C>
Interest income $ 84,453 $ 823 $ - $ 85,276
Interest expense 39,416 464 - 39,880
--------------------------------------------------------------------------------
Net interest margin 45,037 359 - 45,396
Provision for credit losses 473 - 473
Other income 14,945 2,058 - 17,003
Other expenses 40,270 2,065 - 42,335
--------------------------------------------------------------------------------
Income before income taxes 19,239 352 - 19,591
Income tax expense 5,826 108 - 5,934
---------------------------------------------------------------------------------
Net income $ 13,413 $ 244 $ - $ 13,657
================================================================================
Average total assets $988,626 $25,125 $1,013,751
================================================================================
</TABLE>
71
<PAGE>
21. Parent Company Financial Information
The following information presents the condensed balance sheets of Premier
Bancshares, Inc. at December 31, 1998 and 1997, and the statements of income and
cash flows for the years ended December 31, 1998, 1997 and 1996:
Condensed Balance Sheets
<TABLE>
<CAPTION>
1998 1997
----------------------------------------
(In Thousands)
Assets
<S> <C> <C>
Cash and cash equivalents $ 10,386 $ 24,378
Investment in subsidiaries 152,492 124,360
Securities available for sale 8 481
Other assets 7,370 3,544
----------------------------------------
Total assets $170,256 $152,763
========================================
Liabilities
9.00% Subordinated debentures due 2027 $ 29,639 $ 29,701
Other liabilities 2,078 74
----------------------------------------
31,717 29,775
Redeemable preferred stock 2,446 2,446
Stockholders' equity 136,093 120,542
----------------------------------------
Total liabilities and stockholders' equity $170,256 $152,763
========================================
</TABLE>
72
<PAGE>
21. Parent Company Financial Information (continued)
Condensed Statements of Income
<TABLE>
<CAPTION>
1998 1997 1996
-------------------------------------------------------------------------
(dollar in thousands)
<S> <C> <C> <C>
Income:
Interest on deposits $ 544 $ 166 $ 53
Dividends from subsidiaries 7,078 5,463
Other income 1,397 1,101 93
-------------------------------------------------------------------------
1,941 8,345 5,609
-------------------------------------------------------------------------
Expenses:
Salaries and employee benefits 2,844 284 56
Interest 2,809 743 392
Merger related expenses 2,305 859 468
Legal and professional 431 186 42
Other expenses 3,863 645 621
-------------------------------------------------------------------------
Total expenses 12,252 2,717 1,579
-------------------------------------------------------------------------
(Loss) income before income tax
benefits and equity in
undistributed income of (10,311) 5,628 4,030
subsidiaries
Benefit for income taxes 2,542 840 802
-------------------------------------------------------------------------
(Loss) income before equity in
undistributed income of (7,769) 6,468 4,832
subsidiaries
Equity in undistributed income of
subsidiaries 28,683 12,269 8,825
-------------------------------------------------------------------------
Net income $ 20,914 $18,737 $13,657
=========================================================================
</TABLE>
73
<PAGE>
21. Parent Company Financial Information (continued)
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
1998 1997 1996
-----------------------------------------------------------------------------------
(dollar in thousands)
<S> <C> <C> <C>
Operating activities
Net income $ 20,914 $ 18,737 $13,657
Adjustments to reconcile net income to net
cash provided by (used in) operating
activities:
Depreciation 9 13 10
Amortization 142 10 33
Undistributed income of subsidiaries (28,683) (12,269) (8,825)
Gain on sale of subsidiary - (757) -
Gain on sale of thrift charter - (297) -
Other (1,761) (1,556) 527
-----------------------------------------------------------------------------------
Net cash (used in) provided by operating (9,379) 3,881 5,402
activities
Investing activities
Proceeds from sale (purchases) of premises
and equipment 440 - (1,113)
Investment in subsidiaries - (1,889) (1,684)
Proceeds from sale of subsidiary - 800 -
-----------------------------------------------------------------------------------
Net cash used in investing activities 440 (1,089) (2,797)
Financing activities
Net (decrease) increase in other borrowings (5,643) 1,879
Dividends paid (8,324) (5,250) (3,245)
Proceeds from exercise of stock options 3,271 2,001 53
Purchase of treasury stock - (1,142) (643)
Proceeds from issuance of 9.00%
Subordinated Debentures - 29,639 -
-----------------------------------------------------------------------------------
Net cash (used in) provided by financing
activities (5,053) 19,605 (1,956)
Net (decrease) increase in cash (13,992) 22,397 649
Cash at beginning of year 24,378 1,981 1,332
-----------------------------------------------------------------------------------
Cash at end of year $ 10,386 $ 24,378 $ 1,981
===================================================================================
</TABLE>
74
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
PREMIER BANCSHARES, INC. AND SUBSIDIARIES
We have audited the accompanying consolidated balance sheets of PREMIER
BANCSHARES, INC. AND SUBSIDIARIES as of December 31, 1996 and 1995, and the
related statements of income, stockholders' equity and cash flows for each of
the three years in the period ended December 31, 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements of Central and Southern
Holding Company, Citizens Gwinnett Bankshares, Inc. and Lanier Bank & Trust
Company, three companies which were pooled with Premier Bancshares, Inc. 1997
and 1998, 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 $453.2 million and $375.4 million as of December 31, 1996 and
1995, respectively, and total revenues of $35.4 million, $30.1 million and $28.6
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, Citizens Gwinnett Bankshares, Inc. and Lanier Bank & Trust
Company, is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based upon our audits and the report of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Premier Bancshares, Inc. and
subsidiaries as of December 31, 1996 and 1995, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
January 31, 1997, except for Note 2 as to which the date is
June 23, 1997, December 12, 1997, June 9, 1998, July 1,
1998 and July 2, 1998
75
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Central and Southern Holding Company and Subsidiaries
We have audited the accompanying consolidated balance sheets of Central and
Southern Holding Company and subsidiaries as of December 31, 1996 and 1995, and
the related statements of earnings, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Central and Southern
Holding Company and subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ PORTER KEADLE MOORE, LLP
Atlanta, Georgia
January 23, 1997
76
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Citizens Gwinnett Bankshares, Inc.
We have audited the accompanying consolidated balance sheets of Citizens
Gwinnett Bankshares, Inc. and subsidiary as of December 31, 1996 and 1995, and
the related statements of earnings, changes in stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Citizens Gwinnett
Bankshares, Inc. and subsidiary as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ PORTER KEADLE MOORE, LLP
Atlanta, Georgia
February 4, 1997
77
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
The Bank Holding Company and Subsidiaries
Griffin, Georgia
We have audited the accompanying consolidated balance sheets of THE BANK
HOLDING COMPANY AND SUBSIDIARIES as of December 31, 1997 and 1996, and the
related consolidated statements of income, common stockholders' equity, and cash
flows for the three years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of The Bank
Holding Company and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for the three years then ended,
in conformity with generally accepted accounting principles.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
January 29, 1998
78
<PAGE>
INDEPENDENT AUDITOR'S REPORT
TO THE BOARD OF DIRECTORS
BUTTON GWINNETT FINANCIAL CORPORATION AND SUBSIDIARY
LAWRENCEVILLE, GEORGIA
We have audited the accompanying consolidated balance sheets of BUTTON
GWINNETT FINANCIAL CORPORATION AND SUBSIDIARY as of December 31, 1997 and 1996,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Button
Gwinnett Financial Corporation and subsidiary as of December 31, 1997 and 1996,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ MAULDIN & JENKINS, LLC
Atlanta, Georgia
January 14, 1998, except for Note 14 as to
which the date is February 5, 1998
79
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Lanier Bank & Trust Company
Cumming, Georgia
We have audited the accompanying balance sheets of Lanier Bank & Trust
Company as of December 31, 1997 and 1996, and the related statements of income,
changes in stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1997. These financial statements are the
responsibility of Lanier Bank & Trust Company's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Lanier Bank & Trust Company
as of December 31, 1997 and 1996, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1997, in
conformity with generally accepted accounting principles.
The accompanying financial statements as of and for the year ended December
31, 1997, have been prepared assuming Lanier Bank & Trust Company will continue
in existence in its current corporate structure and retain its bank charter. As
discussed in Note B, on December 16, 1997, Lanier Bank & Trust Company entered
into a definitive agreement to be merged into another financial institution.
