<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
AMENDMENT NO. 1 TO 10KSB/A
FORM 10-KSB
x Annual Report under Section 13 of the Securities Exchange Act of
- ------- 1934 for the Fiscal Year ended December 31, 1996 (Fee required)
- ------- Transition report under Section 13 of 15(d) of the Securities Exchange
Act of 1934 (No fee required)
Commission File No. 0-20251
CRESCENT BANKING COMPANY
------------------------
(Name of Small Business Issuer in Its Charter)
Georgia 58-1968323
- ---------------------------------- -------------------------
(State or Other Jurisdiction (I.R.S. Employer Identification No)
of Incorporation or Organization)
251 Highway 515 30143
- --------------------------------------- ---------------------
(Address of Principal Executive Offices) (Zip Code)
(706) 692-2424
-------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
Title of Each Class Securities registered under Section 12(b) of the Exchange
Act: None
Name of Each Exchange on which Registered: None
Title of Each Class Securities registered under Section 12(g) of the Exchange
Act:
Common Stock, $1.00 par value
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or (15) d of the Exchange Act 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 past 90 days. Yes X No
---- -----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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 Company's revenues for its fiscal year ended December 31, 1996 were
$7.5 million.
The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as March 24, 1997 was $14.00. The number of
shares outstanding of the Company Common Stock as of March 24, 1997 was 704,854.
Portions of the Company's 1996 Annual Report to Shareholders for the year
ended December 31, 1996 ("Annual Report") are incorporated by reference into
Parts I and II of this Form 10-KSB.
1
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Company caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CRESCENT BANKING COMPANY
April 10, 1997 By: /s/ J. Donald Boggus, Jr.
-------------------------------------
J. Donald Boggus, Jr.
President and Chief Executive Officer
19
<PAGE>
EXHIBIT INDEX
Sequential
Page Number
13 Crescent Banking Company 1996 Annual Report to Page 22
Shareholders. With the exception of information expressly
incorporated herein, the 1996 Annual Report to Shareholders
is not deemed filed as part of this Annual Report on Form
10-KSB.
20
<PAGE>
[LOGO OF CRESCENT BANKING COMPANY AND SUBSIDIARIES APPEARS HERE]
- -------------------------
1996
Annual Report
- -------------------------
<PAGE>
1996 ANNUAL TABLE OF CONTENTS
<TABLE>
<S> <C>
Chairman's Remarks..........................................................
FINANCIAL OVERVIEW
Financial Highlights........................................................
Statistical Information.....................................................
Management's Discussion & Analysis..........................................
CONSOLIDATED FINANCIAL REPORT
Consolidated Financial Report Contents......................................
Independent Auditor's Report or Financial Statements........................
Consolidated Balance Sheets.................................................
Consolidated Statements of Income...........................................
Consolidated Statements of Stockholder's Equity.............................
Consolidated Statements of Cash Flows.......................................
Notes to Consolidated Financial Statements..................................
Shareholder Information.....................................................
Directors and Officers......................................................
</TABLE>
<PAGE>
TO OUR SHAREHOLDERS:
Its is a pleasure to report that 1996 was a year marked with many
milestones for Crescent Banking Company. Significant strides were made in the
Company's performance as earnings per share increased from $.13 per share to
$.83 per share in 1996. The improvement in earnings resulted in the resumption
of quarterly dividends of $.05 per share which were paid in the fourth quarter.
The Company continued and increased the dividends as $.055 per share was paid in
the first quarter 1997. The Company's total assets increased 30% to $74.3
million at year end.
Also in 1996, the mortgage division of Crescent Bank and Trust Company set
a new production record in closing over $460 million of mortgage loans. In the
fourth quarter, the Company announced an expansion of its wholesale mortgage
operations into the Northeast United States through Crescent Mortgage Services,
Inc. The office is located in Manchester, New Hampshire with a staff of eleven
employees.
The Bank now has full service locations in Jasper and Marble Hill and a
loan production office in Bartow County. With a mortgage operation that serves
the Northeast and Southeast United States, the Company is positioned for the
future.
As we strive to continue to increase the value of our franchise, we must
express our appreciation to the directors, officers, and employees for their
guidance and handwork.
We especially thank you, our shareholders and customers, for your support
in making 1996 a success.
We look forward to 1997.
/s/ Arthur Howell
--------------------------
Arthur Howell
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Year ended December 31:
Interest income (1) $ 5,333,659 $ 4,140,759
Interest expense 2,161,682 1,535,490
Net interest income 3,171,977 2,605,269
Provision for loan losses -- 496,937
Net interest income after
provision for loan losses 3,171,977 2,108,332
Other operating income 4,009,372 3,399,280
Other operating expenses 6,204,512 5,359,055
Net income before income taxes 976,837 148,557
Applicable income taxes 393,489 59,423
Net income 583,348 89,134
[CHART APPEARS HERE]
Per share data:
Net income $0.83 $0.13
Period-end book value $10.89 $10.11
Cash dividends $0.050 $0.250
Financial ratios:
Return on assets 0.93% 0.17%
Return on shareholders' equity 7.92% 1.26%
Total capital to adjusted assets 14.40% 16.16%
[CHART APPEARS HERE]
Balances as of December 31:
Loans, net $28,164,888 $23,634,885
Allowance for loan losses 335,512 566,071
Mortgage loans held for sale 32,996,668 17,361,494
Total assets 74,652,352 57,383,666
Total deposits 55,745,908 40,498,009
Shareholders' equity 7,673,868 7,125,597
</TABLE>
[CHART APPEARS HERE]
(1) The amount of fee income included in interest income for the years ended
December 31, 1996 and December 31, 1995 was $1,386,430 and $979,012,
respectively.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Distribution of Assets, Liabilities and Stockholders' Equity:
Interest Rates and Interest Differential
<TABLE>
<CAPTION>
Year ended December 31, 1996 Year ended December 31, 1995
--------------------------------------------------------------------------------------------
Daily Daily
Average Income/ Yields/ Average Income/ Yields/
Balances Expense Rates Balances Expense Rates
--------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning assets:
Loans (1) $26,048 $2,831 10.87% $18,509 $2,002 10.82%
Mortgage loans held for sale 22,067 2,237 10.14% 15,203 1,732 11.39%
Securities, at cost 1,681 108 6.42% 1,264 86 6.80%
Federal funds sold 1,453 81 5.57% 2,548 155 6.08%
Deposits in other banks 1,235 77 6.23% 2,889 166 5.75%
------------------------------------------------------------------------------------------
Total interest-earning assets 52,484 5,334 10.16% 40,413 4,141 10.25%
Other assets 9,970 10,625
-------------- -------------
Total assets $62,454 $51,038
============== =============
LIABILITIES &
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Demand deposits $6,327 $250 3.95% $5,634 $216 3.83%
Savings deposits 4,036 139 3.44% 4,354 147 3.38%
Time deposits 26,408 1,679 6.36% 19,238 1,166 6.06%
Mortgage warehouse line
of credit and other 2,049 94 4.59% 99 7 7.07%
------------------------------------------------------------------------------------------
Total interest-bearing
liabilities 38,820 2,162 5.57% 29,325 1,536 5.24%
Noninterest bearing deposits 10,314 8,919
Other liabilities 5,950 5,718
Stockholder's equity 7,370 7,076
------------- -----------
Total liabilities &
stockholders' equity $62,454 $51,038
============= ===========
Net interest income $3,172 $2,605
============= ===========
Net yield on interest-earning
assets 6.04% 6.45%
========= =======
</TABLE>
4
(1) For the purpose of these computations, nonaccruing loans are included in
the daily average loan amounts outstanding.
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Distribution of Assets, Liabilities and Stockholders' Equity:
Interest Rates and Interest Differential (continued)
The following table sets forth for the periods indicated a summary of the
changes in interest earned and interest paid resulting from changes in volume
and changes in rate:
<TABLE>
<CAPTION>
1996 compared to 1995 1995 compared to 1994
----------------------------------------------------------------------------------------------
Increase (Decrease) due to (1)
----------------------------------------------------------------------------------------------
Volume Rate Net Volume Rate Net
----------------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C> <C>
Interest earned on:
Loans $819 $10 $829 $235 $268 $503
Mortgage loans held for sale 713 (208) 505 (413) 652 239
Securities, at cost 27 (5) 22 (3) 16 13
Federal funds sold (62) (12) (74) 143 4 147
Deposits in other banks (102) 13 (89) (100) 63 (37)
----------------------------------------------------------------------------------------------
Total interest-earning assets $1,395 ($202) $1,193 ($138) $1,003 $865
==============================================================================================
Interest paid on:
Demand deposits $27 $7 $34 ($4) $29 $25
Savings deposits (11) 3 (8) (17) 16 (1)
Time deposits 453 60 513 90 203 293
Mortgage warehouse
line of credit and other 90 (3) 87 (19) (5) (24)
Total interest-bearing ----------------------------------------------------------------------------------------------
liabilities $559 $67 $626 $50 $243 $293
==============================================================================================
</TABLE>
(1) The change in interest due to both volume and rate has been allocated to
volume and rate changes in proportion to the relationship of the absolute
dollar amounts of the change in each.
5
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
================================================================================
Investment Portfolio
Investment Portfolio
The following table sets forth the maturities of securities, as of December 31,
1996 and the weighted average yields of such securities (calculated on the basis
of the cost and effective yields weighted for the scheduled maturity of each
security).
<TABLE>
<CAPTION>
MATURING
--------------------------------------------------------------------------------------------------
After one but After five but
Within One Within Five Within ten
Year Years Years After Ten Years
--------------------------------------------------------------------------------------------------
Amount Yield Amount Yield Amount Yield Amount Yield
--------------------------------------------------------------------------------------------------
(In Thousand)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Municipal Bond - - - - $345 4.45% - -
Mortgage-backed securities - - - - - - 404 6.77%
--------------------------------------------------------------------------------------------------
Total - - - - $345 4.45% $404 6.77%
==================================================================================================
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Loan Portfolio
The following table shows the amount of loans (excluding real estate-mortgage
and consumer loans) outstanding as of December 31, 1996, which based on
remaining scheduled repayments of principal, are due in the periods indicated.
Also provided are the amounts due after one year, classified according to the
sensitivity to changes in interest rates.
<TABLE>
<CAPTION>
MATURING
------------------------------------------------------------------------------------
After One
Within One but Within After Five
Year Five Years Years Total
------------------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Commercial $3,325 $4,483 $1,512 $9,320
Real estate - construction 9,414 879 53 10,346
------------------------------------------------------------------------------------
Total $12,739 $5,362 $1,565 $19,666
====================================================================================
Loans maturing after one year with:
Fixed interest rates $3,988 $843
Variable interest rates 1,374 722
-------------------------------------
$5,362 $1,565
=====================================
</TABLE>
As a result of economic conditions, losses for all commercial banking loan
categories as a percentage of average loans are expected to be approximately
.25% to .40% in 1997.
