<PAGE>
1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Commission File Number: 33-28514-A
----------
BRYAN BANCORP OF GEORGIA, INC.
- --------------------------------------------------------------------------------
(exact name of small business issuer as specified in its charter)
GEORGIA 58-1835646
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9971 Ford Ave., Richmond Hill, Georgia 31324
- ---------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip code)
(912) 756-4444
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act of 1934:
None
----------------------------
Securities registered pursuant to Section 12(g) of the Exchange Act of 1934:
None
----------------------------
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
---- ----
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. x
----
The issuer's revenues for its last fiscal year were $6,254,856
The aggregate market value of the common stock of the registrant held by
nonaffiliates (252,089 shares) on March 2, 1998 was approximately $13,174,171
(based on a per share price of $52.26, which represents 1.85 times the most
recently reported trade of the common stock of Savannah Bancorp, Inc., which
pursuant to an Agreement of Merger with Registrant, as described hereinafter,
agreed to issue 1.85 shares of its common stock in exchange for each share of
the common stock of Registrant).
State the number of shares outstanding of each issuer's classes of common stock,
as of the latest practicable date:
502,508 shares as of March 2, 1998
----------------------------------
DOCUMENTS INCORPORATED BY REFERENCE:
None
----------------------------
Transitional Small Business Disclosure Format:
Yes No x
---- ----
<PAGE>
2
PART I
Item 1. Business.
- ------------------
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 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.
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.
<PAGE>
3
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 currently has a correspondent relationship with
SunTrust of Atlanta, SunTrust of Savannah, the Bankers Bank, Barnett Bank,
Regions Bank, The Savannah Bank, Federal Home Loan Bank, and First Tennessee.
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 34 persons, of which 31 are 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").
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.
<PAGE>
4
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.
<PAGE>
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.
<PAGE>
6
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 ss 8 of the FDIC Act have been issued or be pending
against the holding company or any of its depository institutions subsidiaries.
<PAGE>
7
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.
<PAGE>
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 recapitalization 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.
<PAGE>
9
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.
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. ss 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.
<PAGE>
10
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.
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, 1997 to a
vote of security holders of the Company.
<PAGE>
11
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 ($)
====================================================================
1997
<S> <C> <C>
First quarter 25 25
====================================================================
Second quarter 25 25
====================================================================
Third quarter 25 25
====================================================================
Fourth quarter 25 25
====================================================================
1996
First quarter 20 18
====================================================================
Second quarter N/A N/A
====================================================================
Third quarter N/A N/A
====================================================================
Fourth quarter 20 20
====================================================================
</TABLE>
During the period covered by this report, there has been no established public
trading market for the Company's common stock.
As of March 2, 1998, the approximate number of holders of record of the
Company's common stock was 413.
The Company has paid cash dividends on an annual basis since 1994. During 1997,
the Company paid a cash dividend of $.85 per share. 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
<PAGE>
12
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, core deposit growth 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 $2,000,000 in cash and due from banks and federal funds sold
at December 31, 1997. The Company's Federal funds sold decreased by
approximately $5,500,000 in 1997. Approximately $4,000,000 of this decrease was
the result of the Company investing in U.S. Agencies bonds with callable
features of three and six months plus approximately another $1,000,000 invested
in short-term certificates of deposits in other banks. During 1997, the Company
was able to fund its continued demand for loans which increased approximately
$6,000,000 with cash generated from operating activities of approximately
$1,400,000, deposit growth of approximately $3,400,000 and advances of
$1,200,000 from the Federal Home Loan Bank.
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 $4,000,000.
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.
<PAGE>
13
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, 1997:
<TABLE>
<CAPTION>
Term to Repricing on Maturity
(in thousands)
--------------------------------------------------------------------------------------
0-90 91-365 One-Five Over Five
days days Years Years Total
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest earning assets:
Interest-bearing deposits
with other banks ............... $ 495,000 $ 495,000 $ 990,000
Federal Funds Sold ............... 38,000 38,000
Available for sale securities .... 198,498 6,491,884 2,615,260 9,305,642
Held to maturity securities ...... 1,117,362 2,228,257 3,345,619
Loans ............................ 9,199,773 15,995,613 21,768,267 1,300,318 48,263,971
------------ ------------ ------------ ------------ ------------
Total interest earning assets .... 9,732,773 16,689,111 29,377,513 6,143,835 61,943,232
------------ ------------ ------------ ------------ ------------
Interest bearing liabilities:
NOW deposits ..................... 11,071,611 11,071,611
Money market deposits ............ 2,093,881 2,093,881
Savings deposits ................. 7,024,668 7,024,668
Time deposits .................... 7,524,940 16,681,350 3,898,311 28,104,601
FHLB advances .................... 6,250 58,750 1,260,000 265,000 1,590,000
Other borrowed funds ............. 130,000 130,000
------------ ------------ ------------ ------------ ------------
Total interest bearing liabilities 27,851,350 16,740,100 5,158,311 265,000 50,014,761
------------ ------------ ------------ ------------ ------------
Interest Rate Sensitivity Gap .... $(18,118,577) $ (50,989) $ 24,219,202 $ 5,878,835 $ 11,928,471
============ ============ ============ ============ ============
</TABLE>
As indicated in the above table, the first twelve 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 next twelve months, this position reverses
after year one to a positive gap position. The near term liability sensitivity
will usually result in a lower net margin when rates increase. However, the
Company's net interest margin not only depends on the direction and magnitude of
future rates, but also customer alternatives and need for liquidity.
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.
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, 1997 and 1996 of 11.36% and 11.84%, respectively.
<PAGE>
14
Shareholders' equity increased $650,375 during 1997, an increase in book value
from $13.42 at December 31, 1996 to $14.75. The Company recorded net earnings
for 1997 of $1,157,766 and paid cash dividends of $.85 per share totaling
$428,704. The Company also purchased 8,050 shares of treasury stock during 1997
at a cost of $200,250.
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, 1997, 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 1997 compared to 1996:
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 $3,275,804 in 1997, representing an increase of $363,933
or 12.5% as compared to 1996. The average yield on interest-earning assets was
9.54% in 1997 compared to 9.48% in 1996 and the average rate paid on
interest-bearing liabilities was 4.87% in 1997 compared to 4.81% in 1996. The
Company's net interest margin (net interest income divided by average
interest-bearing assets) equaled 5.65% in 1997 compared to 5.72% in 1996. The
current year increase in net interest income resulted primarily from volume
increase in the loan portfolio.
The provision for loan losses was $180,000 for 1997 or .40% of average
outstanding loans, compared to $90,000 or .23% of average outstanding loans for
1996. Net charge-offs for 1997 totaled $51,388 or .11% of average outstanding
loans, compared to $62,842 or .16% of average outstanding loans for 1996.
<PAGE>
15
The provision reflects management's assessment of the adequacy of the allowance
for loan losses to absorb potential write-offs in the loan portfolio. Factors
considered in this assessment are past loss experience, known and inherent risks
in the loan portfolio, current and anticipated economic conditions and other
pertinent factors.
Noninterest Income
Noninterest income increased $171,661 or 31,31% in 1997 over 1996. This increase
is primarily attributable to increases in loan origination fees as a result of
the establishment of a mortgage loan origination service in the 4th quarter of
1996. Fees from this service in 1997 were $123,170.
Noninterest Expense
Noninterest expense increased $237,151 or 12.88% in 1997 over 1996. Salaries and
employee benefits was the largest component of non-interest expense and
increased $210,715 in 1997 over 1996. 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.
Net noninterest expense (defined as noninterest expense less noninterest income)
as a percentage of average assets was 1.7% in 1997 compared to 1.8% in 1996. The
efficiency ratio (noninterest expense divided by the sum of net interest income
after provision for loan losses and non-interest income) was 54% in 1997 as
compared to 55% in 1996. 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 $580,000 in 1997 and $508,000 in 1996
representing an effective tax rate of approximately 33% for 1996 and 1997.