These financial statements do not include any adjustments that might result from
Lanier Bank & Trust Company being merged into or acquired by another entity.
Bricker & Melton, P.A.
January 16, 1998
Duluth, Georgia
80
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth under the caption "Election of Directors" in the
Proxy Statement used in connection with the Company's 1999 Annual Shareholders
Meeting, is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information set forth under the caption "Executive Compensation" in the
Proxy Statement used in connection with the Company's 1999 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 Proxy Statement used in connection with
the Company's 1999 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 Proxy Statement used in connection with the
Company's 1999 Annual Shareholders Meeting, is incorporated herein by reference.
81
<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 of Premier Bancshares, Inc.
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
Report of Independent Auditors of Premier Bancshares, Inc.
Report of Independent Auditors of Central and Southern Holding Company
Report of Independent Auditors of Citizens Gwinnett Bankshares, Inc.
Report of Independent Auditors of The Bank Holding Company
Report of Independent Auditors of Button Gwinnett Financial Corporation
Report of Independent Auditors of Lanier Bank & Trust Company
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.
82
<PAGE>
Exhibits
Exhibit
Number Exhibit
- ------- -------
3.1 Restated Articles of Incorporation.
3.2 Amended Restated Bylaws of Registrant.
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 December31, 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 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).
10.4 Premier Bancshares, Inc. 1997 Stock Option Plan, as amended
(Incorporated by reference as Exhibit 99.1 to Premier's Form S-8
filed on July 21, 1998).
10.5 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).
10.6 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).
10.7 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).
10.8 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)
83
<PAGE>
10.9 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).
10.10 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).
10.11 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).
10.12 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).
10.13 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).
10.14 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).
10.15 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).
10.16 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).
10.17 Fourth Amendment to Agreement and Plan of Reorganization dated
January 15, 1998 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).
10.18 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).
10.19 Employment Agreement dated July 1, 1998 by and among Premier, Premier
Bank, The Bank of Gwinnett County and Glenn S. White dated July 1,
1998 (Incorporated by reference as Exhibit 10.2 to Premier's Form
10-Q filed on August 14, 1998).
84
<PAGE>
10.20 Employment Agreement dated as of July 2, 1998, by and among First
Community Bank of Henry County, Premier and Charles B. Blackmon
(Incorporated by reference as Exhibit 10.7 to Premier's Form 10-Q
filed on August 14, 1998).
10.21 Employment Agreement dated as of January 1, 1998 by and between
Premier and Jo S. Hill (Incorporated by reference as Exhibit 10.8 to
Premier's Form 10-Q filed on August 14, 1998).
10.22 Employment Agreement dated as of June 9, 1998 by and between Premier,
Premier Bank and A. Lee Wilhelm (Incorporated by reference as Exhibit
10.9 to Premier's Form 10-Q filed on August 14, 1998).
10.23 Employment Agreement dated effective as of July 1, 1998, by and
between Premier, Premier Bank, Central and Southern Bank of Georgia
and Michael E. Ricketson (Incorporated by reference as Exhibit 10.10
to Premier's Form 10-Q filed on August 14, 1998).
10.24 Employment Agreement dated effective as of July 1, 1998, by and
between Premier, Premier Lending Corporation, Premier Bank and
Darrell D. Pittard (Incorporated by reference as Exhibit 10.11 to
Premier's Form 10-Q filed on August 14, 1998).
10.25 Employment Agreement dated effective as of July 1, 1998, by and
between Premier, Premier Bank and Robert C. Oliver (Incorporated by
reference as Exhibit 10.12 to Premier's Form 10-Q filed on August 14,
1998).
10.26 Master Mortgage Warehouse Loan and Security Agreement by and between
the Company, Premier Lending and SunTrust Bank, Central Florida
National Association as Agent for Certain Lenders (Incorporated by
reference as Exhibit 10.36 to Premier's Form 10-Q filed on August 15,
1998).
21.1 Subsidiaries of Premier Bancshares, Inc.
23.1 Consent of Ernst & Young LLP
23.2 Consent of Mauldin & Jenkins, LLC
23.3 Consent of Porter Keadle Moore LLP
23.4 Consent of Porter Keadle Moore LLP
23.5 Consent of Mauldin & Jenkins, LLC
23.6 Consent of Mauldin & Jenkins, LLC
23.7 Consent of Bricker & Melton, P.A.
27.1 Financial Data Schedule (for SEC use only).
Reports on Form 8-K filed in the fourth quarter of 1998.
On October 16, 1998, the Company filed an amendment to its Form 8-K filed
on September 30, 1998, to add the opinions of auditors of two companies acquired
by the Company in 1997 and the consents of such auditors.
85
<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 24, 1999
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 24, 1999
- -----------------------
N. Michael Anderson
/s/ George S. Carpenter Director March 24, 1999
- -----------------------
George S. Carpenter
/s/ James L. Coxwell, Sr. Director March 24, 1999
- -------------------------
James L. Coxwell, Sr.
/s/ Donald N. Ellis Director March 24, 1999
- ---------------------
Donald N. Ellis
/s/ William M. Evans, Jr. Director March 24, 1999
- -------------------------
William M. Evans, Jr.
/s/ John H. Ferguson Director March 24, 1999
- ---------------------
John H. Ferguson
/s/ Robert E. Flournoy III Director March 24, 1999
- --------------------------
Robert E. Flournoy III
/s/ James E. Freeman Director March 24, 1999
- ----------------------
James E. Freeman
/s/ A. F. Gandy Director March 24, 1999
- ---------------
A. F. Gandy
/s/ Robin R. Howell Director March 24, 1999
- -------------------
Robin R. Howell
/s/ Billy H. Martin Director March 24, 1999
- -------------------
Billy H. Martin
/s/ C. Steve McQuaig Director March 24, 1999
- --------------------
C. Steve McQuaig
/s/ Robert C. Oliver Director, President and Chief March 24, 1999
- -------------------- Operating Officer
Robert C. Oliver
/s/ Thomas E. Owen, Jr. Director March 24, 1999
- -----------------------
Thomas E. Owen, Jr.
</TABLE>
86
<PAGE>
/s/ Darrell D. Pittard Chairman and Chief March 24, 1999
- ---------------------- Executive Officer
Darrell D. Pittard (Principal Executive
Officer)
/s/ James E. Sutherland Director March 24, 1999
- -----------------------
James E. Sutherland
/s/ John D. Stephens
- -------------------- Director March 24, 1999
John D. Stephens
/s/ Michael E. Ricketson Executive Vice March 24, 1999
- ------------------------ President and Chief
Michael E. Ricketson Financial Officer
(Principal Financial
and Accounting Officer)
/s/ John E. Aderhold Director March 24, 1999
- --------------------
John E. Aderhold
87
<PAGE>
EXHIBIT 3.1
RESTATED ARTICLES OF INCORPORATION
OF
PREMIER BANCSHARES, INC.
1.
The name of the Corporation is PREMIER BANCSHARES, INC.
2.
The Corporation is organized pursuant to the Georgia Business Corporation
Code.
3.
The Corporation shall have perpetual duration.
4.
The purposes for which the Corporation is organized are to conduct any
businesses and engage in any activities not specifically prohibited to
corporations for profit under the laws of the State of Georgia, and the
Corporation shall have all powers necessary to conduct such businesses and
engage in such activities, including, but not limited to, the powers enumerated
in the Georgia Business Corporation Code or any amendment thereto.
5.
(a) The Corporation shall have the authority to issue sixty million
(60,000,000) shares of common stock (the "Common Stock"), $1.00 par value,
and two million (2,000,000) shares of preferred stock (the "Preferred
Stock").
