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1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED DECEMBER 31, 1996
Commission File Number: 33-28514-A
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BRYAN BANCORP OF GEORGIA, INC.
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(exact name of small business issuer as specified in its charter)
GEORGIA 58-1835646
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9971 Ford Avenue, Richmond Hill, Georgia 31324
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(Address of principal executive offices) (Zip code)
(912) 756-4444
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(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act of 1934:
None
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Securities registered pursuant to Section 12(g) of the Exchange Act of 1934:
None
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Check whether the registrant (1) filed all reports to be filed by section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 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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Check if there is no disclosure of delinquent filers in response to item 405 of
regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.
Yes X No
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The issuer's revenues for its last fiscal year were $5,375,567
The aggregate market value of the common stock of the registrant held by
nonaffiliates (260,439 shares) on March 18, 1997 was approximately $4,948,341
(based on a per share price of $19 which is an estimate price since the stock is
not listed, not actively traded, and transactions are conducted on a private
basis.
State the number of shares outstanding of each issuer's classes of common stock,
as of the latest practicable date:
504,558 shares as of March 18, 1997
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DOCUMENTS INCORPORATED BY REFERENCE:
None
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Transitional Small Business Disclosure Format:
Yes No X
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2
PART I
Item I. Business.
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History and Organization
Bryan Bancorp of Georgia, Inc. (the "Company") is a registered bank holding
company under the federal Bank Holding Act of 1956, as amended, and owns 100% of
the outstanding capital stock of Bryan Bank & Trust, Richmond Hill, Georgia (the
"Bank"). The Company was incorporated under the laws of the State of Georgia on
March 6, 1989 to enhance the Bank's ability to serve its future customers'
requirements for financial services. The holding company structure provides
flexibility for expansion of the Company's banking business through acquisition
of other financial institutions and provision of additional banking-related
services which the traditional commercial bank may not provide under present
laws.
The Bank commenced operations on December 27, 1989 in a permanent facility
located on Ford Avenue in Richmond Hill, Georgia. This 8,700 square foot
facility is owned by the Bank.
The Bank is a full service commercial bank, without trust powers. The Bank
offers a full range of interest bearing and non-interest bearing accounts,
including commercial and retail checking accounts, negotiable order of
withdrawal ("NOW") accounts, super NOW accounts, public funds accounts, money
market accounts, individual retirement accounts, regular interest-bearing
savings accounts, certificates of deposit, business accounts, commercial loans,
real estate loans and consumer/installment loans.
Market Area and Competition
The primary service area for the Bank encompasses approximately 60 square miles
in the Richmond Hill area of Bryan County, Georgia including that portion of
Bryan County south of Fort Stewart extending south to the northern portion of
Liberty County and the southern fringes of Chatham County, Georgia.
There is only one banking facility, a branch office of a state bank
headquartered in Bryan County, which is located in the Bank's primary service
area. However, the Bank is in competition with many statewide and regional banks
having offices immediately north of the Bank's primary service area in the
adjoining Metropolitan Savannah area, as well as savings and loan associations,
insurance companies, consumer finance companies, brokerage houses, credit unions
and other business entities located in Chatham County, which have recently been
invading the traditional banking markets.
Asset/Liability Management
It is the objective of the Bank to manage assets and liabilities to provide a
satisfactory, consistent level of profitability within the framework of
established cash, loan, investment, borrowing and capital policies. Certain of
the officers of the Bank are responsible for monitoring policies and procedures
that are designed to ensure acceptable composition of the assets/liability mix,
stability and leverage of all sources of funds while adhering to prudent banking
practices. It is the overall philosophy of management to support asset growth
primarily through growth of core deposits, which include deposits of all
categories made by individuals, partnerships and corporations. Management of the
Bank seeks to invest the largest portion of the Bank's assets in commercial,
consumer and real estate loans.
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The Bank's asset/liability mix is monitored on a regular basis with a quarterly
report reflecting interest-sensitive assets and interest-sensitive liabilities
being prepared and presented to the Bank's Board of Directors, The objective of
this policy is to control interest-sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on the Bank's
earnings.
Correspondent Banking
Correspondent banking involves the provision of services by one bank to another
bank which cannot provide that service for itself from an economic or practical
standpoint. The Bank is required to purchase correspondent services offered by
larger banks, including check collections, purchase of Federal Funds, security
safekeeping, investment services, coin and currency supplies, overline and
liquidity loan participations, and sales of loans to or participations with
correspondent banks.
The Bank sells loan participations to correspondent banks and certain
development authorities with respect to loans which exceed the Bank's lending
limit.
Data Processing
The Bank has a data processing servicing agreement with M&I Data Services, Inc.
This servicing agreement provides for the Bank to receive a full range of data
processing services, including an automated general ledger, deposit and loan
accounting. The data processing servicing agreement provides for the Bank to pay
a monthly fee based on the type, kind and volume of data processing services
provided, priced at a stipulated rate schedule.
Employees
The bank employs 32 persons including 30 full-time employees. None of the
employees are represented by a labor union or other collective bargaining unit,
and management believes its employees relationships are satisfactory.
Monetary Policies
The results of operations of the Bank are affected by credit policies of
monetary authorities, particularly the Federal Reserve Board. The instruments of
monetary policy employed by the Federal Reserve Board include open market
operations in U.S. Government securities, changes in the discount rate on member
bank borrowings, changes in reserve requirements against member bank deposits
and limitations on interest rates which member banks may pay on time and savings
deposits. In view of changing conditions in the national economy and in the
money markets, as well as the effects of actions by monetary and fiscal
authorities, including the Federal Reserve Board, no prediction can be made as
to possible future changes in interest rates, deposit levels, loan demand or the
business and earnings of the Bank.
Supervision and Regulation
The Company and the Bank operate in a highly regulated environment, and their
business activities are governed by statute, regulation and administrative
policies. The business activities of the Company and the Bank are closely
supervised by a number of state and federal regulatory agencies, including the
Georgia Department of Banking and Finance, the Federal Reserve Board, the
Securities and Exchange Commission and the Federal Deposit Insurance Corporation
("FDIC").
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The Company is regulated by the Federal Reserve Board under the Federal Bank
Holding Company Act, which requires every bank holding company to obtain the
prior approval of the Federal Reserve Board before acquiring more than 5% of the
voting shares of any bank or all or substantially all of the assets of a bank,
and before merging or consolidating with another bank holding company. The
Federal Reserve Board (pursuant to regulation and published policy statements)
has maintained that a bank holding company must serve as a source of financial
strength to its subsidiary banks. In adhering to the Federal Reserve Board
policy the Company may be required to provide financial support to a subsidiary
bank at a time when, absent such Federal Reserve Board policy, the company may
not deem it advisable to provide such assistance.
Interstate expansion of bank holding companies is prohibited unless such
acquisition is specifically authorized by a statute of the state in which the
target bank or bank holding company is located. A bank holding company is
generally prohibited from acquiring control of any company which is not a bank
and from engaging in any business other than the business of banking or managing
and controlling banks. However, there are certain activities which have been
identified by the Federal Reserve Board to be so closely related to banking as
to be a proper incident thereto and thus permissible for bank holding companies,
including the following activities: acting as investment or financial advisor to
subsidiaries and certain outside companies; leasing personal and real property
or acting as a broker with respect thereto; providing management consulting
advice to nonaffiliated banks and nonbank depository institutions; operating
collection agencies and credit bureaus; acting as a futures commission merchant;
providing data processing and data transmission services; acting as an insurance
agent or underwriter with respect to limited types of insurance; performing real
estate appraisals; arranging commercial real estate equity financing; providing
securities brokerage services; and underwriting and dealing in obligations of
the United States, the states and their political subdivisions.
The Company is also regulated by the Georgia Department of Banking and Finance
under the Georgia Bank Holding Company Act, which requires every Georgia bank
holding company to obtain prior approval of the Commission of Banking before
acquiring more than 5% of the voting shares of any bank or all or substantially
all of the assets of a bank, and before merging or consolidating with any other
bank holding company. A Georgia bank holding company is generally prohibited
from acquiring ownership or control of 5% or more of the voting shares of any
bank unless the bank being acquired is either a bank for purposes of the Federal
Bank Holding Company Act, or a federal or state savings and loan association or
a federal saving bank whose deposits are insured by the Federal Savings and Loan
Insurance Corporation, and such bank has been in existence and continuously
operating as a bank for a period of five years or more prior to the date of
application to the Commissioner for approval of such acquisition.
Both the Company and the Bank are subject to regulatory capital requirements
imposed by the Federal Reserve Board and the FDIC. In 1989, both the Federal
Reserve Board and the FDIC issued new risk-based capital guidelines for bank
holding companies and banks which make regularly capital requirements more
sensitive to differences in risk profiles of various banking organizations. The
capital adequacy guidelines issued by the Federal Reserve Board are applied to
bank holding companies on a consolidated basis with the banks owned by the
holding company. The FDIC's risk capital guidelines apply directly to
state-chartered banks which are not members of the Federal Reserve System and
whose deposits are insured by the FDIC regardless of whether they are a
subsidiary of a bank holding company. Both agencies' requirements (which are
substantially similar) provide that banking organizations must meet minimum
capital requirements. Regulatory guidelines define capital as either Tier 1
(primarily includes common stock, paid-in capital and retained earnings) or Tier
2 (primarily consists of subordinated debentures, certain preferred stock and
general loan and lease valuation allowances). The Company and the bank are
subject to a minimum Tier 1 capital to risk-weighted assets ratio of 4% and a
total capital to risk-weighted assets of 8%. Additionally, the Company and the
Bank are subject to a minimum Tier 1 leverage ratio of 4%. At December 31, 1996
the Company and the Bank meet all minimum capital requirements. See note 10 to
the consolidated financial statements.
Both the risk-based capital guidelines and the leverage ratio are minimum
requirements, applicable only to top-rated banking institutions. Institutions
operating at or near these levels are expected to have well-diversified risk,
excellent asset quality, high liquidity, good earnings and in general, have to
be considered strong banking organizations, rated composite 1 under the CAMEL
rating system for banks or the BOPEC rating system for bank holding companies.
Institutions with lower ratings and institutions with high levels of risk or
experiencing or anticipating significant growth would be expected to maintain
ratios 100 to 200 basis points above the stated minimums.
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5
The Federal Reserve Board and the FDIC recently have proposed a revision to
their risk-based capital guidelines to further ensure that those guidelines take
adequate account of interest rate risk. Interest rate risk is the adverse effect
that changes in market interest rates may have on a bank's financial condition
and is inherent to the business of banking. The agencies have proposed two
alternative methods for assessing a bank's capital adequacy for interest rate
risk. Under the first approach, the banking agencies would establish minimum
capital standards for interest rate risk based on either a supervisory model or
the bank's internal model of measuring risk. Institutions would be required to
have capital sufficient to cover the amount of measured exposure in excess of
the threshold level. The proposed threshold level is a decline in net economy
value equal to 1% of assets. Under the second approach, a minimum capital
requirement for interest rate risk would not be set. Instead, examiners would
consider results of quantitative measures of interest rate risk along with other
factors in evaluating an institution's capital adequacy for interest rate risk.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "Act"),
enacted on December 19, 1991, provides for a number of reforms relating to the
safety and soundness of the deposit insurance system, supervision of domestic
and foreign depository institutions and improvement of accounting standards. One
aspect of the Act involves the development of a regulatory monitoring system
requiring prompt action on the part of banking regulators with regard to certain
classes of undercapitalized institutions. While the Act does not change any of
the minimum capital requirements, it directs each of the federal banking
agencies to issue regulations putting the monitoring plan into effect. The Act
creates five "capital categories" ("well capitalized", "adequately capitalized",
and "undercapitalized", "significantly undercapitalized" and "critically
undercapitalized") which are defined in the Act and which will be used to
determine the severity of corrective action the appropriate regulator may take
in the event an institution reaches a given level of undercapitalization. For
example, an institution which becomes "undercapitalized" must submit a capital
restoration plan to the appropriate regulator outlining the steps it will take
to become adequately capitalized. Upon approving the plan, the regulator will
monitor the institution's compliance. Before a capital restoration plan will be
approved, any entity controlling a bank (i.e., holding companies) must guarantee
compliance with the plan until the institution has been adequately capitalized
for four consecutive calendar quarters. The liability of the holding company is
limited to the lesser of five percent of the institution's total assets or the
amount which is necessary to bring the institution into compliance with all
capital standards. In addition, "undercapitalized" institutions will be
restricted from paying management fees, dividends and other capital
distributions, will be subject to certain asset growth restrictions and will be
required to obtain prior approval from the appropriate regulator to open new
branches or expand into new lines of business. As an institution drops to lower
capital levels, the extent of action to be taken by the appropriate regulator
increases, restricting the types of transactions in which the institution may
engage and ultimately providing for the appointment of a receiver for certain
institutions deemed to be critically undercapitalized.
The Act also provides that banks have to meet new safety and soundness
standards. In order to comply with the Act, the Federal Reserve Board and the
FDIC issued a Notice of Proposed Rulemaking on November 18, 1993, which
institutes regulations defining operational and managerial standards relating to
internal controls, loan documentation, credit underwriting, interest rate
exposure, asset growth, director and officer compensation, asset quality,
earnings and stock valuation.
The State of Georgia has a regional interstate banking statute which authorizes
bank holding companies whose operations are principally conducted in certain
southeastern states to acquire banks and bank holding companies located in
Georgia under certain conditions. Such southeastern states include the States of
Alabama, Arkansas, Florida, Louisiana, Maryland, Mississippi, North Carolina,
South Carolina, Tennessee, Virginia, West Virginia and the District of Columbia.
Such legislation has had the effect of increasing competition among financial
institutions in the Bank's market area and in the State of Georgia generally.
The Georgia General Assembly recently enacted legislation altering the public
policy of the State regarding intrastate branch banking. Essentially, the
legislation allows a bank to establish de novo branch banks on a limited basis
beginning July 1, 1996. Between July 1, 1996 and June 30, 1998, the number of de
novo branch banks is limited to three per bank or group of affiliated banks
under the same bank holding company. Beginning July 1, 1998, the number of de
novo branch banks which may be established is no longer limited by statute.