Nonperforming Loans
The following table summarizes the Bank's nonaccrual, past due and restructured
commercial banking loans:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------------------------------
(In Thousands)
<S> <C> <C>
Nonaccrual loans $168 $416
================================================
Accruing loans past due
90 days or more $23 $387
================================================
Restructured loans - -
================================================
</TABLE>
The gross income on nonaccrual commercial banking loans noted above that would
have have been reported in the year ended December 31, 1996 if the loans had
been current in accordance with their original terms and had been outstanding
throughout the year or since origination was $13,433.
7
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Loan Portfolio (cont'd)
The amount of interest income on nonaccrual commercial banking loans noted above
that was included in net income for the year ended December 31, 1996 was $0.
The following table summarizes activity in the allowance for commercial banking
loan losses for the dates indicated:
<TABLE>
<CAPTION>
Years Ended December 31,
1996 1995
-------------------------------
<S> <C> <C>
Balance, beginning of period $566,071 $275,286
Loans charged-off:
Commercial (217,913) (18,466)
Real estate-construction (19,956) -
Real estate-mortgage - (166,293)
Installment and other consumer (11,023) (25,921)
-------------------------------
Total loans charged-off (248,892) (210,680)
Recoveries:
Installment and other consumer 15,583 4,142
Commercial 2,750 386
-------------------------------
Total loans recovered 18,333 4,528
Net loans charged-off (230,559) (206,152)
Provision for loan losses - 496,937
-------------------------------
Balance, end of period $335,512 $566,071
===============================
(Dollars in Thousands)
Loans outstanding at end of period,
excluding loans held for sale $28,500 $24,201
Ratio of allowance to loans
outstanding at end of period,
excluding loans held for sale 1.18% 2.34%
Average loans outstanding during
the period, excluding loans held
for sale. $26,048 $18,509
Ratio of net charge-offs during the
period to average loans outstanding 0.89% 1.11%
</TABLE>
The allocation of the allowance for commercial banking loan losses by loan
category at the dates indicated is presented below. The Bank does not maintain a
reserve with respect to mortgage loans held for sale due to the low risk
associated with the loans during the Bank's holding period. The percentages
represent the percent of banking loans in each category to total loans
outstanding at the end of each respective period.
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
---------------------------------------------
Amt % Amt %
---------------------------------------------
<S> <C> <C> <C> <C>
Commercial $183 32.7% $387 50.0%
Real estate-mortgage (1) 28 19.7% 35 20.7%
Real estate-construction
and land development 41 36.3% 27 18.9%
Consumer 61 11.3% 58 10.4%
Unallocated 22 59
---------------------------------------------
$335 100.0% $566 100.0%
=============================================
</TABLE>
(1) Includes any loans secured in whole or in part by real estate.
8
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
Deposits
Deposits
The following table summarizes average daily balances of deposits and rates paid
on such deposits for the periods indicated:
<TABLE>
<CAPTION>
Years ended
December 31, 1996 December 31, 1995
----------------------------------------------------------------------------
Amount Rate Amount Rate
----------------------------------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C>
Noninterest-bearing
demand deposits $10,314 - $8,919 -
Interest-bearing
demand deposits 6,327 3.95% 5,634 3.83%
Savings deposits 4,036 3.44% 4,354 3.38%
Time deposits 26,408 6.36% 19,238 6.06%
-------------- --------------
Total $47,085 $38,145
============== ==============
</TABLE>
Maturities of time certificates of deposit of $100,000 or more outstanding at
December 31, 1996 are summarized as follows (in thousands):
<TABLE>
<S> <C>
Under 3 months $946
3 to 6 months 737
6 to 12 months 2,130
Over 12 months 3,044
--------------
$6,857
==============
</TABLE>
Return on Equity and Assets
The following table shows operating and capital ratios for each of the last two
years:
<TABLE>
<CAPTION>
Year ended December 31
1996 1995
-------------------------
<S> <C> <C>
Percentage of net income to:
Average stockholders' equity 7.92% 1.26%
Average total assets 0.93% 0.17%
Percentage of average
stockholders' equity
to average total assets 11.80% 13.86%
Percentage of dividends paid
to net income 6.01% 197.61%
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
Financial Highlights
================================================================================
Short-Term Borrowings
Short-Term Borrowings
The following table presents the outstanding balances of the Bank's borrowings
under its warehouse line of credit and the weighted average interest rates
thereon for the last two years. This line of credit has a one-year term expiring
in March 1997. Draws thereon have a 30-day maturity.
<TABLE>
<CAPTION>
Year ended December 31,
1996 1995
-----------------------------------
<S> <C> <C>
Balance at period end $7,396,755 $0
Weighted average interest rate at period end 6.98% -
Maximum amount outstanding at any month's end $7,396,755 $0
Average amount outstanding $1,966,391 $53,393
Weighted average interest rate 4.61% 7.31%
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion and analysis of the Company's financial condition
and results of operations should be read in conjunction with the Company's
financial statements and related notes, and the statistical information included
elsewhere herein. Certain of the matters discussed under this caption,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations ," and elsewhere in this Annual Report may constitute forward-looking
statements for purposes of the Securities Act of 1933, as amended and the
Securities Exchange Act of 1934, as amended and as such may involve known and
unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from future results, performance or achievements expressed or implied by such
forward-looking statements. The Company's actual results may differ materially
from the results anticipated in these forward looking statements due to a
variety of factors, including, without limitation: the effects of future
economic conditions; governmental monetary and fiscal policies, as well as
legislative and regulatory changes; the risk of changes in interest rates on the
level and composition of deposits, loan demand, and the values of loan
collateral, securities, and interest rate risks; the effects of competition from
other commercial banks, thrifts, mortgage banking firms, consumer finance
companies, credit unions, securities brokerage firms, insurance companies, money
market and other mutual funds and other financial institutions operating in the
Company's market area and elsewhere, including institutions operating locally,
regionally, nationally and internationally, together with such competitors
offering banking products and services by mail, telephone, and computer and the
Internet; and the failure of assumptions underlying the establishment of
reserves for possible loan losses. All written or oral forward-looking
statements attributable to the Company are expressly qualified in their entirety
by these Cautionary Statements.
Summary
The Company's net income for the year ended December 31, 1996 was $583,348
compared with net income of $89,134 for the year ended December 31, 1995. The
increase in net income from 1995 to 1996 was primarily the result of the large
provision for loan loss and expenses incurred exploring a trust business plan in
1995.
Balance Sheets
The Company's assets increased by 30% during 1996 from $57.4 million as of
December 31, 1995 to $74.7 million as of December 31, 1996. The increase in
total assets in 1996 is the result of the increase in the Commercial bank loans
and mortgage loans held for sale. The increase in assets was funded with a 37%
increase in deposits and through other borrowing sources. The increase in
mortgage banking production and related mortgage loans held for sale from 1995
to 1996 was the result of the relatively low historical mortgage rates during
1996, as well as an increase in correspondents from which the mortgage division
purchases mortgage loans.
Earning assets (comprised of commercial banking loans, mortgage loans held
for sale, investment securities, interest-bearing balances in other banks and
temporary investments) totaled $63.8 million or 85.4% of total assets at
December 31, 1996. This represents an increase from December 31, 1995 when
earning assets totaled $47.8 million or 83.3% of total assets. The increase in
earning assets resulted primarily from the increase of $4.3 million of loans
and increase of $15.6 million of mortgage loans held for sale. The increase was
primarily funded through an increase in deposits and other borrowings. Average
mortgage loans held for sale during 1996 of
11
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
$22.1 million constituted 42.1% of average earning assets and 35.4% of average
total assets. Average mortgage loans held for sale during 1995 of $15.2 million
constituted 37.6% of average earning assets and 29.8% of average total assets.
During 1996, average commercial banking loans were $26.1 million and
constituted 49.6% of average earning assets and 41.7% of average total assets.
For 1995, average commercial banking loans were $18.5 million and constituted
45.8% of average earning assets and 36.3% of average total assets. The
increase in commercial banking loans was the result of higher loan demand in the
Bank's service area as well as loan production from the Bank's loan production
office in Bartow County.
Commercial banking loans are expected to produce higher yields than
securities and other interest-earning assets. In addition, mortgage loans held
for sale generate net interest income due to the greater rates of interest paid
to the Bank on the longer term mortgage loans over the rates of interest paid by
the Bank on its shorter term warehouse line of credit and regular funding
sources. Therefore, absolute volume of commercial banking loans and mortgage
loans held for sale and the volume as a percentage of total earning assets are
an important determinant of net interest margin thereof. See the tables
preceding Management's Discussion and Analysis, as well as Note 3 to the
financial statements, for a summary of loans, related maturities and a
discussion of concentrations of credit risk.
The allowance for loan losses represents a reserve for potential losses in
the Bank's commercial banking loan portfolio. The provision for loan losses is
a charge to earnings in the current period to maintain the allowance at a level
management has determined to be adequate. The allowance for loan losses totalled
$335,512 or 1.18% of total commercial banking loans at December 31, 1996, and
$566,071 or 2.34% of total loans at December 31, 1995. The decrease in the
allowance for loan loss from 1995 to 1996 was the result of net charge offs of
$230,559 in 1996. The determination of the reserve level rests upon
management's judgment about factors affecting loan quality and assumptions about
the economy. The adequacy of the allowance for loan losses is evaluated
periodically based on a review of all significant loans, with a particular
emphasis on past due and other loans that management believes require attention.
Management considers the year-end allowance appropriate and adequate to cover
possible losses in the loan portfolio; however, management's judgment is based
upon a number of assumptions about future events which are believed to be
reasonable but which may or may not prove valid. Thus, there can be no
assurance that charge-offs in future periods will not exceed the allowance for
loan losses or that additional increases in the allowance for loan losses will
not be required. The Bank does not maintain a reserve with respect to its
mortgage loans held for sale due to the low credit risk associated with the
loans during the Bank's holding period.
The Bank's policy is to discontinue the accrual of interest on loans which
are 90 days past due unless they are well-secured and in the process of
collection. Interest on these non-accrual loans will be recognized only when
received. As of December 31, 1996, the Bank had $167,916 of loans accounted for
on a non-accrual basis, $23,140 contractually past due more than 90 days and no
loans considered to be troubled debt restructurings, as defined by Financial
Accounting Standards Board Statement No. 15 (FASB #15). As of December 31,
1995, the Bank had $415,589 of loans accounted for on a non-accrual basis,
$387,295 contractually past due more than 90 days and no loans considered to be
troubled debt restructurings, as defined by FASB #15.
Non-performing loans are defined as non-accrual and renegotiated loans.
Adding real estate acquired by foreclosure and held for sale of $727,159 with
non-performing loans results in non-
12
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
performing assets of $895,075 at December 31, 1996. The Bank is currently
holding the foreclosed properties for sale. At December 31, 1995, the Bank had
non-performing assets totalling $565,589. The chart below summarizes the Banks'
assets that management feels warrant attention due to the potential for loss, in
addition to the above mentioned non-performing loans and foreclosed properties.
