UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-KSB
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 33-58832
FIRST CENTRAL BANCSHARES, INC.
Exact name of small business issue as specified in its charter)
Tennessee
(State or other jurisdiction of incorporation or organization)
725 Highway 321 North, Lenoir City, Tennessee
(Address of principal executive office)
62-1482501
(I.R.S. Employer Identification No.)
37771-0230
(Zip Code)
Registrant's telephone number, including area code: (423) 986-
1300
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $1.00 per share)
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 the past 90 days.
[X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response
to items 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 [ ]
The issuer's revenues for its most recent fiscal year was
$7,526,796.
At February 13, 1998, the aggregate market value of the voting
stock held by non-affiliates of the Company was approximately
$12,602,385. The last recorded trade of shares between
individuals was on November 17, 1997 at a price of $27 per share.
As of February 13, 1998, issuer had 466,755 shares of its $5.00
par value common stock outstanding.
PART I
Item 1. Description of Business
(a) Business Development
First Central Bancshares, Inc. (the "Company") is a one bank
holding company for First Central Bank (the "Bank"). The
formation was approved by the stockholders of the Bank on March
18, 1993. On April 6, 1993 the Bank became a wholly owned
subsidiary of the Company with the exchange of one share of Bank
common stock (385,819 shares) for one share of common stock of the
Company. On January 20, 1994 the Company paid a stock dividend of
38,560 shares, this increased the outstanding shares to 424,379.
The Company also paid a stock dividend of 42,376 shares on
February 15, 1996; this brought the total outstanding shares to
466,755.
(b) Business of Issuer
The Bank operates out of the main office located in Lenoir City,
Loudon County, Tennessee and three branch offices, one located in
Loudon, one in Tellico Village, Loudon County, Tennessee, one
located in Farragut, Knox County, Tennessee, and one located in
Kingston, Roane County, Tennessee. All offices are full service
branches serving an area approximately 50 miles in radius which
encompasses parts of Knox County, Blount County,Monroe County,
Roane County, and Anderson County. All offices provide typical
commercial bank products such as checking and savings accounts,
certificates of deposit and individual retirement accounts; and a
complete range of loans including commercial, personal, real
estate, home improvement, automobile and other installment loans,
student education loans and single pay loans. Each office also
offers Visa and MasterCard, ATM cards, safe deposit boxes,
travelers checks, money orders, cashiers checks, collection items,
wire transfers and other customary bank services. All offices
have drive-up window facilities and ATM machines. The ATM cards
may be used at all Most and Cirrus network machines.
The Kingston office in Roane County opened December 29, 1997. The
competition includes four other commercial banks in Loudon County
with only one of them being locally headquartered. The adjoining
counties include twelve commercial banks and seven savings
banks/savings and loan associations. A new commercial bank opened
in Anderson County in 1995 and is the smallest in terms of asset
size. First Central is the second smallest in asset size and
remains the fastest growing institution in Loudon County, and the
above-described market area. The Bank plans to expand its
operations into Mcminn County with the opening of a full service
branch in Sweetwater planned for late 1998 or early 1999.
The Company is subject to regulation by the Federal Reserve Bank
(FRB) and the Securities and Exchange Commission (SEC). The Bank
is subject to regulation by the Department of Financial
Institutions of the State of Tennessee (TDFI) and Federal Deposit
Insurance Corporation (FDIC). As a Bank Holding Company, the
Company is subject to regulation by the Board of Governors of the
Federal Reserve System (Federal Reserve Board). The Bank Holding
Company Act requires the prior approval of the Federal Reserve
Board in any case where a bank holding company proposes to acquire
direct or indirect ownership or control of more than 5% of the
voting shares of any bank (unless it owns a majority of such
bank's voting shares) or to merge or consolidate with any other
bank holding company. The Federal Reserve Board may not approve
such acquisition, merger or consolidation that would have
anticompetitive effects or that would permit a bank holding
company to acquire a bank outside of the holding company's
principal state of operations unless the statutes of the second
state expressly permit the acquisition.
The Bank Holding Company Act also prohibits a bank holding
company, with certain exceptions, from acquiring or retaining more
than 5% of the voting shares of any company that is not a bank and
from engaging in any business other than banking or managing or
controlling banks and other subsidiaries authorized by the Bank
Holding Company Act or providing services to them. The Federal
Reserve Board is authorized to approve the ownership of shares by
a bank holding company of any company whose activities have been
determined by the Federal Reserve Board to be so closely related
to banking or to managing or controlling banks as to be a proper
incident thereto.
The Federal Reserve Board may issue cease and desist orders
against bank holding companies and non-bank subsidiaries to stop
actions believed to present a serious threat to a subsidiary bank.
It also regulates changes in the control of bank holding companies
and the ability to proscribe the payment of dividends by banks and
banks and bank holding companies. The Federal Reserve Board has
expressed its view that a bank holding company experiencing
earnings weakness should not pay cash dividends exceeding its net
income or which could only be funded in ways that weaken the bank
holding company's financial health, such as by borrowing.
The Financial Institutions Reform, Recovery, and Enforcement Act
("FIRREA"), signed into law in 1989, amended provisions of the
Bank Holding Company Act to specifically authorize a bank holding
company, upon receipt of appropriate approvals from the Federal
Reserve Board and the Director of the Office of Thrift Supervision
("OTS"), to acquire control of any savings association or holding
company thereof wherever located. A savings and loan holding
company may not acquire control of a bank. Pursuant to rules
promulgated by FIRREA, a savings association acquired by a bank
holding company (i) may, so long as it continues to meet the
qualified thrift lender test, continue to branch to the same
extent as permitted to their nonaffiliated savings associations
similarly chartered in the state, and (ii) may not continue any
nonbanking activities not authorized for bank holding companies.
Savings associations acquired by a bank holding company may, if
located in a state where the holding company is legally authorized
to acquire a bank, be converted, to the extent permitted by state
law, to the status of a bank but deposit insurance assessments and
payments continue to be paid by the association to the Savings
Association Insurance Fund of the FDIC. A savings association so
converted to a bank becomes subject to the branching restrictions
applicable to banks. Under certain circumstances, a savings
association acquired by a bank holding company may be merged with
an existing bank subsidiary of a holding company.
The Company is also a bank holding company under the Bank
Structure Act of 1974. A bank holding company whose principal
place of business is within the State of Tennessee is allowed to
enter any and all counties in the State through acquisitions of
existing banks. However, a bank holding company may not acquire
any of the shares of a bank in Tennessee unless such bank has been
in operation for at least five (5) years, except in certain
circumstances. A bank holding company is prohibited from
acquiring any bank in Tennessee as long as banks which the holding
company controls retain sixteen and one-half (16.5)% percent or
more of the total individual, partnership or corporate demand and
savings deposits in all banks in Tennessee as reported annually by
the FDIC. Tennessee law provides that any out-of-state holding
company may acquire a Tennessee bank holding company or a
Tennessee Bank with the approval of the Commissioner of the
Department of Financial Institutions of the State of Tennessee
(the "Commissioner") if the laws of the state in which the out-of-
state bank holding company has its principal office permit such
bank holding company to acquire or be acquired by Tennessee bank
holding companies. The Tennessee banks or bank holding companies
to be acquired must have been in existence for more than five
years.
Interstate Banking and Branching Legislation The Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994(the
"IBBEA") authorizes interstate acquisitions of banks and bank
holding companies without geographic limitation beginning one year
after enactment. In addition, since June 1, 1997, a bank may merge
with a bank in another state as long as neither of the states has
opted out of interstate branching between the date of enactment of
the IBBEA and May 31, 1997. Tennessee did not opt out of
interstate branching. The IBBEA further provides that states may
enact laws permitting interstate merger transactions prior to June
1, 1997. Tennessee did not enact such a law. A bank may establish
and operate a de novo branch in a state in which the bank does not
maintain a branch if that state explicitly permits de novo
branching. Once a bank has established branches in a state through
an interstate merger transaction, the bank may establish and
acquire additional branches at any location in the state where any
bank involved in the interstate merger transaction could have
established or acquired branches under applicable federal or state
law. A bank that has established a branch in a state through de
novo branching may establish and acquire additional branches in
such state in the same manner and to the same extent as a bank
having a branch in such state as a result of an interstate merger.