Impact of New Accounting Standards
In June 1997, the Financial Accounting Standards Board (FASB) issued Statements
of Financial Accounting Standards (SFAS) No. 130 "Reporting Comprehensive
Income" This statement established standards for reporting and displaying
comprehensive income and its components in a full set of general-purpose
financial statements. This is effective for fiscal years beginning after
December 15, 1997. The Company does not expect any material changes to its
current reporting format in response to this statement.
In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosure about Segments of an Enterprise and Related information" and is
effective for fiscal years beginning after December 15, 1997. This statement
establishes standards for reporting operating segments by public business
enterprises in annual financial statements and requires that those enterprises
report selected information about operating segments in interim financial
reports to shareholders. The adoption of this statement will have no effect on
the financial statements of the Company.
<PAGE>
16
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,
-------------------------
1997 1996
----------- -----------
ASSETS
<S> <C> <C>
Interest-bearing deposits ................... $ 204,950 $ 171,913
Investment securities available for sale .... 6,983,629 5,309,840
Investment securities held to maturity ...... 3,299,890 3,159,082
Federal funds sold .......................... 2,116,980 2,678,352
Loans ....................................... 45,415,034 39,578,412
----------- -----------
Total interest-earning assets ............. 58,020,483 50,897,599
Cash and due from banks ..................... 2,026,645 2,476,436
Other assets ................................ 1,441,973 1,278,284
----------- -----------
Total assets ............................. $61,489,101 $54,652,319
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
NOW deposits ................................ $ 9,923,986 $ 9,291,178
Money market deposits ....................... 2,142,774 1,690,102
Savings deposits ............................ 6,841,337 6,945,750
Time deposits ............................... 26,308,611 21,465,200
Short-term borrowings ....................... 1,128,833 441,153
----------- -----------
Total interest-earning liabilities ........ 46,345,541 39,833,383
Non-interest bearing deposits ............... 7,645,612 7,839,227
Other liabilities ........................... 508,032 508,553
----------- -----------
Total liabilities ........................ 54,499,185 48,181,163
----------- -----------
Shareholders' equity ........................ 6,989,916 6,471,156
----------- -----------
Total liabilities and shareholders' equity $61,489,101 $54,652,319
=========== ===========
</TABLE>
<PAGE>
17
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 31,1997:
--------------------------------------------
Average Interest Average
Amount Earned Yield
----------- ----------- --------
Assets
<S> <C> <C> <C>
Interest-bearing deposits .............................. $ 204,950 $ 11,407 5.57%
Investment securities available for sale ............... 6,983,629 453,930 6.50%
Investment securities held to maturity ................. 3,299,890 172,070 5.21%
Federal funds sold ..................................... 2,116,980 116,313 5.49%
Loans .................................................. 45,415,034 4,781,290 10.53%
----------- -----------
Total earning assets ................................ 58,020,483 5,535,010 9.54%
=========== -----------
Average Interest Average
Amount Earned Yield
----------- ----------- --------
Liabilities
NOW deposits ........................................... 9,923,986 380,313 3.83%
Money market deposits .................................. 2,142,774 81,398 3.80%
Savings deposits ....................................... 6,841,337 239,388 3.50%
Time deposits .......................................... 26,308,611 1,485,092 5.64%
Short-term borrowings .................................. 1,128,833 73,015 6.47%
----------- -----------
Total interest bearing liabilities .................. $46,345,541 2,259,206 4.87%
=========== -----------
Net interest income .................................... $ 3,275,804
===========
Net yield on interest earning assets ................... 5.65%
========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,1996:
--------------------------------------------
Average Interest Average
Amount Earned Yield
----------- ----------- --------
<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 ................. 3,159,082 164,535 5.21%
Federal funds sold ..................................... 2,678,352 141,655 5.29%
Loans .................................................. 39,578,412 4,187,876 10.58%
----------- -----------
Total earning assets ................................ 50,897,599 4,827,382 9.48%
----------- -----------
Average Interest Average
Amount Earned Yield
----------- ----------- --------
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 .................................... $ 2,911,871
Net yield on interest earning assets ................... ----------- 5.72%
========
<PAGE>
18
<FN>
Includes impaired loans of $304,000 and $56,000 during the years ended
December 31, 1997 and 1996, respectively.
</FN>
</TABLE>
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, 1997
Compared to 1996
Increase (Decrease) Due to
-----------------------------------
Volume Rate Change
--------- -------- ---------
Interest earned on:
<S> <C> <C> <C>
Interest-bearing deposits .............. $ 1,826 $ 1,826
Investment securities available for sale 108,956 21,239 130,195
Investment securities held to maturity . 7,535 7,535
Federal funds sold ..................... (30,699) 5,357 (25,342)
Loans .................................. 613,203 (19,789) 593,414
--------- --------- ---------
Total interest income ............... 700,821 6,807 707,628
--------- --------- ---------
Interest paid on:
Now deposits ........................... 24,896 8,362 33,258
Money market deposits .................. 17,112 17,112
Savings deposits ....................... (3,622) (3,622)
Time deposits .......................... 274,962 (23,612) 251,350
Short-term borrowings .................. 44,494 1,103 45,597
--------- --------- ---------
Total interest expense .............. 357,842 (14,147) 343,695
--------- --------- ---------
Change in net interest income........... $ 342,979 $ 20,954 $ 363,933
--------- --------- ---------
</TABLE>
<PAGE>
19
<TABLE>
<CAPTION>
December 31, 1996
Compared to 1995
Increase (Decrease) Due to
-----------------------------------
Volume Rate Change
--------- -------- ---------
Interest earned on:
<S> <C> <C> <C>
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 .................................. 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
--------- --------- ---------
</TABLE>
<PAGE>
20
INVESTMENTS
As of December 31, 1997 investment securities comprised approximately 19% of the
Company's assets and loans comprised approximately 74% 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-term 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, 1997 and 1996 are
present in the following table:
<TABLE>
<CAPTION>
Available For Sale securities
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1997:
U.S. Treasury and
U.S. Government agencies $6,148,779 $ 22,356 $ 1,502 $6,169,633
Mortgage-backed securities 3,167,546 15,946 47,483 3,136,009
---------- ---------- ---------- ----------
Total .................... $9,316,325 $ 38,302 $ 48,985 $9,305,642
---------- ---------- ---------- ----------
December 31, 1996:
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
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
Held To Maturity
-------------------------------------------------
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-------------------------------------------------
<S> <C> <C> <C> <C>
December 31, 1997:
State and political subdivisions $3,165,919 $ 120,720 $ -- $3,286,639
Other securities ............... 179,700 179,700
---------- ---------- ---------- ----------
Total .......................... $3,345,619 $ 120,720 $ -- $3,466,339
---------- ---------- ---------- ----------
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 $3,330,320
---------- ---------- ---------- ----------
</TABLE>
<PAGE>
21
The following table sets forth the maturities and the weighted average
yield of each type of investment securities on an amortized cost basis at
December 31, 1997.
<TABLE>
<CAPTION>
After one After Five
Within year but within years but within After
one year five years ten years ten years Total
--------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Amount:
U.S. Treasury and
U.S. Government Agencies .$ 198,498 $ 4,969,570 $ 1,001,565 $6,169,633
Mortgage-backed securities . 1,522,314 1,613,695 3,136,009
State and municipal ........ 1,117,362 1,549,961 498,596 3,165,919
----------- ----------- ----------- --------- -----------
198,498 $ 7,609,246 $ 4,165,221 $ 498,596 12,471,561
----------- ----------- ----------- --------- -----------
Equity securities .......... 179,700
-----------
$12,651,261
-----------
Weighted average yield:
U.S. Treasury and
U.S. Government Agencies 4.87% 6.67% 7.07%
Mortgage-backed securities 6.70% 6.02%
State and municipal 4.80% 5.28% 5.60%
----------------------------------------------------------
4.87% 6.40% 5.99% 5.60%
==========================================================
</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,
1997.