Potential problem loans represents loans that are presently performing, however,
management has doubts concerning the ability of the respective borrowers to meet
contractual repayment terms. Potential problem loans to total loans decreased
from 6.9% at December 31, 1995 to 1.42% at December 31, 1996. The decrease was
primarily a result of one loan being acquired by foreclosure of $575,000, charge
offs of $248,892 and the Bank's loan growth in 1996.
<TABLE>
<CAPTION>
December 31,
1996 1995
---------- ---------
<S> <C> <C>
Non-performing loans* $ 167,916 $ 415,589
Troubled debt restructurings** ---- ----
Foreclosed properties 727,159 150,000
-------- ----------
Total non-performing assets 895,075 565,589
======== ==========
Loans 90 days or more past
due on accrual status $ 23,140 $ 387,295
Potential problem loans*** 405,089 1,662,080
Potential problem loans/total loans 1.42% 6.9%
Non-performing assets/total loans
and foreclosed properties 3.06% 2.32%
Non-performing assets and loans 90 days or
more past due on accrual status/
total loans and foreclosed properties 3.14% 3.91%
</TABLE>
* Defined as non-accrual loans and renegotiated loans.
** As defined by Financial Accounting Standards Board Statement No. 15.
*** Loans identified by management as potential problem loans (classified and
criticized loans) but still on accrual.
The information on nonaccrual and restructured loans in the above table is
not comparable with the information on impaired loans as disclosed in Note 3 of
the financial statements.
The Bank invests its excess funds in U.S. Government agency obligations,
corporate securities, federal funds sold, and interest-bearing deposits with
other banks. The Bank's investments are managed in relation to loan demand and
deposit growth, and are generally used to provide for the investment of excess
funds at minimal risk while providing liquidity to fund increases in loan demand
or to offset fluctuations in deposits. Thus, investment securities are managed
in order to minimize the Bank's exposure to interest rate risk. Investment
securities and interest-bearing deposits with other banks totaled $1.7 million
at December 31, 1996 compared to $5.3 million at December 31, 1995. Federal
funds sold totaled $570,000 at December 31, 1996 compared to 1,020,000 at
December 31, 1995. See Note 2 to the financial statements and the tables
preceding Management's Discussion and Analysis for details of the Bank's
investment portfolio as of December 31, 1996 and 1995.
The mortgage division of the Bank acquires mortgage loans from small
retail-oriented originators in the Southeast through the utilization of a
variety of funding sources. These sources
13
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
include Bank's regular funding sources, a $18.0 million warehouse line of credit
from the Federal Home Loan Bank of Atlanta and a $40 million gestation
repurchase agreement. Under the repurchase agreement, the Bank sells mortgage
loans and simultaneously assigns the related forward sale commitments to the
security broker. Substantially all of the mortgage loans are currently being
resold in the secondary market to the Federal Home Loan Mortgage Corporation
("Freddie Mac") and private investors after being "warehoused" for 10 to 30
days. Loans may also be sold in the future to the Federal National Mortgage
Association ("Fannie Mae"). Warehoused loans must meet secondary market
criteria such as amount limitations and loan-to-value ratios to qualify for
resales to Freddie Mac and Fannie Mae. To the extent that the Bank retains the
servicing rights on mortgage loans that it resells, it collects annual servicing
fees while the loan is outstanding. The Bank periodically sells a portion of its
retained servicing rights in bulk form. The annual servicing fees and gains on
the sale of servicing rights are an integral part of the mortgage banking
operation and its contribution to net income. The Bank currently pays a third
party subcontractor to perform servicing functions with respect to its loans
sold with retained servicing.
During 1996, the mortgage division acquired $467.8 million of mortgage
loans, of which $452.1 million were resold in the secondary market with
servicing rights retained by the Bank. The remaining $33 million were carried
as mortgage loans held for sale on the balance sheet as sale of the loans was
pending. At December 31, 1996, capitalized costs of $4.1 million related to
the purchase of the mortgage servicing rights were carried on the balance sheet
as purchased mortgage servicing rights. At December 31, 1995, the Bank carried
$4.5 million of purchased mortgage servicing rights on its balance sheet. The
Bank is amortizing the purchased mortgage servicing rights over an accelerated
period. At December 31, 1996, the Bank held servicing rights with respect to
loans with unpaid principal balances totaling $407.8 million compared to $392.1
at December 31, 1995. During 1996, the Bank sold servicing rights with respect
to $438.8 million of mortgage loans carried on its balance sheet at $5.0 million
for a gain of $884,457. During 1995, the Bank sold servicing rights with
respect to $399.5 million of mortgage loans carried on its balance sheet at $4.6
million for a gain of $920,408. The market value of the servicing portfolio is
contingent upon many factors including interest rate environment, estimated life
of the servicing portfolio, loan quality of the servicing portfolio and coupon
rate of the loan portfolio. There can be no assurance that the Bank will
continue to experience a market value of the servicing portfolio in excess of
the cost to acquire the servicing rights, nor can there be any assurance as to
the expected life of the servicing portfolio.
The Company also provides additional mortgage loan activities throughout
the Southeast through its subsidiary Crescent Mortgage Services, Inc. ("CMS").
In the fourth quarter, 1996, the Company announced the expansion of CMS to
provide wholesale mortgage services the Northeast region of the United States.
The office is located in Manchester, New Hampshire with a market area to include
all of the New England states. The office will be staffed with eleven employees
with production expected to begin in the first quarter 1997. Funding for the
Northeast will be provided through a $26 million line of credit from Paine
Webber and a $5 million line of credit from Home Federal Savings Bank in
Springfield, Minnesota.
The Bank's deposits totalled $55.7 million and $40.5 million at December
31, 1996 and 1995, respectively. Deposits averaged $47.1 million and $38.1
million during the years ended December 31, 1996 and 1995, respectively.
Interest-bearing deposits represented 77% and 81% of total deposits at December
31, 1996 and 1995, respectively. The decrease of interest- bearing deposits as
a percent of total deposits was the result of growth in non-interest bearing
deposits including escrow balances related to the mortgage division.
Certificates of deposit composed 70% of total interest-bearing deposits for
December 31, 1996 compared to 67% at December 31, 1995. The
14
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
composition of these deposits is indicative of the rate- conscious market in
which the Bank operates. There is no assurance that the Bank can maintain or
increase its market share of deposits in its highly competitive service area.
Capital
Capital adequacy is measured by risk-based capital guidelines as well as
against leverage ratios. The risk-based capital guidelines developed by
regulatory authorities assign weighted levels of risk to asset categories to
establish capital requirements. The guidelines currently require a minimum of
8.0% of total capital to risk-adjusted assets. One half of the required capital
must consist of tangible common shareholders' equity and qualifying perpetual
preferred stock ("tier 1 capital"). The leverage guidelines specify a ratio of
tier 1 capital to total assets of 3.0% if certain requirements are met,
including having the highest regulatory rating, or between 4.0% and 5.0%
otherwise. The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the guidelines indicate
that the Federal Reserve Board will continue to consider a "tangible tier 1
leverage ratio" (deducting all intangibles) in evaluating proposals for
expansion or new activity. The Federal Reserve Board has not advised the
Company and the FDIC has not advised the Bank of any specific minimum leverage
ratio or tangible tier 1 leverage ratio applicable to it. The Bank had agreed
with the Department of Banking and Finance to maintain a leverage ratio of 8.0%.
At December 31, 1996 the Bank's leverage ratio was 8.97%.
At December 31, 1996 the Company's total shareholders' equity was $7.7
million or 10.31% of total assets, compared to $7.1 million or 12.4% of total
assets at December 31, 1995. The decrease in shareholders' equity to total
asset ratio in 1996 was the result of a 30% increase in total assets. At
December 31, 1996, total capital to risk-adjusted assets was 14.4%, with 11.6%
consisting of tangible common shareholders' equity. The Company paid $35,077
of dividends during 1996 or $.05 per share compared to $176,139 or $.25 per
share during 1995. The Company's dividends in 1996 were paid during the last
quarter, as the payment of dividends had been suspended in the third quarter of
1995. The suspension of dividends was the result of a decrease in earnings
caused by a large provision for loan loss and expenses incurred exploring a
trust business plan.
During 1995, the Company purchased 3,334 shares of Common Stock to be held
in Treasury for an aggregate of $36,091. During 1995, 600 shares of Common
Stock were issued pursuant to employee stock option exercises for an aggregate
of $6,000. There is no active market for the Common Stock.
Liquidity and Interest Rate Sensitivity
Liquidity involves the ability to raise funds to support asset growth, meet
deposit withdrawals and other borrowing needs, maintain reserve requirements,
and otherwise sustain operations. This is accomplished through maturities and
repayments of loans and investments, deposit growth, and access to sources of
funds other than deposits, such as the federal funds market.
Average liquid assets (cash and amounts due from banks, interest-bearing
deposits in other banks, federal funds sold, mortgage loans held for sale net of
borrowings and drafts payable,
15
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
investment securities and securities held for sale) totalled $24.1 million and
$19.4 million during 1996 and 1995, representing 47% and 51% of average deposits
for those years, respectively. The increase in average liquid assets was the
result of the increase in mortgage loans held for sale. Average non-mortgage
loans were 55% and 49% of average deposits for 1996 and 1995, respectively.
Average deposits were 90% and 94% of average earning assets for 1996 and 1995,
respectively. As noted in the tables preceding Management's Discussion and
Analysis, approximately $19.7 million, or 69%, of the commercial banking loan
portfolio consisted of commercial and real estate - construction loans.
The Bank actively manages the levels, types and maturities of earning
assets in relation to the sources available to fund current and future needs to
ensure that adequate funding will be available at all times. In addition to the
borrowing sources related to the mortgage operations, the Bank also maintains a
federal funds line of credit totalling $4.6 million. The Bank's liquidity
position has also been enhanced by the operations of the mortgage banking
division due to the investment of funds in short-term assets in the form of
mortgages held for sale. Once funded, mortgages will generally be held by the
Bank for a period of 10 to 30 days. Management believes its liquidity sources
are adequate to meet its operating needs.
Net interest income can fluctuate with significant interest rate movements.
To lessen the impact of these margin swings, the balance sheet should be
structured so that repricing opportunities exist for both assets and liabilities
in roughly equivalent amounts at approximately the same time intervals.
Imbalances in these repricing opportunities at any point in time constitute
interest rate sensitivity.
Interest rate sensitivity refers to the responsiveness of interest-bearing
assets and liabilities to changes in market interest rates. The rate-sensitive
position, or gap, is the difference in the volume of rate-sensitive assets and
liabilities, at a given time interval. The general objective of gap management
is to actively manage rate-sensitive assets and liabilities to reduce the impact
of interest rate fluctuations on the net interest margin. Management generally
attempts to maintain a balance between rate-sensitive assets and liabilities as
the exposure period is lengthened to minimize the overall interest rate risks to
the Bank.
Interest rate sensitivity varies with different types of interest-earning
assets and interest-bearing liabilities. Overnight federal funds, on which
rates are susceptible to 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 and certain interest-bearing
demand deposits are much more interest-sensitive than savings deposits. In
addition, brokered deposits, institutional deposits placed by independent
brokers, are more interest sensitive. The Bank had brokered deposits of $6.5
million at December 31, 1996 and $5.1 million at December 31, 1995. The Bank
utilizes the brokered deposits to fund its mortgage loans held for sale and
therefore match those maturities as closely as possible.