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As a bank holding company, the Company is required to file with the Federal
Reserve Board an annual report of its operations at the end of each fiscal year
and such additional information as the Federal Reserve Board may require
pursuant to the Act. The Federal Reserve Board may also make examinations of the
Company and each of its subsidiaries.
As a state bank, the Bank is subject to the supervision of the Georgia
Department of Banking and Finance and, to a limited extent, the FDIC and the
Federal Reserve Board. In addition, the Bank, as a subsidiary of the Company, is
subject to restrictions under federal law in dealing with the Company and other
affiliates, if any. These restrictions apply to extensions of credit to an
affiliate, investments in the securities of an affiliate and the purchase of
assets from an affiliate.
The RCDRIA was enacted September 23, 1994, to promote economic revitalization
and community development to "investment areas". The RCDRIA establishes a
Community Development Financial Institutions Fund to achieve these objectives.
The fund is authorized to provide financial assistance through a variety of
mechanisms, including equity investments, grants, loans, credit union shares and
deposits. The amount of assistance any community development financial
institution and its subsidiaries and affiliates may receive is generally limited
to $5 million. A qualifying institution may receive an additional $3.75 million
for the purpose of serving an investment area in another state.
The RCDRIA also provides certain regulatory relief, requiring each federal
agency to streamline and modify its regulations and policies , remove
inconsistencies and eliminate outmoded and duplicative requirements. The RCDRIA
also directs the federal agencies to coordinate examinations among affiliate
banks, coordinate examinations with other banking agencies, and work to
coordinate with state banking agencies. The federal banking agencies are also
directed to work jointly in developing a system for banks and savings
associations to file reports and statements electronically and to adopt a single
form for filing core information in reports and statements.
The RCDRIA also provides procedures for expediting bank holding company
applications, eliminating prior approval of the Federal Reserve for the
acquisition of control of a bank in a reorganization in which persons exchange
their shares for shares of a newly-formed bank holding company provided the bank
holding company immediately after the acquisition meets capital and other
financial standards and the bank is "adequately capitalized", the holding
company does not engage in any activities other than those of managing and
controlling banks, the company provides 30 days prior notice to the board of the
transaction, and the holding company will not acquire control of any additional
bank. The RCDRIA also provides for reduction of post-approval waiting periods,
decreasing the waiting period from 30 days to 15 days in most instances. The
RCDRIA also exempts from federal securities registration securities issued in
connection with the formation of a one-bank holding company.
The RCDRIA also permits a bank holding company to engage in non-banking
activities or acquire or retain ownership or control of the shares of a company
engaged in non-banking activities if prior written notice of the proposed
transaction or activity is provided to the Federal Reserve at least 60 days
before the transaction or activity occurs or commences. In assessing the
proposed transaction or activity, the board will consider whether performance of
the activity by a bank holding company or a subsidiary can reasonably be
expected to produce benefits to the public, such as greater convenience,
increased competition or gains in efficiency that outweighs possible adverse
effects.
The section of the Bank Holding Company Act ("BHCA") permitting a bank holding
company to engage in nonbanking activities with sixty day notice was amended by
the Economic Growth and Regulatory Paperwork Reduction Act of 1966, enacted as a
part of the Omnibus Consolidated Appropriations Act for Fiscal Year 1997 to
permit a well-capitalized and well-managed bank holding company, that controls
predominantly well-capitalized and well-managed depository institutions, as
defined by amendments to the Bank Holding Company Act, to engage de novo in any
permissible non-banking activities (except for an insured depository
institution, i.e., a savings association) under expedited procedures. To be
eligible for the expedited procedures, the book value of the assets acquired may
not exceed 10% of the holding company's consolidated risk weighted assets and
the consideration paid may not exceed 15% of Tier one capital. The Federal
Reserve Board may adjust these percentages. In addition, no administrative
enforcement action may have been commenced or be pending nor may any cease and
desist order pursuant to & 8 of the FDIC Act have been issued or be pending
against the holding company or any of its depository institutions subsidiaries.
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While all qualifying holding companies engaging in permissible, non-banking
activities under the expedited procedures must provide notice to the Federal
Reserve Board, the notice provisions differ. First, to engage de novo directly
or through a subsidiary in activities that the Fed has already approved by
regulation, the bank holding company must provide notice within ten days after
commencing the activity. Second, to engage in activities that the Fed has
permitted by order or to acquire the shares or assets of an existing company,
the bank holding company must provide notice at least twelve business days prior
to commencing the activity, during which time the Fed may require the full
60-day notice procedure.
The Interstate Bank Act, enacted September 29, 1994, will, among other things,
permit bank holding companies to merge their multi-state bank subsidiaries into
a single bank by June 1, 1997, unless state legislators act to "opt-out" of this
provision, to acquire banks in any state one year after the effective date of
the Interstate Banking Act and permit banks to establish de novo branches across
state lines so long as the individual states into which a potential de novo
entrant proposes to branch specifically passes legislation to "opt-in".
Under the Interstate Bank Act, a bank may merge beginning on June 1, 1997, with
a bank in another state so long as the transaction does not involve a bank in a
home state which has enacted a law after the date of enactment of the Interstate
Banking Act and before June 1, 1997, that applies equally to all out of state
banks and expressly prohibits such interstate merger transactions. Such a law
would have no effect on merger transactions approved before the effective date
of such state law. States may also elect to permit merger transactions before
June 1, 1997.
The Interstate Banking Act authorizes interstate mergers involving the
acquisition of a branch of a bank without the acquisition of the bank only if
state law permits an out of state acquiror to acquire a branch without acquiring
the bank. State minimum age laws for banks to be acquired will be preserved
unless state law provides for a minimum age period of more than five years.
After consummation of any interstate merger transaction, a resulting bank may
establish or operate additional branches at any location where any bank involved
in the transaction could have established or operated a branch under applicable
federal or state law.
Beginning September 29, 1995, the Board of Governors of the Federal Reserve
System is authorized to approve the acquisition by a well capitalized and
adequately managed bank holding company of a bank that is located in another
state without regard as to whether the acquisition is prohibited under the laws
of any state. Again, state minimum age laws for banks to be acquired will be
preserved unless the state law provides for a minimum age period of more than
five years. The Federal Reserve may not approve an interstate acquisition which
would result in the acquiror's controlling more than 10% of the total amount of
deposits of insured depository institutions in the United States with 30% or
more of the deposits in the home state of the target bank. A state may waive the
30% limit based on criteria that does not discriminate against out of state
institutions. The limitations do not apply to the initial entry into a state by
a bank holding company unless the state has a deposit concentration cap that
applies on a nondiscriminatory basis to in state or out of state bank holding
companies making an initial acquisition. Notwithstanding the foregoing,
anti-trust laws are not affected by the Interstate Banking Act.
The Interstate Bank Act now provides that banks may establish branches across
state lines upon approval of the appropriate federal regulator if the state
"opts-in" by enacting legislation that expressly permits de novo interstate
branching. The establishment of the initial branch in a host state which permits
de novo interstate branching is subject to the same requirements which apply to
the initial acquisition of a bank in a host state, other than the deposit
concentration limits, since the bank would not control any deposits in the host
state at the time of entry. Once a branch has been established by de novo
branching, the bank may establish and acquire additional branches at any
location in the host state in the same manner as any bank in the host state
could have established or acquired under applicable federal or state law.
The scope of regulation and permissible activities of the Company and the Bank
is subject to change by future federal and state legislation.
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8
Recent Regulatory Developments
On September 3, 1996, President Clinton signed the Omnibus Consolidated
Appropriations Act for the fiscal year 1997. Subtitle G of Title Two of that Act
is titled the "Deposit Insurance Funds Act of 1996" (Deposit Insurance Funds
Act), which among other things provides for the recapitalization of Savings
Association Insurance Fund ("SAIF") as of October 1, 1996. To accomplish this
recapitalization, the FDIC imposed a special assessment on each insured
depository institution with deposits assessable under the SAIF so that SAIF
would achieve its designated reserve ratio (DRR) on the first business day of
the first month after the date of the enactment of the Deposit Insurance Funds
Act. Because the legislation was enacted as of September 30, 1996, under the
Deposit Insurance Funds Act, SAIF achieved its DRR and became fully capitalized
on October 1, 1996. For purpose of the SAIF special assessment, the amount of
SAIF-assessable deposits is determined as of March 31, 1995. However, the term
"SAIF-assessable deposits" includes deposits assumed after March 31, 1995 if the
deposits were assumed from an institution that is no longer insured when the
special assessment to recapitalize SAIF is imposed under this section.
Therefore, some institutions will be required to pay the special assessment on
SAIF insured deposits that were assumed after March 31, 1995.
A major part of the plan to recapitalize SAIF involves imposing a one-time
special assessment on SAIF-assessable deposits that may be paid in two
installments under certain conditions. Subject to certain statutory adjustments,
the FDIC has discretion to determine the rates of the assessments after
considering certain factors, including the most recent SAIF balance, data on
insured deposits, and any other factors that the FDIC deems appropriate. This
one-time special assessment is subject to certain exceptions, and the FDIC has
discretion to issue orders exempting weak institutions from paying this special
assessment if the exemption will reduce the risk to SAIF. The FDIC prescribed
guidelines for issuing such an exemption within 30 days of enactment of the
Deposit Insurance Funds Act. The Act required FDIC to exempt from the special
assessment (1) institutions that existed on October 1, 1995 and held no SAIF
assessable deposits before January 1, 1993, (2) federal savings banks newly
established in April, 1994 to acquire the deposits of savings institutions in
default that received assistance from the RTC in connection with the
transactions, and (3) an SAIF insured savings association that, before January
1, 1987, was a federal savings bank insured by the FSLIC for the purpose of
acquiring the assets or assuming the liabilities of a national bank in a
transaction consummated after July 1, 1986 and had assets less than $150
million. Exempt institutions generally are required to pay semi-annual
assessments at former rates under the schedule applicable to SAIF fund members
on June 30, 1995, with certain exceptions.
There are three statutory adjustments that the FDIC must consider in setting the
SAIF recpaitalization rates. The first of these relates to Oakar transactions,
which are generally defined to include bank purchases of SAIF-assessable
deposits. Generally, Bank Insurance Fund (BIF) members acquiring SAIF-assessable
deposits in Oakar transactions prior to March 31, 1995 (or after March 31, 1995
if the institution from which the deposits were acquired is no longer insured at
the time the special assessment is imposed), are subject to the SAIF special
assessment but the amount of assessable deposits would, as a general
proposition, be reduced by 20% for purposes of the assessment if certain
conditions are satisfied. The 20% haircut for these BIF members applies for
purposes of the special assessment and for purposes of future semi-annual
assessments on SAIF-assessable deposits that were acquired prior to March 31,
1995. To be eligible for the 20% haircut, a BIF member must satisfy certain
requirements that are based on a suggested attributable deposit amount as of
June 30, 1995.
The second statutory adjustment the FDIC must consider for purposes of computing
this special assessment relates to "converted associations," a term defined by
the Act. An institution meeting one of the Act's definitions of "converted
association" may also reduce by 20% the amount of deposits that are SAIF insured
as of March 31, 1995 (or after March 31, 1995 is subject to the special
assessment because the institution from which the deposits were acquired is no
longer insured at the time the special assessment is imposed). In addition to
"converted associations," Sasser banks - a savings association that converted to
a bank charter prior to SAIF reaching its DRR and as a result the resulting bank
was required to remain an SAIF member - may qualify under this second adjustment
under very limited criteria.
Third, if payment of the special assessment would pose a significant risk that
an insured depository institution or its holding company may default on payments
under debt obligations or preferred stock, the institution may elect to pay the
special assessment under extended terms that would include a supplemental
special assessment.
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9
The SAIF was initially capitalized through the issuance of bond obligations by
the Financing Corporation (FICO), commonly referred to as FICO bonds. The
Deposit Insurance Funds Act also addresses repayment of the interest on those
bonds. Beginning with the semi-annual periods after December 31, 1996,
assessments to pay approximately $8 million in interest on FICO bonds will be
shared among all insured depository institutions, including insured national
banks, instead of only SAIF members. For purposes of the assessments to pay the
interest on the FICO bonds, BIF-assessable deposits will be assessed at a rate
of 20% of the assessment rate applicable to SAIF-assessable deposits until
December 31, 1999. After the earlier of December 31, 1999 or the date the last
savings association ceases to exist, full pro rata sharing of FICO assessments
will begin.
For purposes of paying the interest on the FICO bonds, "BIF-assessable deposits"
means deposits that are subject to assessments under BIF. The term
"SAIF-assessable deposits" means deposits that are assessable under SAIF and
includes any deposits that were assumed after March 31, 1995 if the insured
institution from which the deposits were acquired is not insured when the SAIF
special assessment is imposed.
The Deposit Insurance Funds Act also provides that, as of the date of enactment
and ending on the earlier of December 31, 1999 or the date that the last savings
association ceases to exist, the federal banking agencies must take appropriate
action to prohibit deposit shifting from SAIF to BIF, including enforcement
actions, denial of applications , or imposing exit and interest fees as if the
transaction qualified as a conversion. The legislation requires the office of
the comptroller of the currency, the FDIC, the Federal Reserve Board, and the
Office of Thrift Supervision to take necessary actions to prevent insured
depository institutions and depository institution holding companies from
facilitating or encouraging the shifting of deposits from SAIF-assessable to
BIF-assessable for purpose of evading the assessments imposed on SAIF-assessable
deposits. The FDIC may issue regulations to prevent deposit shifting. It is a
rule of construction, however, that this portion of the Deposit Insurance Funds
Act does not prohibit an institution from engaging in conduct or activity that
is part of the ordinary course of business and is not directed at depositors of
an insured affiliated institution.
The Deposit Insurance Funds Act also provides for the merger of BIF and SAIF
into Deposit Insurance Fund (DIF) on January 1, 1999, if no insured depository
institutions a "savings association" on that date. If an insured savings
association still exists on January 1, 1999, the Deposit Insurance Funds Act
does not make provision for the merger of the funds to occur on a subsequent
date. For purposes of the IF/SERIF merger, the term "savings association" is
defined as having the same meaning as it does in & 3(b) of the FDIC Act
(12 U.S.C. & 1813 (b)), and thus includes both federal and state savings
associations.