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>
22
The following table present various categories of loans contained in the Bank's
loan portfolio as of December 31, 1997 and 1996 and the total amount of all
loans for such periods:
<TABLE>
<CAPTION>
Amount
-----------------------------
Type of Loan 1997 1996
--------------------------------------- -----------------------------
<S> <C> <C>
Domestic:
Commercial, financial and agricultural $ 6,625,697 $ 4,797,874
Real estate construction ............. 7,540,243 6,935,994
Real estate mortgage ................. 29,832,988 25,921,872
Consumer ............................. 4,198,126 4,604,519
------------ ------------
48,197,054 42,260,259
Allowance for loan losses ............ (583,432) (454,820)
------------ ------------
$ 47,613,622 $ 41,805,439
============ ============
</TABLE>
The following table shows the maturities of certain loan types as of December
31, 1997. 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 $ 3,205,163 $ 3,351,121 $ 69,413 $ 6,625,697
Real estate construction ............. 7,489,614 50,629 7,540,243
------------ ----------- ----------- -----------
Total .............................. $ 10,694,777 $ 3,401,750 $ 69,413 $14,165,940
------------ ----------- ----------- -----------
Loans due after 1 year with predetermined interest rates $ 709,154 $ 709,154
Loans due after 1 year with floating rates 2,692,596 $ 69,413 2,762,009
----------- ----------- ----------
$ 3,401,750 $ 69,413 $ 3,471,163
----------- ----------- ----------
</TABLE>
The following table summarizes nonaccrual, past due and restructured loans as of
December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Nonaccrual loans $ 304,000 $ 56,000
Restructured loans 0 0
----------- -----------
Total nonperforming loans $ 304,000 $ 56,000
=========== ===========
Accruing loans past due 90 days or more $ 8,000 $ 3,000
=========== ===========
Nonperforming loans to total loans .63% .13%
=========== ===========
Allowance for loan losses times nonperforming loans 1.92 8.12
=========== ===========
</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 principal and interest is doubtful.
<PAGE>
23
Impaired loans totaled $304,000 and $56,000 as of December 31, 1997 and 1996,
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, 1997 and 1996 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.
The Company's consumer loan portfolio is also well secured. At December 31, 1997
and 1996, 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, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Balance at beginning of year ........................... $ 454,820 $ 427,662
--------- ---------
Charge-offs:
Domestic -
Commercial, financial and agricultural ............ $ (52,969) $ (18,815)
Real estate construction
Real estate mortgage
Consumer .......................................... (69,811) (70,844)
--------- ---------
Total charge-offs .............................. (122,780) (89,659)
--------- ---------
Recoveries:
Domestic -
Commercial, financial and agricultural ............ 37,019
Real estate construction
Real estate mortgage .............................. 2,160
Consumer .......................................... 34,373 24,657
--------- ---------
Total recoveries ............................... 71,392 26,817
--------- ---------
Net (charge-offs) recoveries ........................... (51,388) (62,842)
Additions charged to operations ........................ 180,000 90,000
--------- ---------
Balance at end of year ................................. $ 583,432 $ 454,820
========= =========
Ratio of net charge-offs (recoveries) during the period
to average loans outstanding during the period ......... 0.11% 0.16%
========= =========
</TABLE>
<PAGE>
24
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,
--------------------
1997 1996
-------- ---------
Allocation of Allowance for Loan Losses
by Loan Type
----------------------------------------
Amount Amount
-------- --------
<S> <C> <C>
Commercial, financial and agricultural $ 75,846 $ 54,578
Real estate - construction ........... 93,349 72,772
Real estate - mortgage ............... 361,728 277,440
Consumer ............................. 52,509 50,030
-------- --------
$583,432 $454,820
-------- --------
</TABLE>
<TABLE>
<CAPTION>
Percent Percent
-------- --------
Loans Types as a Percentage of Total Loans
-------------------------------------------
<S> <C> <C>
Commercial, financial and agricultural 13% 12%
Real estate - construction ........... 16% 16%
Real estate - mortgage ............... 62% 61%
Consumer ............................. 9% 11%
-------- --------
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>
25
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, 1997
-----------------------------
Average Average
Amount Rate Paid
------------ -----------
Deposit Category
<S> <C> <C>
Non-interest bearing deposits $ 7,645,612 n/a
NOW deposits ............... 9,923,986 3.83%
Money market deposits ....... 2,142,774 3.80%
Savings deposits ............ 6,841,337 3.50%
Time deposits ............... 26,308,611 5.64%
Year Ended December 31, 1996
-----------------------------
Average Average
Amount Rate Paid
------------ -----------
Deposit Category
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%
</TABLE>
The following is a summary of the remaining maturities of time certificates
of deposit of $100,000 or more outstanding at December 31, 1997:
<TABLE>
<CAPTION>
Certificates
of Deposit
------------
<S> <C>
Three months or less ............... $ 1,145,909
Over three months through six months 4,088,580
Over six months through one year ... 3,953,480
Over one year ...................... 1,274,858
------------
$10,462,827
------------
</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,
------------------------
1997 1996
------- --------
<S> <C> <C>
Return on average assets ............. 1.88% 1.87%
Return on average equity ............. 16.56% 15.78%
Average equity to average assets ratio 11.37% 11.84%
Dividend payout ratio ................ - -
</TABLE>
<PAGE>
26
Item 7. Financial Statements and Supplementary Data.
- -----------------------------------------------------
The response to this Item is submitted in a separate section of this report
commencing on page 33 .
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,
John R. Harvey Class II Director
Thomas A. Lancaster Class II Director
G. Michael Odom, Jr. * Executive Vice President and
Chief Operating Officer
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
Robert T. Thompson, Jr. Class III Director
<FN>
* Mssrs. Burnsed and Odom are the only executive officers of the Company.
</FN>
</TABLE>
Each of the directors, except Director Harvey, have been a director of the
Company since March 1989. Director Harvey was elected a director in 1997. The
Company's Board of Directors is divided into three classes, with one class
being 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.
<PAGE>
27
E. James Burnsed, age 58, 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.
J. Carl Cox, Jr., age 55, 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 57, has been employed by S. A. Allen, Inc. as a procurement
forester since 1964.
John R. Harvey, age 62, is a Superior Court Judge in the Atlantic Judicial
Circuit of Georgia, which includes Bryan County. He has been a director of the
Bank for the past five years and a director of the Company for one year.
Thomas A. Lancaster, age 65, has served as a Vice President - Manager of the
Roofing Department and a Director of Metal Crafts, Inc., Savannah, Georgia since
1969.
G. Michael Odom, Jr., age 35, has served as Executive Vice President of the
Company since March, 1996 and as Chief Operating Officer since March, 1997. Mr.
Odom served in various capacities with SunTrust Bank Southeast Georgia, N.A.,
Brunswick, GA , including most recently, Group Vice President of Commercial
Banking.
Juanita B. Phillips, age 69, has been employed by The New England as an
insurance agent since 1976.
James T. Roberts, Sr., age 53, has been the owner-manager of Roberts GMC Trucks,
Richmond Hill, Georgia since 1969.
James W. Royal, age 49, 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 53, has been Vice President of the Sommers Company, Inc.,
a convenience store and petroleum distribution business, since 1972.
Charles L. Stafford, age 55, 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 57, 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>
28
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, 1997, 1996, and 1995. No other
executive officer's compensation exceeded $100,000 during 1997, 1996 or 1995.
<TABLE>
<CAPTION>
===========================================================================================================
Name and Annual Long-Term
Principal Position Compensation Table Compensation
Other
Annual Stock Other
Year Salary Bonus Compensation Options Compensation
===========================================================================================================
<S> <C> <C> <C> <C> <C>
E. James Burnsed
President and Chief
Executive Officer
1997 $90,000 $36,480(1) $62,000(2) $10,900(3)
1996 $90,000 $32,700 $ 5,821(3)
1995 $90,000 $41,200 $ 6,673(3)
<FN>
(1) Includes regular bonus of $35,280 and Christmas bonus of $1,200.
(2) Represents the value of amounts earned on exercise of options during
the fiscal year, calculated by taking the difference between the
fair market value of the 4,000 shares received on the exercise date
($25.00/share) and the exercise price ($9.50/share).
(3) Represents the amount earned but not paid from the Company's
profit-sharing plan.