(b) The Board of Directors of the Corporation is authorized, subject
to limitations prescribed by law and the provisions of this Article, to
provide for the issuance of the shares of Preferred Stock in series, and by
filing a certificate pursuant to the applicable law of the State of Georgia
to establish from time to time the number of shares to be included in each
such series, and to fix the designation, powers, preferences, and relative
rights of the shares of each such series and the qualifications, or
restrictions thereof. The authority of the Board of Directors with respect
to each series shall include, but not be limited to, determination of the
following:
(i) The number of shares constituting that series and the
distinctive designation of that series;
<PAGE>
(ii) The dividend rate on the shares of that series, whether
dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if
any, of payments of dividends on shares of that series;
(iii) Whether that series shall have voting rights, in addition
to the voting rights provided by law, and, if so, the
terms of such voting rights;
(iv) Whether that series shall have conversion privileges,
and, if so, the terms and conditions of such conversion,
including provisions for adjustment of the conversion
rate in such events as the Board of Directors shall
determine;
(v) Whether or not the shares of that series shall be
redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after
which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary
under different conditions and at different redemption
rates;
(vi) Whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if
so, the terms and amount of such sinking fund;
(vii) The rights of the shares of that series in the event of
voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, and the relative rights of
priority, if any, of payment of shares of that series;
and
(viii) Any other relative rights, preferences and limitations of
that series.
6.
Shares of the Corporation may be issued by the Corporation for such
consideration, not less than the par value thereof, as shall be fixed from time
to time by the Board of Directors.
7.
No shareholder shall have any preemptive right to subscribe for or to
purchase any shares or other securities issued by the Corporation.
8.
Subject to the provisions of Section 14-2-91 of the Georgia Business
Corporation Code, the Board of Directors shall have the power to distribute a
portion of the assets of the Corporation, in cash or in property, to holders of
shares of the Corporation out of the capital surplus of the Corporation.
<PAGE>
9.
The initial Board of Directors of the Corporation shall consist of the
following members, whose names and addresses are:
Henry P. Bradford Charles E. Holmes
3701 Frey Lake Road NW 4960 Burnt Hickory Road
Kennesaw, GA 30144 Kennesaw, GA 30144
James L. Coxwell James L. Newsome
P. O. Box 692 3830 Stylesboro Road NW
Acworth, GA 30101 Kennesaw, GA 30144
Robert E. Flournoy, III J. O. Stephenson
356 Redwood Drive 2060 Pine Hill Circle
Marietta, GA 30101 Kennesaw, GA 30144
James E. Freeman E. W. Teague
483 Kingswood Drive 4640 Due West Road
Marietta, GA 30064 Kennesaw, GA 30144
10.
The Corporation shall have the full power to purchase and otherwise
acquire, and dispose of, its own shares and securities granted by the laws of
the State of Georgia and shall have the right to purchase its shares out of its
unreserved and unrestricted capital surplus available therefor as well as out of
its unreserved and unrestricted earned surplus available therefor.
11.
The address of the initial registered office of the Corporation shall be
located at 2760 Cobb Parkway, Kennesaw, Cobb County, Georgia 30144 Attention:
Mr. Robert E. Flournoy, III, registered agent of the Corporation.
12.
The Corporation shall not commence business until it shall have received
not less than $500 in payment for the issuance of its shares.
13.
The name and address of the Incorporator is Robert E. Flournoy, III, 236
Washington Avenue, Marietta, Georgia 30061.
<PAGE>
14.
No director of the Corporation shall be personally liable to the
Corporation or its shareholders for monetary damages for a breach of duty of
care or other duty as a director, provided that this elimination of liability
shall not eliminate or limit the liability of a director (i) for an
appropriation, in violation of his duties, of any business opportunity of the
Corporation; (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) for the types of
liability set forth in Section 14-2-154 of the Georgia Business Corporation Code
or (iv) for any transaction from which the director derived an improper personal
benefit.
IN WITNESS WHEREOF, the undersigned has executed these Restated Articles of
Incorporation this _____ day of January, 1999.
____________________________________________
Darrell D. Pittard, Chairman of the Board of
Directors
<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BYLAWS
OF
PREMIER BANCSHARES, INC.
ARTICLE ONE
OFFICES
The corporation shall at all times maintain its principal office in
Atlanta, Georgia, its registered office in the State of Georgia and its
registered agent at that address, but it may have other offices located within
or outside the State of Georgia as the Board of Directors may determine.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 ANNUAL MEETING. A meeting of shareholders of the corporation shall be
--------------
held annually, within six (6) months after the end of each fiscal year of the
corporation. The annual meeting shall be held at such time and place and on
such date as the Directors shall determine from time to time and as shall be
specified in the notice of the meeting.
2.2 SPECIAL MEETINGS. Special meetings of the shareholders may be called
----------------
at any time by the corporation's Board of Directors, its President, and by the
corporation upon the written request of any one or more shareholders owning an
aggregate of not less than 25% of the outstanding capital stock of the
corporation. Special meetings shall be held at such a time and place and on
such date as shall be specified in the notice of the meeting.
2.3 PLACE. Annual or special meetings of shareholders may be held within
-----
or without the State of Georgia.
2.4 NOTICE. Notice of annual or special shareholders meetings stating the
------
place, day and hour of the meeting shall be given in writing not less than 10
nor more than 50 days before the date of the meeting, either mailed to the last
known address or personally given to each shareholder. Notice of any special
meeting of shareholders shall state the purpose or purposes for which the
meeting is called. The notice of any meeting at which amendments to or
restatements of the articles of incorporation, a merger or share exchange of the
corporation, or the disposition of corporate assets requiring shareholder
approval are to be considered shall state such purpose, and shall further comply
with all requirements of law. Notice of a meeting may be waived by an
instrument in writing executed before or after the meeting. The waiver need not
specify the purpose of the meeting or the business transacted, unless one of the
purposes of the meeting concerns an action specified in Section 14-2-706 of the
Georgia Business Corporation Code (or any successor thereto) that would entitle
the shareholder to dissent therefrom, in which event the waiver shall comply
with the further requirements of Section 14-2-706 concerning such waivers.
Attendance at such meeting in person or by proxy shall constitute a waiver of
notice thereof,
<PAGE>
2.5 QUORUM. At all meetings of shareholders, the presence, in person or
------
by proxy, of a majority of the shares outstanding and entitled to vote shall
constitute a quorum for the transaction of business, and no resolution shall be
passed or business transacted without the favorable vote of the holders of a
majority of the shares represented at the meeting and entitled to vote. The
shareholders at a meeting at which a quorum is once present may continue to
transact business at the meeting or at any adjournment thereof, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum. If a meeting
cannot be organized for lack of a quorum, those shareholders present may adjourn
the meeting to such time and place as they determine. Notice of any adjourned
meeting need only be given by announcement at the meeting at which the
adjournment is taken.
2.6 PROXIES; REQUIRED VOTE. At every meeting of the shareholders,
----------------------
including meetings of shareholders for the election of Directors, any
shareholder having the right to vote shall be entitled to vote in person or by
proxy, but no proxy shall be voted after eleven months from its date, unless
said proxy provides for a longer period. Unless otherwise specified in the
corporation's Articles of Incorporation, each shareholder shall have one vote
for each share of stock having voting power registered in his or her name on the
books of the corporation. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall represent the act of the shareholders, except as otherwise
provided by law, the Articles of Incorporation or these Bylaws.
2.7 PRESIDING OFFICER AND SECRETARY. At every meeting of shareholders,
-------------------------------
the Chairman or the President, or, if such officers shall not be present, then
the person appointed by one of them, shall preside. The presiding officer shall
appoint such persons as he or she deems necessary to assist with the meeting.
The Secretary or an Assistant Secretary, or if such officers shall not be
present, the appointee of the presiding officer of the meeting, shall act as
secretary of the meeting.
2.8 SHAREHOLDER LIST. The officer or agent having charge of the stock
----------------
transfer books of the corporation shall produce for inspection of any
shareholder at, and continuously during, every meeting of the shareholders, a
complete alphabetical list of shareholders showing the address and share
holdings of each shareholder. If the record of shareholders readily shows such
information, it may be produced in lieu of such a list.
2.9 ACTION IN LIEU OF MEETING. Any action to be taken at a meeting of the
-------------------------
shareholders of the corporation, or any action that may be taken at a meeting of
the shareholders may be taken without a meeting, if a consent in writing setting
forth the action to be taken shall be signed by those persons who would be
entitled to vote at a meeting those shares having voting power to cast not less
than the minimum number (or numbers, in the case of voting by class) of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote were present and voted.
2.10 SHAREHOLDER PROPOSALS. Any proposal to be presented by a shareholder
---------------------
at the annual meeting of the shareholders must be received at the principal
executive offices of the corporation to the attention of the Corporate Secretary
not later than 120 days before the anniversary of the mailing date of the
corporation's proxy statement for the previous year's annual shareholders'
meeting.