If a state opts out of interstate branching within the specified
time period, no bank in any other state may establish a branch in
the opting out of state, whether through an acquisition or de
novo.
Compliance with environmental laws has not directly impacted the
Company or Bank. However, compliance has impacted the lending
functions of the Bank to commercial business customers. All
commercial loans require an environmental assessment at varying
levels of expertise.
As of December 31, 1997, the Bank employed 35 salaried persons and
7 hourly persons.
(b)(1) Distribution of Assets, Liabilities and Stockholders'
Equity; Interest Rates and Interest Differential
See Schedule I (Attached)
(b)(2) Investment and Loan Portfolio Maturities and
Sensitivities to Changes in Interest Rates
See Schedule III (Attached)
(b)(3) Risk Elements
See Item 6 - Management's Discussion and Analysis or Plan of
Operation and Schedule V - Nonperforming Assets.
(b)(4) Summary of Loan Loss Experience
See Schedule VI - Analysis of Loan Loss Reserve and Schedule VII -
Allocation of the Loan Loss Reserve (Attached).
(b)(5) Deposits
See Item 7 - Financial Statements and Schedule I (Attached)
(b)(6) Return on Equity and Assets
See Item 6 - Management's Discussion and Analysis or Plan of
Operation and Schedule VIII - Return on Assets and Equity.
(b)(7) Short-Term Borrowings
None.
Item 2. Description of Property.
(a) Location of Property
As detailed in Item 1, the Bank operates offices in Lenoir City,
Loudon, Tellico Village, Loudon County, Tennessee, Farragut, Knox
County, Tennessee and Kingston, Roane County, Tennessee. The main
office in Lenoir City is a new, modern facility containing
approximately 10,000 square feet and was occupied in January of
1993. The Loudon office is a modern facility which was remodeled
and expanded during 1996. The extensive remodeling in the first
half of 1996 better supports the level of business maintained at
that location. The Tellico Village office is a new, modern
facility containing approximately 3,000 square feet of space and
is a full service office with a drive-up ATM. The Farragut
office, which opened in May 1995, is a modern full service
facility of approximately 6,000 square feet. The Kingston office
which opened December 29, 1997, is similar to the Farragut branch
with approximately 6,000 square feet.
(b) Investment Policies
(1) The Bank and Company do not invest in real estate other than
for property from which to conduct its operations.
(2) The Bank makes mortgage loans for single family dwellings,
commercial properties, unimproved land, and developmental
property. These mortgage loans may be first or second
mortgages and are serviced and held by the Bank. The Bank
may also from time to time purchase government agency bonds
secured by mortgages and backed and/or guaranteed by
governmental agencies. These agency bonds may include
Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation and Government National Mortgage
Association.
(3) No investment is made in securities of or interest in persons
engaged in real estate activities.
(c) Description of Real Estate and Operating Data
(1) The Company has its principal offices in its headquarters
building at 725 Highway 321 North, Lenoir City, Tennessee
37771, which is owned by the Bank. The Bank also owns
properties which house the branches at Loudon and Tellico
Village, Loudon, Tennessee, Farragut, Tennessee and at
Kingston, Tennessee. The Bank held an operating lease on an
office in Oak Ridge, Tennessee for the purpose of a loan
office, which was not in operation as of December 31, 1997.
The bank also holds vacant property for a future branch in
Sweetwater, Tennessee. None of the properties amount to ten
(10%) percent of total assets and none are encumbered.
Item 3. Legal Proceedings
The Company is not aware of any material pending legal proceedings
to which the Company or the Bank is a party.
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the
fourth quarter of the Company's fiscal year ending December 31,
1997.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
(a) Market Information
The stock of the Company is not publicly traded on any exchange or
market. The stock is traded between individual stockholders only.
The stock was issued in a one for one share exchange with the Bank
stockholders when the Bank was merged with the Company on April 6,
1993. The price for the traded stock is set between the
individuals. However, Company officials believe that the stock
has traded from a low of $21.00 per share to a high of $30.00 per
share between January 1997 and the date of this report as per
individuals who have sold and/or purchased stock.
(b) Holders
The Company has approximately six hundred and twenty (620)
shareholders of common stock.
(c) Dividends
No dividends were distributed in 1997. In February 1996 the
Company distributed a ten (10%) percent dividend to its
stockholders by issuing an additional 42,376 shares of common
stock. The Company used a fair market value of $25.00 per share
and credited common stock $5.00 per share or $211,880, additional
paid in capital $20.00 or $847,520, and charged retained earnings
a total of $1,059,400.
Item 6. Management's Discussion and Analysis
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
First Central Bancshares, Inc. is a one bank holding company which
owns 100% of outstanding the stock of First Central Bank. The
investment in First Central Bank represents virtually all of the
assets of First Central Bancshares, Inc.
The following represents a narrative analysis of the financial
condition and operational results of the company and its
subsidiary bank for 1997. For a more complete understanding of
this narrative, please refer to the Consolidated Financial
Statements and notes thereto presented elsewhere in this Annual
Report.
The accompanying financial statements are consolidated statements
of the Bank and the Company as detailed above. In 1997 total
assets increased 10.6% from December 31, 1996. Federal Funds sold
increased significantly due to good deposit growth and resulted in
a net increase of 295.1% at December 31, 1997 from December 31,
1996. Investment securities increased 1.3% from December 31, 1996
as the bank essentially replaced maturing securities and increased
liquidity through the federal funds market.
Net loans increased 4.5% as the Bank had more normal loan growth
and experienced some pay downs at year end. Real estate loan
growth overall was 2.8%, however, residential properties increased
significantly as opposed to commercial properties. Construction
and land development loans increased by 6.3%. Commercial and non-
residential properties decreased by 48.5%, with residential
mortgage loans and other properties increasing by 49.2%. Consumer
and other loans increased 15.0%, and commercial loans decreased by
4.9%.
Management has continued to increase the loan loss reserve
prudently with the growth of loans. The adequacy of the loan loss
reserve is evaluated monthly by management and quarterly by the
board of directors. The reserve for loan losses was increased
4.3% and remains approximately 1% of net loans outstanding.
Nonperforming assets increased by $35,000 from 1996. This
resulted in nonperforming loan ratios of .06% of total loans at
12/31/97 and .007% at 12/31/96. Coverage of loan loss reserve to
nonperforming assets was 15x and 140x respectively for 1997 and
1996. Total nonperforming assets to total assets were .05% at
12/31/97 and .005% at 12/31/96. The nonperforming ratios all
remain insignificant. Past dues of thirty (30) days or more but
less than ninety (90) days total 1.22% of total net loans. We
continue to monitor loans very closely and anticipate that past
dues and losses will remain low.
As noted earlier, net Investment securities increased 1.3%. The
total net securities are accounted for under Financial Accounting
Standard (FAS) 115, (see notes to consolidated financial
statements). All securities are in Government or Government
agency issues. Also the Bank increased by 12.4% its investment in
Federal Home Loan Bank of Cincinnati stock due to growth in
assets, real estate loans and through stock dividends.
Net investment in premises and equipment increased 22.8% due
primarily to completion of the Kingston Office and the purchase of
property in Sweetwater for a future office. Other assets
increased by 6.3% due to an increase in accrued interest
receivable and an increase in prepaid expense.
Deposit increases of 9.9% reflect continued steady growth with the
Farragut Office continuing to be a major factor. Deposit growth
is expected to increase significantly in 1998 due to the Kingston
Office. Demand deposit growth increased 22.2% as opposed to an
increase in time deposits of .2%. Non-interest bearing demand
deposits increased 13.3% and interest bearing demand deposits
increased 26.3%. The increase in these deposits reflect the
continued success of a new money market product that produced new
money as well as the transfer of money from certificates of
deposit which accounts for the slight increase in time deposits.