</FN>
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================
Aggregated Option
Exercises in Last Fiscal
Year and FY-End Option
values
====================================================================================================================
Name Shares acquired Value Number of securities Value of unexercised
on realized underlying unexercised in-the-money options at
exercise (#) ($) option at FY-end (#) FY-end ($) Exercisable/
exercisable/unexercisable Unexercisable
====================================================================================================================
<S> <C> <C> <C> <C>
E. James Burnsed, 4,000 $62,000 16,000/0 $663,520(4)/0
President and Chief
Executive Officer
====================================================================================================================
<FN>
(4) Calculated as the difference between an average strike price of
$10.79 per share and per share fair market value on March 10, 1998 of
$52.26. Fair market value of $52.26 per share represents 1.85 times
the most recently reported trade of the common stock of Savannah
Bancorp, Inc., which has pursuant to an Agreement of Merger with the
Company (as described below) agreed to issue 1.85 shares of its
common stock in exchange for each share of common stock of the Company.
</FN>
</TABLE>
<PAGE>
29
Item 11. Security Ownership of Certain Beneficial Owners and Management.
- -------------------------------------------------------------------------
The following table sets forth certain information as of December 31, 1997, 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 AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNER (1) PERCENT OF CLASS
=============================================================================
<S> <C> <C>
E. James Burnsed
173 Davis Road 33,599 (2) 6.47%(13)
Richmond Hill, GA 31324
=============================================================================
J. Carl Cox, Jr.
7346 Highway 17 20,015 (3) 3.98%
Richmond Hill, GA 31324
=============================================================================
L. Carlton Gill
P. O. Box 59 35,735 (4) 7.10%
Richmond Hill, GA 31324
=============================================================================
John R. Harvey
P. O. Box 1018 2,200 (12) 0.44%
Pembroke, GA 31321
=============================================================================
Thomas A. Lancaster
P. O. Box 1448 15,602 (5) 3.10%
Richmond Hill, GA 31324
=============================================================================
G. Michael Odom, Jr.
292 Mingarry Drive 2,000 (14) 0.40%
Richmond Hill, GA 31324
=============================================================================
Juanita B. Phillips
197 Ogeechee Drive 14,717 (6) 2.93%
Richmond Hill, GA 31324
=============================================================================
James T. Roberts
415 Whitehall Lane 26,062 (7) 5.16%
Richmond Hill, GA 31324
=============================================================================
James W. Royal
P. O. Box 1096 21,263 (8) 4.23%
Richmond Hill, GA 31324
=============================================================================
Jimmy F. Sommers
P. O. Box 556 29,635 (9) 5.89%
Richmond Hill, GA 31324
=============================================================================
Charles L. Stafford
P. O. Box 460 46,196 (10) 9.18%
Richmond Hill, GA 31324
=============================================================================
Robert T. Thompson, Jr.
2369 Fort McAllister Rd. 21,395 (11) 4.25%
Richmond Hill, GA 31324
=============================================================================
<FN>
(1) Information relating to beneficial ownership by all executive officers
and directors is based upon information furnished by each executive
officer and 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.
<PAGE>
30
(2) Includes 16,000 shares subject to presently exercisable stock options
granted in connection with Mr. Burnsed's Employment Agreement. Of the
remaining shares beneficially owned by Mr. Burnsed, 11,256 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, 6,277 shares
are in her IRA and 8,440 are owned by her children.
(7) Of the 26,062 shares beneficially owned by Mr. Roberts, 20,487 shares
are owned individually, 2,975 shares are in his IRA, 600 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 shares 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.
(12) Of the 2,200 shares owned by Mr. Harvey, all are jointly owned with his
wife.
(13) Mr. Burnsed's percent of class is calculated on the assumption that he
has exercised the 16,000 options owned by him, and that the total
number of issued and outstanding shares of the Company has been
correspondingly increased.
(14) All of the shares listed for Mr. Odom are stock options that are
exercisable by him in the next 60 days.
</FN>
</TABLE>
The Company's common stock beneficially owned by all directors and executive
officers as a group as of March 6, 1998 (12 persons) totaled 268,419 shares
representing 51.14% of the Company's common stock. This total figure and
percentage are calculated on the assumption that all persons listed who own
stock options exercisable within the next 60 days will in fact do so, and that
the number of issued and outstanding shares of the Company has been increased by
a corresponding amount.
On February 11, 1998, the Company and The Savannah Bancorp, Inc. ("Savannah")
jointly announced that they had entered into a definitive agreement and plan of
merger ("Agreement of Merger") of the Company into Savannah. Savannah is a
one-bank holding company. Its wholly owned subsidiary, The Savannah Bank, N.A.
operates four offices in the Savannah, Georgia area. The proposed merger is
subject to any required corporate shareholder and regulatory approvals.
<PAGE>
31
Pursuant to Section 5.23 of the Agreement of Merger, the Company represented and
warranted to Savannah, as an inducement to entering the Agreement of Merger,
that each of the Company's directors (except Charles Stafford) had executed and
delivered to Savannah a "Director's Agreement" in the form attached to the
Agreement of Merger as Exhibit 3. Each director of the Company (except Charles
Stafford) did deliver a "Director's Agreement" to Savannah in accordance with
that warranty and representation. Pursuant to Section 2 of the Director's
Agreement, each of the Company's directors (except Charles Stafford) agreed to
(1) vote all shares of common stock of the Company beneficially owned by him or
her (and as to which he or she possessed sole voting power) in favor of the
merger of the Company into Savannah, (2) recommend approval of the merger to
shareholders of the Company, and (3) use his or her best efforts to effect
consummation of the merger. In addition, each of the Company's directors agreed
not to sell or otherwise dispose of his or her shares of the Company's common
stock. The total number of shares beneficially owned (and as to which each
director possesses sole voting power) by all directors delivering such
Director's Agreements is 195,083, representing 38.78% of the common stock of the
Company.(1) The total number of shares beneficially owned (whether or not each
director has sole power to vote such shares) by all directors delivering
Directors Agreements is 220,223, representing 42.43% of the common stock of the
Company.(2) This figure differs from that given for all directors and executive
officers as a group, stated above as 266,419 shares (51.33%) of the Company's
common stock because, as noted, Mr. Charles Stafford (beneficial owner of 46,196
shares) did not deliver a director's agreement.
Savannah agreed, in Section 5.23 of the Agreement of Merger, that if it failed
to reelect any of the Company's Directors to the Bank's Board during the 24
months following the closing, it would immediately pay such director the fees he
or she would have earned as a director of the Bank's Board during the
remainder of the 24 month period.
On February 26 and 27, 1998, the Company filed, respectively, a Form 8-K and an
amendment thereto, Form 8-K/A, disclosing the foregoing information and included
as exhibits the Agreement of Merger and form of Director's Agreement described
hereinabove.
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.
- --------
1 Calculated on the assumption that no options would be exercised. If, however,
it is assumed that all directors delivering Director's Agreements exercise
options held by them, then the total number of shares (as to which each
director would possess sole voting power) will be 211,083, representing 40.67%
of the then issued and outstanding common stock of the Company.
2 Calculated on the assumption that all options would be exercised.
<PAGE>
32
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, 1997 and 1996
Consolidated Statements of Income-Years ended December 31, 1997
and 1996 Consolidated Statements of Shareholders' Equity-Years
ended December 31, 1997 and 1996 Consolidated Statements of
Cash Flows-Years ended December 31, 1997 and 1996 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"), (iii) The Annual Report on Form 10-K
for the year ended December 31, 1990 ("1990 10-K"),(iv) Current
Report on Form 8-K, filed February 27, 1998 with the Commission
("8-K"), or (v) Current Report on Form 8-K/A, filed March 3,
1998 with the Commission ("8-K/A"). The exhibit number
corresponds to the exhibit number in the referenced document.
Exhibit No. Description of Exhibit
----------- ----------------------
*2 Agreement of Merger between The
Savannah Bancorp , Inc. and
Registrant (8-K and 8-K/A).
*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 1997.