The following table shows the interest sensitivity gaps for four different
time intervals as of December 31, 1996. The Bank was in an asset-sensitive
position for the cumulative three-month, one-year and five-year intervals. This
means that during the five-year period, if interest rates decline, the net
interest margin will decline. Conversely, if interest rates increase over this
period, the net interest margin will improve. At December 31, 1996, the Bank
was within its policy guidelines of rate sensitive assets to rate sensitive
liabilities of 80 - 120% at the one year interval. Since all interest rates and
yields do not adjust at the same velocity, this is only a general indicator of
rate sensitivity. The total excess of interest-bearing assets over interest-
bearing liabilities, based on a
16
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
five-year time period, was $13.3 million, or 17.8% of total assets.
<TABLE>
<CAPTION>
Interest Rate Sensitivity Gaps
As of December 31, 1996
Amounts Repricing In
--------------------------------
0-90 91-365 1-5 Over 5
Days Days Years Years
---- ---- ----- -----
(Millions of dollars)
<S> <C> <C> <C> <C>
Interest-earning
assets $ 49.8 $ 3.8 $8.6 $1.6
Interest-bearing
liabilities 25.0 17.0 8.5 -
------- ------ ---- -----
Interest sensitivity
gap $ 24.8 $(13.2) $ .1 $1.6
======= ====== ==== =====
</TABLE>
The mortgage division adopted a policy intended to minimize potential
interest rate risk incurred as a result of market movements between the time
commitments to purchase mortgage loans are made and the time the loans are
closed. Accordingly, commitments to purchase loans will be covered either by a
mandatory sale into the secondary market or by the purchase of an option to
deliver to the secondary market a mortgage-backed security.
While other hedging techniques may be used, speculation is not allowed
under the mortgage division's secondary marketing policy. As of December 31,
1996, the Bank had in place purchase commitment agreements terminating from
January to March 1997 with respect to an aggregate of approximately $20.5
million to hedge the mortgage pipeline of $31.7 for which the Bank has interest
rate risk. At December 31, 1996, the Financial Accounting Standards Board had
issued an exposure draft "Accounting for Derivative and Similar Financial
Instrument and for Hedging Activities." The pronouncement would require the
forward commitments to be recorded as an asset or liability with the changes in
fair value recorded in the income statement. Management has not yet determined
the impact of this pronouncement on its financial statements.
Management continually tries to minimize the interest rate sensitivity gap.
Attempting to minimize the gap is a continual challenge in a changing interest
rate environment and one of the objectives of the Bank's asset/liability
management strategy.
Results of Operations
A source of revenue for the Bank is net interest income, which is the
difference between income on interest-earning assets, such as investment
securities and loans, and interest-bearing sources of funds, such as deposits
and borrowings. The level of net interest income is determined primarily by the
average balances ("volume") of interest-earning assets and the various rate
spreads between the interest-earning assets and the Bank's funding sources.
Changes in net interest income from period to period result from increases or
decreases in volume of interest-earning assets and interest-bearing liabilities,
increases or decreases in the average rates earned and paid on such assets and
liabilities, the ability to manage the earning-asset portfolio (which includes
loans) and the availability of particular sources of funds, such as non-interest
bearing deposits.
17
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
The Bank had interest income of $5.3 million in 1996, and $4.1 million in
1995. The increase in interest income is attributable to the increase in earning
assets which is the result of the higher volume of Commercial Bank loans as well
as a higher volume of fee income associated with mortgage loans which is
included in interest income The Bank had closed $467.8 million of mortgage loans
during 1996 compared to 329.1 million during 1995.
The Bank had interest expense of $2.2 million in 1996 and $1.5 million in
1995. The increase resulted from a higher volume of interest-bearing deposits.
The increase in interest-bearing time deposits was the result of the increase in
brokered deposits utilized to fund mortgage loans held for sale as well as core
deposits growth. Deposits increased $15.2 million in 1996 of which $13.8
million represented core deposits and $1.4 million represents broker deposits.
Growth of the interest-bearing deposits accounted for 67.1% of the total growth
in 1996. In 1996 and 1995, interest expense accounted for 26% and 22% of total
expenses, respectively. See the tables preceding Management's Discussion and
Analysis for a breakdown of the average rates paid on interest bearing-
liabilities.
Net interest income for 1996 was $3.2 million. The key performance measure
for net interest income is the "net interest margin," or net interest income
divided by average interest-earning assets. The Bank's net interest margin
during 1996 was 6.0%. Interest spread, which represents the difference between
average yields on earnings assets and average rates paid on interest-bearing
liabilities, was 4.6%. Net interest income, interest margin and net interest
spread in 1995 were $2.6 million, 6.5%, and 5.0%. The increase in net interest
income is related to the volume of Commercial bank loans and fee income related
to a higher volume of mortgage loans closed. Loan fee income, such as
processing fees associated with the purchase of mortgage loans is taken into
interest income as the mortgage loans are sold. The decrease in net interest
margin and interest spread is indicative of the rate-conscious and highly
competitive market in which the Bank operates.
The Bank did not make a provision to the allowance for loan losses in 1996,
due to a decrease of $1.3 million of the Bank's problem loans which are defined
as classified and critical but still on accrual. The Bank made provisions to
the allowance for loan losses in the amount of $496,937 in 1995. During 1996,
the Bank charged-off $248,892 of loans to the allowance for loan losses. During
1995, the Bank charged off $210,680 of loans to the allowance for loan losses.
The ratios of net charge-offs to average non-mortgage loans outstanding during
the year were .89%, and 1.11% for 1996 and 1995, respectively.
Other income of $4.0 million in 1996 compared to 1995 other income of $3.4
million. The increase in other income was related to the increase of gestation
fee income. The Bank sold bulk blocks of servicing rights with respect to
$438.8 million of mortgage loans in 1996 for a total net gain of $884,457
compared to servicing rights sales in 1995 of $339.5 million for a gain of
$920,408. The Bank currently plans to sell, on a quarterly basis, a portion of
the servicing rights retained during 1997, although there can be no assurance as
to the volume of the Bank's loan acquisition or that a premium will be
recognized on the sales. Gestation fee income is generated from the sale of
mortgage loans to securities brokers through a gestation repurchase agreement.
Under the agreement, the Bank sells mortgage loans and simultaneously assigns
the related forward sale commitments to a securities broker. The Bank continues
to receive fee income from the securities broker until the loan is delivered
into the forward commitment.
Other expenses increased to $6.2 million in 1996 from $5.4 million in 1995.
The increase in other operating expenses was related to the increase in salaries
and benefits and third party mortgage outsourcing expense.
18
<PAGE>
- --------------------------------------------------------------------------------
Management's Discussion & Analysis
- --------------------------------------------------------------------------------
The Company had net income of $583,348 in 1996 which was primarily related
to the improvement in net interest income, mortgage banking operations and the
related gains on the sale of servicing rights. The Company's net income of
$89,134 in 1995 was in part due to the result of the mortgage banking operations
and related servicing rights sales gains. Income tax as a percentage of pretax
net income was 40% for both 1996 and 1995.
Effects of Inflation
Inflation generally increases the cost of funds and operating overhead, and
to the extent loans and other assets bear variable rates, the yields on such
assets. Unlike most industrial companies, virtually all of the assets and
liabilities of a financial institution are monetary in nature. As a result,
interest rates generally have a more significant impact on the performance of a
financial institution than the effects of general levels of inflation. Although
interest rates do not necessarily move in the same direction or to the same
extent as the prices of goods and services, increases in inflation generally
have resulted in increased interest rates. In addition, inflation affects
financial institutions' increased cost of goods and services purchased, the cost
of salaries and benefits, occupancy expense, and similar items. Inflation and
related increases in interest rates generally decrease the market value of
investments and loans held and may adversely affect liquidity, earnings, and
shareholders' equity. Mortgage originations and refinancings tend to slow as
interest rates increase, and likely will reduce the Company's earnings from such
activities and the income from the sale of residential mortgage loans in the
secondary market.
19
<PAGE>
CONSOLIDATED FINANCIAL REPORT CONTENTS
TABLE OF CONTENTS
Page
INDEPENDENT AUDITOR'S REPORT......................................... 21
FINANCIAL STATEMENTS
Consolidated balance sheets.................................. 22
Consolidated statements of income ........................... 23
Consolidated statements of stockholders' equity.............. 24 and 25
Consolidated statements of cash flows........................ 26 and 27
Notes to consolidated financial statements................... 28 - 54
20
<PAGE>
INDEPENDENT AUDITOR'S REPORT
- -------------------------------------------------------------------------------
To the Board of Directors
Crescent Banking Company and Subsidiaries
Jasper, Georgia
We have audited the accompanying consolidated balance sheets of the
Crescent Banking Company and Subsidiaries as of December 31, 1996 and 1995, and
the related consolidated statements of income, stockholders' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Crescent
Banking Company and Subsidiaries as of December 31, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
/s/ Mauldin & Jenkins, LLC
----------------------------------
Atlanta, Georgia
February 21, 1997
21
<PAGE>
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Assets 1996 1995
------ ------------ ------------
<S> <C> <C>
Cash and due from banks $ 3,011,864 $ 1,791,026
Interest-bearing deposits in banks 76,703 3,551,138
Federal fund sold 570,000 1,020,000
Securities available-for-sale 882,475 902,175
Securities held-to-maturity, fair value of $749,386
and $797,710 748,630 802,233
Mortgage loans held for sale 32,996,668 17,361,494
Loans 28,500,400 24,200,956
Less allowance for loan losses 335,512 566,071
------------ ------------
Loans, net 28,164,888 23,634,885
Premises and equipment 2,195,828 2,182,169
Other real estate owned 727,159 150,000
Purchased mortgage servicing rights 4,093,493 4,510,966
Other assets 1,184,644 1,477,580
------------ ------------
Total assets $ 74,652,352 $ 57,383,666
============ ============
Liabilities and Stockholders' Equity
Deposits
Noninterest-bearing demand $ 12,655,027 $ 7,643,492
Interest-bearing demand 11,547,662 9,770,708
Savings 1,366,145 1,234,616
Time, $100,000 and over 6,857,157 5,859,788
Other time 23,319,917 15,989,405
------------ ------------
Total deposits 55,745,908 40,498,009
Drafts payable 2,438,733 8,766,438
Other liabilities 675,849 636,217
Deferred taxes 721,239 357,405
Other borrowings 7,396,755 0
------------ ------------
Total liabilities 66,978,484 50,258,069
============ ============
Commitments and contingent liabilities
Stockholders' equity
Preferred stock, par value $1, 1,000,000 shares
authorized, no shares issued or outstanding 0 0
Common stock, par value $1; 2,500,000 shares
authorized; 704,854 issued and outstanding 704,854 704,854
Capital surplus 6,355,686 6,355,686
Retained earnings 649,419 101,148
Treasury stock, 3,334 shares (36,091) (36,091)
------------ ------------
Total stockholders' equity 7,673,868 7,125,597
------------ ------------
Total liabilities and stockholders' equity $ 74,652,352 $ 57,383,666
============ ============
</TABLE>
See Notes to Consolidated Financial Statements.