Time deposits under $100,000 decreased 5.5% while time deposits
over $100,000 increased by 18.8%. Other liabilities increased
12.3% which primarily was due to year end construction liabilities
associated with the Kingston Office.
Liquidity, which is the company's ability to mobilize cash to meet
operating needs, was up significantly from the prior year. This
increase resulted primarily from the increase in federal funds
sold as noted previously. The liquidity ratio at year end was
well above regulatory requirements. The Bank is a member of the
Federal Home Loan Bank of Cincinnati and is eligible to obtain
both short and long term credit advances. Also, the Bank may
enter into repurchase agreements or purchase federal funds should
the need for additional liquidity arise. Cash and due from banks
increased by 9.7% over 1996. Net unrealized losses on investments
in 1996 improved by 103.8% which resulted in a net gain at year
end by 195.9%. The fair value of securities fluctuates with the
movement of interest rates. Generally, during periods of
decreasing interest rates, the fair values increase whereas the
opposite may hold true during a rising rate environment.
The Company and its subsidiaries had an increase of 47.8% in net
income for 1997 as compared to an increase of 52.6% for 1996. The
return on average assets (ROAA) for the year was 1.5% versus 1.0%
for 1996. The return on equity (ROE) was 16.9% versus 13% for
1996.
Net interest income increased by 20.5% while total interest income
increased by 12.3%. Interest income is composed of the following:
loan income which increased by 16.5%; investment securities income
which increased by 1.6% and federal funds sold income which
decreased 46.6%. Interest expense increased by 3.7%. The
components of interest expense include interest on now accounts
and money market accounts which increased 114.0% due to the
previously mentioned new money market product; savings accounts
which decreased 17.2%; and certificates of deposits which
decreased 15.5%. This small increase in interest expense reflects
the shifting of deposits from term deposits to lower yielding
money market accounts, as well as flat rates. These factors
resulted in a net interest margin of 5.25% versus a margin of
4.58% for 1996.
Non-interest income increased 31.5%. Service charge income is the
largest component of non-interest income and increased 26.8% as
deposit accounts continued to grow. Non-interest expense
increased 9.6%. Salaries and benefits, data processing fees and
occupancy expense account for the largest components of non-
interest expense and all increased moderately. Salaries and
benefits increased by 10.5% due to the addition of employees and
normal salary increases. Data processing increased only 1.1% as a
result of transferring postage costs to a third party which is
reflected below. Occupancy expense/F&E depreciation and
maintenance expenses increased by 5.7%. Other miscellaneous
expenses, including the shift in postage resulted in an increase
of 13.8%. All non-interest costs will continue to increase as
deposits grow and a new planned full service office is opened in
1998.
The Bank utilizes and is dependent upon data processing systems
and software to conduct its business. The data processing systems
include various software packages licensed to the Bank by outside
vendors and a data processing service center. During 1997, the
Bank initiated a review and assessment of all hardware and
software to confirm that it will function properly in the year
2000. The Bank's data processing service center and the majority
of the other vendors which have been contacted have indicated that
their hardware and or software will be Year 2000 compliant.
Testing will be performed for compliance. It is anticipated there
will be some additional expenses incurred during the next to years
related to the Year 2000 issues and they may be material to the
consolidated financial statements of the company.
CAPITAL ADEQUACY
The Company and Bank had consolidated total equity of $4.6 million
on December 31, 1993. The company issued 38,560 shares of stock
in 1994 in the form of a stock dividend to shareholders. The
Company also issued 42,376 shares of stock in the form of a stock
dividend in 1996. The Company will issue 46,526 shares of stock
as a stock dividend in February 1998.
Total capital was $6.9 million at December 31, 1996. Total Tier I
capital was $6.3 million. Total capital at December 31, 1997 was
$8 million and Tier I capital was $7.5 million Risk based capital
guidelines as defined by the banking regulators require the Bank
to maintain minimum total capital ratios of 8% to risk-weighted
assets, Tier I capital of 4%, and Tier I capital to average assets
of 3%. The Bank maintained total capital of 13.9% at 12/31/97 and
10.6% at 12/31/96. Tier I capital was 12.9% and 9.7% for 1997 and
1996 respectively. Tier I capital to average assets was 9.5% at
12/31/97 and 8.4% at 12/31/96. The Bank exceeds all of the
minimum capital ratio requirements in the years discussed and
management believes that the capital position is more than
adequate to support the operations of the company and the
subsidiary bank.
REGULATORY MATTERS AND RECENT LEGISLATION
The Bank is state chartered and federally insured, and is subject
to the rules and regulations of the Tennessee Department of
Financial Institutions (TDFI) and the Federal Deposit Insurance
Corporation (FDIC). The holding company is also subject to the
rules and regulations of the Federal Reserve Bank (FRB) and
Securities and Exchange Commission (SEC).
In 1993, the shareholders of the Bank approved the formation of a
single-bank holding company and a plan for the exchange of one
share of bank stock for one share of holding company stock. This
transaction was accomplished April 6, 1993. The Bank had an
agreement with TDFI and FDIC not to declare or pay any cash
dividends for the first three years of existence. The Company has
now passed that three year threshold and will address dividends
according to the established dividend policy. As noted
previously, the Company declared and paid a stock dividend in 1994
of 38,560 shares which represented a dividend of 10%. The company
also paid a stock dividend of 42,376 shares in 1996.
Beginning in 1993, FDIC deposit insurance premiums were assessed
based on the financial soundness (including capital adequacy) and
the risks inherent in the Bank. The premiums ranged from $.23 per
$100 of deposits to $.31 per $100. The Bank was assigned the rate
of $.23 per $100 for 1993 and 1994. In 1995 the rate was lowered
to a range of $.04 to $.31 for assessments when the Bank Insurance
Fund (BIF) reached 1.25% of total bank domestic deposits in the
third quarter. This rate was further reduced to a minimum of $500
at year end. This significantly reduced the bank's cost for 1995
and remained nominal for 1996 and 1997.
The following are recently issued accounting standards which we
have yet to adopt. For information about recent accounting
standards which we have adopted, see the Notes to Financial
Statements in this report.
In June 1996, the FASB issued SFAS No. 125, "Accounting for
Transfers and Services of Financial Assets and Extinguishments of
Liabilities." SFAS No. 125 provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishment of liabilities. Those standards are based on
consistent application of a financial-components approach that
focuses on control. Under that approach, after a transfer of
financial assets, an entity recognizes the financial and servicing
assets it controls and the liabilities it has incurred,
derecognizes financial assets when control has been surrendered,
and derecognizes liabilities when extinguished. This statement
provides standards for distinguishing transfers of financial
assets that are sales from transfers that are secured borrowings.
This statement is effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring
after December 31, 1996, and is to be applied prospectively.
In December 1996, the FASB subsequently issued SFAS No. 127,
"Deferral of the Effective Date of Certain Provisions of FASB No.
125" as an amendment of FASB Statement No. 125. SFAS No. 127
provides a one year deferral on selected portions of SFAS No. 125.
We have never entered into any transactions related to transfers
of financial assets, sales of loans with servicing retained, or
servicing of loans for other entities. In addition, we do not
anticipate entering into any of these types of transactions in the
future. Therefore, SFAS No. 125 and SFAS No. 127 will not have any
effect on our financial condition or results of operations.
In August 1997, the FASB issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," and Statement of
Financial Accounting Standards No. 129, "Disclosure of Information
about Capital Structure." SFAS Nos. 128 and 129 establish
standards for computing and presenting earnings per share and
makes them comparable to international standards. These
statements are effective for financial statements issued for
periods ending after December 15, 1997.
Application of these statements is not anticipated to have a
significant impact on the preparation of the holding company's
financial statements.
In June 1997, the FASB issued Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," and Statement
of Financial Accounting Standards No. 131, "Disclosure about
Segments of an Enterprise and Related Information." SFAS Nos. 130
and 131 establish additional reporting requirements that will
apply to the holding company's financial statements beginning in
1998, but are not anticipated to have a significant impact on the
preparation of our holding company's financial statements. Both
statements are effective for financial statements issued for
periods beginning after December 31, 1997.