<PAGE>
33
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, 1997 and 1996, and the related
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, 1997 and 1996 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, 1998
<PAGE>
34
<TABLE>
<CAPTION>
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash and due from banks ........................... $ 2,039,246 $ 2,296,408
Interest-bearing deposits with other banks ........ 990,000
Federal funds sold ................................ 38,000 5,530,000
Investment securities available for sale .......... 9,305,642 5,289,372
Investment securities held to maturity
(estimated market value of $3,466,339
in 1997 and $3,330,320 in 1996) ................. 3,345,619 3,194,200
Loans ............................................. 48,197,054 42,260,259
Less allowance for loan losses .................... (583,432) (454,820)
------------ ------------
Loans, net .............................. 47,613,622 41,805,439
Interest receivable ............................... 452,262 373,089
Premises and equipment, net ....................... 1,493,663 1,456,993
Other assets ...................................... 234,625 267,409
------------ ------------
Total assets ................................. $ 65,512,679 $ 60,212,910
============ ============
LIABILITIES
Deposits:
Noninterest-bearing ............................. $ 7,685,324 $ 9,624,367
Interest-bearing ................................ 48,294,761 42,979,709
------------ ------------
Total deposits ............................... 55,980,085 52,604,076
Federal Home Loan Bank advances ................... 1,590,000 380,000
Other borrowed funds .............................. 130,000 53,195
Interest payable .................................. 210,290 227,940
Other liabilities ................................. 181,425 177,195
------------ ------------
Total liabilities ............................ 58,091,800 53,442,406
------------ ------------
SHAREHOLDERS' EQUITY
Common stock - par value $1 per share;
authorized 10,000,000 shares;
issued 528,258 shares in 1997 ................. 528,258 521,758
and 521,758 shares in 1996
Additional paid-in capital ........................ 4,963,745 4,869,485
Retained earnings ................................. 2,444,135 1,715,073
Net unrealized (loss) on investment securities
available for sale, net of deferred income taxes (6,409) (27,212)
------------ ------------
7,929,729 7,079,104
Treasury stock at cost, 25,250 shares
in 1997 and 17,200 shares in 1996 ........... (508,850) (308,600)
------------ ------------
Total shareholders' equity ................... 7,420,879 6,770,504
------------ ------------
Total liabilities and shareholders' equity ... $ 65,512,679 $ 60,212,910
============ ============
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
35
<TABLE>
<CAPTION>
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
---------- ----------
INTEREST INCOME
<S> <C> <C>
Loans ................................. $4,781,290 $4,187,876
Investment securities:
Taxable ........................... 453,930 323,735
Tax-exempt ........................ 172,070 164,535
Federal funds sold ................... 116,313 141,655
Deposits in other banks .............. 11,407 9,581
---------- ----------
Total interest income ............ 5,535,010 4,827,382
---------- ----------
INTEREST EXPENSE
Deposits .............................. 2,186,191 1,888,093
Federal Home Loan Bank advances ....... 68,317 22,718
Other borrowed funds .................. 4,698 4,700
---------- ----------
Total interest expense ........... 2,259,206 1,915,511
---------- ----------
NET INTEREST INCOME ................... 3,275,804 2,911,871
PROVISION FOR LOAN LOSSES ............. 180,000 90,000
---------- ----------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES ........... 3,095,804 2,821,871
---------- ----------
NONINTEREST INCOME
Service charges on deposit accounts ... 345,294 368,628
Mortgage origination fees ............. 123,170 10,896
Other service charges and fees ........ 102,418 81,271
Net realized gain on sales of available
for sale securities ............... 2,061
Other ................................. 146,903 87,390
---------- ----------
719,846 548,185
---------- ----------
NONINTEREST EXPENSES
Salaries and employee benefits ........ 1,213,257 1,002,542
Occupancy ............................. 96,489 99,701
Equipment and data processing ......... 216,881 224,853
Other ................................. 551,257 513,637
---------- ----------
2,077,884 1,840,733
---------- ----------
INCOME BEFORE INCOME TAXES ............ 1,737,766 1,529,323
PROVISION FOR INCOME TAXES ............ 580,000 508,000
---------- ----------
NET INCOME ............................ $1,157,766 $1,021,323
========== ==========
Basic earnings per share $ 2.30 $ 2.01
========== ==========
Diluted earnings per share $ 2.25 $ 1.98
========== ==========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
36
<TABLE>
<CAPTION>
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
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, 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 change 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
Net income 1,157,766 1,195,766
Dividends paid - $.85 per share (428,704) (428,704)
Purchase of 8,050 shares of treasury stock (200,250) (200,250)
Exercise of stock options 6,500 6,500 56,260 62,760
Tax Benefit from exercise of stock options 38,000 38,000
Net change in unrealized gain (loss) on
investment securities available for sale 20,803 20,803
------- --------- ----------- ----------- ------------- ---------- -----------
BALANCE - DECEMBER 31, 1997 528,258 $ 528,258 $ 4,963,745 $ 2,444,135 $ (6,409) $(508,850) $ 7,420,879
======= ========= =========== =========== ============= ========== ===========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
37
<TABLE>
<CAPTION>
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
----------- -----------
OPERATING ACTIVITIES
<S> <C> <C>
Net income ............................................ $ 1,157,766 $ 1,021,323
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation ..................................... 123,301 107,856
Amortization and accretion, net .................. 3,740 534
Provision for loan losses ........................ 180,000 90,000
Net realized gain on available for sale securities (2,061)
Amortization of deferred loan fees ............... (10,556) 14,043
Changes in:
Interest receivable ........................... (79,173) (5,847)
Other assets .................................. 18,915 (8,299)
Interest payable .............................. (17,650) 7,153
Other liabilities ............................. 42,230 (178,104)
----------- -----------
Net cash provided by operating activities . 1,416,512 1,048,659
----------- -----------
INVESTING ACTIVITIES
Net increase in time deposits in other banks .......... (990,000)
Net (increase) decrease in federal funds sold ......... 5,492,000 (3,059,000)
Proceeds from maturities of investment securities:
Held to maturity securities ......................... 75,000 50,000
Available for sale securities ....................... 2,504,205 881,310
Proceeds from sales of available for sale securities .. 1,207,405
Purchase of investment securities:
Held to maturity securities ......................... (223,500) (181,900)
Available for sale securities ....................... (7,697,806) (500,000)
Net increase in loans ................................. (5,977,627) (5,458,342)
Additions to premises and equipment ................... (159,971) (476,072)
----------- -----------
Net cash used for investing activities .... (5,770,294) (8,744,004)
----------- -----------
FINANCING ACTIVITIES
Net increase in deposits .............................. 3,376,009 9,107,028
Proceeds from Federal Home Loan Bank advances ......... 2,750,000 400,000
Repayment of Federal Home Loan Bank advances .......... (1,540,000) (1,320,000)
Net increase in other borrowings ..................... 76,805 3,221
Dividends paid ........................................ (428,704) (354,591)
Purchase of Treasury Stock............................. (200,250) (250,800)
Exercise of Stock Options.............................. 62,760
----------- -----------
Net cash provided by financing activities . 4,096,620 7,584,858
----------- -----------
Decrease in cash and cash equivalents ................... (257,162) (110,487)
Cash and cash equivalents - beginning ................... 2,296,408 2,406,895
----------- -----------
Cash and cash equivalents - ending ...................... $ 2,039,246 $ 2,296,408
=========== ===========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
<PAGE>
38
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
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.
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 - 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.
The Bank has 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 acccounting by creditors for impairment of loans by
specifying how allowances for credit losses related to certain loans should
be determined. This statement also addressses the accounting by creditors
for certain loans that are restructured in a troubled debt restructuring.
The Company considers a loan to be impaired when it is probable that it will
be unable to collect all amounts due (principal and interest) according to
the original terms of the loan agreement. Major risk classifications
considered by the Company in identifying loans that are to be evaluated for
impairment include; loans on nonaccrual, loans with a repeated history of
collection problems, troubled debt restructured loans, large loans 90 days
past due and loans with adverse classifications by management and regulatory
authorities. The Company considers residential mortgage loans and consumer
loans, including home equity lines of credit, to be small balance
homogeneous loans.