If immediately before the merger , the SAIF reserve ratio exceeds the DRR, the
excess will be placed in DIF's special reserve. While the DIF special reserve
will not be included for purposes of calculating the DIF DRR and the FDIC can
not refund any amount in the special reserve, it can be drawn upon for emergency
purposes if the reserve ratio of the DIF should drop below 50% of its DRR for a
sustained period of time. This portion of the Deposit Insurance also makes
conforming changes to the FDIC Act and other provisions of law effective on
January 1, 1999 if the funds are so merged. If the funds are not merged, the
Deposit Insurance Fund Act establishes an SAIF special reserve as of January 1,
1999 that will consist of the excess in the SAIF over the DRR as of that date.
While the amount in the SAIF special reserve can not be used for refunds from
the SAIF, it would be available for emergency purposes if the reserve ratio of
the SAIF is less than 50% of its DRR for a sustained period of time.
The Deposit Insurance Funds Act also required the FDIC on such basis as it deems
appropriate to refund any amounts in excess of the DRR to BIF members and, after
it is established, to DIF members. There are no similar provisions for refunds
to SIF members. A member can not, however, receive any refund for any
semi-annual assessment period that exceeds the assessment paid during that
period. Institutions that are not "well-capitalized" or that have other
weaknesses are not eligible for refunds. The refund provision becomes effective
as of the end of any semi-annual assessment period beginning after the date of
enactment of the Deposit Insurance Funds Act.
<PAGE>
10
Item 2. Properties.
- --------------------
The executive offices and the Bank facility are located on Ford Avenue in
Richmond Hill, Georgia on approximately 2.8 acres of land. The building, which
is owned by Bryan Bank & Trust and carried as an asset on its balance sheet, is
two stories with approximately 8,700 square feet. The lobby with five teller
windows and several service desks, the executive and lending offices, the loan
department and the vault which contains 700 safe deposit boxes for rental to
Bank customers are located on the ground floor. The accounting operations and a
conference room are located on the second floor. The building also has a
drive-in teller window.
Item 3. Legal Proceedings.
- ---------------------------
There are no pending legal proceedings to which the Company or the Bank is a
party or of which any of their properties are subject; nor are there proceedings
known to the Company to be contemplated by any governmental authority; nor are
there proceedings known to the Company, pending or contemplated, in which any
director, officers or affiliate or any principal security holder of the Company,
or any associate of the foregoing is a party or has an interest adverse to the
Company or the Bank.
Item 4. Submission of Matters to a Vote of Security Holders.
- -------------------------------------------------------------
No matter was submitted during the fourth quarter ended December 31, 1996 to a
vote of security holders of the Company.
PART II
Item 5. Market or Registrant's Common Equity and Related Stockholder Matters.
- ------------------------------------------------------------------------------
The Company has maintained partial records of share prices based upon actual
transactions disclosed. However, these records are incomplete since they do not
reflect prices for all transactions in the common stock of the Company. To the
extent such information has been disclosed to the Company, the share prices of
the common stock of the Company is as follows:
<TABLE>
<CAPTION>
--------------------------------------------------------
Selling Price
---------------------------
Year High Low
<S> <C> <C>
---------------------------------------------------------
1996:
First quarter $ 20 $ 18
---------------------------------------------------------
Second quarter n/a n/a
----------------------------------------------------------
Third quarter n/a n/a
----------------------------------------------------------
Fourth quarter $ 20 $ 20
----------------------------------------------------------
1995:
First quarter $ 15 $ 15
----------------------------------------------------------
Second quarter n/a n/a
----------------------------------------------------------
Third quarter n/a n/a
----------------------------------------------------------
Fourth quarter n/a n/a
----------------------------------------------------------
</TABLE>
<PAGE>
11
During the period covered by this report and to date, there has been no
established public trading market for the Company's common stock.
As of March 5, 1997, the approximate number of holders of record of the
Company's common stock was 428.
The Company has paid cash dividends on an annual basis since 1994. In the second
quarters of 1996 and 1995, the Company paid cash dividends totaling $.70 and
$.60 per share, respectively. The Company expects to continue paying annual
dividends, although there is no assurance as to future dividends because they
will depend on the future earnings, capital requirements, financial condition
and other factors considered relevant by the Board of Directors of the Company.
The Company's ability to pay dividends will depend entirely on the amount of
dividends paid by the Bank and any other subsequently acquired entities. The
Bank is, and such other entities may be, subject to regulatory restrictions on
the payment of dividends. The Bank is subject to restrictions on the payment of
dividends under Georgia law and Georgia Banking Department regulations. Pursuant
to regulations adopted by the Georgia Banking Department, a bank needs the
approval of the Georgia Banking Department to pay cash dividends if at the time
of such payment (i) total classified assets exceed 80% of the bank's equity
capital (which included the aggregate par value of all common stock, paid in
surplus, retained earnings, capital reserves and reserves for loan losses), or
(ii) the aggregate amount of dividends to be paid or anticipated to be paid
during the calendar year exceeds 50% of the net after-tax profits of the bank
for the previous calendar year, or (iii) the ratio of equity capital (as defined
above) to adjusted total assets is less than six percent (6%). The Georgia
Business Corporation Code permits payment of dividends to shareholders in money,
indebtedness or other property unless, after giving effect to such distribution,
the corporation would not be able to pay its debts as they became due in the
usual course of business or the corporation's total assets would be less than
the sum of its total liabilities plus the amount that would be needed if the
corporation were to be dissolved at the time of distribution to satisfy the
preferential rights upon dissolution of shareholders whose preferential rights
are superior to those receiving the distribution.
Item 6. Management's Discussion and Analysis of Financial Condition and
- -------------------------------------------------------------------------
Results of Operations.
----------------------
The following analysis reviews the important factors affecting the financial
condition and results of operations of Bryan Bancorp (the "Company"). The
Company owns all of the outstanding stock of Bryan Bank and Trust (the "Bank").
The financial position, results of operations, and the cash flows of the Company
are primarily related to the Bank. This review should be read in conjunction
with the consolidated financial statements and related notes.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The primary functions of asset/liability management are to assure adequate
liquidity and maintain an appropriate balance between interest-sensitive earning
assets and interest-bearing liabilities. The goal of liquidity management is to
ensure the availability of adequate funds to meet the loan demand and the
deposit withdrawal needs of the Company's customers. This is achieved through
maintaining a combination of sufficient liquid assets and unused capacity to
purchase funds in the money markets. Interest rate sensitivity management seeks
to avoid fluctuating net interest margins and to enhance consistent growth of
net interest income through periods of changing interest rates.
The Company meets most of its daily liquidity needs through the management of
cash and federal funds sold. The Company continues to be in a liquid position
with approximately $5,500,000 invested in federal funds sold and approximately
$2,300,000 in cash and due from banks at December 31, 1996. The Company's cash
and cash equivalents plus Federal funds sold increased by approximately
$2,900,000 in 1996. The primary source of this increase was approximately
$1,000,000 generated from operating activities and approximately $9,100,000 in
deposit growth in 1996. The Company also received short-term advances from the
Federal Home Loan Bank at various times during the year which were used in
funding the continued demand for loans which increased approximately $5,400,000
in 1996.
<PAGE>
12
In addition to the Company's credit line with the Federal Home Loan Bank which
allows advances up to seventy-five percent of the book value of one-to-four
family first mortgage loans. The Company also has the ability on a short-term
basis to purchase funds from other financial institutions. Presently, the
Company has federal funds line of credit arrangements with other financial
institutions aggregating $3,000,000.
There are no trends, demands, commitments, events or uncertainties that should
result in or are reasonably likely to result in the Company's liquidity
increasing or decreasing in any material way.
Interest rate sensitivity varies with the different types of interest-earning
assets and interest-bearing liabilities. Overnight federal funds on which rates
change daily and loans which are tied to the prime rate differ considerably from
long-term investment securities and fixed-rate loans. Similarly, time deposits
over $100,000 or more sensitive than regular savings accounts. The shorter-term
interest rate sensitivities are key to measuring the interest sensitivity gap.
Management monitors the Company's asset and liability positions in order to
maintain a balance between rate-sensitive assets and rate-sensitive liabilities
and at the same time maintain sufficient liquid assets to meet expected customer
needs for loans and for withdrawals of deposits.
The following table shows the interest sensitivity gaps for four different time
intervals as of December 31, 1996:
<TABLE>
<CAPTION>
Term to Repricing on Maturity
(in thousands)
-------------------------------------------------------------------------
0-90 91-365 One-Five Over Five
days days Years Years Total
------------ ------------ ------------ ------------ ------------
Interest earning assets:
<S> <C> <C> <C> <C> <C>
Federal Funds Sold .......................... $ 5,530,000 $ 5,530,000
Available for sale securities ............... 505,941 $ 1,639,347 $ 3,189,437 5,334,725
Held to maturity securities ................. 156,200 $ 75,000 718,026 2,244,974 3,194,200
Loans, net .................................. 6,704,617 14,272,834 20,420,045 407,943 41,805,439
------------ ------------ ------------ ------------ ------------
Total interest earning assets ............... 12,896,758 14,347,834 22,777,418 5,842,354 55,864,364
------------ ------------ ------------ ------------ ------------
Interest bearing liabilities:
NOW deposits ................................ 9,335,919 9,335,919
Money market deposits ....................... 1,787,254 1,787,254
Savings deposits ............................ 6,719,504 6,719,504
Time deposits ............................... 7,896,225 13,986,417 3,254,390 25,137,032
short-term borrowings ....................... 433,195 433,195
------------ ------------ ------------ ------------ ------------
Total interest bearing liabilities 26,172,097 13,986,417 3,254,390 43,412,904
------------ ------------ ------------ ------------ ------------
Interest Rate Sensitivity Gap ............... $(13,275,339) $ 361,417 $ 19,523,028 $ 5,842,354 $ 12,451,460
============ ============ ============ ============ ============
</TABLE>
As indicated in the above table, the first three months reflect a negative
cumulative gap position. A negative gap position indicates that the Company's
rate sensitive liabilities will reprice faster than its rate sensitive assets.
While the Company's rate sensitive liabilities reprice more quickly than the
rate sensitive assets during the first three months, this position reverses
during the remainder of the first year to a positive gap position. The
$19,523,028 excess of interest-earning assets over interest-bearing liabilities
for the one-to-five year period is primarily related to the longer maturities of
loans over relative to deposits.
The interest rate sensitivity table presumes that all loans and securities will
perform according to their contractual maturities when, in reality, actual loan
terms are much shorter than the original terms and in many cases securities are
subject to early redemption. In addition, the table does not necessarily
indicate the impact of general interest rate movements on net interest margin
since the repricing categories of assets and liabilities is subject to
competitive pressures and customers needs.
<PAGE>
13
CAPITAL RESOURCES
The Company continues to maintain a satisfactory level of capital which exceeds
regulatory requirements and is available to support future growth. The Company's
level of capital can be measured by its average equity to average assets ratio
at December 31, 1996 and 1995 of 11.84% and 12.16%, respectively.
Shareholders' equity increased $396,497 during 1996, an increase in book value
from $12.33 at December 31, 1995 to $13.42. The Company recorded net earnings
for 1996 of $1,021,323 and paid cash dividends of $.70 per share totaling
$354,591. The Company also purchased 12,600 shares of treasury stock during 1996
at a cost of $250,800
The Company and the Bank are subject to various regulatory capital requirements
administered by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possible additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Company's financial statements. Under capital adequacy
guidelines and the regulatory framework for prompt corrective action, the Bank
must meet specific capital guidelines that involve quantitative measures of the
Company's assets, liabilities, and certain off-balance sheet items as calculated
under regulatory accounting practices. The Company's capital amounts and the
classification are also subject to qualitative judgments by the regulators about
components, risk weightings, and other factors. Quantitative measures
established by regulation to ensure capital adequacy require the Company and the
Bank to maintain minimum amounts and ratios of Tier 1 capital (as defined in the
regulations) to total average assets (as defined) and minimum ratios of Tier 1
and total capital (as defined) to risk-weighted assets (as defined). Management
believes, as of December 31, 1996, that the Company and the Bank meet all
capital adequacy requirements to which it is subject.
Management is not aware of any required regulatory changes or any recommendation
by any regulatory authority which will have a material effect on the Company's
liquidity, capital, or results of operations.
RESULTS OF OPERATIONS
The following discussion and analysis summarizes the more significant factors
affecting operations for 1996 compared to 1995:
Net Interest Income
The Company's results of operations are determined by its ability to effectively
manage interest income and expense, to minimize loan and investment losses, to
generate noninterest income and to control noninterest expense. Since interest
rates are determined by market forces and economic conditions beyond the control
of management. The Company's ability to generate net interest income is
dependent upon its ability to obtain an adequate net interest spread between the
rate paid on interest bearing liabilities and the rate earned on interest
earning assets.
Net interest income was $2,611,420 in 1996, representing an increase of $256,280
or 11% as compared to 1995. The average yield on interest-earning assets was
9.01% in 1996 compared to 9.11% in 1995 and the average rate paid on
interest-bearing liabilities was 4.81% in 1996 compared to 4.86% in 1995. The
Company's net interest margin (net interest income divided by average
interest-bearing assets) equaled 5.20% in 1996 and 1995. The current year
increase in net interest income resulted primarily from volume increase in the
loan portfolio.
Noninterest Income
Noninterest income increased $138,449 or 19.49% in 1996 over 1995. This increase
is primarily attributable to increases in service charges on deposit accounts
which was the result of deposit growth and rate changes fees.
Noninterest Expense
Noninterest expense increased $232,908 or 14.49% in 1996 over 1995. Salaries and
employee benefits was the largest component of non-interest expense and
increased $204,938 in 1996 over 1995. The increase in salaries and employee
benefits was due primarily to the growth in the operations of the Bank and the
need to add additional employees as well as normal salary increases.
<PAGE>
14
Net noninterest expense (defined as noninterest expense less noninterest income)
as a percentage of average assets was 1.8% in 1996 and 1995. The efficiency
ratio (noninterest expense divided by the sum of net interest income after
provision for loan losses and non-interest income) was 55% in 1996 as compared
to 54% in 1995. Management will continue to focus on improving the non-interest
fee income of the Company as it closely monitors operating expenses.