In February 1998, the FASB issued Statement of Financial
Accounting Standards No. 132, "Employers' Disclosures about
Pensions and Other Post Retirement Benefits." SFAS No. 132 revises
employers' disclosures about pension and other post retirement
benefit plans but does not change the measurement or recognition
of those plans. SFAS No. 132 amends FASB Statements Nos. 87, 88
and 106 and is effective for fiscal years beginning after December
15, 1997. SFAS No. 132 does not apply to any of the benefit plans
we currently provide or anticipate providing to our employees in
the near future. Therefore, it will not have any effect on our
financial condition, results of operations, or preparation of
consolidated financial statements.
NOTE: NUMERICAL ENTRIES APPEARING IN THIS REPORT HAVE BEEN
ROUNDED FOR EASE IN READABILITY. ACTUAL FIGURES APPEAR IN THE
AUDITOR'S REPORT, WHICH IS CONTAINED WITHIN THE FOLLOWING PAGES OF
THIS DOCUMENT.
Item 7. Consolidated Financial Statements and Financial Data
Schedules
FIRST CENTRAL BANCSHARES, INC.
AND SUBSIDIARY
Lenoir City, Tennessee
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996, and 1995
INDEPENDENT AUDITOR'S REPORT
Board of Directors
First Central Bancshares, Inc.
Lenoir City, Tennessee
We have audited the accompanying consolidated balance sheets of
First Central Bancshares, Inc. and subsidiary as of December 31,
1997 and 1996, and the related consolidated statements of income,
changes in shareholders' equity, and cash flows for the years
ended December 31, 1997, 1996, and 1995. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
consolidated 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 First Central Bancshares, Inc. and subsidiary as of
December 31, 1997 and 1996 and the results of their operations
and their cash flows for the years ended December 31, 1997, 1996
and 1995, in conformity with generally accepted accounting
principles.
Certified Public
Accountants
February 13, 1998
FIRST CENTRAL BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
As of December 31, 1997 1996
ASSETS
Cash and Due From Banks $ 3,032,065 $ 2,764,463
Federal Funds Sold 5,650,000 1,430,000
Total Cash and Cash Equivalents 8,682,065 4,194,463
Investment Securities at Fair Value 11,214,710 11,066,097
Loans, Net 58,035,658 55,539,328
Premises and Equipment, Net 4,133,082 3,365,315
Accrued Interest Receivable 494,593 473,576
Prepaid Expenses and Other 186,807 70,969
Deferred Income Tax Benefit 43,218 137,227
TOTAL ASSETS $82,790,133 $74,846,975
LIABILITIES AND EQUITY
LIABILITIES
Deposits:
Demand $36,466,335 $29,852,289
Term 38,108,158 38,021,658
Total Deposits 74,574,493 67,873,947
Advances From Federal Home Loan Bank 43,121 45,291
Accrued Interest Payable 335,242 330,963
Accrued Income Taxes 9,499 148,057
Other 346,646 129,652
Total Liabilities 75,309,001 68,527,910
SHAREHOLDERS' EQUITY
Common Stock - Par Value $5.00, Authorized 2,000,000
Shares; Issued and Outstanding 466,755 Shares2,333,775 2,333,775
Capital in Excess of Par Value 3,426,999 3,426,999
Retained Earnings 1,719,082 591,812
Shareholders' Equity Before Net Unrealized Gain
(Loss) on Investment Securities 7,479,856 6,352,586
Net Unrealized Gain (Loss) on
Investment Securities 1,276 (33,521)
Total Shareholders' Equity 7,481,132 6,319,065
TOTAL LIABILITIES AND EQUITY $82,790,133 $74,846,975
The accompanying notes are an integral part of these financial stateme
nts.
FIRST CENTRAL BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 1997 1996 1995
INTEREST INCOME
Loans $5,902,302 $5,062,850 $3,945,231
Investment Securities and
Certificates of Deposit
in Other Banks 740,478 729,119 534,512
Federal Funds Sold 123,232 230,768 179,837
Total Interest Income 6,766,012 6,022,737 4,659,580
INTEREST EXPENSE 3,033,938 2,926,849 2,231,678
NET INTEREST INCOME 3,732,074 3,095,888 2,427,902
PROVISION FOR LOAN LOSSES 177,500 211,500 115,000
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 3,554,574 2,884,388 2,312,902
NONINTEREST INCOME
Service Charges on Demand
Deposits 488,050 384,746 305,767
Loan Fees and Other
Service Charges 244,812 176,494 176,427
Gain on Sales of Investment
Securities -0- -0- 4,858
Other 27,922 17,207 13,589
Total Noninterest Income 760,784 578,447 500,641
NONINTEREST EXPENSE
Salaries and Employee Benefits 1,262,753 1,142,994 963,218
Occupancy Expense 234,578 226,885 192,803
Data Processing Fees 200,105 197,935 182,031
Furniture and Equipment
Depreciation and Maintenance 253,172 234,558 184,744
Federal Insurance Premiums 21,961 14,536 64,718
Advertising and Promotion 93,087 82,138 102,609
Office Supplies and Postage 131,344 94,435 94,352
Other 275,922 262,998 217,846
Total Noninterest Expense 2,472,922 2,256,479 2,002,321
INCOME BEFORE INCOME TAXES 1,842,436 1,206,356 811,222
INCOME TAXES 715,166 443,618 311,288
NET INCOME $1,127,270 $ 762,738 $ 499,934
EARNINGS PER SHARE AMOUNTS $ 2.42 $ 1.65 $ 1.18
The accompanying notes are an integral part of these financial
statements.
FIRST CENTRAL BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For The Years Ended December 31, 1997, 1996, and 1995
Net
Unrealized
Gain (Loss)
Capital in on Total
Common Excess of Retained Investment Shareholders'
Stock Par Value Earnings Securities Equ
ity
BALANCES,
JANUARY 1, 1995$2,121,895 $2,579,479 $ 388,540 $(189,930)$4,89
9,984
Change in Net
Unrealized Gain
(Loss) on
Investment
Securities -0- -0- -0- 178,605 178,605
Net Income -0- -0- 499,934 -0- 499,934
BALANCES,
DECEMBER 31, 19952,121,895 2,579,479 888,474 (11,325) 5,578,523
Change in Net
Unrealized Gain
(Loss) on
Investment
Securities -0- -0- -0- (22,196) (22,196)
Stock Dividend
of 42,376
Shares of
Common Stock 211,880 847,520 (1,059,400) -0- -0-
Net Income -0- -0- 762,738 -0- 762,738
BALANCES,
DECEMBER 31, 19962,333,775 3,426,999 591,812 (33,521) 6,319,065
Change in Net
Unrealized Gain
(Loss) on
Investment
Securities -0- -0- -0- 34,797 34,797
Net Income -0- -0- 1,127,270 -0- 1,127,270
BALANCES,
DECEMBER 31, 1997$2,333,775 $3,426,999 $ 1,719,082 $ 1,276 $7,4
81,132
The accompanying notes are an integral part of these financial
statements.