<PAGE>
39
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
These loan categories are collectively evaluated for impairment. Commercial
business and real estate loans are individually measured for impairment
based on the present value of future cash flows discounted at the loan's
effective interest rate, except that all collateral dependent commercial
loans are measured for impairment based on observable market price or fair
value of the collateral. Loans past due 30 days or less as to principal and
interest or having a shortfall in the amount of payment of less than 5% of
the required principal and interest payment are considered by the Company to
be insignificant and not impaired.
If the measure of the impaired loan is less than the recorded investment in
the loan, the Company recognized an impairment through an allocation in its
allowance for loan losses. The allowance for loan losses is increased by
charges to income and decreased by loan charge-offs (net of recoveries). The
allowance for loan losses is maintained at a level which, in management's
judgement, 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 Company'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.
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, 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 1996 consolidated financial
statements have been reclassified to conform to the 1997 presentation.
Cash and Cash Equivalents - For purposes of reporting cash flows, cash and
cash equivalents include cash on hand and amounts due from banks.
Recent Accounting Pronouncements - In June 1997, the Financial Accounting
Standards Board (FASB) issued Statements of Financial Accounting Standards
(SFAS) No. 130 "Reporting Comprehensive Income" This statement established
standards for reporting and displaying comprehensive income and its
components in a full set of general-purpose financial statements. This is
effective for fiscal years beginning after December 15, 1997. The Company
does not expect any material changes to its current reporting format in
response to this statement.
<PAGE>
40
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
Also, in June 1997, the Financial Accounting Standards Board issued SFAS No.
131 "Disclosure about Segments of an Enterprise and Related information" and
is effective for fiscal years beginning after December 15, 1997. This
statement establishes standards for reporting operating segments by public
business enterprises in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports to shareholders. The adoption of this statement will have
no effect on the financial statements of the Company.
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 $371,000 and
$338,000 at December 31, 1997 and 1996, respectively.
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
------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
December 31, 1997:
U.S. Treasury and
U.S. Government agencies $ 6,148,779 $ 22,356 $ 1,502 $ 6,169,633
Mortgage-backed securities 3,167,546 15,946 47,483 3,136,009
------------ ------------- ------------- ------------
Total $ 9,316,325 $ 38,302 $ 48,985 $ 9,305,642
============ ============= ============= ============
December 31, 1996:
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
============ ============= ============= ============
Held To Maturity Securities
-----------------------------------------------------------
Gross Gross
Amortized Unrealized Unrealized Fair
Costs Gains Losses Value
------------ ------------- ------------- ------------
December 31, 1997:
State and political subdivisions $ 3,165,919 $ 120,720 $ - $ 3,286,639
Other securities 179,700 179,700
------------ ------------- ------------- ------------
Total $ 3,345,619 $ 120,720 $ - $ 3,466,339
============ ============= ============= ============
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
============ ============= ============= ============
</TABLE>
Other securities reported in held to maturity securities at December 31,
1997 and 1996 represent an investment in Federal Home Loan Bank stock which
is not traded on Exchanges and has only redemption capabilities.
<PAGE>
41
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
Gross realized gains and gross realized losses on sales of
available-for-sale securities were $2,735 and $674, respectively, in 1997.
There were no sales of investment securities during 1996.
The amortized cost and estimated market value of debt securities at December
31, 1997, 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 .... $ 200,000 $ 198,498
Due after one year through
five years ............... 4,949,699 4,969,570 1,117,362 1,138,614
Due after five years through
ten years ................ 999,080 1,001,565 1,549,961 1,620,720
Due after ten years ........ 498,596 527,305
Mortgage-backed securities . 3,167,546 3,136,009
---------- ---------- ---------- ----------
$9,316,325 $9,305,642 $3,165,919 $3,286,639
========== ========== ========== ==========
</TABLE>
Securities with a carrying amount of $4,135,612 at December 31, 1997, and
$4,701,114 at December 31, 1996 were pledged to secure deposits of public
funds and for other purposes required or permitted by law.
4. LOANS
Loans are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Commercial ........................... $ 6,627,303 $ 4,798,046
Commercial real estate ............... 21,693,095 17,839,771
Real estate construction ............. 7,561,049 6,971,033
Residential real estate .............. 8,179,407 8,123,898
Consumer ............................. 4,203,117 4,604,984
------------ ------------
48,263,971 42,337,732
Net deferred loan fees ............... (66,917) (77,473)
------------ ------------
$ 48,197,054 $ 42,260,259
============ ============
</TABLE>
An analysis of the allowance for loan losses is as follows:
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Balance, beginning of year ........... $ 454,820 $ 427,662
Provision for loan losses .......... 180,000 90,000
Loans charged off .................. (122,780) (89,659)
Recoveries ......................... 71,392 26,817
------------ ------------
Balance, end of year ................. $ 583,432 $ 454,820
============ ============
</TABLE>
<PAGE>
42
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
Loans having recorded investments of approximately $304,000 at December 31,
1997 and approximately $56,000 at December 31, 1996 have been identified as
impaired in accordance with the provisions of FASB Statement No. 114. as
amended by FASB Statement No. 118. The average recorded investment in such
loans during 1997 and 1996 was approximately $311,000 and $56,700,
respectively. The total allowance for possible loan losses related to these
loans was $45,575 and $12,000 at December 31, 1997 and 1996, respectively.
In the normal course of its lending activities, the Company is a party to
financial instruments with off-balance-sheet risk . 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, 1997, the Company had outstanding loan
commitments of approximately $6,498,000 and standby letters of credit of
approximately $91,000. 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. 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,
-------------------------
1997 1996
---------- -----------
<S> <C> <C>
Balance, beginning of year ............. $ 1,776,000 $ 2,230,000
Amounts advanced ....................... 651,000 605,000
Repayments ............................. (557,000) (1,059,000)
----------- -----------
Balance, end of year ................... $ 1,870,000 $ 1,776,000
=========== ===========
</TABLE>
<PAGE>
43
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
6. PREMISES AND EQUIPMENT
Premises and equipment is summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1997 1996
---------- ----------
<S> <C> <C>
Building ................................... $1,066,254 $ 992,156
Furniture and equipment .................... 450,664 401,452
Automobiles ................................ 38,300 40,412
---------- ----------
1,555,218 1,434,020
Less accumulated depreciation .............. 466,004 380,576
---------- ----------
1,089,214 1,053,444
Land ....................................... 404,449 403,549
---------- ----------
$1,493,663 $1,456,993
========== ==========
</TABLE>
7. INTEREST-BEARING DEPOSITS
Interest-bearing deposits and related interest cost for the years ended
December 31, 1997 and 1996 are summarized as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
Deposits Interest Deposits Interest
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NOW ..................... $11,071,611 $ 380,313 $ 9,335,919 $ 347,055
Money market ............ 2,093,881 81,398 1,787,254 64,286
Savings ................. 7,024,668 239,388 6,719,504 243,010
Certificates of deposits,
$100,000 or more ..... 10,261,339 543,236 8,963,538 380,948
Other time deposits ..... 17,843,262 941,856 16,173,494 852,794
----------- ----------- ----------- -----------
$48,294,761 $ 2,186,191 $42,979,709 $ 1,888,093
=========== =========== =========== ===========
</TABLE>
At December 31, 1997, scheduled maturities of certificates of deposit are as
follows:
<TABLE>
<CAPTION>
<S> <C>
1998 $ 24,206,289
1999 2,829,314
2000 714,737
2001 184,345
2002 169,916
------------
$ 28,104,601
============
</TABLE>
<PAGE>
44
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
8. FEDERAL HOME LOAN BANK ADVANCES
The Bank has an agreement for advances with the Federal Home Loan Bank.
These advances are secured by 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.