Income Taxes
The provision for income taxes was $508,000 in 1996 and $456,000 in 1995
representing an effective tax rate of approximately 33% for 1996 and 1995.
Impact of New Accounting Standards
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards (SFAS) No 121 "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to Be Disposed Of". The adoption of this statement had no
impact on the results of operations of the Company for the year ended December
31, 1996.
In October 1995, the Financial Standards Board issued Statement of Financial
Accounting Standards (SFAS) No 123, "Accounting for Stock-Based Compensation",
which provides an alternative to APB Opinion No. 25, "Accounting for Stock
Issued to Employees", in accounting for stock-based compensation issued to
employees. The statement allows for a fair value based method of accounting for
employee stock options and similar equity instruments. However, for companies
that continue to account for stock-based compensation arrangements under Opinion
No. 25, Statement No. 125 requires disclosure of the pro forma effect on net
income and earnings per share of its fair value accounting for those
arrangements. These disclosure requirements are effective for fiscal years
beginning after December 15, 1995, or upon initial adoption of the statement, if
earlier. The Company continues to evaluate the provisions of Statement No. 123
and has not determined whether it will adopt the recognition and measurement
provisions of that Statement.
In June 1996, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities", which
requires an entity, after a transfer of financial assets that meets the criteria
to be accounted for as a sale, to recognize the financial and servicing assets
it controls and the liabilities it has incurred and to derecognize financial
assets when control has surrendered. This standard is effective for transfers
and servicing of financial assets and extinguishments of liabilities occurring
after December 31, 1996, except that the standard will be effective for
transfers of financial assets and transactions related to repurchase agreement,
dollar rolls, securities lending and the like, occurring after December 31,
1997. The adoption of this statement is not expected to have a material effect
on the Company's financial position or results of operations.
<PAGE>
15
DISTRIBUTION OF ASSETS, LIABILITIES, AND SHAREHOLDERS' EQUITY; INTEREST RATES
AND INTEREST DIFFERENTIAL
The following tables set forth selected statistical information and should be
read in conjunction with the consolidated financial statements of Bryan Bancorp
of Georgia, Inc. (the "Company") and subsidiary (the "Bank").
Table 1 - Average Consolidated Balance Sheets
The following table is a presentation of the average consolidated balance
sheets of the Company and includes all major categories of interest-earning
assets and interest-bearing liabilities:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Interest-bearing deposits ................... $ 171,913 $ 222,203
Investment securities available for sale .... 5,309,840 6,059,371
Investment securities held to maturity ...... 3,006,483 2,913,562
Federal funds sold .......................... 2,678,352 814,358
Loans, net .................................. 39,081,731 35,282,784
------------ ------------
Total interest-earning assets ............. 50,248,319 45,292,278
Cash and due from banks ..................... 2,476,436 2,625,972
Other assets ................................ 1,927,564 1,516,624
------------ ------------
Total assets ............................. $ 54,652,319 $ 49,434,874
============ ============
LIABILITIES
NOW deposits ................................ $ 9,291,178 $ 8,561,434
Money market deposits ....................... 1,690,102 1,402,700
Savings deposits ............................ 6,945,750 7,389,304
Time deposits ............................... 21,465,200 17,453,221
Short-term borrowings ....................... 441,153 1,685,981
------------ ------------
Total interest-earning liabilities ........ 39,833,383 36,492,640
Non-interest bearing deposits ............... 7,839,227 6,534,999
Other liabilities ........................... 508,553 395,331
------------ ------------
Total liabilities ........................ 48,181,163 43,422,970
------------ ------------
SHAREHOLDERS' EQUITY
Common stock ................................ 521,758 521,758
Additional paid-in capital .................. 4,869,485 4,869,485
Retained earnings ........................... 1,321,694 678,461
Treasury stock .............................. (241,781) (57,800)
------------ ------------
Total shareholders' equity ............... 6,471,156 6,011,904
------------ ------------
Total liabilities and shareholders' equity $ 54,652,319 $ 49,434,874
============ ============
</TABLE>
<PAGE>
16
Table 2 - Net Interest Earnings
The following table is an analysis of the net interest earnings of the
Company with respect to each major category of interest-earning assets
and interest-bearing liabilities:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,1996:
---------------------------------------------
Average Interest Average
Amount Earned Yield
----------- ----------- -----------
Assets
<S> <C> <C> <C>
Interest-bearing deposits .............. $ 171,913 $ 9,581 5.57%
Investment securities available for sale 5,309,840 323,735 6.10%
Investment securities held to maturity . 3,006,483 153,475 5.10%
Federal funds sold ..................... 2,678,352 141,655 5.29%
Loans, net ............................. 39,081,731 3,898,485 9.98%
----------- ---------
Total earning assets ................ 50,248,319 4,526,931 9.01%
=========== ---------
Average Interest Average
Amount Paid Rate Paid
----------- ----------- -----------
Liabilities
NOW deposits ........................ 9,291,178 347,055 3.74%
Money market deposits ............... 1,690,102 64,286 3.80%
Savings deposits .................... 6,945,750 243,010 3.50%
Time deposits ....................... 21,465,200 1,233,742 5.75%
Short-term borrowings ............... 441,153 27,418 6.22%
----------- -----------
Total interest bearing liabilities $39,833,383 1,915,511 4.81%
=========== -----------
Net interest income ................. $ 2,611,420
===========
Net yield on interest earning assets 5.20%
===========
YEAR ENDED DECEMBER 31,1995:
---------------------------------------------
Average Interest Average
Amount Earned Yield
----------- ----------- -----------
Assets
Interest-bearing deposits .............. $ 222,203 $ 12,132 5.46%
Investment securities available for sale 6,059,371 364,153 6.01%
Investment securities held to maturity . 2,913,562 148,033 5.08%
Federal funds sold ..................... 814,358 46,699 5.73%
Loans, net ............................. 35,282,784 3,556,859 10.08%
----------- -----------
Total earning assets ................. 45,292,278 4,127,876 9.11%
=========== -----------
Average Interest Average
Amount Earned Yield
----------- ----------- -----------
Liabilities
NOW deposits ........................ 8,561,434 333,656 3.90%
Money market deposits ............... 1,402,700 53,199 3.79%
Savings deposits .................... 7,389,304 258,553 3.50%
Time deposits ....................... 17,453,221 1,000,487 5.73%
Short-term borrowings ............... 1,685,981 126,841 7.52%
----------- -----------
Total interest bearing liabilities 36,492,640 1,772,736 4.86%
=========== -----------
Net interest income ................. $ 2,355,140
===========
Net yield on interest earning assets 5.20%
===========
<FN>
Includes impaired loans of $56,000 and $32,000 during the years
ended December 31, 1996 and 1995, respectively.
** No loan fees or loan service fees are included in interest
earned on net loans.
</FN>
</TABLE>
<PAGE>
17
Table 3 - Rate/Volume Analysis of Net Interest Income
The effect of changes in average balances (volume) and rates on interest
income, interest expense, and net interest income, for the periods
indicated, is shown below. The effect of a change in average balance has
been determined by applying the average rate in the earlier period to the
change in average balance in the later period, as compared with the earlier
period. The effect of a change in the average rate paid has been determined
by applying the average balance in the earlier period to the change in the
average rate paid in the later period, as compared with the earlier period.
Changes resulting from average balance/rate variances are included in
changes resulting from volume.
<TABLE>
<CAPTION>
December 31, 1996
Compared to 1995
Increase (Decrease) Due to
-----------------------------------
Volume Rate Change
--------- --------- ---------
<S> <C> <C> <C>
Interest earned on:
Interest-bearing deposits .............. $ (2,801) $ 250 $ (2,551)
Investment securities available for sale (45,695) 5,277 (40,418)
Investment securities held to maturity . 4,743 699 5,442
Federal funds sold ..................... 98,588 (3,632) 94,956
Loans, net ............................. 378,955 (37,329) 341,626
--------- --------- ---------
Total interest income ............... 433,790 (34,735) 399,055
--------- --------- ---------
Interest paid on:
Now deposits ................ 27,268 (13,869) 13,399
Money market deposits ....... 10,942 145 11,087
Savings deposits ............ (15,543) (15,543)
Time deposits ............... 230,462 2,793 233,255
Short-term borrowings ....... (77,371) (22,052) (99,423)
--------- --------- ---------
Total interest expense ... 175,758 (32,983) 142,775
--------- --------- ---------
Change in net interest income $ 258,032 $ (1,752) $ 256,280
========= ========= =========
December 31, 1995
Compared to 1994
Increase (Decrease) Due to
-----------------------------------
Volume Rate Change
--------- --------- ---------
Interest earned on:
Interest-bearing deposits $ (88,627) $ 24,063 $ (64,564)
Investment securities available for sale (26,425) 40,300 13,875
Investment securities held to maturity 14,650 3,938 18,588
Federal funds sold (10,319) 16,208 5,889
Loans, net 721,863 310,132 1,031,995
--------- --------- ---------
Total interest income 611,142 394,641 1,005,784
--------- --------- ---------
Interest paid on:
Now deposits ................ (9,219) 30,495 21,276
Money market deposits ....... (43) 12,511 12,468
Savings deposits ............ (79,202) (79,202)
Time deposits ............... 310,228 142,507 452,735
Short-term borrowings ....... 109,959 6,158 116,117
--------- --------- ---------
Total interest expense ... 331,723 191,671 523,394
--------- --------- ---------
Change in net interest income $ 279,419 $ 202,970 $ 482,390
========= ========= =========
</TABLE>
<PAGE>
18
INVESTMENTS
As of December 31, 1996 investment securities comprised approximately 14% of the
Company's assets and loans comprised approximately 70% of the assets. In
addition, the Bank has entered into Federal Funds transactions with its
principal correspondent banks, and acts as a net seller of such funds. The sale
of Federal Funds amounts to a short-time loan from the Bank to another bank.
Investment securities available for sale (carried at estimated fair value) and
held to maturity (carried at amortized cost) at December 31, 1996 and 1995 are
present in the following table:
<TABLE>
<CAPTION>
Available For Sale securities
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
December 31, 1996:
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Goverment agencies $1,399,708 $ 60 $ 1,361 $1,398,407
Mortgage-backed securities 3,928,861 20,054 64,106 3,884,809
---------- ---------- ---------- ----------
Total debt securities .... 5,328,569 20,114 65,467 5,283,216
Equity securities ........ 6,156 6,156
---------- ---------- ---------- ----------
Total ................... $5,334,725 $ 20,114 $ 65,467 $5,289,372
========== ========== ========== ==========
December 31, 1995:
U.S. Treasury and
U.S. Government agencies $1,698,753 $ 5,877 $ 16,316 $1,688,313
Mortgage-backed securities 4,015,599 48,212 50,735 4,013,077
---------- ---------- ---------- ----------
Total debt securities .... 5,714,352 54,089 67,051 5,701,390
Equity securities ........ 5,440 5,440
---------- ---------- ---------- ----------
Total .................... $5,719,792 $ 54,089 $ 67,051 $5,706,830
========== ========== ========== ==========
Held To Maturity
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ---------- ---------- ----------
December 31, 1996:
State and political subdivisions $3,038,000 $ 136,335 $ 215 $3,174,120
Other securities ............... 156,200 156,200
----------- ---------- ---------- ----------
Total .......................... $3,194,200 $ 136,335 $ 215 $3,330,320
========== ========== ========== ==========
December 31, 1995:
State and political subdivisions $2,919,777 $ 86,112 $ 1,725 $3,004,164
Other securities ............... 139,300 139,300
---------- ---------- ---------- ----------
Total .......................... $3,059,077 $ 86,112 $ 1,725 $3,143,464
========== ========== ========== ==========
</TABLE>
<PAGE>
19
The following table sets forth the maturities and the weighted average
yield of each type of investment securities on an amortized cost basis at
December 31, 1996.
<TABLE>
<CAPTION>
After one After one
year but year but
Within within within After
one year five years ten years ten years Total
---------- ---------- ---------- ---------- ----------
Amount:
<S> <C> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government Agencies $ 499,785 $ 399,923 $ 500,000 $1,399,708
Mortgage-backed securities 1,239,424 504,477 $2,184,960 3,928,861
State and municipal ...... 75,000 718,026 1,646,060 598,914 3,038,000
---------- ---------- ---------- ---------- ----------
$ 574,785 $2,357,373 $2,650,537 $2,783,874 8,366,569
========== ========== ========== ========== ==========
Other securities ......... 162,356
----------
$8,528,925
Weighted average yield:
U.S. Treasury and
U.S. Government Agencies 4.24% 5.30% 8.00%
Mortgage-backed securities 6.61% 7.57% 5.95%
State and municipal ...... 3.75% 4.96% 5.00% 5.55%
---------- ---------- ---------- ----------
4.17% 5.89% 6.09% 5.86%
========== ========== ========== ==========
</TABLE>
There are no investments in the obligations of any state or municipality
which exceed 10% of the Company's stockholders' equity at December 31,
1996.
Distributions of maturities for mortgage-backed securities is based on
expected final maturities which may be different from contractual terms.
LOAN PORTFOLIO
The Bank engages in a full compliment of lending activities, including
commercial, consumer and real estate loans.
Commercial lending is directed principally towards businesses whose demand for
funds fall within the Bank's legal lending limits and which are potential
deposit customers of the Bank. This category of loans includes loans made to
individual, partnership or corporate borrowers, and obtained for a variety of
business purposes.
The Bank's real estate loans consist of residential and commercial first
mortgage loans, second mortgage financing, and residential construction loans.
This category of loans also includes home equity loans secured by second
mortgages on residences of borrowers for a variety of purposes including home
improvements, education, and other personal expenditures.
The Bank's consumer loans consist primarily of installment loans to individuals
for personal, family and household purposes, including automobile loans to
individuals and pre-approved lines of credit.