FIRST CENTRAL BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 1997 1996
1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,127,270 $ 762,738 $ 499,934
Adjustments to Reconcile Net Income
to Net Cash Provided by Operating
Activities:
Provision for Loan Losses 177,500 211,500 115,000
Depreciation 238,292 222,441 192,275
Amortization 4,460 4,460 4,460
Loss on Sale of Premises and
Equipment 143 -0- -0-
Deferred Income Tax (Benefit) 72,681 (33,140) (35,009)
Increase in Unearned Interest 92,637 434,666 122,456
Increase (Decrease) in Unearned
Loan Fees (9,225) 17,990 19,353
Amortization of Net Premiums on
Certificates of Deposit in Other
Banks and Investment Securities12,874 17,302 8,074
Federal Home Loan Bank Stock Dividends (15,900) (13,700)
(11,900)
(Gain) on Sales of Investment
Securities -0- -0- (4,858)
(Gain) on Sales of Foreclosed
Real Estate -0- -0- (733)
(Increase) in Accrued Interest
Receivable (21,017) (112,871) (70,850)
(Increase) Decrease in Prepaid
Expenses and Other (120,298) 16,035
(2,632)
Increase in Accrued Interest
Payable 4,279 16,165 92,536
Increase (Decrease) in Income Taxes
Payable (138,558) (23,232) 257,827
Increase in Other Liabilities 216,994 21,868 81,236
Total Adjustments 514,862 779,484 767,235
Net Cash Provided by
Operating Activities 1,642,132 1,542,222 1,267,169
CASH FLOWS FROM INVESTING ACTIVITIES
Net Decrease in Certificates of
Deposit in Other Banks -0- 100,000 -0-
Investment Securities Available
For Sale:
Purchases (2,827,894) (7,705,466) (2,695,419)
Principal Repayments on Mortgage-
Backed Securities 388,432 478,085 459,437
Maturities 2,350,000 4,600,000 1,400,000
Sales -0- -0- 192,018
Investment Securities Held to Maturity
Purchases -0- -0- (2,248,750)
Maturities -0- -0- 1,750,000
Increase in Loans (2,757,242)(12,394,112) (7,431,029)
Net Purchases of Premises
and Equipment (1,007,064) (498,511) (707,111)
Proceeds from Sale of Premises
and Equipment 862 -0- -0-
Net Cash Used in Investing
Activities (3,852,906) (15,420,004) (9,280,854)
FIRST CENTRAL BANCSHARES, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
For the Years Ended December 31, 1997 1996
1995
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in Deposits 6,700,546 7,348,063 14,554,437
Repayment of Federal Home
Loan Bank Advances (2,170) (2,000) (1,843)
Net Cash Provided by Financing
Activities 6,698,376 7,346,063 14,552,594
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 4,487,602 (6,531,719) 6,538,909
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 4,194,463 10,726,182 4,187,273
CASH AND CASH EQUIVALENTS,
END OF YEAR $8,682,065 $ 4,194,463 $10,726,182
Supplementary Disclosures of Cash
Flow Information:
Cash Paid During the Year for:
Interest $3,029,659 $ 2,910,684 $ 2,139,142
Income Taxes $ 781,043 $ 499,990 $ 88,470
Supplementary Disclosures of Noncash
Investing Activities:
Sales of Foreclosed Real Estate by
Origination of Mortgage Loans$ -0- $ -0- $ 20,755
Transfer of Investment Securities From
Held to Maturity to Available For Sale
Category $ -0- $ -0- $ 2,090,422
Change in Unrealized Gain (Loss) on
Investment Securities $ 56,125 $ 35,797 $ 288,069
Change in Deferred Income Tax Associated
With Unrealized Gain (Loss) on
Investment Securities $ 21,328 $ 13,601 $ 109,464
Change in Net Unrealized Gain (Loss)
on Investment Securities $ 34,797 $ 22,196 $ 178,605
Issuance of Common Stock Dividend:
Par $ -0- $ 211,880 $ -0-
Capital in Excess of Par Value$ -0- $ 847,520 $ -0-
Reduction in Retained Earnings Due
to Issuance of Common Stock$ -0- $ 1,059,400 $ -0-
The accompanying notes are an integral part of these financial
statements.
FIRST CENTRAL BANCSHARES, INC.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1997, 1996, and 1995
NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Nature of Operations - The Company's subsidiary, First Central
Bank (the Bank), provides a variety of banking services to
individuals and business through its five branches in Lenoir
City, Loudon, Tellico Village, Farragut, and Kingston, Tennessee.
Its primary deposit products are demand deposits and certificates
of deposit, and its primary lending products are commercial
business, real estate mortgage, and installment loans.
Principles of Consolidation - The consolidated financial
statements include the accounts of First Central Bancshares,
Inc., a bank holding company, and its wholly owned subsidiary,
First Central Bank. All significant intercompany balances and
transactions have been eliminated.
Estimates - The preparation of consolidated financial statements
In accordance with generally accepted accounting principles
requires management to make estimates and assumptions. Those
estimates and assumptions affect certain reported amounts and
disclosures. Accordingly, actual results could vary from those
estimates.
Cash and Due From Banks - Cash and due from banks includes
balances in four correspondent commercial banks located in the
southeastern United States, approximately $24,000 ($23,000 in
1996) on deposit with the Nashville branch of Federal Reserve
Bank of Atlanta, and approximately $17,000 ($18,000 in 1996) on
deposit with the Federal Home Loan Bank of Cincinnati. Balances
in correspondent bank accounts in excess of FDIC insurance limits
are approximately $102,000 as of December 31, 1997 ($102,000 in
1996).
Federal Funds Sold - Federal funds sold consist of unsecured
loans to two correspondent commercial banks located in the
southeastern United States. These loans are repaid on the next
business day.
Investment Securities - The Bank applies the Financial Accounting
Standards Board Statement of Financial Accounting Standards No.
115, Accounting for Certain Investments in Debt Equity Securities
(SFAS No. 115). In accordance with SFAS No. 115, the Bank has
classified all of its investment securities in the available for
sale category. These securities are carried at fair value based
on quoted market prices. Any unrealized gain or loss is reported
in the consolidated balance sheets as a component of
shareholders' equity, net of any deferred tax effect.
Realized gains and losses on the sales of investment securities
are based on the net proceeds and amortized cost of the
securities sold, using the specific identification method.
See Note 2 for additional information on investment securities.
Recognition of Interest on Loans - Unearned interest on
installment loans is recognized as income over the terms of the
loans using a declining balance method. Interest on other loans
is calculated using the simple interest method on the principal
outstanding. Accrual of interest is discontinued on a loan when
management believes, after considering economic and business
conditions and collection efforts, that the borrower's financial
condition is such that collection of interest is doubtful.
Allowance for Loan Losses - The allowance for loan losses is
maintained at a level which, in management's judgment, is
adequate to absorb credit losses inherent in the loan portfolio.
The amount of the allowance is based on management's evaluation
of the collectibility of the loan portfolio, including the nature
of the portfolio, credit concentrations, trends in historical
loss experience, specific impaired loans, and economic
conditions. Allowances for impaired loans are generally
determined based on collateral values or the present value of
estimated cash flows. Because of uncertainties associated with
regional economic conditions, collateral values, and future cash
flows on impaired loans, it is reasonably possible that
management's estimate of credit losses inherent in the loan
portfolio and the related allowance may change materially in the
near term. The allowance is increased by a provision for loan
losses, which is charged to expense and reduced by charge-offs,
net of recoveries. Changes in the allowance relating to impaired
loans are charged or credited to the provision for loan losses.
Loan Fees - Loan fees, net of initial direct costs related to
initiating and closing loans, have been deferred and are being
amortized into interest income over the remaining lives of the
loans as an adjustment of yield using the interest method.
Premises and Equipment - Premises and equipment are stated at
cost, less accumulated depreciation. Depreciation, computed
principally using the straight-line method, is based on the
following estimated useful lives:
Buildings and Land Improvements 15 to 40 years
Leasehold Improvements 7 to 31 years
Furniture, Fixtures and Equipment 5 to 7 years
Organization Costs - Organization costs incurred in the share
exchange with the Holding Company totalled $22,305 and are being
amortized over sixty months.
Earnings Per Share - Earnings per share is based on the weighted
average number of shares outstanding of 466,755, 461,531, and
424,379, as of December 31, 1997, 1996 and 1995, respectively.
Income Taxes - Income taxes are provided for the tax effects of
transactions reported in the consolidated financial statements
and consist of taxes currently due plus deferred taxes related
primarily to differences between the basis of the allowance for
loan losses, accumulated depreciation, and the conversion from
the accrual basis of accounting for financial reporting purposes
to the cash basis of accounting for tax reporting. The deferred
tax assets and liabilities represent the future tax return
consequences of those differences which will either be taxable or
deductible when the assets and liabilities are recovered or
settled.
Advertising and Promotion - Advertising and promotion costs are
expensed as incurred.