Advances from the Federal Home Loan Bank are summarized as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
---------- ----------
<S> <C> <C>
Advance payable - interest payable monthly
at 6.37%, principal due May 14, 1999 ..... $1,000,000
Advance payable - interest payable monthly
at 7.41%, semi-annual principal reductions
of $20,000 through June 2006 ............ 340,000 $ 380,000
Advance payable - interest payable monthly
at 6.41%, quarterly principal reductions
of $6,250 through October 2007 .......... 250,000
----------
$1,590,000 $ 380,000
========== ==========
</TABLE>
Aggregate annual maturities of FHLB advances:
<TABLE>
<CAPTION>
<S> <C>
Years ended December 31, 1998 $ 65,000
1999 1,065,000
2000 65,000
2001 65,000
2002 65,000
thereafter 265,000
---------
$1,590,000
==========
</TABLE>
9. OTHER BORROWED FUNDS
Other borrowed funds consist of short-term borrowings from the Federal
Reserve Bank under the Treasury Tax and Loan Investment Program and federal
funds purchased.
10. CREDIT ARRANGEMENTS
At December 31, 1997, federal funds line of credit arrangements aggregating
$4,000,000 were available to the Bank from corresponding banking
institutions. There are no commitment fees and compensated 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.
<PAGE>
45
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
11. INCOME TAXES
The provision for income taxes is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Current $ 621,000 $ 510,000
Deferred (41,000) (2,000)
---------- ----------
$ 580,000 $ 508,000
========== ==========
</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,
------------------------
1997 1996
--------- ----------
<S> <C> <C>
Income tax at statutory rate ........... $ 591,000 $ 520,000
Increase (decrease) in taxes:
Tax-exempt interest .................. (57,000) (52,000)
State income taxes, net
of federal income tax benefit ....... 42,000 38,000
Other ................................ 4,000 2,000
--------- ---------
Provision for income taxes ............. $ 580,000 $ 508,000
========= =========
</TABLE>
The components of net deferred tax assets are as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1997 1996
-------- --------
Deferred tax assets:
<S> <C> <C>
Allowance for loan losses ...... $211,000 $139,000
Deferred loan fees ............. 27,000 31,000
Unrealized loss on investment
securities available for sale 4,000 18,000
Deferred compensation .......... 15,000 32,000
Other .......................... 4,000
-------- --------
Total deferred tax assets .... 257,000 224,000
-------- --------
Deferred tax liabilities:
Accumulated depreciation ....... 79,000 78,000
Other .......................... 15,000 10,000
-------- --------
Total deferred tax liabilities 94,000 88,000
-------- --------
Net deferred tax assets .......... $163,000 $136,000
======== ========
</TABLE>
<PAGE>
46
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
12. 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, 1997, the Bank could declare approximately $588,000 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, 1997, that the Bank meets all capital adequacy requirements
to which it is subject.
As of March 31, 1997, 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
------------------- ------------------- -----------------------
<S> <C> <C> <C> <C> <C> <C>
December 31, 1997:
Total Capital ( to Risk Weighted Assets )
Consolidated ........................... $8,010,719 15% $3,841,155 8% $4,801,444 10%
Bank ................................... $7,572,085 15% $3,827,336 8% $4,784,171 10%
Tier 1 Capital ( to Risk Weighted Assets )
Consolidated ........................... $7,427,287 17% $1,920,578 4% $2,880,866 6%
Bank ................................... $6,988,653 16% $1,913,668 4% $2,870,502 6%
Tier 1 Capital ( to Average Assets )
Consolidated ........................... $7,427,287 12% $2,459,564 4% $3,074,455 5%
Bank ................................... $6,988,653 11% $2,446,624 4% $3,058,280 5%
December 31, 1996:
Total Capital ( to Risk Weighted Assets )
Consolidated ........................... $7,252,536 16% $3,735,650 8% $4,669,562 10%
Bank ................................... $6,917,375 15% $3,735,849 8% $4,669,812 10%
Tier 1 Capital ( to Risk Weighted Assets )
Consolidated ........................... $6,797,716 15% $1,867,825 4% $2,801,737 6%
Bank ................................... $6,462,555 14% $1,867,925 4% $2,801,887 6%
Tier 1 Capital ( to Average Assets )
Consolidated ........................... $6,797,716 12% $2,186,093 4% $2,732,616 5%
Bank ................................... $6,462,555 12% $2,177,771 4% $2,722,214 5%
</TABLE>
<PAGE>
47
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
13. 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 $57,351 and $31,592 to the plan
in 1997 and 1996, respectively.
14. 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.
Also, the Company adopted an Incentive Stock Option Plan in 1997 which
provides for granting of stock options to officers and certain key employees
of the Bank. The exercise price of these options is equal to the fair market
value of the Company's stock on the date of grant. There are 5,000 remaining
stock options authorized to be granted under this plan as of December 31,
1997. The maximum term of the options is ten years and they vest and become
exercisable at such times and in such installments as the Board of Directors
shall provide in each individual stock option agreement.
<TABLE>
<CAPTION>
1997 1996
--------------------------- ---------------------------
Exercise Exercise
Shares Price Shares Price
----------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Options outstanding - beginning 25,000 $9.63 - $11.75 25,000 $9.63 - $11.75
Options granted 5,000 $19
Options exercised (6,500) $9.63 - $10.66
----------- -------------- ----------- --------------
Options outstanding - ending 23,500 $9.63 - $19.00 25,000 $9.63 - $11.75
=========== ============== =========== ==============
</TABLE>
The total stock options exercisable at December 31, 1997 and 1996 were
19,500 and 25,000, respectively, which had a weighted average exercise price
of $11.21 and $10.50, respectively.
The Company has elected not to adopt the fair value method of accounting for
employee stock options as prescribed by Statement of Financial Accounting
Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation" issued by
the Financial Accounting Standards Board. Instead, as permitted by SFAS No.
123, the Company has elected to continue to apply the intrinsic value method
of accounting prescribed under the provisions of Accounting Principles Board
Statement No. 25, "Accounting for Stock Issued to Employees". Accordingly,
no compensation cost has been recognized for options granted in 1997. Pro
forma disclosures of the effects of applying the fair value based method are
considered immaterial and have been omitted.
<PAGE>
48
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
15. OTHER NONINTEREST EXPENSES
The major components of other noninterest expenses are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1997 1996
-------- --------
<S> <C> <C>
Postage ............... $ 54,642 $ 52,185
Stationery and supplies 52,434 48,344
Professional services . 62,435 58,599
Director fees ......... 58,200 46,000
Other ................. 323,546 308,509
-------- --------
Total ............ $551,257 $513,637
======== ========
</TABLE>
16. EARNINGS PER SHARE
Earnings per share has been calculated in accordance with the provisions of
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per
Share" issued by the Financial Accounting Standards Board. SFAS No. 128
requires presentation of earnings per share on a basic computation and a
diluted computation. The basic computation divides net income by only the
weighted average number of common shares outstanding for the year and the
diluted computation gives effect to all diluted common shares that were
outstanding during the year.
Earnings per share amounts for 1996 have been restated to give effect to the
application of this new standard.
The following data shows the amounts used in computing earnings per share
and the effect on income and the weighted average number of shares of
dilutive potential common stock.
<TABLE>
<CAPTION>
Years Ended December 31,
1997 1996
-----------------------
<S> <C> <C>
Income available to common shareholders:
Used in basic earnings per share ..... $1,157,766 $1,021,323
========== ==========
Used in diluted earnings per share ... $1,157,766 $1,021,323
========== ==========
Weighted average number of common
shares used in basic earnings per share 503,882 507,902
Effect of dilutive securities:
Stock options ........................ 11,712 7,503
---------- ----------
Weighted average number of common
and dilutive potential common shares
used in diluted earnings per share ... 515,594 515,405
========== ==========
</TABLE>
<PAGE>
49
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
17. 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, interest-bearing deposits in other financial
institutions, federal funds sold and accrued interest receivable - The
carrying amounts of these assets approximates fair value because of their
short-term maturities.
Investments Securities - Fair values for investment 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. The carrying value of
off-balance-sheet commitments approximates fair value based on the fact that
the Company generally does not offer lending commitments to its customers
for long periods and, the underlying rates of the commitments approximate
market rates.
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.
Federal Home Loan Bank advances - Fair value for fixed-rate borrowings from
the Federal Home Loan Bank are estimated using a discounted cash flow
calculation that considers interest rates currently being offered on
advances of similar terms to maturity.
Other borrowed funds - The carrying amounts of federal funds purchased and
other short-term borrowings approximate their fair values.