2
<PAGE>
Notices of proposals to be brought before an annual meeting pursuant to this
Section 2.10 shall set forth as to each matter the shareholder proposes to bring
before the annual meeting (i) a brief description of the business desired to be
brought before the annual meeting and the reasons therefor; (ii) the name and
address, as they appear on the corporation's books, of the shareholder giving
the notice; the classes and number of shares of the corporation owned of record
or beneficially by the shareholder; and (iii) any material interest of the
shareholder in the proposal other than his interest as a shareholder of the
corporation and shall otherwise be in compliance with Rules 14a-4 and 14a-1
under the Securities Exchange Act of 1934, or any successor or other rules
applicable thereto. Notwithstanding anything in these bylaws to the contrary, no
business shall be conducted at an annual meeting except in accordance with the
provisions set forth in this Section. Any proposal to be presented by a
shareholder at a special meeting of the shareholders must be received at the
principal executive offices of the corporation to the attention of the Corporate
Secretary within a reasonable time before the mailing of proxy materials in
connection with the special meeting or as otherwise provided in Rule 14a-4 of
the Securities Exchange Act of 1934 or any successor rule or other rules
applicable thereto.
Business to be conducted at meetings of shareholders shall be limited to
that properly submitted to the meeting either by or at the direction of the
Board of Directors or by any holder of voting securities of the corporation who
shall be entitled to vote at such meeting and who complies with the notice
requirements of applicable law or as otherwise set forth in the bylaws of the
corporation including this Section 2.10. If the Chairman of the meeting shall
determine that any business was not properly submitted, the Chairman shall
declare to the meeting that such business was not properly submitted and would
not be transacted at that meeting.
ARTICLE THREE
DIRECTORS
3.1 MANAGEMENT. Subject to these Bylaws, or any lawful agreement between
----------
the shareholders, the full and entire management of the affairs and business of
the corporation shall be vested in the Board of Directors, which shall have and
may exercise all of the powers that may be exercised or performed by the
corporation.
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.
3.3 VACANCIES. The Directors may fill the position of any Director that
---------
becomes vacant prior to the expiration of such Director's term, even though
acting through less than a quorum of Directors or by the sole remaining
Director, or may fill any directorship created by reason of an increase in the
number of directors. Any such appointment by the Directors shall continue until
the expiration of the term of the Director whose position has become vacant.
3
<PAGE>
3.4 ELECTION OF DIRECTORS. Except as provided in Section 3.3, the
---------------------
directors shall be elected by the affirmative vote of a majority of the shares
represented and entitled to vote at the corporation's annual meeting of
shareholders. Each director shall serve until the election and qualification of
his or her successor or until his or her earlier resignation. death or removal
from office.
3.5 REMOVAL. Any Director may be removed from office at a meeting with
-------
respect to which notice of such purpose is given (a) without cause, only upon
the affirmative vote of the holders of at least two-thirds (66-2/3 %) of the
issued and outstanding shares of the corporation, and (b) with cause, only upon
the affirmative vote of the holders of a majority of the issued and outstanding
shares of the corporation. The term "cause" shall mean (i) the adjudication of
such director as incompetent by a court having jurisdiction in the matter, (ii)
the conviction of such director of a felony, (iii) the failure of such director
to accept office either in writing or by attendance at no less than one of the
first two meetings of the Board of Directors following his or her election or
(iv) the failure of such director to attend regular meetings of the Board of
Directors for six consecutive meetings without having been excused by the Board
of Directors.
3.6 RESIGNATION. Any Director may resign at any time either orally at any
-----------
meeting of the Board of Directors or by so advising the Chairman of the Board or
the President or by giving written notice to the corporation. A Director who
resigns may postpone the effectiveness of his or her resignation to a future
date or upon the occurrence of a future event specified in a written tender of
resignation. If no time of effectiveness is specified therein, a resignation
shall be effective upon tender. A vacancy shall be deemed to exist at the time
a resignation is tendered, and the Board of Directors or the shareholders may,
then or thereafter, elect a successor to take office when the resignation by its
terms becomes effective.
3.7 COMPENSATION. Directors may be allowed such compensation for their
------------
services as Directors as may from time to time be fixed by resolution of the
Board of Directors.
3.8 HONORARY AND ADVISORY DIRECTORS. When a Director of the corporation
-------------------------------
retires under the retirement policies of the corporation as established from
time to time by the Board of Directors, such Director automatically shall become
an Honorary Director of the corporation following his or her retirement. The
Board of Directors of the corporation also may appoint any individual an
Honorary Director, Director Emeritus or member of any advisory board established
by the Board of Directors. Any individual automatically becoming an Honorary
Director or appointed an Honorary Director, Director Emeritus or member of an
advisory board as provided by this Section 3.8 may be compensated as provided in
Section 3.7, but such individual may not vote at any meeting of the Board of
Directors or be counted in determining a quorum as provided in Section 5.5 and
shall not have any responsibility or be subject to any liability imposed upon a
Director or otherwise be deemed a Director.
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ARTICLE FOUR
COMMITTEES
4.1 EXECUTIVE COMMITTEE. (a) The Board of Directors may, by resolution
-------------------
adopted by a majority of the entire Board, designate an Executive Committee
consisting of one or more Directors. Each Executive Committee member shall hold
office until the first meeting of the Board of Directors after the annual
meeting of shareholders and until the member's successor is duly elected and
qualified, or until the member's death, resignation or removal, or until the
member shall cease to be a Director.
(b) During the intervals between the meetings of the Board of Directors,
the Executive Committee may exercise all the authority of the Board of
Directors; provided, however, that the Executive Committee shall not have the
power to amend or repeal any resolution of the Board of Directors that by its
terms shall not be subject to amendment or repeal by the Executive committee,
and the Executive Committee shall not have the authority of the Board of
Directors in reference to (i) the amendment of the Articles of Incorporation or
Bylaws of the corporation; (ii) the adoption of a plan of merger or
consolidation; (iii) the sale, lease, exchange or other disposition of all or
substantially all the property and assets of the corporation; or (iv) a
voluntary dissolution of the corporation or the revocation of any such voluntary
dissolution.
(c) The Executive Committee shall meet from time to time on call of the
Chairman of the Board or the President or of any two or more members of the
Executive committee. Meetings of the Executive Committee may be held at such
place or places, within or without the State of Georgia, as the Executive
Committee shall determine or as may be specified or fixed in the respective
notices or waivers of such meetings. The Executive Committee may fix its own
rules of procedure, including provision for notice of its meetings. It shall
keep a record of its proceedings and shall report these proceedings to the Board
of Directors at the meeting thereof held next after such proceedings have been
taken, and all such proceedings shall be subject to revision or alteration by
the Board of Directors except to the extent that action shall have been taken
pursuant to or in reliance upon express authority of the Board of Directors
prior to any such revision or alteration.
(d) The Executive Committee shall act by majority vote of its members.
(e) Members of the Executive Committee may participate in committee
proceedings via conference telephone or similar communications equipment by
means of which all persons participating in the proceedings can hear each other,
and such participation shall constitute presence in person at such proceedings.
(f) The Board of Directors, by resolution adopted in accordance with
paragraph (a) of this section, may designate one or more Directors as alternate
members of the Executive Committee who may act in the place and stead of any
absent member or members at any meeting of said committee.
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4.2 OTHER COMMITTEES. The Board of Directors, by resolution adopted by a
----------------
majority of the entire Board, may designate one or more additional committees,
each committee to consist of one or more of the Directors of the corporation,
which shall have such name or names and shall have and may exercise such powers
of the Board of Directors, except the powers denied to the Executive Committee,
as may be determined from time to time by the Board of Directors. Such
committees shall provide for their own rules of procedure, subject to the same
restrictions thereon as provided above for the Executive Committee.
4.3 REMOVAL. The Board of Directors shall have the power to remove any
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member of any committee at any time, with or without cause, and to fill
vacancies on and to dissolve any such committee.
ARTICLE FIVE
MEETINGS OF THE BOARD OF DIRECTORS
5.1 TIME AND PLACE. Meetings of the Board of Directors may be held at any
--------------
place either within or without the State of Georgia.