NOTE 2 - INVESTMENT SECURITIES
The Bank applies SFAS No. 115 for its accounting for investment
securities. The amortized cost and estimated fair value of
investment securities as of December 31, 1997 and 1996 are as
follows:
Investment Securities Available for Sale
Gross Gross Estimated
Amortized UnrealizedUnrealized Market
Cost Gains Losses Value
As of December 31, 1997:
Debt Securities:
U.S. Treasury Securities
and Obligations of U.S.
Government Corporations
and Agencies $8,953,856 $16,205$(16,589)$ 8,953,472
Obligations of States and
Political Subdivisions 497,978 4,320 -0- 502,298
Mortgage-Backed Securities 1,524,018 6,351 (8,229) 1,522,1
40
10,975,852 26,876 (24,818)10,977,910
Equity Security:
Stock in Federal Home Loan
Bank of Cincinnati, at Cost 236,800 -0- -0- 236
,800
$11,212,652 $26,876$(24,818)$11,214,710
As of December 31, 1996:
Debt Securities:
U.S. Treasury Securities and
Obligations of U.S. Government
Corporations and Agencies$ 8,978,541$15,212$(54,921)$ 8,938,8
32
Mortgage-Backed Securities 1,930,923 1,949 (16,307) 1,916,5
65
10,909,464 17,161 (71,228)10,855,397
Equity Security:
Stock in Federal Home Loan
Bank of Cincinnati, at Cost 210,700 -0- -0- 210
,700
$11,120,164 $17,161$(71,228)$11,066,097
The amortized cost and estimated market value of debt securities
as of December 31, 1997 by contractual maturity are shown below.
Actual maturities may differ from contractual maturities because
borrowers may have the right to call or prepay obligations with
or without call or prepayment penalties.
Available for Sale
Estimated
Amortized Market
Cost Value
Due in One Year or Less $ 798,912$ 799,939
Due After One Year Through Five Years 3,769,208 3,760,444
Due After Five Years Through Ten Years 6,407,732 6,417,527
Total Debt Securities $10,975,852$10,977,910
For purposes of the maturity table, mortgage-backed securities,
which are not due at a single maturity date, have been allocated
over maturity groupings based on their contractual maturities.
The mortgage-backed securities may mature earlier than their
contractual maturities because of principal prepayments.
There were no sales of investment securities classified as
available for sale during the year ended December 31, 1997 or
1996 ($192,018 in 1995). Accordingly, no gross gains or gross
losses were realized for the year ended December 31, 1997 or 1996
($4,858 and $-0- in 1995).
During 1995, in accordance with the Guide to Implementation of
Statement 115 on Accounting for Certain Investments in Debt and
Equity Securities issued by the Financial Accounting Standards
Board in November 1995, the Bank transferred U.S. Treasury
Securities and Government Agency Securities with an amortized
cost of $2,090,422 to its available for sale category. These
securities had a net unrealized gain of approximately $8,000 on
the date transferred. There were no transfers between categories
in either 1997 or 1996.
Investments with carrying values of approximately $1,010,000 and
$1,433,000 were pledged to secure deposits of public funds as of
December 31, 1997 and 1996, respectively.
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES
The Bank provides mortgage, commercial and consumer lending
services to businesses and individuals primarily in the Loudon
County area. A summary of loans is as follows:
1997 1996
Loans secured by real estate:
Commercial properties $ 8,108,542 $15,745,306
Construction and land development 8,271,983 7,780,866
Residential and other properties 25,087,066 16,816,150
Total loans secured by real estate 41,467,591 40,342,322
Commercial and industrial loans 5,230,760 5,499,775
Consumer loans 12,389,226 10,719,368
Other loans 982,702 904,748
60,070,279 57,466,213
Less: Allowance for Loan Losses (586,860) (562,536)
Unearned Interest (1,395,335) (1,302,698)
Unearned Loan Fees (52,426) (61,651)
$58,035,658 $55,539,328
In the ordinary course of business, the Bank has entered into off-
balance-sheet financial instruments consisting of commitments to
extend credit, commercial letters of credit and standby letters
of credit. These financial instruments are recorded in the
financial statements when they become payable. Outstanding
letters of credit were approximately $2,729,000 and $3,717,000 as
of December 31, 1997 and 1996, respectively. Unadvanced lines of
credit and commitments to extend credit were approximately
$15,935,000 and $15,865,000 as of December 31, 1997 and 1996,
respectively. Of the total outstanding letters of credit and
unadvanced lines and commitments as of December 31, 1997 and
1996, approximately $11,238,000 and $12,502,000, respectively,
were secured, primarily by real estate.
From time to time, the Bank provides credit to its executive
officers, directors and their affiliates. Such transactions are
made on the same terms as those prevailing for comparable
transactions with other borrowers and do not represent more than
a normal risk of collection.
Loans to executive officers, directors and their affiliates are
as follows:
December 31,
1997 1996
Loans at beginning of year $1,787,598 $1,811,884
Disbursements 623,068 279,077
Repayments (932,182) (303,363)
Loans at end of year $1,478,484 $1,787,598
The transactions in the allowance for loan losses are as follows:
1997 1996 1995
Balance, Beginning of Year $ 562,536 $ 434,068 $368,599
Provision - Charged to Expense 177,500 211,500 115,000
Recoveries of Loans Previously
Charged Off 55,329 39,007 22,300
Loans Charged Off (208,505) (122,039) (71,831)
Balance, End of Year $ 586,860 $ 562,536 $434,068
Loans past due ninety days or more and still accruing interest
totalled approximately $39,000 as of December 31, 1997 ($4,000 in
1996). There were no loans on which the accrual of interest had
been discontinued as of December 31, 1997 and 1996.
As of December 31, 1997 and 1996, the Bank had no loans
specifically classified as impaired, therefore none of the
allowance for loan losses is related to impaired loans.
NOTE 4 - PREMISES AND EQUIPMENT
A summary of premises and equipment is as follows:
1997 1996
Land $1,122,798 $ 757,798
Buildings 2,602,408 2,190,130
Furniture, Fixtures and Equipment 1,300,811 1,083,087
5,026,017 4,031,015
Less Accumulated Depreciation 892,935 665,700
$4,133,082 $3,365,315
In December 1997, the Bank completed construction of the Kingston
branch with a total cost of construction of approximately
$410,000.
NOTE 5 - ACCRUED INTEREST RECEIVABLE
A summary of accrued interest receivable is as follows:
1997 1996
Investment securities $181,740 $169,560
Loans 312,853 304,016
$494,593 $473,576
NOTE 6 - DEPOSITS
A summary of deposits is as follows:
1997 1996
Demand Deposits:
Noninterest-bearing accounts $10,760,651 $ 9,498,960
NOW and MMDA accounts 22,350,989 16,915,879
Savings accounts 3,354,695 3,437,450
Total Demand Deposits 36,466,335 29,852,289
Term Deposits:
Less than $100,000 27,450,853 29,050,819
$100,000 or more 10,657,305 8,970,839
Total Term Deposits 38,108,158 38,021,658
$74,574,493 $67,873,947
As of December 31, 1997, the scheduled maturities of term
deposits above are as follows:
1998 $23,535,239
1999 7,306,770
2000 6,047,301
2001 861,657
2002 240,191
Thereafter 117,000
$38,108,158
NOTE 7 - ADVANCES FROM FEDERAL HOME LOAN BANK
During 1994, the Bank obtained an advance from the Federal Home
Loan Bank of Cincinnati (FHLB). The advance is repayable monthly
with interest at the rate of 8.20% and has a maturity of fifteen
years. Interest expense associated with the advance from the
FHLB totalled $3,634 for the year ended December 31, 1997 ($3,804
in 1996 and $3,961 in 1995). Pursuant to collateral agreements
with the FHLB, the advance is secured by the Bank's FHLB stock
and certain first mortgage loans.