<PAGE>
50
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
The carrying values and estimated fair values of the Company's financial
instruments were as follows:
<TABLE>
<CAPTION>
December 31, 1997 December 31, 1996
------------------------- -------------------------
Carrying Fair Carrying Fair
Value Value Value Value
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks ... $ 2,039,246 $ 2,039,246 $ 2,296,408 $ 2,296,408
Interest-bearing deposits . 990,000 990,000
Federal funds sold ........ 38,000 38,000 5,530,000 5,530,000
Investment securities:
Available for sale ..... 9,305,642 9,305,642 5,289,372 5,289,372
Held to maturity ....... 3,345,619 3,466,339 3,194,200 3,330,320
Loans ..................... 48,197,054 48,409,461 42,260,259 42,298,473
Accrued interest receivable 452,262 452,262 373,089 373,089
Financial liabilities:
Deposits .................. $55,980,085 $56,150,661 $52,604,076 $52,734,792
Federal Home Loan advances 1,590,000 1,619,400 380,000 380,000
Other borrowed funds ...... 130,000 130,000 53,195 53,195
</TABLE>
18. SUPPLEMENTAL CASH FLOW INFORMATION
Certain supplemental disclosure of cash flow information and noncash
investing and financing activities:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Cash paid during the year for:
Income taxes ............................ $ 632,818 $ 685,301
=========== ===========
Interest ................................ $ 2,276,856 $ 1,908,358
=========== ===========
Noncash investing and financing activities:
Net unrealized gain (loss) on investment
securities available for sale ......... $ 20,803 $ (19,435)
=========== ===========
</TABLE>
<PAGE>
51
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
19. 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 follow:
<TABLE>
<CAPTION>
Condensed Balance Sheets
- -----------------------------------------------------
December 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Assets
Cash ............................................. $ 112,140 $ 49,667
Land ............................................. 301,494 301,494
Other Assets ..................................... 63,000 22,000
Investment in subsidiary ......................... 6,982,245 6,435,343
----------- -----------
Total Assets .................................. $ 7,458,879 $ 6,808,504
=========== ===========
Liabilities
Deferred compensation payable .................... $ 38,000 $ 38,000
----------- -----------
Shareholders' equity
Common Stock ..................................... $ 528,258 $ 521,758
Additional paid-in capital ....................... 4,963,745 4,869,485
Retained Earnings ............................... 2,444,135 1,715,073
Net unrealized loss on investment securities
available for sale, net of deferred income taxes (6,409) (27,212)
----------- -----------
7,929,729 7,079,104
Treasury stock ................................... (508,850) (308,600)
----------- -----------
Total shareholders' equity .................... 7,420,879 6,770,504
----------- -----------
Total liabilities and shareholders' equity .... $ 7,458,879 $ 6,808,504
=========== ===========
Condensed Statements of Income
- -------------------------------
Years Ended December 31,
-------------------------
1997 1996
----------- -----------
Income
Dividends from Bank .............................. $ 650,000 $ 458,000
Interest income .................................. 1,338 5,859
----------- -----------
651,338 463,859
Expenses ........................................... 29,671 23,250
----------- -----------
Income before income tax benefit
and equity in undistributed income of Bank ...... 621,667 440,609
Income tax benefit ................................. 10,000 7,000
----------- -----------
Income before equity in undistributed
income of Bank ................................... 669,667 447,609
Equity in undistributed income of Bank ............. 526,099 573,714
----------- -----------
Net income ......................................... $ 1,157,766 $ 1,021,323
=========== ===========
</TABLE>
<PAGE>
52
BRYAN BANCORP OF GEORGIA, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997 and 1996
================================================================================
<TABLE>
<CAPTION>
Condensed Statements of Cash Flows
- ----------------------------------
Years Ended December 31,
-------------------------
1997 1996
----------- -----------
Operating Activities
<S> <C> <C>
Net income ...................................... $ 1,157,766 $ 1,021,323
Adjustments to reconcile net income
to net cash provided by operating activities:
Equity in undistributed income of Bank ...... (526,099) (573,714)
Net (increase) in other assets .............. ( 3,000) (5,422)
----------- -----------
Net cash provided by operating activities 628,667 442,187
----------- -----------
Investing Activities
Purchase of land ................................. (301,494)
Net cash (used) for investing activities . (301,494)
----------- -----------
Financing Activities
Purchase of treasury stock ....................... (200,250) (250,800)
Exercise of stock options .................. 62,760
Dividends paid ................................... (428,704) (354,591)
----------- -----------
Net cash (used) for financing activities . (566,194) (605,391)
----------- -----------
Increase (decrease) in cash ........................ 62,473 (464,698)
Cash - beginning of year ........................... 49,667 514,365
----------- -----------
Cash - end of year ................................. $ 112,140 $ 49,667
=========== ===========
</TABLE>
20. SUBSEQUENT EVENT
On February 10, 1998, the Company signed a definitive agreement to merge
with The Savannah Bancorp, Inc., a bank holding company that owns The
Savannah Bank located in Savannah, Georgia. This merger would result in The
Savannah Bancorp, Inc. acquiring all of the Company's outstanding stock in a
business combination accounted for as a pooling of interest. Upon
consummation of this merger, which is subject to regulatory and shareholder
approvals, shareholders of the Company would receive 1.85 shares of stock in
The Savannah Bancorp, Inc. in exchange for each share of the Company's
stock.
<PAGE>
53
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: October 8, 1998 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 October 8, 1998
- ------------------------- ---------------
E. James Burnsed Officer and Director
Director
- ------------------------- ---------------
J. Carl Cox, Jr.
/s/ L. Carlton Gill Director October 8, 1998
- ----------------------- ---------------
L. Carlton Gill
Director
- ------------------------- ---------------
John R. Harvey
/s/ Thomas A. Lancaster Director October 8, 1998
- ------------------------- ---------------
Thomas A. Lancaster
Director
- ------------------------- ---------------
Juanita B. Phillips
Director
- ------------------------- ---------------
James T. Roberts, Sr.
(SIGNATURES CONTINUED ON NEXT PAGE)
<PAGE>
54
SIGNATURES TITLE DATE
- ---------- ----- ----
/s/ James W. Royal Secretary and Director October 8, 1998
- ------------------------- ---------------
James W. Royal
/s/ Jimmy F. Sommers Director October 8, 1998
- ------------------------- ---------------
Jimmy F. Sommers
/s/ Charles L. Stafford Chairman of the Board October 8, 1998
- ------------------------- ---------------
Charles L. Stafford
Director
- ------------------------- ---------------
Robert T. Thompson
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANT 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, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,039,246
<INT-BEARING-DEPOSITS> 990,000
<FED-FUNDS-SOLD> 38,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 9,305,642
<INVESTMENTS-CARRYING> 3,345,619
<INVESTMENTS-MARKET> 3,466,339
<LOANS> 48,197,054
<ALLOWANCE> 583,432
<TOTAL-ASSETS> 65,512,679
<DEPOSITS> 55,980,085
<SHORT-TERM> 170,000
<LIABILITIES-OTHER> 1,941,715
<LONG-TERM> 0
0
0
<COMMON> 528,258
<OTHER-SE> 7,401,471
<TOTAL-LIABILITIES-AND-EQUITY> 65,512,679
<INTEREST-LOAN> 4,781,290
<INTEREST-INVEST> 626,000
<INTEREST-OTHER> 127,720
<INTEREST-TOTAL> 5,535,010
<INTEREST-DEPOSIT> 2,186,191
<INTEREST-EXPENSE> 2,259,206
<INTEREST-INCOME-NET> 3,275,804
<LOAN-LOSSES> 180,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 2,077,884
<INCOME-PRETAX> 1,737,766
<INCOME-PRE-EXTRAORDINARY> 1,157,766
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,157,766
<EPS-PRIMARY> 2.30
<EPS-DILUTED> 0
<YIELD-ACTUAL> 5.65
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 454,820
<CHARGE-OFFS> 122,780
<RECOVERIES> 71,392
<ALLOWANCE-CLOSE> 583,432
<ALLOWANCE-DOMESTIC> 583,432
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