22
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
--------------- ---------------
<S> <C> <C>
Interest income
Loans $ 2,830,673 $ 2,002,249
Mortgage loans held for sale 2,236,949 1,731,570
Taxable securities 93,162 84,429
Nontaxable securities 15,353 1,706
Deposits in banks 77,001 166,263
Federal funds sold 80,521 154,542
--------------- ---------------
Total interest income 5,333,659 4,140,759
--------------- ---------------
Interest expense
Deposits 2,067,996 1,528,710
Other borrowings 93,686 6,780
--------------- ---------------
Total interest expense 2,161,682 1,535,490
--------------- ---------------
Net interest income 3,171,977 2,605,269
Provision for loan losses 0 496,937
--------------- ---------------
Net interest income after provision for
loan losses 3,171,977 2,108,332
--------------- ---------------
Other income
Service charges on deposit accounts 193,300 171,389
Gestation fee income 989,350 559,500
Mortgage servicing fee income 735,336 1,003,850
Gains on sales of purchased mortgage servicing rights 884,457 920,408
Gains on sales of mortgage loans held for sale 1,154,026 680,149
Other operating income 52,903 63,984
--------------- ---------------
Total other income 4,009,372 3,399,280
--------------- ---------------
Other expenses
Salaries and employee benefits 2,689,768 2,359,579
Equipment and occupancy expenses 651,827 478,789
Other operating expenses 2,862,917 2,520,687
--------------- ---------------
Total other expenses 6,204,512 5,359,055
--------------- ---------------
Income before income taxes 976,837 148,557
Income tax expense 393,489 59,423
--------------- ---------------
Net income $ 583,348 $ 89,134
=============== ===============
Net income per share of common stock $ 0.83 $ 0.13
=============== ===============
Weighted average shares outstanding 701,520 703,037
=============== ===============
</TABLE>
See Notes to Consolidated Financial Statements.
23
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock
---------------------
Shares Par Value
-------- ----------
<S> <C> <C>
Balance, December 31, 1994 704,254 $ 704,254
Net income 0 0
Cash dividends declared, $.25 per share 0 0
Exercise of stock options 600 600
Purchase of treasury stock 0 0
-------- ----------
Balance, December 31, 1995 704,854 704,854
Net income 0 0
Cash dividends declared, $.05 per share 0 0
-------- ----------
Balance, December 31, 1996 704,854 $ 704,854
======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
24
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Treasury Stock Total
Capital Retained ----------------- Stockholders'
Surplus Earnings Shares Cost Equity
--------- ---------- ------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 6,350,286 $ 188,153 0 $ 0 $7,242,693
Net income 0 89,134 0 0 89,134
Cash dividends declared, $.25 per share 0 (176,139) 0 0 (176,139)
Exercise of stock options 5,400 0 0 0 6,000
Purchase of treasury stock 0 0 3,334 (36,091) (36,091)
--------- ---------- ----- -------- ----------
Balance, December 31, 1995 6,355,686 101,148 3,334 (36,091) 7,125,597
Net income 0 583,348 0 0 583,348
Cash dividends declared, $.05 per share 0 (35,077) 0 0 (35,077)
--------- ---------- ----- -------- ----------
Balance, December 31, 1996 6,355,686 $ 649,419 3,334 $(36,091) $7,673,868
========= ========== ===== ======== ==========
</TABLE>
See Notes to Consolidated Financial Statements.
25
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
------------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 583,348 $ 89,134
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation 247,003 180,105
Amortization of purchased mortgage servicing rights 441,151 545,853
Provision for loan losses 0 496,937
Provision for losses on other real estate owned 25,000 0
Deferred income taxes 363,834 58,243
Gains on sales of purchased mortgage servicing rights (884,457) (920,408)
Net increase in mortgage loans held for sale (15,635,174) (3,335,142)
Increase (decrease) in drafts payable (6,327,705) 7,486,845
(Increase) decrease in interest receivable 79,703 (150,264)
Increase (decrease) in interest payable (27,302) 48,415
Other operating activities 280,167 (694,036)
------------- ------------
Net cash provided by (used in) operating activities (20,854,432) 3,805,682
------------- ------------
INVESTING ACTIVITIES
Proceeds from sales of securities available-for-sale 19,700 0
Purchases of securities held-to-maturity 0 (345,000)
Proceeds from maturities of securities held-to-maturity 53,603 76,404
Net decrease in Federal funds sold 450,000 480,000
Net (increase) decrease in interest-bearing deposits in banks 3,474,435 (2,327,806)
Net increase in loans (5,132,162) (8,146,274)
Purchase of premises and equipment (260,662) (358,482)
Acquisition of purchased mortgage servicing rights (5,040,376) (5,293,161)
Proceeds from sale of purchased mortgage servicing rights 5,901,155 5,547,286
------------- ------------
Net cash used in investing activities (534,307) (10,367,033)
------------- ------------
FINANCING ACTIVITIES
Net increase in deposits 15,247,899 6,342,902
Proceeds from other borrowings 112,596,755 0
Repayment of other borrowings (105,200,000) (22,444)
Dividends paid (35,077) (176,139)
Proceeds from exercise of stock options 0 6,000
Purchase of treasury stock 0 (36,091)
------------- ------------
Net cash provided by financing activities $ 22,609,577 $ 6,114,228
============= ============
</TABLE>
26
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Net increase (decrease) in cash and due from banks $1,220,838 $ (447,123)
Cash and due from banks at beginning of year 1,791,026 2,238,149
---------- ----------
Cash and due from banks at end of year $3,011,864 $1,791,026
========== ==========
SUPPLEMENTAL DISCLOSURES
Cash paid for:
Interest $2,188,984 $1,487,075
Income taxes $ 29,331 $ 0
NONCASH TRANSACTION
Principal balances of loans transferred to other real estate $ 602,159 $ 0
</TABLE>
See Notes to Consolidated Financial Statements.
27
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Crescent Banking Company (the "Company") provides a full range of
banking services to individual and corporate customers through its
subsidiary, Crescent Bank and Trust Company (the "Bank") in Jasper,
Pickens County, Georgia and the surrounding areas. The Company also
provides mortgage loan origination and servicing to customers throughout
the southeastern United States. The Company is involved in additional
mortgage loan servicing activities through its subsidiary, Crescent
Mortgage Services, Inc. ("Crescent Mortgage"). Crescent Mortgage,
located in Atlanta, Georgia, provides mortgage loan servicing to
customers throughout the southeastern United States and, in December
1996, established operations to provide mortgage loan servicing to
customers throughout the northeastern United States.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the
Company and its subsidiaries. Significant intercompany transactions and
accounts are eliminated in consolidation.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices within
the financial services industry. In preparing the financial statements,
management is required to make estimates and assumptions that affect the
reported amounts of assets and liabilities as of the date of the balance
sheet and revenues and expenses for the period. Actual results could
differ from those estimates.
CASH AND DUE FROM BANKS
Cash on hand, cash items in process of collection, and amounts due from
banks are included in cash and due from banks.
The Company maintains amounts due from banks which, at times, may exceed
Federally insured limits. The Company has not experienced any losses in
such accounts.
28
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
SECURITIES
Securities are classified based on management's intention on the date of
purchase. Securities which management has the intent and ability to hold
to maturity are classified as held-to-maturity and reported at amortized
cost. Equity securities without a readily determinable fair value are
carried at cost.
Interest and dividends on securities, including amortization of premiums
and accretion of discounts, are included in interest income. Realized
gains and losses from the sales of securities are determined using the
specific identification method.
MORTGAGE LOANS HELD FOR SALE
The Company originates first mortgage loans with the intention to sell
the loans in the secondary market. These loans are usually held for a
period of less than thirty days prior to delivery to investors. Due to
the short period these loans are held, they are reported at cost which
approximates fair value. Interest collected on these loans during the
period they are held in inventory is included in interest income. Income
from the sale of these loans is recognized at the time of sale and is
determined by the difference between net sales proceeds and the book
value of the loans.
LOANS
Loans are carried at their principal amounts outstanding less the
allowance for loan losses. Interest income on loans is credited to
income based on the principal amount outstanding.
Loan origination fees and certain direct costs of loans are recognized
at the time the loan is recorded. Because net origination loan fees and
costs are not material, the results of operations are not materially
different than the results which would be obtained by accounting for
loan fees and costs in accordance with generally accepted accounting
principles.
29
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
LOANS (Continued)
The allowance for loan losses is maintained at a level that management
believes to be adequate to absorb potential losses in the loan
portfolio. Management's determination of the adequacy of the allowance
is based on an evaluation of the portfolio, past loan loss experience,
current economic conditions, volume, growth, composition of the loan
portfolio, and other risks inherent in the portfolio. In addition,
regulatory agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and may
require the Company to record additions to the allowance based on their
judgment about information available to them at the time of their
examinations.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. Interest income is subsequently recognized only to the
extent cash payments are received.
A loan is impaired when it is probable the Company will be unable to
collect all principal and interest payments due in accordance with the
terms of the loan agreement. Individually identified impaired loans are
measured based on the present value of payments expected to be received,
using the contractual loan rate as the discount rate. Alternatively,
measurement may be based on observable market prices or, for loans that
are solely dependent on the collateral for repayment, measurement may be
based on the fair value of the collateral. If the recorded investment in
the impaired loan exceeds the measure of fair value, a valuation
allowance is established as a component of the allowance for loan
losses. Changes to the valuation allowance are recorded as a component
of the provision for loan losses.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated depreciation.
Depreciation is computed principally by the straight-line method over
the estimated useful lives of the assets.
30
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
OTHER REAL ESTATE OWNED
Other real estate owned represents properties acquired through
foreclosure. Other real estate owned is held for sale and is carried at
the lower of the recorded amount of the loan or fair value of the
properties less estimated selling costs. Any write-down to fair value at
the time of transfer to other real estate owned is charged to the
allowance for loan losses. Subsequent gains or losses on sale and any
subsequent adjustment to the value are recorded as other expenses.
PURCHASED MORTGAGE SERVICING RIGHTS
Purchased mortgage servicing rights represent the cost of acquiring the
rights to service mortgage loans. Those rights are being amortized in
proportion to, and over the period of, estimated future net servicing
income. Gains related to the sales of purchased mortgage servicing
rights represent the difference between the sales proceeds and the
related capitalized purchased mortgage servicing rights.
DRAFTS PAYABLE
Drafts payable represent the amount of mortgage loans held for sale that
have been closed by the Bank, but for which the cash has not yet been
disbursed. The Bank disburses the cash funds when the loan proceeds
checks are presented for payment.
GESTATION FEE INCOME
The Bank uses gestation repurchase agreements to facilitate the sales of
mortgage loans to security brokers. Gestation fee income, which is
recognized as earned, represents the spread between the gestation fee
(which is based on the loan's coupon rate) received on the mortgage loan
and the fee charged by the security broker during the gestation period.