NOTE 8 - INTEREST EXPENSE
A summary of interest expense is as follows:
1997 1996 1995
Deposits:
NOW and MMDA Accounts $ 928,161 $ 433,730 $ 329,165
Savings Accounts 72,545 87,643 86,544
Term Deposits 2,028,246 2,401,672 1,807,145
Total Interest Expense on Deposits 3,028,952 2,923,045 2,222,8
54
Borrowings:
Federal Funds Purchased 1,352 -0- 4,863
FHLB Advances 3,634 3,804 3,961
Total Interest Expense on Borrowings 4,986 3,804 8
,824
Total Interest Expense $3,033,938 $2,926,849 $2,231,678
NOTE 9 - INCOME TAXES
Income taxes as shown in the consolidated statements of income
differ from the amount computed using the statutory federal
income tax rate as follows:
1997 1996 1995
Percent Percent Percent
of of of
Pretax Pretax Pretax
Amount Income Amount Income Amount Income
Federal income tax
at statutory rate$626,428 34.0% $410,161 34.0% $275,815 34.0%
State income tax
and other 88,738 4.8 33,457 2.8 35,473 4.4%
$715,166 38.8% $443,618 36.8% $311,288 38.4%
Income taxes consist of:
Current $642,485 $476,758 $346,297
Deferred (benefit) 72,681 (33,140) (35,009)
$715,166 $443,618 $311,288
The net deferred tax asset in the December 31, 1997 and 1996
consolidated balance sheets includes the following components:
1997 1996
Deferred Tax Assets:
Unrealized Holding Loss on Investment Securities$ -0-$ 20,546
Provision for Loan Losses 158,982 159,538
Deferred Loan Fees 19,901 23,403
Other -0- 61,926
Total Deferred Tax Assets 178,883 265,413
Deferred Tax Liabilities:
Depreciation 67,994 70,456
FHLB Stock Dividends 20,954 14,918
Conversion to Cash Basis 32,194 42,812
Unrealized Holding Gain on Investment Securities782 -0-
Other 13,741 -0-
Total Deferred Tax Liabilities 135,665 128,186
Net Deferred Tax Assets $ 43,218 $137,227
NOTE 10 - RETIREMENT PLAN
The Bank has a profit sharing retirement plan which allows for
discretionary contributions by the Bank as determined annually by
its board of directors. The plan also allows for voluntary
(401k) contributions by employees up to fifteen percent of their
compensation. The Bank's contributions to the plan for the years
ended December 31, 1997, 1996 and 1995 are as follows:
401k
Matching Profit Sharing Total
1997 $6,522 $68,105 $74,627
1996 3,358 59,865 63,223
1995 2,260 51,585 53,845
NOTE 11 - REGULATORY MATTERS
The Bank is subject to various regulatory capital requirements
administered by the federal and state banking agencies. Failure
to meet minimum capital requirements can initiate certain
mandatory, and possibly additional discretionary, actions by
regulators that, if undertaken, could have a direct material
effect on the Bank's financial statements. Under capital
adequacy guidelines and the regulatory framework for prompt
corrective action, the Bank must meet specific capital guidelines
that involve quantitative measures of the Bank's assets,
liabilities, and certain off-balance-sheet items as calculated
under regulatory accounting practices. The Bank's capital
amounts and classification are also subject to qualitative
judgments by the regulators about components, risk weightings,
and other factors.
Quantitative measures established by regulation to ensure capital
adequacy require the Bank to maintain minimum amounts and ratios
(set forth in the table below) of Total and Tier I capital (as
defined in the regulations) to Risk-Weighted Assets (as defined),
and of Tier I capital (as defined) to Average Assets (as
defined). Management believes, as of December 31, 1997, that the
Bank meets all capital adequacy requirements to which it is
subject.
As of December 31, 1997, the Bank is categorized as well
capitalized under the regulatory framework for prompt corrective
action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based and Tier I
leverage ratios as set forth in the table. There are no
conditions or events since that date that management believes
have changed the institution's category.
The Bank's actual capital amounts and ratios are also presented
in the table. All amounts are in thousands of dollars.
To be Well
To Comply With Capitalized U
nder
Minimum CapitalPrompt Correc
tive
Actual Requirements Action Provi
sions
Amount Ratio Amount Ratio Amount Ratio
As of December 31, 1997:
Total Capital
(to Risk-Weighted Assets)$8,05013.9%$4,641 >8.0% $5,801 >10.0%
Tier I Capital
(to Risk-Weighted Assets)$7,46312.9%$2,320 >4.0% $3,481 >6.0%
Tier I Capital
(to Average Assets) $7,463 9.5% $2,351 >3.0% $3,919 >5.0%
As of December 31, 1996:
Total Capital
(to Risk-Weighted Assets)$6,89710.6%$5,224 >8.0% $6,530 >10.0%
Tier I Capital
(to Risk-Weighted Assets)$6,3349.7%$2,612 >4.0% $3,918 >6.0%
Tier I Capital
(to Average Assets) $6,334 8.4% $2,263 >3.0% $3,772 >5.0%
NOTE 12 - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments (SFAS No. 107), which requires the
Company to disclose the fair value of financial instruments, both
assets and liabilities recognized and not recognized in the
consolidated statements of financial condition, for which it is
practicable to estimate fair value.
According to SFAS No. 107, a financial instrument is defined as
cash, evidence of an ownership interest in an entity, or a
contract that both: (1) imposes on one entity a contractual
obligation to deliver cash or another financial instrument to a
second entity, or to exchange other financial instruments on
potentially unfavorable terms with the second entity, and (2)
conveys to that second entity a contractual right to receive cash
or another financial instrument from the first entity, or to
exchange other financial instruments on potentially favorable
terms with the first entity.
SFAS No. 107 also states that the fair value of a financial
instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties, other
than in a forced or liquidation sale. Quoted market prices in an
active market, if available, are the best evidence of the fair
value of financial instruments. For financial instruments that do
not trade regularly, management's best estimate of fair value is
based on either the quoted market price of a financial instrument
with similar characteristics or on valuation techniques such as
the present value of estimated future cash flows using a discount
rate commensurate with the risks involved.
For the Bank, as for most financial institutions, the majority of
its assets and liabilities are considered financial instruments
as defined above. However, a large majority of those assets and
liabilities do not have an active trading market nor are their
characteristics similar to other financial instruments for which
an active trading market exists. In addition, it is the Bank's
practice and intent to hold the majority of its financial
instruments to maturity and not to engage in trading or sales
activities. Therefore, much of the information as well as the
amounts disclosed below are highly subjective and judgmental in
nature. The subjective factors include estimates of cash flows,
risks characteristics, credit quality, and interest rates, all of
which are subject to change. Because the fair value is estimated
as of December 31, 1997, the amounts which will actually be
realized or paid upon settlement or maturity of the various
financial instruments could be significantly different.
The estimates of fair value are based on existing financial
instruments without attempting to estimate the value of
anticipated future business or activity nor the value of assets
and liabilities that are not considered financial instruments.
For example, the value of mortgage loan servicing rights and the
value of the Bank's long-term relationships with depositors,
commonly known as core deposit intangibles, have not been
considered in the estimates of fair values presented below. In
addition, the tax implications related to the realization of
unrealized gains and losses can have a significant effect on fair
value estimates and have not been included in the estimated fair
values below.
The following methods and assumptions were used to estimate the
fair value of the following classes of financial instruments:
Cash and Cash Equivalents - Cash and cash equivalents include
cash and due from banks, and interest-bearing deposits with
banks. For these short-term instruments, the recorded book value
is a reasonable estimate of fair value.
Investment Securities - Quoted market prices are used to
determine the estimated fair value of investment securities.
Net Loans - The estimated fair value of fixed rate mortgage loans
and commercial loans is calculated by discounting future cash
flows to their present value. Future cash flows, consisting of
both principal and interest payments, are discounted using
current Bank rates for similar loans with similar maturities.
The estimated fair value of variable rate loans is considered
equal to recorded book value.
Fixed rate installment loans have an average maturity of less
than three years, a relatively stable average interest rate, and
a variety of credit risks associated with them. The fair value
of these loans is estimated by discounting future estimated cash
flows to their present value using current Bank rates for similar
loans with similar maturities.