<PAGE>
20
The following table present various categories of loans contained in the Bank's
loan portfolio as of December 31, 1996 and 1995 and the total amount of all
loans for such periods:
<TABLE>
<CAPTION>
Amount
----------------------------
Type of Loan 1996 1995
----------------------------------------- ------------ ------------
Domestic:
<S> <C> <C>
Commercial, financial and agricultural $ 4,797,874 $ 5,273,585
Real estate construction ............. 6,935,994 5,315,643
Real estate mortgage ................. 25,921,872 21,522,225
Consumer ............................. 4,604,519 4,767,349
------------ ------------
42,260,259 36,878,802
Allowance for loan losses ............ (454,820) (427,661)
------------ ------------
$ 41,805,439 $ 36,451,141
============ ============
</TABLE>
The following table shows the maturities of certain loan types as of December
31, 1996. Also, provided are the amounts due after one year classified according
to the sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
Due in 1 Due in 1 Due After
Year or Less To 5 Years 5 years Total
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural $ 2,558,572 $ 2,210,408 $ 28,894 $ 4,797,874
Real estate construction ............. 4,798,925 2,131,943 5,126 6,935,994
------------ ----------- ----------- -----------
Total .............................. $ 7,357,497 $ 4,342,351 $ 34,020 $11,733,868
============ =========== =========== ===========
Loans due after 1 year with predetermined interest rates $ 828,755 $ 828,755
Loans due after 1 year with floating rates 3,513,596 $ 34,020 3,547,616
----------- ----------- -----------
$ 4,342,351 $ 34,020 $ 4,376,371
=========== =========== ===========
</TABLE>
Accrual of interest is discontinued on a loan when management of the Bank
determines, upon consideration of economic and business factors affecting
collection efforts, that collection of interest is doubtful.
Impaired loans totaled $56,000 and $32,000 as of December 31, 1996 and 1995,
respectively.
Interest income which would have been recorded on impaired loans had the loans
been current in accordance with their original terms and had been outstanding
throughout the period or since origination and the interest income actually
recorded was insignificant.
Allowance for Loan Losses
In considering the adequacy of allowance for possible loan losses, it is
management's view that commercial loans generally have greater risk than other
categories of loans in the loan portfolio. However, the great majority of these
commercial loans at December 31, 1996 and 1995 were made on a secured basis,
such collateral consisting primarily of equipment. Management believes that the
secured condition of the preponderant portion of its commercial loan portfolio
greatly reduces any risk of loss inherently present in commercial loans.
<PAGE>
21
The Company's consumer loan portfolio is also well secured. At December 31, 1996
and 1995, the majority of the Company's consumer loans were secured by
collateral primarily consisting of automobiles, boats, and other personal
property. Management believes that these loans involve less risk than other
categories of loans.
The Company's Board of Directors monitors the loan portfolio monthly to enable
it to evaluate the adequacy of the allowance for loan losses. The loans are
rated and allowance established based on the assigned rating. The provision for
loan losses charged to operating expenses is based on this established
allowance. Factors considered by the Board in rating the loans include
delinquent loans, underlying collateral value, payment history, and local and
general economic conditions affecting collectibility.
SUMMARY OF LOAN LOSS EXPERIENCE
An analysis of the Bank's loan loss experience is furnished in the following
table for the years ended December 31, 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Balance at beginning of year ........................... $ 427,662 $ 353,009
--------- ---------
Charge-offs:
Domestic -
Commercial, financial and agricultrual ............ $ (18,815)
Real estate construction
Real estate mortgage .............................. (2,160)
Consumer .......................................... (70,844) (14,020)
--------- ---------
Total charge-offs .............................. (89,659) (16,180)
--------- ---------
Recoveries:
Domestic -
Commercial, financial and agricultural
Real estate construction
Real estate mortgage .............................. 2,160
Consumer .......................................... 24,657 5,833
--------- ---------
Total recoveries ............................... 26,817 5,833
--------- ---------
Net (charge-offs) recoveries ........................... (62,842) (10,347)
--------- ---------
Additions charged to operations ........................ 90,000 85,000
--------- ---------
Balance at end of year ................................. $ 454,820 $ 427,662
========= =========
Ratio of net charge-offs (recoveries) during the period
to average loans outstanding during the period ......... 0.16% 0.03%
========= =========
</TABLE>
<PAGE>
22
The Company's allocation of the allowance for loan losses according to the
amount deemed to be reasonably necessary to absorb potential losses within
each loan category and the percent of loans in each category to total loans
is presented in the following tables:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
-------- --------
Allocation of Allowance for Loan Losses
by Loan Type
----------------------------------------
Amount Amount
-------- --------
<S> <C> <C>
Commercial, financial and agricultural $ 54,578 $ 58,628
Real estate - construction ........... 72,772 64,054
Real estate - mortgage ............... 277,440 225,074
Consumer ............................. 50,030 79,906
-------- --------
$454,820 $427,662
======== ========
Percent Percent
-------- --------
Loans Types as a Percentage of Total Loans
------------------------------------------------
Commercial, financial and agricultural 12% 14%
Real estate - construction ........... 16% 15%
Real estate - mortgage ............... 61% 58%
Consumer ............................. 11% 13%
-------- --------
100% 100%
======== ========
</TABLE>
DEPOSITS
The Bank offers a full range of interest-bearing and non-interest bearing
deposit amounts, including commercial and retail checking accounts, negotiable
order of withdrawal ("NOW") accounts, super NOW accounts, public funds accounts,
money market accounts with limited transactions and a variable interest rate,
individual retirement accounts, regular interest-bearing savings account, and
certificates of deposit with fixed and variable rates and a range of maturity
date options. The sources of deposits are residents, business, and employees of
business within the Bank's market area, obtained through the personal
solicitation of the Bank's officers and directors, direct mail solicitation, and
advertisements published in the local media. The Bank pays competitive interest
rates on time and savings deposits up to the maximum permitted by law or
regulation. In addition, the Bank has implemented a competitive service charge
fee schedule, covering such matters as maintenance fees on checking accounts,
per item processing fees on checking accounts, returned check charges and the
like.
<PAGE>
23
The following table presents, for the periods indicated, the average amount of
and average rate paid on each of the following deposit categories:
<TABLE>
<CAPTION>
Year Ended December 31, 1996
------------------------------
Average Average
Amount Rate Paid
----------- ---------
Deposit Category
<S> <C> <C>
Non-interest bearing deposits $ 7,839,227 n/a
NOW deposits ............... 9,291,178 3.74%
Money market deposits ....... 1,690,102 3.80%
Savings deposits ............ 6,945,750 3.50%
Time deposits ............... 21,465,200 5.75%
Year Ended December 31, 1995
-----------------------------
Average Average
Amount Rate Paid
----------- ---------
Deposit Category
Non-interest bearing deposits $ 6,534,999 n/a
Now deposits ............... 8,561,434 3.90%
Money market deposits ....... 1,402,700 3.79%
Savings deposits ............ 7,389,304 3.50%
Time deposits ............... 17,453,221 5.73%
</TABLE>
The following is a summary of the remaining maturities of time certificates of
deposit of $100,000 or more outstanding at December 31, 1996:
<TABLE>
<CAPTION>
Certificates
of Deposit
------------
<S> <C>
Three months or less ............... $2,767,094
Over three months through six months 1,742,324
Over six months through one year ... 3,168,104
Over one year ...................... 1,286,016
----------
$8,963,538
==========
</TABLE>
Return on Equity and Assets
Returns on average consolidated assets and average consolidated equity for the
periods indicated are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Return on average assets ............. 1.87% 1.85%
Return on average equity ............. 15.78% 15.24%
Average equity to average assets ratio 11.84% 12.16%
Dividend payout ratio ................ -- --
</TABLE>
<PAGE>
24
Item 7. Financial Statements and Supplementary Data.
- -----------------------------------------------------
The response to this Item is submitted in a separate section of this report
commencing on page 28.
Item 8. Changes and Disagreements with Accountants on Accounting and Financial
- -------------------------------------------------------------------------------
Disclosures.
------------
There are no changes in or disagreements with accountants on accounting and
financial disclosures.
PART III
Item 9. Directors and Executive Officers of the Registrant.
- ------------------------------------------------------------
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
Name Position with Company
- --------------------------------------------------------------------------
<S> <C>
E. James Burnsed * Class I Director,
President and
Chief Executive Officer
J. Carl Cox, Jr. Class I Director
L. Carlton Gill Class I Director,
Vice Chairman of the Board
Thomas A. Lancaster Class II Director
Juanita B. Phillips Class II Director,
James T. Roberts, Sr. Class II Director
James W. Royal Class III Director,
Secretary
Jimmy F. Sommers Class III Director
Charles L. Stafford Class III Director,
Chairman of the Board
<FN>
* Mr. Burnsed is the only executive officer of the Company.
</FN>
</TABLE>
Each of the above persons has been a director of the Company since March 1989.
The Company has a classified Board of Directors whereby one-third of the members
of the Board of Directors are elected each year at the Company's Annual Meeting
of Shareholders. Upon such election, each director will serve for a term of
three years. The Company's officers are appointed by the Board of Directors and
hold office at the will of the Board.
E. James Burnsed, age 57, has served as President and Chief Executive Officer of
the Company since March 1989 and of the Bank since April 1989. From 1958 to
1989, Mr. Burnsed served in various capacities with First Union Bank of Savannah
(formerly Savannah Bank and Trust Company), including most recently, Regional
Consumer Banking Manager.
<PAGE>
25
J. Carl Cox, Jr., age 54, has been the owner, manager and operator of J. C.
Logging, which is engaged in the logging business, for the past 25 years.
L. Carlton Gill, age 56, has been employed by S. A. Allen, Inc. as a procurement
forester since 1964.
Thomas A. Lancaster, age 64, has served as a Vice President - Manager of the
Roofing Department and a Director of Metal Crafts, Inc., Savannah, Georgia since
1969.
Juanita B. Phillips, age 68, has been employed by The New England as an
insurance agent since 1976.
James T. Roberts, Sr., age 52, has been the owner-manager of Roberts GMC Trucks,
Richmond Hill, Georgia since 1969.
James W. Royal, age 48, has served as Secretary of the Company since March 1994.
In addition, he has been President of Royal Brothers, Inc., engaged in the
retail hardware business in the Richmond Hill area under the name of Royal True
Value and Village True Value Hardware Stores, since 1980.
Jimmy F. Sommers, age 52, has been Vice President of the Sommers Company, Inc.,
a convenience store and petroleum distribution business, since 1972.
Charles L. Stafford, age 54, has served as Chairman of the Board of the Company
since March 1989. In addition, he is engaged in the land development/property
management business through a number of companies that he owns or controls.
Since 1975, Mr. Stafford has been President of C. L. Stafford Building
Contractors, Inc.
Robert T. Thompson, Jr., age 56, has been employed by CSX Incorporated, a
railroad company, since 1962. In addition from 1989 to 1990, he served as the
owner of The Hub, a men's clothing store and from 1985 to 1989, he served as the
general manager for Superior Sanitation Service, Inc.
The directors do not hold any other directorships in reporting companies.
There are no family relationships between any director or executive officer and
any other director or executive officer of the Company.
No director or executive officer was involved in any bankruptcy petition filed
by or against any business with which the director or executive was a general
partner or executive officer at the time of the bankruptcy or within two years
prior to that time.
No director or executive officer was involved in any conviction in a criminal
proceeding or subject to a pending criminal proceeding (excluding traffic
violations or other minor offenses).
No director or executive officer was subject to any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any court of competent
jurisdiction permanently or temporarily enjoining, barring, suspending or
otherwise limiting his or her involvement in any type of business, securities or
banking activities.
No director or executive officer was found by a court of competent jurisdiction,
the SEC or the Commodity Futures Trading Commission to have violated a federal
or state securities or commodities law.
<PAGE>
26
Item 10. Executive Compensation.
- -------- -----------------------
The following table provides certain summary information concerning compensation
paid or accrued by the Bank to or on behalf of the Bank's Chief Executive
Officer for the years ended December 31, 1996, 1995, and 1994. No other
executive officer's compensation exceeded $100,000 during 1996, 1995 or 1994.
<TABLE>
<CAPTION>
Name and Long-term
Principal Position Annual Compensation Table Compensation
------------------------- -------------------------------------------- -------------
Other Annual Other
Year Salary Bonus Compensation Stock Options Compensation
<S> <C> <C> <C> <C> <C> <C>
E. James Burnsed
President and Chief 2
Executive Officer 1996 $90,000 $32,700 $5,821
2
1995 $90,000 $41,200 $6,673
1 2
1994 $80,000 $41,200 $21,412 4,000 $5,886
<FN>
1 Represents the value of amounts earned on exercise of warrants and paid during
the fiscal year, calculated by taking the difference between the fair market
value of the 6,571 warrants purchased on the exercise date ($15.00/share) and
the exercise price (11.74/share).
2 Represents the amount earned but not paid from the Company's profit-sharing
plan.
</FN>
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- ------------------------------------------------------------------------
The following table sets forth certain information as of December 31, 1996, with
respect to ownership of the outstanding common stock of the Company by (i) all
persons known to the Company to own beneficially more than 5% of the outstanding
shares of the common stock of the Company, (ii) each director of the Company,
and (iii) all executive officers and directors of the Company as a group.
<TABLE>
<CAPTION>
=================================== =============================== =============================
NAME AND ADDRESS OF BENEFICIAL AMOUNT AND NATURE OF PERCENT OF CLASS
1
OWNER BENEFICIAL OWNER
=================================== =============================== =============================
<S> <C> <C>
E. James Burnsed 2
173 Davis Road 33,599 6.40%
Richmond Hill, GA 31324
=================================== =============================== =============================
J. Carl Cox, Jr. 3
7346 Highway 17 20,015 3.82%
Richmond Hill, GA 31324
=================================== =============================== =============================
L. Carlton Gill 4
P. O. Box 59 35,735 6.81%
Richmond Hill, GA 31324
=================================== =============================== =============================
Thomas A. Lancaster 5
P. O. Box 1448 15,602 2.97%
Richmond Hill, GA 31324
=================================== =============================== =============================
Juanita B. Phillips 6
197 Ogeechee Drive 14,717 2.81%
Richmond Hill, GA 31324
=================================== =============================== =============================
James T. Roberts 7
415 Whitehall Lane 25,962 4.95%
Richmond Hill, GA 31324
=================================== =============================== =============================
James W. Royal 8
P. O. Box 1096 21,263 4.05%
Richmond Hill, GA 31324
=================================== =============================== =============================
Jimmy F. Sommers 9
P. O. Box 556 29,635 5.65%
Richmond Hill, GA 31324
=================================== =============================== =============================
Charles L. Stafford 10
P.O. Box 460 46,196 8.81%
Richmond Hill, GA 31324
=================================== =============================== =============================
Robert T. Thompson, Jr. 11
2369 Fort McAllister Road 21,395 4.08%
Richmond Hill, GA 31324
=================================== =============================== =============================
<PAGE>
27
<FN>
1 Information relating to beneficial ownership by directors is based upon
information furnished by each director using "beneficial Ownership" concepts set
forth in rules promulgated by the Securities and Exchange Commission under
Section 13(d) of the Securities Exchange Act of 1934.