MORTGAGE SERVICING FEES AND EXPENSES
Mortgage servicing fees are based on a contractual percentage of the
unpaid principal balance of the loans serviced and are recorded as
income when received. Mortgage servicing costs are charged to expense
when incurred.
31
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
INCOME TAXES
Income tax expense consists of current and deferred taxes. Current
income tax provisions approximate taxes to be paid or refunded for the
applicable year. Deferred tax assets and liabilities are recognized on
the temporary differences between the bases of assets and liabilities as
measured by tax laws and their bases as reported in the financial
statements. Deferred tax expense or benefit is then recognized for the
change in deferred tax assets or liabilities between periods.
Recognition of deferred tax balance sheet amounts is based on
management's belief that it is more likely than not that the tax benefit
associated with certain temporary differences, tax operating loss
carryforwards and tax credits will be realized. A valuation allowance is
recorded for those deferred tax items for which it is more likely than
not that realization will not occur.
The Company and the subsidiaries file a consolidated income tax return.
Each entity provides for income taxes based on its contribution to
income taxes (benefits) of the consolidated group.
EARNINGS PER COMMON SHARE
Earnings per common share are computed by dividing net income by the
weighted average number of shares of common stock and common stock
equivalents outstanding. Common stock equivalents consist of stock
options.
32
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 2. SECURITIES
The amortized cost and fair value of securities are summarized as
follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
-------------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Securities Available-for-Sale
December 31, 1996:
Equity securities $ 882,475 $ - $ - $ 882,475
========= ========= ========= =========
December 31, 1995:
Equity securities $ 902,175 $ - $ - $ 902,175
========= ========= ========= =========
Gross Gross
Unrealized Unrealized Fair
Amortized Cost Gains Losses Value
-------------- ---------- ---------- ---------
Securities Held-to-Maturity
December 31, 1996:
State and municipal securities $ 345,000 $ - $ (931) $ 344,069
Mortgage-backed securities 403,630 1,687 - 405,317
--------- --------- --------- ---------
$ 748,630 $ 1,687 $ (931) $ 749,386
========= ========= ========= =========
December 31, 1995:
State and municipal securities $ 345,000 $ - $ (224) $ 344,776
Mortgage-backed securities 457,233 - (4,299) 452,934
--------- --------- --------- ---------
$ 802,233 $ - $ (4,523) $ 797,710
========= ========= ========= =========
33
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 2. SECURITIES (Continued)
The amortized cost and fair value of securities as of December 31, 1996
by contractual maturity are shown below. Maturities may differ from
contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or prepaid with or
without penalty. Therefore, these securities and equity securities are
not included in the maturity categories in the following maturity
summary.
<TABLE>
<CAPTION>
Securities Available-for-Sale Securities Held-to-Maturity
------------------------------ ---------------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ------------- ----------- -----------
<S> <C> <C> <C> <C>
Due from five to ten years $ - $ - $ 345,000 $ 344,069
Mortgage-backed securities - - 403,630 405,317
Equity securities 882,475 882,475 - -
--------- --------- --------- ---------
$ 882,475 $ 882,475 $ 748,630 $ 749,386
========= ========= ========= =========
</TABLE>
Securities with a carrying value of $ - - and $190,770 at December 31,
1996 and 1995, respectively, were pledged to secure public deposits and
for other purposes.
There were no gains or losses on sales of securities available-for-sale
in 1996. There were no sales of securities available-for-sale in 1995.
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
<TABLE>
<CAPTION>
December 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Commercial $ 3,425,000 $ 5,779,000
Real estate - construction and land development 10,346,000 4,577,000
Real estate - mortgage 11,522,000 11,335,000
Consumer 3,207,400 2,509,956
----------- -----------
28,500,400 24,200,956
Allowance for loan losses (335,512) (566,071)
----------- -----------
Loans, net $28,164,888 $23,634,885
=========== ===========
</TABLE>
34
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
Changes in the allowance for loan losses were as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
--------- ---------
<S> <C> <C>
Balance, beginning of year $ 566,071 $ 275,286
Provision for loan losses - 496,937
Loans charged off (248,892) (210,680)
Recoveries of loans previously charged off 18,333 4,528
--------- ---------
Balance, end of year $ 335,512 $ 566,071
========= =========
</TABLE>
The total recorded investment in impaired loans was $167,916 and
$415,589 at December 31, 1996 and 1995, respectively. There wee no loans
that had related allowances for loan losses determined in accordance
with Statement of Financial Accounting Standard No. 114 ("Accounting by
Creditors for Impairment of a Loan") at December 31, 1996 and 1995,
respectively. The average recorded investment in impaired loans for 1996
and 1995 was $521,901 and $315,765, respectively. Interest income on
impaired loans of $46,984 and $18,644 was recognized for cash payments
received for the years ended 1996 and 1995, respectively.
The Company has granted loans to certain directors, executive officers,
and related entities of the Company and the Bank. The interest rates on
these loans were substantially the same as rates prevailing at the time
of the transaction and repayment terms are customary for the type of
loan involved. Changes in related party loans for the year ended
December 31, 1996 are as follows:
<TABLE>
<CAPTION>
<S> <C>
Balance, beginning of year $ 2,105,060
Advances 1,302,900
Repayments (1,191,838)
-----------
Balance, end of year $ 2,216,122
===========
</TABLE>
35
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 4. PREMISES AND EQUIPMENT
Premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Land $ 263,978 $ 263,978
Buildings and improvements 1,154,906 1,154,906
Equipment 1,651,402 1,474,634
---------- ----------
3,070,286 2,893,518
Accumulated depreciation (874,458) (711,349)
---------- ----------
$2,195,828 $2,182,169
========== ==========
</TABLE>
NOTE 5. BROKERED DEPOSITS
Brokered deposits amounted to $6,529,000 and $5,144,000 at December 31,
1996 and 1995, respectively, and are included in time deposits as
follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
---------- ----------
<S> <C> <C>
Time, $100,000 and over $ 500,000 $ 200,000
Other time 6,029,000 4,944,000
---------- ----------
$6,529,000 $5,144,000
========== ==========
</TABLE>
36
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 6. OTHER BORROWINGS
Other borrowings consist of the following:
<TABLE>
<CAPTION>
December 31,
--------------------------
1996 1995
----------- ----------
<S> <C> <C>
$18,000,000 line of credit from Federal Home Loan $ 5,100,000 $ -
Bank with interest at the FHLB Daily Rate Credit plus .25%
(7.20% at December 31, 1996) due on demand and collateralized
by first mortgage loans and investment in FHLB
$26,000,000 line of credit with interest at the one month 2,296,755 -
LIBOR rate plus .80% due on demand, and collateralized
by first mortgage loans
----------- ----------
$ 7,396,755 $ -
=========== ==========
</TABLE>
At December 31, 1996 and 1995, the Company had unsecured lines of
credit available totaling $19,600,000 and $4,600,000, respectively,
which bear interest ranging from the prevailing Federal funds rate to
the prime rate. The Company had no funds borrowed under these
agreements at December 31,1996 and 1995.
At December 31,1996 and 1995, the Company had the ability to sell up to
$40 million in mortgage loans to security brokers without recourse
under gestation repurchase agreements. Under these agreements, the
Company sells mortgage loans and simultaneously assigns the related
forward sale commitments to the security broker. The Company continues
to receive fee income from the security broker until the loan is
delivered into the forward commitment.
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7. STOCK OPTIONS
The Company has a non-qualified stock option plan for key employees and
has reserved 73,566 shares of common stock. At the discretion of the
Company, cash awards may be paid to option holders which are designed to
compensate the employee for the difference in the tax treatment between
the non-qualified options and incentive stock options. The Company also
has a non-qualified stock option plan for directors and has reserved
25,000 shares of common stock. All options under these plans are granted
at the estimated fair market value at the date of grant and expire ten
years from the date of grant. At December 31, 1996, 9,666 and 12,200
options were available to grant under the employee and director plans,
respectively. Other pertinent information related to the options
follows:
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------
1996 1995
---------------------- ---------------------
Weighted- Weighted-
Average Average
Exercise Exercise
Number Price Number Price
--------- --------- -------- -----------
<S> <C> <C> <C> <C>
Under option, beginning of year 54,900 $ 10.96 55,500 $ 11.15
Granted 21,800 14.76 5,000 13.75
Exercised - - (600) 10.00
Terminated - - (5,000) 16.00
------- -------
Under option, end of year 76,700 12.04 54,900 10.96
======= =======
Exercisable, end of year 54,700 11.73 36,567 10.20
======= =======
</TABLE>
<TABLE>
<CAPTION>
Weighted-
Weighted- Average
Average Remaining
Range of Exercise Contractual
Number Prices Price Life
------- --------------- -------- -----------
<S> <C> <C> <C> <C>
Under option, end of year 63,900 $10.00 - 13.75 $11.24 5
12,800 16.00 16.00 10
-------
76,700
=======
Options exercisable, end of year 41,900 10.00 - 13.75 10.42 2
12,800 16.00 16.00 10
-------
54,700
=======
</TABLE>
38
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTE 7. STOCK OPTIONS (Continued)
As permitted by SFAS No. 123 ("Accounting for Stock-Based
Compensation"), the Company recognizes compensation cost for stock-based
employee compensation awards in accordance with APB Opinion No. 25
("Accounting for Stock Issued to Employees"). The Company recognized no
compensation cost for stock-based employee compensation awards for the
year ended December 31, 1996. If the Company had recognized compensation
cost in accordance with SFAS No. 123, net income and earnings per share
would have been reduced as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------------------
1996 1995
------------------------ ----------------------
Net Earnings Net Earnings
Income Per Share Income Per Share
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
As reported $ 583,438 $ 0.83 $ 89,134 $ 0.13
Stock-based compensation, net of
related tax effect (48,450) (0.07) (3,738) (0.01)
--------- --------- --------- ---------
As adjusted $ 534,988 $ 0.76 $ 85,396 $ 0.12
========= ========= ========= =========
</TABLE>
The fair value of the options granted or vested during the year was
based upon the discounted value of future cash flows of the options
using the following assumptions:
Risk-free interest rate 6.50%
Expected life of the options 5 Years
Expected dividends (as a percent of the
fair value of the stock) 3.85%
39
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES
The components of income tax expense are as follows:
December 31,
---------------------
1996 1995
--------- ---------
Current $ 360,690 $ 1,180
Deferred 363,834 446,309
Benefit of net operating loss carryforward (331,035) (388,066)
--------- ---------
Income tax expense $ 393,489 $ 59,423
========= =========
The Company's income tax expense differs from the amounts computed by
applying the Federal income tax statutory rates to income before income
taxes. A reconciliation of the differences is as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------------------
1996 1995
------------------- ------------------
Amount Percent Amount Percent
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Income taxes at statutory rate $332,125 34% $50,509 34%
Other items, net 61,364 6 8,914 6
-------- -- ------- --
Income tax expense $393,489 40% $59,423 40%
======== == ======= ==
</TABLE>
40
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 8. INCOME TAXES (Continued)
The components of deferred income taxes are as follows:
<TABLE>
<CAPTION>
December 31,
------------------------------
1996 1995
---------- ----------
<S> <C> <C>
Deferred tax assets:
Loan loss reserves $ 52,864 $ 148,563
Net operating loss carryforward 549,801 909,189
Alternative minimum tax carryforward 42,084 -
Accrual to cash adjustment for income
tax reporting purposes - 44,904
Other 5,018 36,994
---------- ----------
649,767 1,139,650
---------- ----------
Deferred tax liabilities:
Purchased mortgage servicing rights 1,206,433 1,328,083
Depreciation 153,025 157,106
Other 11,548 11,866
---------- ----------
1,371,006 1,497,055
---------- ----------
Net deferred tax liabilities $ (721,239) $ (357,405)
========== ==========
</TABLE>
At December 31, 1996, the Company has available net operating loss
carryforwards of $1,853,234 for Federal income tax purposes. If unused,
the carryforwards will expire beginning in 2008.