5.2 REGULAR MEETINGS. Regular meetings of the Board of Directors may be
----------------
held without notice at such time and place, within or without the State of
Georgia, as shall be determined by the Board of Directors from time to time.
5.3 SPECIAL MEETINGS. Special meetings of the Board of Directors may be
----------------
called by the Chairman of the Board or the President on not less than one day's
notice by mail, telegram, facsimile, cablegram, personal delivery or telephone
to each Director, and shall be called by the Chairman of the Board or the
President in like manner and on like notice on the written request of any two or
more Directors. Any such special meeting shall be held at such time and place,
within or without the State of Georgia, as shall be stated in the notice of the
meeting.
5.4 CONTENT AND WAIVER OF NOTICE. No notice of any meeting of the Board
----------------------------
of Directors shall be required to state the purposes thereof. Notice of any
meeting may be waived by an instrument in writing executed before or after the
meeting. Attendance in person at any such meeting shall constitute a waiver of
notice thereof unless the director at the beginning of the meeting (or promptly
upon his or her arrival) objects to holding the meeting or transacting business
at the meeting and does not thereafter vote for or assent to action taken at the
meeting.
5.5 QUORUM; PARTICIPATION BY TELEPHONE. At all meetings of the Board of
----------------------------------
Directors, the presence of a majority of the authorized number of Directors
shall be necessary and sufficient to constitute a quorum for the transaction of
business. Directors may participate in any meeting via conference telephone or
similar communications equipment by means of which all persons participating in
the meeting can hear each other, and participation in a meeting by means of such
communications equipment shall constitute the presence in person at such
meeting. Except as may be otherwise specifically provided by law, the Articles
of Incorporation or these Bylaws, all resolutions adopted and all business
transacted by the Board of Directors shall require the affirmative
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vote of a majority of the Directors present at the meeting. In the absence of a
quorum, a majority of the Directors present at any meeting may adjourn the
meeting from time to time until a quorum is present. Notice of any adjourned
meeting need only be given by announcement at the meeting at which the
adjournment is taken.
5.6 ACTION IN LIEU OF MEETING. Any action required or permitted to be
-------------------------
taken at any meeting of the Board of Directors or of any committee thereof may
be taken without a meeting if a written consent thereto is signed by all members
of the Board of Directors or of such committee, as the case may be, and such
written consent is filed with the minutes of the proceedings of the Board of
Directors and upon compliance with any further requirements of law pertaining to
such consents.
5.7 INTERESTED DIRECTORS AND OFFICERS. An interested Director or officer
---------------------------------
is one who is a party to a contract or transaction with the corporation or who
is an officer or Director of, or has a financial interest in, another
corporation, partnership or association which is a party to a contract or
transaction with the corporation. Contracts and transactions between the
corporation and one or more interested Directors or officers shall not be void
or voidable solely because of the involvement or vote of such interested persons
as long as (a) the contract or transaction is approved in good faith by the
Board of Directors or an appropriate committee thereof by the affirmative vote
of a majority of disinterested Directors, even if the disinterested Directors be
less than a quorum, at a meeting of the Board or committee at which the material
facts as to the interested person or persons and the contract or transaction are
disclosed or known to the Board or committee prior to the vote; (b) the contract
or transaction is approved in good faith by the shareholders after the material
facts as to the interested person or persons and the contract or transaction
have been disclosed to them; or (c) the contract or transaction is fair as to
the corporation as of the time it is authorized, approved or ratified by the
Board, committee or shareholders. Interested Directors may be counted in
determining the presence of a quorum at a meeting of the Board or committee
which authorizes the contract or transaction.
ARTICLE SIX
OFFICERS, AGENTS AND EMPLOYEES
6.1 GENERAL PROVISIONS. The officers of the corporation shall be a
------------------
President, a Secretary and a Treasurer, and may include a Chairman of the Board,
one or more Vice Presidents, one or more Assistant Secretaries and one or more
Assistant Treasurers. The officers shall be elected by the Board of Directors
at the first meeting of the Board of Directors after the annual meeting of the
shareholders in each year or shall be appointed as provided in these Bylaws.
The Board of Directors may elect other officers, agents and employees, who shall
have such authority and perform such duties as may be prescribed by the Board of
Directors. All officers shall hold office until the meeting of the Board of
Directors following the next annual meeting of the shareholders after their
election or appointment and until their successors shall have been duly elected
or appointed and shall have qualified. Any two or more offices may be held by
the same person. Any officer, agent or employee of the corporation may be
removed by the Board of Directors with or without cause. Removal without cause
shall be without prejudice to such person's contractual rights, if any, but the
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election or appointment of any person as an officer, agent or employee of the
corporation shall not of itself create contractual rights. The compensation of
officers, agents and employees elected by the Board of Directors shall be fixed
by the Board of Directors or by a committee thereof, and this power may also be
delegated to any officer, agent or employee as to persons under his or her
direction or control. The Board of Directors may require any officer, agent or
employee to give security for the faithful performance of his or her duties.
6.2 POWERS AND DUTIES OF THE CHAIRMAN OF THE BOARD AND THE PRESIDENT. The
----------------------------------------------------------------
powers and duties of the Chairman of the Board and the President, subject to the
supervision and control of the Board of Directors, shall be those usually
appertaining to their respective offices and whatever other powers and duties
are prescribed by these Bylaws or by the Board of Directors.
(a) The Chairman of the Board shall preside at all meetings of the
---------------------
Board of Directors and at all meetings of the shareholders. The Chairman of the
Board shall perform such other duties as the Board of Directors may from time to
time direct, but shall not participate in any major policy-making functions of
the corporation other than in his or her capacity as a director. The President
shall act as Chairman of the Board of Directors unless another director is
elected Chairman.
(b) The President shall, unless otherwise provided by the Board of
---------
Directors, be the chief executive officer of the corporation. The President
shall have general charge of the business and affairs of the corporation and
shall be obligated to keep the Board of Directors fully advised thereof. The
President shall employ and discharge employees and agents of the corporation,
except such as shall be elected by the Board of Directors, and he or she may
delegate these powers. The President shall have such powers and perform such
duties as generally pertain to the office of the President, as well as such
further powers and duties as may be prescribed by the Board of Directors. The
President may vote the shares or other securities of any other domestic or
foreign corporation of any type or kind which may at any time be owned by the
corporation, may execute any shareholders' or other consents in respect thereof
and may, in his or her discretion, delegate such powers by executing proxies on
behalf of the corporation. The Board of Directors, by resolution from time to
time, may confer like powers upon any other person or persons.
6.3 POWERS AND DUTIES OF VICE PRESIDENTS. Each Vice President shall have
------------------------------------
such powers and perform such duties as the Board of Directors or the President
may prescribe and shall perform such other duties as may be prescribed by these
Bylaws. In the absence or inability to act of the President, unless the Board
of Directors shall otherwise provide, the Vice President who has served in that
capacity for the longest time and who shall be present and able to act, shall
perform all duties and may exercise any of the powers of the President. The
performance of any such duty by a Vice President shall be conclusive evidence of
his or her power to act.
6.4 POWERS AND DUTIES OF THE SECRETARY. The Secretary shall have charge
----------------------------------
of the minutes of all proceedings of the shareholders and of the Board of
Directors and shall keep the minutes of all their meetings at which he or she is
present. Except as otherwise provided by these Bylaws, the Secretary shall
attend to the furnishing of all notices to shareholders and Directors. He or
she shall
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have charge of the seal of the corporation, shall attend to its use on all
documents the execution of which on behalf of the corporation under its seal is
duly authorized and shall attest the same by his or her signature whenever
required. The Secretary shall have charge of the record of shareholders of the
corporation, of all written requests by shareholders that notices be mailed to
them at an address other than their addresses on the record of shareholders, and
of such other books and papers as the Board of Directors may direct. Subject to
the control of the Board of Directors, the Secretary shall have all such powers
and duties as generally are incident to the position of Secretary or as may be
assigned to the Secretary by the President or the Board of Directors.
6.5 POWERS AND DUTIES OF THE TREASURER. The Treasurer shall have charge
----------------------------------
of all funds and securities of the corporation, shall endorse the same for
deposit or collection when necessary and deposit the same to the credit of the
corporation in such banks or depositories as the Board of Directors may
authorize. The Treasurer may endorse all commercial documents requiring
endorsements for or on behalf of the corporation and may sign all receipts for
or on behalf of the corporation and may sign all receipts and vouchers for
payments made to the corporation. The Treasurer shall have all such powers and
duties as generally are incident to the position of Treasurer or as may be
assigned to the Treasurer by the President or by the Board of Directors.