2 Includes 20,000 shares subject to presently exercisable stock options granted
in connection with Mr. Burnsed's Employment Agreement. Of the 33,599 shares
beneficially owned by Mr. Burnsed, 7,256 shares are owned individually, 5,653
shares are in his IRA, 200 shares are owned by his wife individually, and 490
shares are in his wife's IRA.
3 Of the 20,015 shares beneficially owned by Mr. Cox, 19,815 shares are
owned individually and 200 shares are owned by his wife.
4 Of the 35,735 shares beneficially owned by Mr. Gill, 22,265 shares are owned
jointly with his wife, 1,070 shares are in his IRA, 1,200 shares are in his
wife's IRA, and 10,600 shares are owned by the Estate of Louis C. Gill, of which
he is the Executor, and 600 shares are owned by his children.
5 Of the 15,602 shares beneficially owned by Mr. Lancaster, 11,202 shares are
owned individually, 3,300 shares are in his IRA, 700 shares are in his wife's
IRA, and 400 shares are owned by his children.
6 Of the 14,717 shares beneficially owned by Mrs. Phillips, 4,740 shares are
owned individually, 6,277 shares are in her IRA and 3,700 are owned by her
children.
7 Of the 25,962 shares beneficially owned by Mr. Roberts, 20,487 shares are
owned individually, 2,975 shares are in his IRA, 500 shares are owned by his
wife, and 2,000 shares are owned by his children.
8 Of the 21,263 shares beneficially owned by Mr. Royal, 19,263 shares are owned
individually, 1,800 shares are in his IRA, and 200 shares are owned jointly with
his children.
9 Of the 29,635 shares beneficially owned by Mr. Sommers, 28,995 shares are
owned individually and 640 shares are owned jointly with his children.
10 Of the 46,196 shares beneficially owned by Mr. Stafford, 17,700 shares are
owned individually, 2,673 shares are in his IRA, 1,550 shares are owned by his
wife, 1,689 shares are in his wife's IRA, 250 shares are owned by his son, and
22,334 share are owned by C. L. Stafford Profit Sharing Plan.
11 Of the 21,395 shares beneficially owned by Mr. Thompson, 18,009 shares are
owned individually, 1,079 shares are in his IRA, 1,807 shares are in his wife's
IRA and 500 shares are owned by his children.
</FN>
</TABLE>
The Company's common stock beneficially owned by all directors and executive
officers as a group as of March 18, 1997 (10 persons) totaled 264,119 shares
representing 50.35% of the Company's common stock.
The Company knows of no arrangements which may result in a change of control of
the Company.
Item 12. Certain Relationships and Related Transactions.
- ---------------------------------------------------------
The Company's directors, executive officers, and certain business organizations
and individuals associated therewith, have been customers of and have had
banking transactions with Bryan Bank & Trust and are expected to continue such
relationships in the future. Pursuant to such transactions, the Company's
directors and executive officers from time to time have borrowed funds from
Bryan Bank & Trust for various business and personal reasons. These loans were
made in the ordinary course of business, were made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with persons not affiliated with the Company or the
Bank and did not involved more than the normal risk of collectibility or present
other unfavorable features.
<PAGE>
28
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
- -------------------------------------------------------------------------
(a) 1. Financial Statements.
--------------------
The following financial statements and accountant's report have
been filed as item 7 in Part II of this report:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - Years ended December 31,
1996 and 1995
Consolidated Statements of Shareholders' Equity - Years ended
December 31, 1996 and 1995
Consolidated Statements of Cash Flows - Years ended December 31,
1996 and 1995
Notes to Consolidated Financial Statements
2. Financial Statement Schedules.
-----------------------------
Financial statement schedules are omitted as the required information
is inapplicable, or the information is presented in the financial
statements or related notes.
3. Exhibits.
--------
The following exhibits are filed with or incorporated by reference
into this report. The exhibits which are denominated by an asterisk
(*) were previously filed as a part of, and are hereby incorporated
by reference from either (i) a Registration Statement on Form
S-18 under the Securities Act of 1933 for the Registrant,
Registration No. 33-28514-A ("S-18"), (ii) Amendment No. 1 to the
Company's Registration Statement on Form S-18 ("S-18 Amendment") or
(iii) The Annual Report on Form 10-K for the year ended December 31,
1990 ("1990 10-K"). The exhibit number corresponds to the exhibit
number in the referenced document.
Exhibit No. Description of Exhibit
----------- --------------------------------------------------------
*3.1 - Articles of Incorporation dated March 6, 1989 (S-18).
*3.2 - By-Laws adopted March 6, 1989 (S-18).
*22.1 - Subsidiaries of the Registrant (1990 10-K).
(b) Reports on Form 8-K.
-------------------
No reports on Form 8-K were required to be filed for the fourth
quarter of 1996.
<PAGE>
29
INDEPENDENT AUDITOR'S REPORT
The Board of Directors and Shareholders
Bryan Bancorp of Georgia, Inc.
Richmond Hill, Georgia
We have audited the accompanying consolidated balance sheets of Bryan Bancorp of
Georgia, Inc. and subsidiary as of December 31, 1996 and 1995, and the related
consolidated statements of income, shareholders' 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 conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 Bryan Bancorp of
Georgia, Inc. and subsidiary at December 31, 1996 and 1995 and the results of
their operations and their cash flows for the years then ended in conformity
with generally accepted accounting principles.
/s/Tiller, Stewart & Company, LLC
Savannah, Georgia
January 30, 1997
<PAGE>
30
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------ ------------
ASSETS
<S> <C> <C>
Cash and due from banks ........................ $ 2,296,408 $ 2,406,895
Federal funds sold ............................. 5,530,000 2,471,000
Investment securities available for sale ....... 5,289,372 5,706,830
Investment securities held to maturity
(estimated market value of $3,330,320
in 1996 and $3,143,464 in 1995) .............. 3,194,200 3,059,077
Loans .......................................... 42,260,259 36,878,802
Less allowance for loan losses ................. (454,820) (427,662)
------------ ------------
Loans, net ........................... 41,805,439 36,451,140
Interest receivable ............................ 373,089 367,242
Premises and equipment, net .................... 1,456,993 1,088,777
Other assets ................................... 267,409 246,154
------------ ------------
Total assets .............................. $ 60,212,910 $ 51,797,115
============ ============
LIABILITIES
Deposits:
Noninterest-bearing .......................... $ 9,624,367 $ 7,563,837
Interest-bearing ............................. 42,979,709 35,933,211
------------ ------------
Total deposits ............................ 52,604,076 43,497,048
Federal Home Loan Bank advances ................ 380,000 1,300,000
Other borrowed funds ........................... 53,195 49,974
Interest payable ............................... 227,940 220,787
Other liabilities .............................. 177,195 355,299
------------ ------------
Total liabilities ......................... 53,442,406 45,423,108
------------ ------------
SHAREHOLDERS' EQUITY
Common stock - par value $1 per share;
authorized 10,000,000 shares;
issued 521,758 shares ...................... 521,758 521,758
Additional paid-in capital ..................... 4,869,485 4,869,485
Retained earnings .............................. 1,715,073 1,048,341
Net unrealized (loss) on investment
securities available for sale .............. (27,212) (7,777)
------------ ------------
7,079,104 6,431,807
Treasury stock at cost, 17,200 shares in 1996
and 4,600 shares in 1995 .................. (308,600) (57,800)
------------ ------------
Total shareholders' equity ................ 6,770,504 6,374,007
------------ ------------
Total liabilities and shareholders' equity $ 60,212,910 $ 51,797,115
============ ============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
31
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
INTEREST INCOME
<S> <C> <C>
Loans ......................................... $ 3,898,485 $ 3,552,908
Investment securities:
Taxable ................................... 323,735 364,153
Tax-exempt ................................ 153,475 148,033
Federal funds sold ........................... 141,655 46,699
Deposits in other banks ...................... 9,581 16,083
----------- -----------
Total interest income .................... 4,526,931 4,127,876
----------- -----------
INTEREST EXPENSE
Deposits ...................................... 1,888,093 1,645,895
Federal Home Loan Bank advances ............... 22,718 91,045
Other borrowed funds .......................... 4,700 35,796
----------- -----------
Total interest expense ................... 1,915,511 1,772,736
----------- -----------
NET INTEREST INCOME ........................... 2,611,420 2,355,140
PROVISION FOR LOAN LOSSES ..................... 90,000 85,000
----------- -----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ................... 2,521,420 2,270,140
----------- -----------
NONINTEREST INCOME
Service charges on deposit accounts ........... 368,628 303,653
Loan servicing fees ........................... 268,054 262,609
Other service charges and fees ................ 118,247 68,602
Net realized (loss) on sales of available
for sale securities ....................... (80)
Other ......................................... 93,707 75,403
----------- -----------
848,636 710,187
----------- -----------
NONINTEREST EXPENSES
Salaries and employee benefits ................ 1,002,542 797,604
Occupancy ..................................... 99,701 98,011
Equipment and processing expense .............. 129,088 137,183
Other ......................................... 609,402 575,027
----------- -----------
1,840,733 1,607,825
----------- -----------
INCOME BEFORE INCOME TAXES .................... 1,529,323 1,372,502
PROVISION FOR INCOME TAXES .................... 508,000 456,000
----------- -----------
NET INCOME .................................... $ 1,021,323 $ 916,502
=========== ===========
Net income per share .......................... $ 2.01 $ 1.77
=========== ===========
Weighted average number of common shares ...... 507,902 516,961
outstanding ................................. =========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
32
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Net
Unrealized
Gain (Loss)
on Investment
Additional Securities
Common Stock Paid-In Retained Available Treasury
Shares Amount Capital Earnings for Sale Stock Total
----------- ----------- ----------- ----------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1994 ................. $ 521,758 $ 521,758 $ 4,869,485 $ 442,133 $ (291,435) $ (57,800) $ 5,484,141
Net income ................................ 916,502 916,502
Dividends paid - $.60 per share ........... (310,294) (310,294)
Sale of 1,000 shares of treasury stock .... 15,000 15,000
Purchase of 1,000 shares of treasury stock (15,000) (15,000)
Net changes in unrealized gain (loss) on
investment securities available for sale 283,658 283,658
----------- ----------- ----------- ----------- ------------- --------- ------------
BALANCE - DECEMBER 31, 1995 ................. 521,758 521,758 4,869,485 1,048,341 (7,777) (57,800) 6,374,007
Net income ................................ 1,021,323 1,021,323
Dividends paid - $.70 per share ........... (354,591) (354,591)
Purchase of 12,600 shares of treasury stock (250,800) (250,800)
Net changes in unrealized gain (loss) on
investment securities available for sale (19,435) (19,435)
----------- ----------- ----------- ----------- ------------- --------- ------------
BALANCE - DECEMBER 31, 1996 ................. $ 521,758 $ 521,758 $ 4,869,485 $ 1,715,073 $ (27,212) $(308,600) $ 6,770,504
=========== =========== =========== =========== ============= ========= ============
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
33
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income ............................................. $ 1,021,323 $ 916,502
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation ...................................... 107,856 79,941
Amortization and accretion, net ................... 534 (2,466)
Provision for loan losses ......................... 90,000 85,000
Net realized loss on available for sale securities 80
Changes in:
Interest receivable ............................ (5,847) (45,392)
Other assets ................................... (8,299) (77,861)
Interest payable ............................... 7,153 81,262
Other liabilities .............................. (178,104) (25,794)
----------- -----------
Net cash provided by operating activities .. 1,034,616 1,011,272
----------- -----------
INVESTING ACTIVITIES
Net decrease in time deposits in other banks ........... 1,188,000
Net increase in federal funds sold ..................... (3,059,000) (2,330,000)
Proceeds from maturities of investment securities:
Held to maturity securities .......................... 50,000 452,100
Available for sale securities ........................ 881,310 727,656
Proceeds from sales of available for sale securities 300,765
Purchase of investment securities:
Held to maturity securities .......................... (181,900) (495,792)
Available for sale securities ........................ (500,000) (300,957)
Net increase in loans .................................. (5,444,299) (3,971,110)
Real estate acquired through foreclosure ............... (65,500)
Additions to premises and equipment .................... (476,072) (79,672)
----------- -----------
Net cash used for investing activities ..... (8,729,961) (4,574,510)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits ............................... 9,107,028 2,997,797
Federal Home Loan Bank advance proceeds ................ 400,000 5,775,000
Repayment of Federal Home Loan Bank advances ........... (1,320,000) (4,475,000)
Net increase (decrease) in other borrowings ........... 3,221 (63,628)
Dividends paid ......................................... (354,591) (310,294)
Acquisition of treasury stock .......................... (250,800) (15,000)
Sale of treasury stock ................................. 15,000
----------- -----------
Net cash provided by financing activities .. 7,584,858 3,923,875
----------- -----------
Increase (decrease) in cash and cash equivalents ......... (110,487) 360,637
Cash and cash equivalents - beginning .................... 2,406,895 2,046,258
----------- -----------
Cash and cash equivalents - ending ....................... $ 2,296,408 $ 2,406,895
=========== ===========
<FN>
See notes to consolidated financial statements.
</FN>
</TABLE>
<PAGE>
34
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
- --------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Bryan Bancorp of Georgia, Inc. (the "Company")
through its wholly-owned subsidiary, Bryan Bank & Trust (the "Bank"),
provides a full range of banking services to individuals and business
throughout Bryan and surrounding counties.
Basis of Presentation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiary. All intercompany
balances and transactions have been eliminated. The accounting and
reporting policies and practices of the Company conform to generally
accepted accounting principles and to general practice within the banking
industry. The following is a summary of the more significant of such
policies and practices.