41
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 9. MORTGAGE LOAN SERVICING
Mortgage loans serviced for others are not reflected in the financial
statements. The Company is obligated to service the unpaid principal
balances of these loans, which approximated $407 million as of December
31, 1996. The Company pays a third party subcontractor to perform
servicing and escrow functions with respect to loans sold with retained
servicing. During 1996, substantially all of the Company's mortgage
lending and servicing activity was concentrated within the Southeastern
United States. Also, the servicing portfolio was comprised principally
of mortgage loans serviced on behalf of the Federal Home Loan Mortgage
Corporation.
At December 31, 1996, the Company had errors and omissions and fidelity
bond insurance coverage in force of $1,000,000.
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into
financial instruments with off-balance-sheet risk which are not
reflected in the financial statements (through the purchase and sale of
mortgage loans and the management of the related loss exposure caused
by fluctuations in interest rates.) These financial instruments include
commitments to extend credit, mortgage loans in process of origination
(the pipeline), mandatory and optional forward commitments, and other
hedging instruments. These instruments involve, to varying degrees,
elements of credit and interest rate risk in excess of the amount
recognized in the balance sheet. Credit risk is managed by the Company
by entering into agreements only with permanent investors meeting the
credit standards of the Company. At any time the risk to the Company,
in the event of default by the purchaser, is the difference between the
contract price and current market value of an alternative financial
instrument, the amount of which is a percentage of the outstanding
commitments.
42
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
In addition to the mortgage loans held for sale on the balance sheet,
the Company's mortgage loan pipeline at December 31, 1996 totaled
approximately $113,595,000. The Company's exposure to credit loss in
the event of nonperformance by another party to the mortgage is
represented by the principal balance of loans for which the Company has
offered to extend credit. The pipeline consists of approximately
$31,657,000 in mortgage loans for which the Company has interest rate
risk. The remaining $81,938,000 of mortgage loans are not subject to
interest rate risk. The mortgages not subject to interest rate risk are
comprised of (1) loans under contract to be placed with a private
investor through a "best efforts" agreement, whereas the investor
purchases the loans from the Company at whatever rate the loan
contains, (2) loans with floating interest rates, therefore, the loan
closes at the current market rate and therefore, does not subject the
Company to any interest rate risk, and (3) loans where the original
fixed interest rate commitment has expired, therefore, the loans will
reprice at the current market rate. The Company funds approximately
fifty percent of its mortgage pipeline every month and has adequate
lines of credit and availability under gestation repurchase agreements
at December 31, 1996 to fund its projected loan closing from its
mortgage pipeline.
The Company hedges the interest rate risk of the mortgage loan pipeline
that is expected to close and of mortgage loans held for sale.
Mandatory forward commitments to sell whole loans are the Company's
primary hedge. At December 31, 1996, the Company had approximately
$20,450,000 of mandatory commitments for the mortgage pipeline. To the
extent mortgage loans at the appropriate rates are not available to
fill these commitments, the Company has interest rate risk due to
interest fluctuations. In addition, the Company had mandatory
commitments for all mortgage loans held for sale at December 31, 1996.
The Company's exposure to credit loss in the event of nonperformance by
the other party to the financial instrument for commitments to extend
credit and standby letters of credit is represented by the contractual
amount of those instruments. The Company uses the same credit and
collateral policies for these off-balance-sheet financial instruments
as it does for on-balance-sheet financial instruments. A summary of the
Bank's commitments is as follows:
December 31,
--------------------------
1996 1995
---------- ----------
Commitments to extend credit $7,594,000 $6,895,000
Standby letters of credit 563,190 209,500
---------- ----------
$8,157,190 $7,104,500
========== ==========
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 10. COMMITMENTS AND CONTINGENT LIABILITIES (Continued)
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn upon, the
total commitment amounts do not necessarily represent future cash
requirements. The credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending loans
to customers. The Company evaluates each customer's creditworthiness on
a case-by-case basis. The amount of collateral obtained, if deemed
necessary by the Company upon extension of credit, is based on
management's credit evaluation of the customer. Collateral held varies
but may include real estate and improvements, marketable securities,
accounts receivable, inventory, equipment and personal property.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
facilities to customers. Collateral held varies as specified above and
is required in instances which the Company deems necessary.
The Company does not anticipate any material losses as a result of the
commitments and contingent liabilities.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management of the Company, any
liability resulting from such proceedings would not have a material
effect on the Company's financial statements.
Employment contracts:
At December 31, 1996, the Company was obligated under an employment
agreement with one of its key officers. The employment agreement
includes provisions for severance pay that would be paid if certain
events occur, including but not limited to, the termination of the
employee due to a change in control of the Company. The maximum
amount the Company would be obligated to pay under this plan is
approximately $240,000.
44
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 11. CONCENTRATIONS OF CREDIT
The Company originates primarily commercial, residential, and consumer
loans to customers in Pickens County and surrounding areas. The ability
of the majority of the Company's customers to honor their contractual
loan obligations is dependent on the economy in these areas.
Seventy-six percent (76%) of the Company's loan portfolio is
concentrated in loans secured by real estate of which a substantial
portion is secured by real estate in the Company's primary market area.
In addition, a substantial portion of the other real estate owned is
located in those same markets. Accordingly, the ultimate collectibility
of the loan portfolio and the recovery of the carrying amount of other
real estate owned are susceptible to changes in market conditions in
the Company's primary market area. The other significant concentrations
of credit by type of loan are set forth in Note 3.
The Company, as a matter of policy, does not generally extend credit to
any single borrower or group of related borrowers in excess of 25% of
statutory capital, or approximately $1,380,000.
NOTE 12. REGULATORY MATTERS
The Bank is subject to certain restrictions on the amount of dividends
that may be declared without prior regulatory approval. At December 31,
1996, approximately $344,000 of retained earnings were available for
dividend declaration without regulatory approval.
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
possibly additional discretionary - actions by regulators that, if
undertaken, could have a direct material effect on the financial
statements. Under capital adequacy guidelines and the regulatory
framework for prompt corrective action, the Company and Bank must meet
specific capital guidelines that involve quantitative measures of the
assets, liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Company and Bank capital
amounts and classification are also subject to qualitative judgments by
the regulators about components, risk weightings, and other factors.
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 12. REGULATORY MATTERS (Continued)
Quantitative measures established by regulation to ensure capital
adequacy require the Company and the Bank to maintain minimum amounts
and ratios of total and Tier I capital to risk-weighted assets and of
Tier I capital to average assets. Management believes, as of December
31, 1996, the Company and the Bank meet all capital adequacy
requirements to which it is subject.
As of December 31, 1996, 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 following table. There are
no conditions or events since that notification that management
believes have changed the Bank's category.
The Company and Bank's actual capital amounts and ratios are presented
in the following table.
<TABLE>
<CAPTION>
To Be Well
For Capital Capitalized Under
Adequacy Prompt Corrective
Actual Purposes Action Provisions
------------------- ------------------- --------------------
Amount Ratio Amount Ratio Amount Ratio
---------- ------ ---------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996
Total Capital
(to Risk Weighted Assets):
Company $7,806,958 14.40% $4,337,033 8% $5,421,291 10%
Bank $6,394,313 12.27% $4,169,111 8% $5,211,389 10%
Tier I Capital
(to Risk Weighted Assets):
Company $7,471,445 13.78% $2,168,516 4% $3,252,775 6%
Bank $6,058,800 11.63% $2,084,555 4% $3,126,834 6%
Tier I Capital
(to Average Assets):
Company $7,471,445 10.67% $2,801,101 4% $3,501,377 5%
Bank $6,058,800 8.97% $2,700,440 4% $3,375,550 5%
</TABLE>
46
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments. In
cases where quoted market prices are not available, fair values are
based on estimates using discounted cash flow methods. Those methods
are significantly affected by the assumptions used, including the
discount rates and estimates of future cash flows. In that regard, the
derived fair value estimates cannot be substantiated by comparison to
independent markets and, in many cases, could not be realized in
immediate settlement of the instrument. The use of different
methodologies may have a material effect on the estimated fair value
amounts. Also, the fair value estimates presented herein are based on
pertinent information available to management as of December 31, 1996
and 1995. Such amounts have not been revalued for purposes of these
financial statements since those dates and, therefore, current
estimates of fair value may differ significantly from the amounts
presented herein.
The following methods and assumptions were used by the Company in
estimating fair values of financial instruments as disclosed herein:
CASH, DUE FROM BANKS, AND FEDERAL FUNDS SOLD:
The carrying amounts of cash, due from banks, and Federal funds sold
approximate their fair value.
SECURITIES
Fair values for securities are based on quoted market prices. The
carrying values of equity securities with no readily determinable fair
value approximate fair values.
LOANS:
For mortgage loans held for sale and variable-rate loans that reprice
frequently and have no significant change in credit risk, fair values
are based on carrying values. For other loans, the fair values are
estimated using discounted cash flow methods, using interest rates
currently being offered for loans with similar terms to borrowers of
similar credit quality. Fair values for impaired loans are estimated
using discounted cash flow methods or underlying collateral values.
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
PURCHASED MORTGAGE SERVICING RIGHTS:
Fair values for purchased mortgage servicing rights are based upon
independent appraisal.
DEPOSITS AND DRAFTS PAYABLE:
The carrying amounts of demand deposits, savings deposits, variable-
rate certificates of deposit and drafts payable approximate their fair
values. Fair values for fixed-rate certificates of deposit are
estimated using discounted cash flow methods, using interest rates
currently being offered on certificates.
OTHER BORROWINGS:
The fair values of the Company's other borrowings are estimated using
discounted cash flow methods based on the Company's current
incremental borrowing rates for similar types of borrowing
arrangements.
ACCRUED INTEREST:
The carrying amounts of accrued interest approximate their fair
values.
OFF-BALANCE SHEET INSTRUMENTS:
Fair values of the Company's off-balance sheet financial instruments
are based on fees charged to enter into similar agreements. However,
commitments to extend credit and standby letters of credit do not
represent a significant value to the Company until such commitments
are funded. The Company has determined that these instruments do not
have a distinguishable fair value and no fair value has been assigned.