6.6 APPOINTMENT, POWERS AND DUTIES OF ASSISTANT SECRETARIES. Assistant
-------------------------------------------------------
Secretaries may be appointed by the President or elected by the Board of
Directors. In the absence or inability of the Secretary to act, any Assistant
Secretary may perform all the duties and exercise all the powers of the
Secretary. The performance of any such duty shall be conclusive evidence of the
Assistant Secretary's power to act. An Assistant Secretary shall also perform
such other duties as the Secretary or the Board of Directors may assign to him,
or her.
6.7 APPOINTMENT, POWERS AND DUTIES OF ASSISTANT TREASURERS. Assistant
------------------------------------------------------
Treasurers may be appointed by the President or elected by the Board of
Directors. In the absence or inability of the Treasurer to act, an Assistant
Treasurer may perform all the duties and exercise all the powers of the
Treasurer. The performance of any such duty shall be conclusive evidence of the
Assistant Treasurer's power to act. An Assistant Treasurer shall also perform
such other duties as the Treasurer or the Board of Directors may assign to him
or her.
6.8 DELEGATION OF DUTIES. In case of the absence of any officer of the
--------------------
corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board of Directors (or in the case of Assistant Secretaries or
Assistant Treasurers only, the President) may confer for the time being the
powers and duties, or any of them, of such officer upon any other officer or
elect or appoint any new officer to fill a vacancy created by death,
resignation, retirement or termination of any officer. In the latter event,
such new officer shall serve until the next annual election of officers.
ARTICLE SEVEN
CAPITAL STOCK
7.1 CERTIFICATES. (a) The interest of each shareholder shall be evidenced
------------
by a certificate or certificates representing shares of the corporation which
shall be in such form as the Board of
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Directors may from time to time adopt and shall be numbered and shall be entered
in the books of the corporation as they are issued. Each certificate
representing shares shall set forth upon the face thereof the following:
(i) the name of this corporation;
(ii) that the corporation is organized under the laws of the
State of Georgia;
(iii) the name or names of the person or persons to whom the
certificate is issued;
(iv) the number and class of shares, and the designation of the
series, if any, which the certificate represents; and
(v) if any shares represented by the certificate are nonvoting
shares, a statement or notation to that effect; and, if the
shares represented by the certificate are subordinate to
shares of any other class or series with respect to
dividends or amounts payable on liquidation, the
certificate shall further set forth on either the face or
back thereof a clear and concise statement to that effect.
(b) Each certificate shall be signed by the President or a Vice
President and the Secretary or an Assistant Secretary and may be sealed with the
seal of the corporation or a facsimile thereof. If a certificate is
countersigned by a transfer agent or registered by a registrar, other than the
corporation itself or an employee of the corporation, the signature of any such
officer of the corporation may be a facsimile. In case any officer or officers
who shall have signed, or whose facsimile signature or signatures shall have
been used on, any such certificate or certificates shall cease to be such
officer or officers of the corporation, whether because of death, resignation or
otherwise, before such certificate or certificates shall have been delivered by
the corporation, such certificate or certificates may nevertheless be delivered
as though the person or persons who signed such certificate or certificates or
whose facsimile signatures shall have been used thereon had not ceased to be
such officer or officers.
7.2 SHAREHOLDER LIST. The corporation shall keep or cause to be kept a
----------------
record of the shareholders of the corporation which readily shows, in
alphabetical order or by alphabetical index, and by classes or series of stock,
if any, the names of the shareholders entitled to vote, with the address of and
the number of shares held by each.
7.3 TRANSFER OF SHARES. Transfers of stock shall be made on the books of
------------------
the corporation only by the person named in the certificate, or by power of
attorney lawfully constituted in writing, and upon surrender of the certificate,
or in the case of a certificate alleged to have been lost, stolen or destroyed,
upon compliance with the provisions of Section 7.7 of these Bylaws.
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7.4 RECORD DATES. (a) For the purpose of determining shareholders
------------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the Board
of Directors may provide that the stock transfer books shall be closed for a
stated period, which period may not exceed 70 days. If the stock transfer books
shall be closed for the purpose of determining shareholders entitled to notice
of or to vote at a meeting of shareholders, such books shall be closed for at
least ten days immediately preceding such meeting.
(b) In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date to be not more than 70 days and, in
case of a meeting of shareholders, not less than ten days, prior to the date on
which the particular action requiring such determination of shareholders is to
be taken.
7.5 REGISTERED OWNER. The corporation shall be entitled to treat the
----------------
holder of record of any share of stock of the corporation as the person entitled
to vote such share, to receive any dividend or other distribution with respect
to such share and for all other purposes, and accordingly shall not be bound to
recognize any equitable or other claim or interest in such share on the part of
any other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by law.
7.6 TRANSFER AGENT AND REGISTRAR. The Board of Directors may appoint one
----------------------------
or more transfer agents and one or more registrars and may require each stock
certificate to bear the signature or signatures of a transfer agent or a
registrar or both.
7.7 LOST CERTIFICATES. Any person claiming a certificate of stock to be
-----------------
lost, stolen or destroyed shall make an affidavit or affirmation of that fact in
such manner as the Board of Directors may require and, if the Board so requires,
shall give the corporation a bond of indemnity in form and amount and with one
or more sureties satisfactory to the Board of Directors, whereupon an
appropriate new certificate may be issued in lieu of the certificate alleged to
have been lost, stolen or destroyed.
7.8 FRACTIONAL SHARES OR SCRIP. The corporation may, when and if
--------------------------
authorized so to do by its Board of Directors, issue certificates for fractional
shares or scrip in order to effect share transfers, share distributions or
reclassifications, mergers, consolidations or reorganizations. Holders of
fractional shares shall be entitled, in proportion to their fractional holdings,
to exercise voting rights, receive dividends and participate in any of the
assets of the corporation in the event of liquidation. Holders of scrip shall
not, unless expressly authorized by the Board of Directors, be entitled to
exercise any rights of a shareholder of the corporation, including voting
rights, dividend rights or the right to participate in any assets of the
corporation in the event of liquidation. In lieu of issuing fractional shares
or scrip, the corporation may pay in cash the fair value of fractional interests
as determined by the Board of Directors; and the Board of Directors may adopt
resolutions regarding rights with respect to fractional shares or scrip as it
may deem appropriate, including without limitation the right for persons
entitled to receive fractional shares to sell such fractional
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shares or purchase such additional fractional shares as may be needed to acquire
one full share, or sell such fractional shares or scrip for the account of such
persons.
ARTICLE EIGHT
BOOKS AND RECORDS; SEAL; ANNUAL STATEMENTS
8.1 INSPECTION OF BOOKS AND RECORDS. (a) Any person who shall have been a
-------------------------------
shareholder of record for at least six months immediately preceding his or her
demand or who shall be the holder of record of, or authorized in writing by the
holders of record of, at least two percent (2%) of the outstanding shares of any
class or series of the corporation, upon written demand stating the purpose
thereof, shall have the right to examine in person or by agent or attorney, at
any reasonable time or times, for any proper purpose, the corporation's books
and records of account and minutes and records of shareholders and to make
extracts therefrom.
(b) A shareholder may inspect and copy the records described in the
immediately preceding paragraph only if (i) his or her demand is made in good
faith and for a proper purpose that is reasonably relevant to his or her
legitimate interest as a shareholder; (ii) the shareholder describes with
reasonable particularity his or her purpose and the records he or she desires to
inspect; (iii) the records are directly connected with the stated purpose; and
(iv) the records are to be used only for that purpose.
(c) If the Secretary or a majority of the corporation's Board of
Directors or Executive Committee members find that the request is proper, the
Secretary shall promptly notify the shareholder of the time and place at which
the inspection may be conducted.
(d) If such request is found by the Secretary, the Board of Directors
or the Executive Committee to be improper, the Secretary shall so notify the
requesting shareholder on or prior to the date on which the shareholder
requested to conduct the inspection. The Secretary shall specify in such notice
the basis for the rejection of the shareholder's request.