Use of Estimates - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for loan losses. The allowance
for loan losses is maintained at a level which, in management's judgment,
is adequate to absorb credit losses inherent in the loan portfolio.
Management's periodic evaluation of the adequacy of the allowance is based
on the Bank's past loss experience, known and inherent risks in the
portfolio, adverse situations that may affect the borrower's ability to
pay, the estimated value of the underlying collateral, current economic
conditions, and other pertinent factors. The allowance for loan losses is
increased by charges to income and recoveries on loans previously charged
off as uncollectible. Decreases in the allowance occur as loans deemed
uncollectible are charged to the allowance.
Investment Securities Available for Sale - Investments available for sale
are carried at market value. The related unrealized gain or loss, net of
tax, is included as a separate component of shareholders' equity. Premiums
and discounts are amortized and accreted using a method which approximates
a level yield. Gains and losses from dispositions are based on the net
proceeds and adjusted carrying amounts of the securities sold, using the
specific identification method.
Investment Securities Held to Maturity - Investment securities held to
maturity are stated at cost, adjusted for amortization of premiums and
accretion of discounts which are recognized as adjustments to interest
income. The Company has the intent and ability to hold these investment
securities to maturity. Premiums and discounts are amortized and accreted
using a method which approximates a level yield. Gains and losses on
dispositions are based on the net proceeds and the adjusted carrying
amounts of the security sold, using the specific identification method.
Loans - Effective January 1, 1995, the Bank adopted Statement of Financial
Accounting Standards No. 114 (as amended by No. 118), "Accounting by
Creditors for Impairment of a Loan." SFAS 114 establishes the accounting by
creditors for impairment of loans by specifying how allowances for credit
losses related to certain loans should be determined. This statement also
addresses the accounting by creditors for certain loans that are
restructured in a troubled debt restructuring. When a loan is impaired, the
amount of the impairment is measured based on the present value of expected
future cash flows discounted at the loan's effective interest rate.
<PAGE>
35
For collateral dependent loans, impairment is measured based on a loan's
observable market price or the fair value of the collateral. The adoption
of these accounting standards did not have a material effect on the
consolidated financial condition and the results of operations of the
company as of the year ended December 31, 1995.
Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or pay-off are reported at their
outstanding principal amounts adjusted for any charge-offs, the allowance
for possible loan losses, and any deferred fees or costs. Interest on loans
is recognized using the simple interest method based on the principal
balance outstanding. Interest accruals including accruals of interest on
impaired loans are discontinued when either principal or interest becomes
90 days past due, or when in management's opinion, after considering
economic and business conditions and collection efforts, that the
borrower's financial condition is such that it is not reasonable to expect
such interest will be collected. Interest income is subsequently recognized
only to the extent cash payments are received.
Loan fees, net of direct origination costs, are deferred and amortized over
the terms of the loans using a method which approximates a level yield.
Premises and Equipment - Property is stated at cost less accumulated
depreciation. Depreciation is computed using the straight-line method over
the estimated useful lives of such assets.
Income Taxes - Provisions for income taxes are based upon amounts reported
in the statements of income (after exclusion of non-taxable income such as
interest on state and municipal securities) and include deferred taxes
based on the differences between financial statement and tax bases of
assets and liabilities using current enacted tax rates. As changes in tax
laws or rates are enacted, deferred tax assets and liabilities are adjusted
through the provision for income taxes.
Net Income Per Share - Net income per share is computed based on the
weighted average number of common and common equivalent shares outstanding
during the year.
Reclassifications - Certain amounts in the 1995 consolidated financial
statements have been reclassified to conform to the 1996 presentation.
Cash and Cash Equivalents - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and amounts due from banks.
2. RESTRICTIONS ON CASH AND DUE FROM BANKS
The Bank is required to maintain certain reserve balances in the form of
vault cash. Such reserve requirements totaled approximately $338,000 and
$241,000 at December 31, 1996 and 1995, respectively
<PAGE>
36
3. SECURITIES
Debt and equity securities have been classified according to management's
intent. The amortized cost, estimated market value and gross unrealized
gains and losses on securities are as follows:
<TABLE>
<CAPTION>
Available For Sale Securities
------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Costs Gains Losses Value
---------- ---------- ---------- ---------
December 31, 1996:
<S> <C> <C> <C> <C>
U.S. Treasury and
U.S. Government agencies $1,399,708 $ 60 $ 1,361 $1,398,407
Mortgage-backed securities 3,928,861 20,054 64,106 3,884,809
---------- ---------- ---------- ----------
Total debt securities ... 5,328,569 20,114 65,467 5,283,216
Equity securities ........ 6,156 6,156
---------- ---------- ---------- ----------
Total ................... $5,334,725 $ 20,114 $ 65,467 $5,289,372
========== ========== ========== ==========
December 31, 1995:
U.S. Treasury and
U.S. Government agencies $1,698,753 $ 5,877 $ 16,316 $1,688,314
Mortgage-backed securities 4,015,599 48,212 50,735 4,013,076
---------- ---------- ---------- ----------
Total debt securities .... 5,714,352 54,089 67,051 5,701,390
Equity securities ........ 5,440 5,440
---------- ---------- ---------- ----------
Total .................... $5,719,792 $ 54,089 $ 67,051 $5,706,830
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
Held To Maturity
-------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Costs Gains Losses Value
---------- ---------- ---------- ----------
December 31, 1996:
<S> <C> <C> <C> <C>
State and political subdivisions $3,038,000 $ 136,335 $ 215 $3,174,120
Other securities ............... 156,200 156,200
---------- ---------- ---------- ----------
Total .......................... $3,194,200 $ 136,335 $ 215 $3,330,320
========== ========== ========== ==========
December 31, 1995:
State and political subdivisions $2,919,777 $ 86,112 $ 1,725 $3,004,164
Other securities ............... 139,300 139,300
---------- ---------- ---------- ----------
Total .......................... $3,059,077 $ 86,112 $ 1,725 $3,143,464
========== ========== ========== ==========
</TABLE>
Other securities reported in held-to-maturity securities at December 31,
1996 and 1995 represents an investment in Federal Home Loan Bank stock
which is not traded on Exchanges and has only redemption capabilities.
There were no sales of investment securities for sale during 1996. Proceeds
from sales of investment securities available for sale during 1995 were
$300,765 and resulted in gross realized losses of $80.
<PAGE>
37
The amortized cost and estimated market value of debt securities at
December 31, 1996, by contractual maturity are as follows:
<TABLE>
<CAPTION>
Available for sale Held to maturity
----------------------- -----------------------
Amortized Market Amortized Market
Cost Value Cost Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due in one year or less .... $ 499,785 $ 499,845 $ 75,000 $ 74,905
Due after one year through
five years ............... 399,923 398,562 718,026 738,605
Due after five years through
ten years ................ 500,000 500,000 1,646,060 1,718,640
Due after ten years ........ 598,914 641,970
Mortgage-backed securities . 3,928,861 3,884,809
---------- ---------- ---------- ----------
$5,328,569 $5,283,216 $3,038,000 $3,174,120
========== ========== ========== ==========
</TABLE>
Securities with a carrying amount of $4,701,114 at December 31, 1996 and
$4,917,622 at December 31, 1995 were pledged to secure deposits of public
funds and short-term obligations due the Federal Reserve Bank.
4. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1996 1995
------------ ------------
<S> <C> <C>
Commercial real estate . $ 17,839,771 $ 14,091,433
Real estate construction 6,971,033 5,344,462
Commercial ............. 4,798,046 5,273,585
Residential real estate 8,123,898 7,465,403
Consumer ............... 4,604,984 4,767,349
------------ ------------
42,337,732 36,942,232
Net deferred loan fees . (77,473) (63,430)
------------ ------------
$ 42,260,259 $ 36,878,802
============ ============
</TABLE>
An analysis of the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Balance, beginning of year $ 427,662 $ 353,009
Provision for loan losses 90,000 85,000
Loans charged off ....... (89,659) (16,180)
Recoveries .............. 26,817 5,833
--------- ---------
Balance, end of year ...... $ 454,820 $ 427,662
========= =========
</TABLE>
<PAGE>
38
Loans having recorded investments of approximately $56,000 at December 31,
1996 and approximately $32,000 at December 31, 1995 have been identified as
impaired in accordance with the provisions of FASB No. 114. The average
recorded investment in such loans during 1996 and 1995 was approximately
$56,700 and $33,000, respectively. The total allowance for possible loan
losses related to these loans was $12,000 and $6,000 at December 31, 1996
and 1995, respectively.
The Company is a party to financial instruments with off-balance-sheet risk
in the normal course of its lending activities to meet the financing needs
of its customers. These financial instruments include commitments to extend
credit and standby letters of credit. The Company's exposure to credit loss
in the event of non-performance by the other party of the financial
instrument for commitments to extend credit and standby letters of credit
is represented by contractual amount of those instruments. The Company uses
the same credit policies in making these commitments as it does for
on-balance-sheet instruments and evaluates each customer's credit
worthiness on a case-by-case basis. At December 31, 1996, the Company had
outstanding loan commitments of approximately $5,693,000 and standby
letters of credit of approximately $194,000. The amount of collateral
obtained, if deemed necessary, for these commitments by the Company, upon
extension of credit, is based on management's credit evaluation of the
customer. Collateral held, if any, varies but may include inventory,
equipment, real estate, or other property. The Bank's loans are primarily
concentrated in its market area of Bryan and Chatham counties of Georgia.
5. PREMISES AND EQUIPMENT
Premises and equipment is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1996 1995
---------- ----------
<S> <C> <C>
Building .................... $ 992,156 $ 973,766
Furniture and equipment ..... 401,452 304,835
Automobiles ................. 40,412 18,012
---------- ----------
1,434,020 1,296,613
Less accumulated depreciation 380,576 309,890
---------- ----------
1,053,444 986,723
Land ........................ 403,549 102,054
---------- ----------
$1,456,993 $1,088,777
========== ==========
</TABLE>
<PAGE>
39
6. INTEREST-BEARING DEPOSITS
Interest-bearing deposits and related interest cost for the years ended
December 31, 1996 and 1995 are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
Deposits Interest Deposits Interest
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NOW ..................... $ 9,335,919 $ 347,055 $ 8,287,706 $ 333,656
Money market ............ 1,787,254 64,286 1,174,751 53,199
Savings ................. 6,719,504 243,010 6,993,368 258,553
Certificates of deposits,
$100,000 or more ..... 8,963,538 380,948 5,806,392 309,872
Other time deposits ..... 16,173,494 852,794 13,670,994 690,615
----------- ----------- ----------- -----------
$42,979,709 $ 1,888,093 $35,933,211 $ 1,645,895
=========== =========== =========== ===========
</TABLE>
At December 31, 1996, scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<CAPTION>
<S> <C>
1997 $21,882,641
1998 1,885,431
1999 693,369
2000 500,808
2001 174,783
-----------
$25,137,032
===========
</TABLE>
7. FEDERAL HOME LOAN BANK ADVANCES
The Bank has an agreement for short-term advances with the Federal Home
Loan Bank of Atlanta. These advances are secured under a blanket floating
lien agreement which provides a security interest in all unencumbered first
mortgage residential loans and by stock in the Federal Home Loan Bank.
Interest on outstanding advances is at variable rates and payable monthly.
The average rate paid on short-term advances from the Federal Home Loan
Bank in 1996 was 6.84%. As of December 31, 1996, Federal Home Loan Bank
advances were collateralized by unencumbered first mortgage residential
loans totaling approximately $6,575,700 and $156,200 of stock in the
Federal Home Loan Bank.
8. OTHER BORROWED FUNDS
Other borrowed funds consist of Short-term borrowings from the Federal
Reserve Bank under the Treasury Tax and Loan Investment Program. This
program permits the Bank to borrow treasury tax and loan funds by executing
an open-ended interest-bearing note to the Federal Reserve Bank. Interest
is payable monthly at one fourth of one percent below Federal Funds
interest rate. The note is secured by mortgage-backed obligations with a
carrying value of approximately $ 682,600 at December 31, 1996.
<PAGE>
40
9. INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Current ........................... $ 510,000 $ 538,000
Deferred .......................... (2,000) (82,000)
--------- ---------
$ 508,000 $ 456,000
========= =========
</TABLE>
The provision for income taxes is less than computed by applying the
statutory federal income tax rate of 34% to income before income taxes as
indicated by the following:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1995
--------- ---------
<S> <C> <C>
Income tax at statutory rate ... $ 520,000 $ 467,000
Increase (decrease) in taxes:
Tax-exempt interest .......... (52,000) (50,000)
State income taxes, net
of federal income tax benefit 38,000 41,000
Other ........................ 2,000 (2,000)
--------- ---------
Provision for income taxes ..... $ 508,000 $ 456,000
========= =========
</TABLE>
The components of net deferred tax assets are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Allowance for loan losses ..... $171,000 $166,500
Deferred loan fees ............ 31,000 25,000
Unrealized loss on investment
securities available for sale 18,141 5,185
Deferred compensation ......... 32,000 37,500
Other ......................... 4,000
-------- --------
Total deferred tax assets ... 256,141 234,185
Deferred tax liabilities:
Accumulated depreciation ...... 78,000 76,000
Other ......................... 10,000
-------- --------
Net deferred tax assets ......... $168,141 $158,185
======== ========
</TABLE>
<PAGE>
41
10. REGULATORY REQUIREMENTS
The approval of the Georgia Department of Banking and Finance is required
if dividends declared by the Bank to the Company in any year will exceed
50% of the net income of the Bank for the previous calendar year. As of
December 31, 1996, the Bank could declare approximately $511,000 of
dividends without prior approval.
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital
requirements can initiate certain mandatory and possible additional
discretionary actions by regulators that, if undertaken, could have a
direct material effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt corrective
action, the Bank must meet specific capital guidelines that involve
quantitative measures of the Bank's assets, liabilities, and certain
off-balance sheet items as calculated under regulatory accounting
practices. The Bank's capital amounts and the classification are also
subject to qualitative judgments by the regulators about components, risk
weightings, and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios (set forth in the
table below) of Tier 1 capital (as defined in the regulations) to total
average assets (as defined) and minimum ratios of Tier 1 and total capital
(as defined) to risk-weighted assets (as defined). Management believes, as
of December 31, 1996, that the Bank meets all capital adequacy requirements
to which it is subject.