48
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 13. FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
The estimated fair values of the Company's financial instruments were
as follows:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
--------------------------- ----------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Financial assets:
Cash and due from banks,
interest-bearing deposits with
banks and Federal funds sold $ 3,658,567 $ 3,658,567 $ 6,362,164 $ 6,362,164
Securities available-for-sale 882,475 882,475 902,175 902,175
Securities held-to-maturity 748,630 749,386 802,233 797,710
Mortgage loans held for sale 32,996,668 32,996,668 17,361,494 17,361,494
Loans 28,164,888 28,453,632 23,634,885 23,890,142
Accrued interest receivable 249,489 249,489 329,193 329,193
Purchased mortgage
servicing rights 4,093,493 5,186,999 4,510,966 4,814,511
Financial liabilities:
Deposits 55,745,908 55,868,834 40,498,009 40,668,115
Drafts payable 2,438,733 2,438,733 8,766,438 8,766,438
Other borrowings 7,396,755 7,396,755 - -
Accrued interest payable 460,371 460,371 487,673 487,673
49
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 14. SUPPLEMENTAL FINANCIAL DATA
Components of other operating expenses in excess of 1% of total
revenue are as follows:
December 31,
----------------------------
1996 1995
----------- -----------
Outside service fees $ 547,926 $ 311,202
Subservicing expense 276,965 356,626
Amortization of purchased
mortgage servicing rights 441,151 486,327
Business development 229,930 266,352
Stationery and printing 143,164 126,930
Telephone 144,288 101,010
Directors fees 92,250 89,775
NOTE 15. SUPPLEMENTAL SEGMENT INFORMATION
SEGMENT PERFORMANCE
----------------------------------------------------------------------
Year Ended December 31,
------------------------------
1996 1995
----------- -----------
Net interest income after
provision for loan losses
Mortgage banking $ 1,284,449 $ 920,552
Commercial banking 1,887,528 1,187,780
----------- -----------
Total $ 3,171,977 $ 2,108,332
=========== ===========
Pre-tax earnings
Mortgage banking $ 155,321 $ 253,758
Commercial banking 525,864 (490,078)
----------- -----------
Operating (loss) profit segments 681,185 (236,320)
Unallocated holding company
expenses 66,194 37,936
----------- -----------
Operating (loss) profit 614,991 (274,256)
Other income 1,207,920 746,833
Other expenses 846,074 324,020
----------- -----------
Total $ 976,837 $ 148,557
=========== ===========
50
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 15. SUPPLEMENTAL SEGMENT INFORMATION (Continued)
OTHER SEGMENT DATA
------------------------------------------------------------------
Year Ended December 31,
--------------------------------
1996 1995
------------ ------------
Assets
Mortgage banking $ 38,772,499 $ 29,911,732
Commercial banking 35,879,853 27,471,934
------------ ------------
Total $ 74,652,352 $ 57,383,666
============ ============
Depreciation and amortization
Mortgage banking $ 494,097 $ 573,411
Commercial banking 195,254 138,868
------------ ------------
Segments 689,351 712,279
Corporate 13,679 13,679
------------ ------------
Total $ 703,030 $ 725,958
============ ============
Capital expenditures
Mortgage banking $ 129,761 $ 67,798
Commercial banking 130,901 308,185
------------ ------------
Total $ 260,662 $ 375,983
============ ============
51
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION
The following information presents the condensed balance sheets,
statements of income, and cash flows of Crescent Banking Company as of
and for the years ended December 31, 1996 and 1995:
CONDENSED BALANCE SHEETS
1996 1995
---------- ----------
Assets
Cash $ 109,207 $ 783,758
Investment in subsidiaries 7,588,184 6,317,682
Other assets 10,477 24,157
---------- ----------
Total assets $7,707,868 $7,125,597
========== ==========
Liabilities, other $ 34,000 $ -
Stockholders' equity 7,673,868 7,125,597
---------- ----------
Total liabilities and
stockholders' equity $7,707,868 $7,125,597
========== ==========
52
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF INCOME
1996 1995
-------- --------
Income, dividends from subsidiary $ - $176,139
-------- --------
Expenses, other 87,154 51,614
-------- --------
Income (loss) before equity in
undistributed income of subsidiaries (87,154) 124,525
Equity in undistributed income of
subsidiaries (distributions in excess
of earnings of subsidiaries) 670,502 (35,391)
-------- --------
Net income $583,348 $ 89,134
======== ========
53
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 16. PARENT COMPANY FINANCIAL INFORMATION (Continued)
CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
1996 1995
-------- ---------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $583,348 $ 89,134
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
(Undistributed income of subsidiaries) distributions
in excess of earnings of subsidiaries (670,502) 35,391
Other operating activities 47,680 (27,341)
-------- ---------
Net cash provided by (used in) operating activities (39,474) 97,184
-------- ---------
INVESTING ACTIVITIES
Investment in subsidiaries (600,000) (105,889)
-------- ---------
Net cash used in investing activities (600,000) (105,889)
-------- ---------
FINANCING ACTIVITIES
Dividends paid (35,077) (176,139)
Proceeds from exercise of stock options - 6,000
Purchase of treasury stock - (36,091)
-------- ---------
Net cash used in financing activities (35,077) (206,230)
-------- ---------
Net decrease in cash (674,551) (214,935)
Cash at beginning of year 783,758 998,693
-------- ---------
Cash at end of year $109,207 $ 783,758
======== =========
</TABLE>
54
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
================================================================================
Market for the Company's Common Stock
The Company's authorized shares consist of 1) 2,500,000 shares of common stock,
par value $1.00, of which 704,854 shares are issued and outstanding, and
2)1,000,000 shares of preferred stock, par value $1.00, none of which have been
issued. As of December 31, 1996, there were 620 record holders of common stock.
There is not an active trading market for the shares of the Company, and trades
involving the stock have been infrequent and made primarily by private
negotiation.
Annual Meeting of Shareholders
The annual meeting of the shareholders of Crescent Banking Company and
Subsidiaries will be held at the Pickens County Chamber of Commerce Community
Center located at 500 Stegall Drive, Jasper, Georgia on April 17, 1997 at 2 p.m.
Form 10-KSB
A copy of Form 10-KSB, Annual Report of the Company as filed with Securities and
Exchange Commission for the year ended December 31, 1996, will furnished free of
charge to any stockholder upon written request. Requests should be mailed to J.
Donald Boggus, Jr., Crescent Banking Company and Subsidiaries, Post Office Box
668, Jasper, Georgia, 30143.
55
<PAGE>
- --------------------------------------------------------------------------------
DIRECTORS & OFFICERS
================================================================================
CRESCENT BANK & TRUST COMPANY
<TABLE>
<CAPTION>
Directors:
<S> <C><C>
J. Donald Boggus, Jr. - President and CEO, Crescent Banking Company and
Subidiaries
James D. Boggus, Sr. - Owner, Pickland, Inc.
John S. Dean, Sr. - Public Utility Executive, Amicalola Electric
Membership Cooperative
A. James Elliott - Chairman of the Board of Crescent Bank &
Trust Company; Associate Dean, Emory
University Law School
Charles Fendley - Mortgage Officer, Crescent Bank and Trust
Company
Chuck Gehrmann - President, Mack Truck Sales of Atlanta
Harry C. Howard - Vice Chairman of the Board of Crescent
Bank & Trust Company; Retired Partner,
King & Spalding
Robert C. KenKnight - President, Crescent Mortgage Services, Inc.
Michael W. Lowe - President, Jasper Jeep Sales, Inc.
Edwin M. Steinmann - Chairman of the Board, Consultant and
Retired Chief Executive Officer,
Corrosion Specialities, Inc.
Janie F. Whitfield - Secretary of the Board of Crescent Bank & Trust
Company; President, Mountain Gold, Inc.
Charles B. Wynne - Retired Bank Executive, Crescent Banking
Company and Subsidiaries
Officers:
J. Donald Boggus ,Jr. - President and CEO
Robert C. Kenknight - Executive Vice President and Mortgage Division
President
Gary Reece - Executive Vice President
Michael Leddy - Senior Vice President of Secondary Marketing
Pat Anthony - Vice President & Operations and
Underwriting Manager
Lorrie L. Shaw - Vice President and Lending Officer
John Shellenberger - Vice President and Loan Disposition
Manager
Paul E. Stephens - Vice President and Lending Officer
Ann NeSmith - Vice President and Mortgage Customer
Service Representative
C. Alex Williams - Vice President and Mortgage Customer
Service Representative
Paul Battles - Assistant Vice President
Parthiv Dave - Assistant Vice President
Judith Eddington - Assistant Vice President and Head
Bookkeeper
Chris Kenney - Assistant Vice President and Internal Auditor
C. Mark McHan - Assistant Vice President and Controller
Penny Aaron - Banking Officer and EDP Manager
Ginger Branch - Banking Officer and Head Teller
Charles Fendley - Mortgage Officer
</TABLE>
56
<PAGE>
- --------------------------------------------------------------------------------
Directors & Officers
================================================================================
CRESCENT BANKING COMPANY
<TABLE>
<CAPTION>
Directors:
<S> <C> <C>
J. Donald Boggus, Jr. - President and CEO
A. James Elliott - Associate Dean of Emory University Law School
Charles Fendley - Secretary, Crescent Banking Company,
Mortgage Officer, Crescent Bank and Trust
Company
Harry C. Howard - Retired Partner, King & Spalding
Arthur Howell - Chairman of Crescent Banking Company,
Retired Partner, Alston & Bird
Michael W. Lowe - President, Jasper Jeep Sales, Inc.
L. Edmund Rast - Retired President and Chief Executive Officer,
Southern Bell Telephone Company
Officers:
J. Donald Boggus, Jr. - President and CEO
</TABLE>
CRESCENT MORTGAGE SERVICES, INC.
<TABLE>
<CAPTION>
Directors:
<S> <C>
J. Donald Boggus, Jr. - President and CEO, Crescent Banking Company and
Subsidiaries; Secretary, Crescent Mortgage
Services, Inc.
Robert C. KenKnight - President and CEO, Crescent Mortgage Services,
Inc.
James D. Boggus, Sr. - Owner, Pickland, Inc.
A. James Elliott - Associate Dean of Emory University Law School
Chuck Gehrmann - President, Mack Truck Sales of Atlanta
Harry C. Howard - Retired Partner, King & Spalding
Edwin M. Steinmann - Chairman of the Board, Crescent Mortgage
Services, Inc.; Consultant and Retired CEO,
Corrosion Specialities, Inc.
Officers:
Robert C. KenKnight - President and CEO
Michael Leddy - Senior Vice President of Secondary Marketing
John Cappello - Regional Vice President
Pat Anthony - Vice President & Operations and Underwriting
Manager
John Shellenberger - Vice President
Parthiv Dave - Assistant Vice President
C. Mark McHan - Assistant Vice President
</TABLE>
57