(e) The Secretary, the Board of Directors and the Executive Committee
shall at all times be entitled to rely on the corporate records in making any
determination hereunder.
8.2 SEAL. The corporate seal shall be in such form as the Board of
----
Directors may from time to time determine. In the event it is inconvenient to
use such a seal at any time, the signature of the corporation followed by the
word "Seal" enclosed in parentheses or scroll shall be deemed the seal of the
corporation.
8.3 ANNUAL STATEMENTS. Not later than four months after the close of each
-----------------
fiscal year, and in any case prior to the next annual meeting of shareholders,
the corporation shall prepare:
(a) A balance sheet showing in reasonable detail the financial
condition of the corporation as of the close of its fiscal year; and
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(b) A profit and loss statement showing the results of its operations
during its fiscal year. Upon written request, the corporation promptly shall
mail to any shareholder of record a copy of its most recent balance sheet and
profit and loss statement.
ARTICLE NINE
INDEMNIFICATION
9.1 AUTHORITY TO INDEMNIFICATION. The corporation may indemnify or
----------------------------
obligate itself to indemnify an individual made a party to a proceeding because
he or she is or was a Director, officer, employee or agent of the corporation
(or was serving at the request of the corporation as a director, officer, or
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise) for reasonable expenses, judgments, fines, penalties and
amounts paid in settlement (including attorneys'' fees), incurred in connection
with the proceeding if the individual acted in manner he or she believed in good
faith to be in or not opposed to the best interests of the corporation and, in
the case of any criminal proceeding, he or she had no reasonable cause to
believe his or her conduct was unlawful. The termination of a proceeding by
judgment, order, settlement, or conviction, or upon a plea of nolo contendere or
its equivalent is not, of itself, determinative that the director, officer,
employee or agent did not meet the standard of conduct set forth above.
Indemnification permitted under this section in connection with a proceeding by
or in the right of the corporation is limited to reasonable expenses incurred in
connection with the proceeding.
9.2 MANDATORY INDEMNIFICATION. To the extent that a Director, officer,
-------------------------
employee or agent of the corporation has been successful, on the merits or
otherwise, in the defense of any proceeding to which he or she was a party, or
in defense of any claim, issue or matter therein, because he or she is or was a
Director, officer, employee or agent of the corporation, the corporation shall
indemnify the Director, employee or agent against reasonable expenses incurred
by him or her in connection therewith.
9.3 ADVANCEMENT FOR EXPENSES. The corporation shall pay for or reimburse
------------------------
the reasonable expenses incurred by a Director, officer, employee or agent of
the corporation who is a party to a proceeding in advance of final disposition
of the proceeding if (a) he or she furnishes the corporation written affirmation
of his or her good faith belief that he or she has met the standard of conduct
set forth in Section 9.1 of this Article, and (b) he or she furnishes the
corporation a written undertaking, executed personally or on his or her behalf,
to repay any advances if it is ultimately determined that he or she is not
entitled to indemnification. The undertaking required by this section must be
an unlimited general obligation but need not be secured and may be accepted
without reference to financial ability to make repayment.
9.4 COURT-ORDERED INDEMNIFICATION AND ADVANCES FOR EXPENSES. A Director,
-------------------------------------------------------
officer, employee or agent of the corporation who is a party to a proceeding may
apply for indemnification or advances for expenses to the court conducting the
proceeding or to another court of competent jurisdiction.
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9.5 DETERMINATION OF INDEMNIFICATION. Except as provided in Section 9.2
--------------------------------
and except as may be ordered by a court, the corporation may not indemnify a
Director, officer, employee or agent under Section 9.1 unless authorized
thereunder and a determination has been made in the specific case that
indemnification of the Director, officer, employee or agent is permissible in
the circumstances because he or she has met the standard of conduct set forth in
Section 9. 1. The determination shall be made:
(a) By the Board of Directors by majority vote of a quorum consisting
of Directors not at the time parties to the proceedings;
(b) If a quorum cannot be obtained, by majority vote of a committee
duly designated by the Board of Directors (in which designation Directors who
are parties may participate), consisting solely of two or more Directors not at
the time parties to the proceeding;
(c) By special legal counsel:
(i) Selected by the Board of Directors or its committee in the
manner prescribed in paragraph (a) or (b) of this section;
or
(ii) If a quorum of the Board of Directors cannot be obtained
and a committee cannot be designated, selected by majority
vote of the full Board of Directors (in which selection
Directors who are parties may participate); or
(d) By the shareholders, but shares owned by or voted under the
control of Directors who are at the time parties to the proceeding may not be
voted on the determination.
9.6 AUTHORIZATION OF INDEMNIFICATION. Authorization of indemnification or
--------------------------------
an obligation to indemnify and evaluation as to the reasonableness of expenses
shall be made in the same manner as the determination that indemnification is
permissible, except that if the determination is made by special legal counsel,
authorization of indemnification and evaluation as to reasonableness of expenses
shall be made by those entitled under subsection (c) of Section 9.5 to select
counsel.
9.7 OTHER RIGHTS. The indemnification and advancement of expenses
------------
provided by or granted pursuant to this Article Nine shall not be deemed
exclusive of any other rights, in respect of indemnification or otherwise, to
which those seeking indemnification or advancement of expenses may be entitled
under any bylaw, resolution, agreement or contract either specifically or in
general terms approved by the affirmative vote of the holders of a majority of
the shares entitled to vote thereon taken at a meeting, the notice of which
specified that such bylaw, resolution or agreement would be placed before the
shareholders, both as to action by a Director, trustee, officer, employee or
agent in his or her official capacity and as to action in another capacity while
holding such office or position; except that no such other rights, in respect to
indemnification or otherwise, may be provided or granted to a Director, trustee,
officer, employee or agent pursuant to this Section 9.7 by
14
<PAGE>
the corporation for liability for (a) any appropriation, in violation of his or
her duties, of any business opportunity of the corporation; (b) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) the types of liability set forth in Section 14-2-832 of
the Georgia Business Corporation Code dealing with illegal or unauthorized
distributions of corporate assets, whether as dividends or in liquidation of the
corporation or otherwise; or (d) any transaction from which the director derived
an improper material tangible personal benefit.
9.8 INSURANCE. The corporation may purchase and maintain insurance on
---------
behalf of an individual who is or was a Director, officer, employee or agent of
the corporation or who, while a Director, officer, employee or agent of the
corporation, is or was serving at the request of the corporation as a director,
officer, partner, trustee, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against liability asserted against or incurred by him or her in that
capacity or arising from his or her status as a director, officer, employee, or
agent whether or not the corporation would have power to indemnify him, or her
against the same liability under this Article Nine.
9.9 CONTINUATION OF EXPENSES. The indemnification and advancement of
------------------------
expenses provided by or granted pursuant to this Article Nine shall continue as
to a person who has ceased to be a Director, trustee, officer, employee or agent
and shall inure to the benefit of the heirs, executors and administrators of
such a person.
ARTICLE TEN
NOTICES; WAIVERS OF NOTICE
10.1 NOTICES. Except as otherwise specifically provided in these Bylaws,
-------
whenever under the provisions of these Bylaws notice is required to be given to
any shareholder, Director or officer, it shall not necessarily be construed to
mean personal notice, but such notice may be given by personal notice,
facsimile, telegram or cablegram, or by mail by depositing the same in the post
office or letter box in a postage prepaid sealed envelope, addressed to such
shareholder, Director or officer at such address as appears on the books of the
corporation, and such notice shall be deemed to be given at the time when the
same shall be thus sent or mailed.
10.2 WAIVERS OF NOTICE. Except as otherwise provided in these Bylaws, when
-----------------
any notice is required to be given by law, by the Articles of Incorporation or
by these Bylaws, a written waiver thereof, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. In the case of a shareholder, such waiver of notice may
be signed by the shareholder's attorney or proxy duly appointed in writing.
ARTICLE ELEVEN
EMERGENCY POWERS
11.1 BYLAWS. The Board of Directors may adopt emergency bylaws, subject to
------
repeal or change by action of the shareholders, which shall, notwithstanding any
provision of law, the Articles of Incorporation or these Bylaws, be operative
during any emergency in the conduct of the business
15
<PAGE>
of the corporation resulting from an attack on the United States or on a
locality in which the corporation conducts its business or customarily holds
meetings of its Board of Directors or its shareholders, or during any nuclear or
atomic disaster, or during the existence of any catastrophe or other similar
emergency condition, as a result of which a quorum of the Board of Directors or
a standing committee thereof cannot readily be convened for action. The
emergency bylaws may make any provision that may be practical and necessary for
the circumstances of the emergency.