As of December 31, 1995, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized the Bank
must maintain minimum total risk-based, Tier I risk-based, and Tier I
leverage ratios as set forth in the table. There are no conditions or
events since that notification that management believes have changed the
institution's category.
<TABLE>
<CAPTION>
To Be Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Provisions
Amount Ratio Amount Ratio Amount Ratio
------------------ ------------------- -----------------------
December 31, 1996:
<S> <C> <C> <C> <C> <C> <C>
Total Capital (to Risk Weighted Assets)
Consolidated ......................... $7,252,536 15.53% $3,735,650 8.00% $4,669,562 10.00%
Bank ................................. $6,917,375 14.81% $3,735,849 8.00% $4,669,812 10.00%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated ......................... $6,797,716 14.56% $1,867,825 4.00% $2,801,737 6.00%
Bank ................................. $6,462,555 13.84% $1,867,925 4.00% $2,801,887 6.00%
Tier 1 Capital (to Average Assets)
Consolidated ......................... $6,797,716 12.44% $2,186,093 4.00% $2,732,616 5.00%
Bank ................................. $6,462,555 11.87% $2,177,771 4.00% $2,722,214 5.00%
December 31, 1995:
Total Capital (to Risk Weighted Assets)
Consolidated ......................... $6,809,446 17.28% $3,151,728 8.00% $3,939,659 10.00%
Bank ................................. $6,316,503 15.74% $3,210,037 8.00% $4,012,547 10.00%
Tier 1 Capital (to Risk Weighted Assets)
Consolidated ......................... $6,381,784 16.20% $1,575,864 4.00% $2,363,796 6.00%
Bank ................................. $5,888,841 14.68% $1,605,019 4.00% $2,407,528 6.00%
Tier 1 Capital (to Average Assets)
Consolidated ......................... $6,381,784 12.91% $1,977,395 4.00% $2,471,744 5.00%
Bank ................................. $5,888,841 12.69% $1,856,473 4.00% $2,320,592 5.00%
</TABLE>
<PAGE>
42
11. STOCK OPTIONS
Under the terms of a stock option agreement which expired December 31,
1994, certain officers of the Bank were granted options to purchase shares
of the Company's common stock at a price of book value per share at date of
grant. All options are exerciseable upon grant and expire beginning in
December 1997 through December 2001. At December 31, 1996 and 1995 there
were 25,000 options outstanding and exerciseable at prices ranging from
$9.63 to $11.72 per share.
12. RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Bank has direct and indirect loans
outstanding to certain directors, executive officers, and principal
shareholders, including their associates. Such loans are made on the same
terms as those prevailing at the time for comparable transactions with
unaffiliated customers.
The following is a summary of the activity of loans to directors, executive
officers, and principal shareholders:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Balance, beginning of year $ 2,209,000 $ 2,244,000
Amounts advanced ......... 641,500 1,446,000
Repayments ............... (1,048,000) (1,481,000)
----------- -----------
Balance, end of year ..... $ 1,802,500 $ 2,209,000
=========== ===========
</TABLE>
13. CREDIT ARRANGEMENTS
At December 31, 1996, federal funds line of credit arrangements aggregating
$3,000,000 were available to the Bank from corresponding banking
institutions. There are no commitment fees and compensation balances are
not required. The Bank also has a Blanket Floating Lien Agreement with the
Federal Home Loan Bank of Atlanta. Under this agreement, the Bank has a
credit line up to seventy-five percent of the book value of its one-to-four
family first mortgage loans. These credit arrangements principally serve as
liquidity back-up for the Bank.
14. PROFIT SHARING PLAN
Effective January 1, 1996, the Bank amended its profit sharing plan to
allow salary deferrals under Internal Revenue code section 401(k). All
employees of the Bank can participate in the plan after they meet certain
eligibility requirements. Employer contributions to the plan are at the
discretion of the Board of Directors. The Bank contributed $31,592 and
$37,836 to the plan in 1996 and 1995, respectively.
<PAGE>
43
15. OTHER NON-INTEREST EXPENSES
The major components of other non-interest expenses are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
-------- --------
<S> <C> <C>
Postage .................. $ 52,185 $ 46,416
Stationery and supplies .. 48,344 57,403
FDIC insurance ........... 2,000 46,534
Professional services .... 58,599 59,116
Correspondent bank charges 83,346 43,703
Director fees ............ 46,000 43,650
Other .................... 318,928 278,205
-------- --------
Total ............... $609,402 $575,027
======== ========
</TABLE>
16. FAIR VALUES OF FINANCIAL INSTRUMENTS
The following disclosures of the estimated fair value of financial
instruments is made in accordance with requirements of Statement of
Financial Standards No, 107, "Disclosures about Fair Value of Financial
Instruments". The estimated fair value amounts have been determined by the
Company using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required to
interpret market data to develop the estimates of fair value. Accordingly,
the estimates presented herein are not necessarily indicative of the
amounts the Company could realize in a current market exchange. The use of
different market assumptions and/or estimation methodologies may have a
material effect on the estimated fair value amounts.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments:
Cash and Cash Equivalents - The carrying amounts of cash and short-term
instruments approximate their fair value.
Investments Securities - Available for sale and Held to maturity securities
are based on quoted market prices.
Loans - For variable-rate loans that reprice frequently and have no
significant change in credit risk, fair values are based on carrying
values. The fair values for all other loans are estimated using discounted
cash flow analysis, using interest rates currently being offered for loans
with similar terms to borrowers of similar credit quality.
Deposit liabilities - Fair values of certificates of deposit are estimated
using a discounted cash flow calculation that applies interest rates
currently being offered on certificates of similar terms and maturities.
The carrying amounts of all other deposits, due to their nature,
approximate their fair values.
<PAGE>
44
Short-term borrowings - The carrying amounts of advances from the Federal
Home Loan Bank and other short-term borrowings approximate their fair
values.
Commitments to Extend Credit and Standby Letters of Credit - The fair value
of commitments is estimated using the fees currently charged to enter into
similar agreements, taking into account the remaining terms of the
agreements and the present creditworthiness of the counterparties. The fair
value of letters of credit is based on fees currently charged for similar
agreements or on the estimated cost to terminate them or otherwise settle
the obligations with the counterparties at the reporting date.
The carrying values and estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
------------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------- ----------- ----------- -----------
Financial assets:
<S> <C> <C> <C> <C>
Cash and due from banks .... $ 2,296,408 $ 2,296,408 $ 2,406,895 $ 2,406,895
Federal funds sold ......... 5,530,000 5,530,000 2,471,000 2,471,000
Investment securities:
Available for sale ...... 5,289,372 5,289,372 5,706,830 5,706,830
Held to maturity ........ 3,194,200 3,330,320 3,059,077 3,143,464
Loans, net ................. 41,805,439 41,870,811 36,451,140 36,367,958
Accrued interest receivable 373,089 373,089 367,242 367,242
Financial liabilities:
Deposits ................... $52,604,076 $52,734,792 $43,497,048 $43,615,883
Federal Home Loan advances . 380,000 380,000 1,300,000 1,300,000
Other borrowed funds ....... 53,195 53,195 49,974 49,974
Off-balance sheet liabilities:
Commitments to extend credit $ 5,693,000 $ 6,550,516 $ 5,226,929 $ 5,226,929
Standby letters of credit .. 194,000 194,027 632,683 632,683
</TABLE>
17. SUPPLEMENTAL CASH FLOW INFORMATION
Certain supplemental disclosure of cash flow information and noncash
investing and financing activities:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash paid during the year for:
Income taxes ............................ $ 685,301 $ 555,809
=========== ===========
Interest ................................ $ 1,908,358 $ 1,691,474
=========== ===========
Noncash investing and financing activities:
Net unrealized gain (loss) on investment
securities available for sale ......... $ (19,435) $ 283,658
=========== ===========
</TABLE>
<PAGE>
45
18. BRYAN BANCORP OF GEORGIA, INC. (PARENT ONLY) FINANCIAL INFORMATION
- -----------------------------------------------------------------------
Bryan Bancorp of Georgia, Inc. condensed balance sheets and the related
condensed statements of income and cash flows are as follows:
<TABLE>
<CAPTION>
Condensed Balance Sheets
--------------------------------------------------
December 31,
--------------------------
1996 1995
----------- -----------
Assets
<S> <C> <C>
Cash ........................................ $ 49,667 $ 514,365
Land ........................................ 301,494
Other Assets ................................ 22,000 16,578
Investment in subsidiary .................... 6,435,343 5,881,064
----------- -----------
Total Assets ............................. $ 6,808,504 $ 6,412,007
=========== ===========
Liabilities
Deferred compensation payable ............... $ 38,000 $ 38,000
----------- -----------
Shareholders' equity
Common Stock ................................ 521,758 521,758
Additional paid-in capital .................. 4,869,485 4,869,485
Retained Earnings .......................... 1,715,073 1,048,341
Net unrealized loss on investment
securities available for sale ............. (27,212) (7,777)
----------- -----------
7,079,104 6,431,807
Tresury stock ............................... (308,600) (57,800)
----------- -----------
Total shareholders' equity ............... 6,770,504 6,374,007
----------- -----------
Total liabilities and shareholders' equity $ 6,808,504 $ 6,412,007
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
Condensed Statements of Income
--------------------------------------------------
Years Ended December 31,
------------------------
1996 1995
---------- ----------
Income
<S> <C> <C>
Dividends from subsidiary ................... $ 458,000
Interest income ............................. 5,859 $ 17,239
---------- ----------
463,859 17,239
Expenses ...................................... 23,250 22,837
---------- ----------
Income (loss) before income tax benefit and
equity in undistributed income of subsidiary 440,609 (5,598)
Income tax benefit ............................ 7,000 2,000
---------- ----------
Income (loss) before equity in
undistributed income of subsidiary .......... 447,609 (3,598)
Equity in undistributed income of subsidiary .. 573,714 920,100
---------- ----------
Net income .................................... $1,021,323 $ 916,502
========== ==========
</TABLE>
<PAGE>
46
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
--------------------------------------------------
Years Ended December 31,
--------------------------
1996 1995
----------- -----------
Operating Activities
<S> <C> <C>
Net income ..................................... $ 1,021,323 $ 916,502
Adjustments to reconcile net income
to net cash provided by operating activities:
Equity in undistributed income of subsidiary (573,714) (920,100)
Net decrease (increase) in other assets .... (5,422) 42,500
----------- -----------
Net cash provided by operating activities 442,187 38,902
----------- -----------
Investing Activities
Purchase of land ................................ (301,494)
----------- -----------
Net cash (used) for investing activities (301,494)
----------- -----------
Financing Activities
Purchase of treasury stock ...................... (250,800) (15,000)
Proceeds from issuance of stock ................. 15,000
Dividends paid .................................. (354,591) (310,294)
----------- -----------
Net cash (used) for financing activities (605,391) (310,294)
----------- -----------
Decrease in cash .................................. (464,698) (271,392)
Cash - beginning of year .......................... 514,365 785,757
----------- -----------
Cash - end of year ................................ $ 49,667 $ 514,365
=========== ===========
</TABLE>
<PAGE>
47
SIGNATURES
Pursuant to the requirements of Section 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.
BRYAN BANCORP OF GEORGIA, INC.
Date: March 26, 1997 By:/s/ E. James Burnsed
-------------- ---------------------------------------------
E. James Burnsed
President and Chief Executive Officer
(principal executive, financial and accounting
officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ E. James Bunsed President, Chief Executive March 26, 1997
E. James Burnsed Officer and Director
/s/ J. Carl Cox, Jr. Director March 26, 1997
J. Carl Cox, Jr.
/s/ L. Carlton Gill Director March 26, 1997
L. Carlton Gill
/s/ Thomas A. Lancaster Director March 26, 1997
Thomas A. Lancaster
/s/ Juanita B. Phillips Director March 26, 1997
Juanita B. Phillips
/s/ James T. Roberts, Sr. Director March 26,1997
James T. Roberts, Sr.
(SIGNATURES CONTINUED ON NEXT PAGE)
<PAGE>
48
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ James W. Royal Secretary and Director March 26, 1997
James W. Royal
/s/ Jimmy F. Sommers Director March 26, 1997
Jimmy F. Sommers
/s/ Charles L. Stafford Chairman of the Board March 26, 1997
Charles L. Stafford
/s/ Robert T. Thompson Director March 26, 1997
Robert T. Thompson
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
No annual report or proxy has been sent to security holders as of the date of
filing this report. An annual report and proxy materials will be furnished to
security holders subsequent to the filing if this report, and the Registrant
shall furnish copies of such material to the Commission when they are sent to
security holders.
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BRYAN BANCORP OF GEORGIA, INC. FOR THE PERIOD ENDED
DECEMBER 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,296,408
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 5,530,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,289,372
<INVESTMENTS-CARRYING> 3,194,200
<INVESTMENTS-MARKET> 3,330,320
<LOANS> 42,260,259
<ALLOWANCE> 454,820
<TOTAL-ASSETS> 60,212,910
<DEPOSITS> 52,604,076
<SHORT-TERM> 433,195
<LIABILITIES-OTHER> 405,135
<LONG-TERM> 0
0
0
<COMMON> 521,758
<OTHER-SE> 6,248,746
<TOTAL-LIABILITIES-AND-EQUITY> 60,212,910
<INTEREST-LOAN> 3,898,485
<INTEREST-INVEST> 477,480
<INTEREST-OTHER> 151,236
<INTEREST-TOTAL> 4,526,931
<INTEREST-DEPOSIT> 1,888,093
<INTEREST-EXPENSE> 1,915,511
<INTEREST-INCOME-NET> 2,611,420
<LOAN-LOSSES> 90,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 1,840,733
<INCOME-PRETAX> 1,529,323
<INCOME-PRE-EXTRAORDINARY> 1,021,323
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,021,323
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.32
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 427,662
<CHARGE-OFFS> 89,659
<RECOVERIES> 26,817
<ALLOWANCE-CLOSE> 454,820
<ALLOWANCE-DOMESTIC> 454,820
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