11.2 LINES OF SUCCESSION. The Board of Directors, either before or during
-------------------
any such emergency, may provide, and from time to time may modify, lines of
succession in the event that during such an emergency any or all officers or
agents of the corporation shall for any reason be rendered incapable of
discharging their duties.
11.3 HEAD OFFICE. The Board of Directors, either before or during any such
-----------
emergency, may (effective during the emergency) change the head office or
designate several alternative head offices or regional offices, or authorize the
officers to do so.
11.4 PERIOD OF EFFECTIVENESS. To the extent not inconsistent with any
-----------------------
emergency bylaws so adopted, these Bylaws shall remain in effect during any such
emergency and upon its termination, the emergency bylaws shall cease to be
operative.
11.5 NOTICES. Unless otherwise provided in emergency bylaws, notice of any
-------
meeting of the Board of Directors during any such emergency may be given only to
such of the Directors as it may be feasible to reach at the time, and by such
means as may be feasible at the time, including publication, radio or
television.
11.6 OFFICERS AS DIRECTORS PRO TEMPORE. To the extent required to
---------------------------------
constitute a quorum at any meeting of the Board of Directors during any such
emergency, the officers of the corporation who are present shall, unless
otherwise provided in emergency bylaws, be deemed, in order of rank and within
the same rank in order of seniority, Directors for such meeting.
11.7 LIABILITY OF OFFICERS, DIRECTORS AND AGENTS. No officer, Director,
-------------------------------------------
agent or employee acting in accordance with any emergency bylaw shall be liable
except for willful misconduct. No officer, Director, agent or employee shall be
liable for any action taken by him or her in good faith in such an emergency in
furtherance of the ordinary business affairs of the corporation even though not
authorized by the bylaws then in effect.
ARTICLE TWELVE
CHECKS, NOTES, DRAFTS, ETC.
Checks, notes, drafts, acceptances, bills of exchange and other orders or
obligations for the payment of money shall be signed by such officer or officers
or person or persons as the Board of Directors by resolution shall from time to
time designate.
16
<PAGE>
ARTICLE THIRTEEN
AMENDMENTS
The Bylaws of the corporation may be altered or amended and new bylaws may
be adopted by the shareholders at any annual or special meeting of the
shareholders or by the Board of Directors at any regular or special meeting of
the Board of Directors; provided, however, that, if such action is to be taken
at a meeting of the shareholders, notice of the general nature of the proposed
change in the Bylaws shall be given in the notice of meeting. The shareholders
may provide by resolution that any Bylaw provision repealed, amended, adopted,
or altered by them may not be repealed, amended, adopted or altered by the Board
of Directors. Except as otherwise provided in the Articles of Incorporation,
action by the shareholders with respect to Bylaws shall be taken by an
affirmative vote of a majority of all shares entitled to elect Directors, and
action by the Board of Directors with respect to Bylaws shall be taken by an
affirmative vote of a majority of all Directors then holding office.
17
<PAGE>
EXHIBIT 21
All of the following are Georgia corporations:
Premier Bank
Premier Lending Corporation
The Bank of Spalding County
First Community Bank of Henry County
Frederica Bank & Trust
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference 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, in the
Registration Statement (Form S-8 No. 333-59475) pertaining to the Premier
Bancshares, Inc. 1997 Stock Option Plan and the Premier Bancshares, Inc.
Directors' Deferred Stock Unit Plan (formerly the Premier Bancshares, Inc.
Directors' Stock Option Plan), in the Registration Statement (Form S-3 No.
333-60245) and related Prospectus of Premier Bancshares, Inc. for the
registration of 1,000,000 shares of its common stock, in the Registration
Statement (Form S-8 No. 333-60249) pertaining to the Premier Bancshares, Inc.
Employee Stock Purchase Plan, and in the Registration Statement (Post-Effective
Amendment No. 1 on Form S-8 to Registration Statement on Form S-4 No. 333-65025)
pertaining to the Frederica Bank & Trust Directors' Stock Option Plan of our
report dated February 5, 1999, with respect to the consolidated financial
statements of Premier Bancshares, Inc. and Subsidiaries included in this Annual
Report (Form 10-K) for the year ended December 31, 1998.
/s/ Ernst & Young LLP
March 22, 1999
Atlanta, Georgia
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report, dated January 31, 1997, except
for Note 2 as to which the date is June 23, 1997, December 12, 1997, June 9,
1998, July 1, 1998 and July 2, 1998, relating to the consolidated statements of
income, stockholders' equity and cash flows of Premier Bancshares, Inc. and
subsidiaries for the year ended December 31, 1996, included in this Annual
Report on Form 10-K and incorporated by reference in the previously filed
Registration Statements of Premier Bancshares, Inc. on Forms S-8 (File Numbers
333-29941, 333-60249 and 333-59475) and Form S-3D (File Number 333-60245).
/s/ Mauldin & Jenkins, LLC
Atlanta, Georgia
March 23, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 23, 1997, accompanying the consolidated
financial statements of Central and Southern Holding Company for the year ended
December 31, 1996, included in the Form 10-K for Premier Bancshares, Inc. for
the year ended December 31, 1998. We hereby consent to the incorporation by
reference of said report in the Registration Statements of Premier Bancshares,
Inc. on Form S-3D (File No. 333-60245), Forms S-8 (File No. 333-29941, File No.
333-59475 and File No. 333-60249) and the Registration Statement (Post effective
amendment #1 on Form S-8 to the Registration Statement on Form S-4, File No.
333-65025) pertaining to the Fredrica Bank and Trust Directors Stock Option
Plan.
/s/ PORTER KEADLE MOORE, LLP
Atlanta, Georgia
March 24, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 4, 1997, accompanying the consolidated
financial statements of Citizens Gwinnett Bankshares, Inc. for the year ended
December 31, 1996, included in on Form 10-K for Premier Bancshares, Inc. for the
year ended December 31, 1998. We hereby consent to the incorporation by
reference of said report in the Registration Statements of Premier Bancshares,
Inc. on Form S-3D (File No. 333-60245), Forms S-8 (File No. 333-29941, File No.
333-59475 and File No. 333-60249), and the Registration Statement (Post
effective amendment #1 on Form S-8 to the Registration Statement on Form S-4,
File No. 333-65025) pertaining to the Fredrica Bank and Trust Directors Stock
Option Plan.
/s/ PORTER KEADLE MOORE, LLP
Atlanta, Georgia
March 24, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report, dated January 29, 1998,
relating to the consolidated financial statements of The Bank Holding Company
and subsidiaries for the two years ended December 31, 1997, included in this
Annual Report on Form 10-K and incorporated by reference in the previously filed
Registration Statements of Premier Bancshares, Inc. on Forms S-8 (File Numbers
333-29941, 333-60249 and 333-59475) and Form S-3D (File Number 333-60245).
/s/ Mauldin & Jenkins, LLC
-----------------------------
Atlanta, Georgia
March 23, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use of our report, dated January 14, 1998, except
for Note 14 as to which the date is February 5, 1998, relating to the
consolidated financial statements of Button Gwinnett Financial Corporation and
subsidiary for the two years ended December 31, 1997, included in this Annual
Report on Form 10-K and incorporated by reference in the previously filed
Registration Statements of Premier Bancshares, Inc. on Forms S-8 (File Numbers
333-29941, 333-60249 and 333-59475) and Form S-3D (File Number 333-60245).
/s/ Mauldin & Jenkins, LLC
-------------------------------
Atlanta, Georgia
March 23, 1999
<PAGE>
EXHIBIT 23.7
[LETTERHEAD OF BRICKER & MELTON, P.A. APPEARS HERE]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We consent to the incorporation of our report dated January 16, 1998, which
appears in the annual report on Form 10-K of Premier Bancshares, Inc. and
Subsidiaries for the year ended December 31, 1998.
BRICKER & MELTON, P.A.
Duluth, Georgia
March 22, 1999
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