The estimated fair value of the allowance for loan losses is
considered to be recorded book value. Additionally, the credit
exposure known to exist in the loan portfolio is embodied in the
allowance for loan losses.
Deposits - The estimated fair value of demand, savings, NOW and
money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of
deposit is estimated using the rates currently offered for
deposits of similar maturities.
Advances From Federal Home Loan Bank - The advances are fixed
rate and fixed maturity liabilities. Their fair value is
estimated using rates currently available to the Bank for debt
with similar terms and remaining maturities.
Off-Balance-Sheet Loan Commitments - The fair value of loan
commitments is based on fees currently charged to enter into
similar agreements, taking into account the remaining terms of
the agreements and the present creditworthiness of the
counterparties. For fixed rate loan commitments, fair value also
considers the difference between current levels of interest rates
and the committed rates. The fair value of letters of credit is
based on fees currently charged for similar agreements or on the
estimated cost to terminate them or otherwise settle the
obligations with the counterparties at the reporting date. The
fair value of these items is not material to the Company as of
December 31, 1997.
The recorded book value and estimated fair value of the Company's
financial instruments as of December 31 are as follows:
1997
1996
Recorded Estimated Recorded Estimated
Book Fair Book Fair
Value Value Value Value
FINANCIAL ASSETS:
Cash and Cash Equivalents $ 8,682,065$ 8,682,065$ 4,194,463$ 4,
194,463
Investment Securities$11,214,710$11,214,710$11,066,097$11,066,0
97
Net Loans $58,035,658$57,611,197$55,539,328$55,734,783
FINANCIAL LIABILITIES:
Deposits $74,574,493$74,686,410$67,873,947$67,888,206
Advances From Federal
Home Loan Bank $ 43,121$ 46,893$ 45,291$ 48,779
NOTE 13 - SIGNIFICANT GROUP CONCENTRATIONS OF CREDIT RISK
The Bank's primary business activity is with customers located
within East Tennessee. As of December 31, 1997, the Bank's
receivables included two industry concentrations, one to four
family residential properties ($25,087,066) and commercial
properties ($8,108,542). These concentrations are generally
mitigated by being spread over several hundred unrelated
borrowers and by more than adequate collateral loan to value
ratios.
NOTE 14 - CONDENSED PARENT COMPANY FINANCIAL INFORMATION
Condensed financial information of First Central Bancshares, Inc.
(parent company only) is as follows:
CONDENSED BALANCE SHEET
December 31, 1997
Assets:
Demand Balance With Subsidiary $ 13,027
Accounts Receivable - Subsidiary 1,684
Investment in Subsidiary 7,464,026
Organization Costs, Net 1,119
Total Assets $ 7,479,856
Shareholders' Equity:
Common Stock - Par Value $5.00,
Authorized 2,000,000 Shares; 466,755
Shares Issued and Outstanding $ 2,333,775
Capital in Excess of Par Value 3,426,999
Retained Earnings 1,719,082
Total Shareholders' Equity $ 7,479,856
CONDENSED STATEMENT OF INCOME
Year Ended December 31, 1997
Expenses $ 2,765
Loss Before Equity in Undistributed
Earnings of Subsidiary (2,765)
Undistributed Earnings of Subsidiary 1,130,035
Net Income $ 1,127,270
CONDENSED STATEMENT OF CASH FLOWS
Year Ended December 31, 1997
Operating Activities:
Net Income $ 1,127,270
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities:
Amortization 4,460
Undistributed Earnings of Subsidiary (1,130,035)
Decrease in Accounts Receivable - Subsidiary 796
Total Adjustments (1,124,779)
Net Cash Provided by Operating Activities and
Net Increase in Demand Balance With Subsidiary 2,491
Demand Balance With Subsidiary, Beginning of Year 10,536
Demand Balance With Subsidiary, End of Year $ 13,027
NOTE 15 - STOCK DIVIDENDS
During 1996, the Holding Company's board of directors approved
the issuance of a ten percent stock dividend to shareholders of
record as of January 1, 1996. An additional 42,376 shares of
common stock were issued at $25 per share, and retained earnings
were reduced by $1,059,400 as a result of the stock dividend.
The holding company did not declare a stock dividend in either
1997 or 1995.
FINANCIAL DATA SCHEDULES
SCHEDULE I
AVERAGE BALANCES, INTEREST AND AVERAGE RATES
(IN THOUSANDS)
1997 1996
Average AverageAverage Average
BalanceInterest Yield BalanceInterest Yield
ASSETS
Federal Funds Sold$ 2,301 $ 117 5.08%$ 4,362 $ 231 5.30%
Investment Securities:
Available for Sale:
Taxable 11,013 732 6.65% 11,233 729 6.49%
Tax - Exempt 20 1 5.00% -0- -0-
Gross Loans,
Including Fees 61,017 6,086 9.97% 52,057 5,063 9.73%
Total Interest
Earning Assets 74,351 $6,936 9.33% 67,652 $6,023 8.90%
Cash and Due From Banks2,295 2,438
All Other Assets 4,249 3,784
Less:
Reserve for Loan Losses(592) (497)
Unearned Fees &
Interest (1,538) (1,000)
$78,765 $72,377
LIABILITIES AND SHAREHOLDERS EQUITY
Interest Bearing Deposits:
Time Deposits $36,257 $2,028 5.59%$41,106 $2,402 5.84%
Other Deposits 24,895 1,001 4.02% 15,655 521 3.33%
FHLB Advances` 44 4 9.09% 46 4 8.70%
Federal Funds Purchased 22 14.55% -0- -0- 0.00%
Total Interest
Bearing Liabilities61,218 $3,034 4.96% 56,807 $2,927 5.15%
Non-Interest Bearing
Deposits 10,151 9,268
Total Cost of Funds 4.25% 4.43%
All Other Liabilities 533 458
Shareholders' Equity6,908 5,932
Unrealized Gain (Loss)
on Securities Available
for Sale (45) (88)
Total Liabilities &
Shareholders' Equity$78,765 $72,377
Net Interest Yield 4.37% 3.75%
Net Interest Margin 5.25% 4.58%
SCHEDULE II
RATE/VOLUME ANALYSIS
(IN THOUSANDS)
1997/1996 1996/1995
Increase (Decrease) dueIncrease (Decrease) due
change in change in
AverageAverage AverageAverage
Balance Rate Total Balance Rate Total
INTEREST REVENUE
Federal Funds Sold $ (105) $ (9)$ (114)$ 65 $(14)$ 51
Securities Available
for Sale (14) 18 4 218 (24) 194
Loans, Including Fees 894 129 1,023 1,019 99 1,118
Total Interest Revenue 775 138 913 1,302 61 1,363
INTEREST EXPENSE
Interest Bearing
Deposits 217 (111) 106 673 27 700
Other Short-Term
Borrowings (-0-) -0- (-0-) (-0-) -0- -0-
Federal Funds Purchased 1 -0- 1 -0- (5) (5)
Total Interest Expense$ 218 (111) 107 $ 673 22 695
Net Change in Net
Interest Revenue $ 557 $ 249 $ 806 $ 629 $ 39 $ 668
SCHEDULE III
INTEREST RATE SENSITIVITY
(IN THOUSANDS)
December 31, 1997
0-3 4 MO 1 YR
MONTHS TO 1 YR TO 5 YR > 5 YR TOTAL
ASSETS
Federal Funds Sold $ 5,650 $ -0- $ -0- $ -0- $ 5,650
Investments 6,414 2,612 1,687 502 11,215
Loans:
Fixed Rate 1,775 4,334 14,878 45 21,032
Floating Rate 18,717 3,597 16,710 14 39,038
Non-Interest Earning
Assets, Unearned
Assets & Loan Loss
Reserve 5,855 -0- -0- -0- 5,855
Total Assets $38,411 $ 10,543 $33,275 $ 561 $82,790
LIABILITIES AND SHAREHOLDERS EQUITY
Interest-Bearing
Deposits $ 33,679 $ 15,661 $14,456 $ 17 $63,813
Non-Interest
Bearing Deposits 10,761 -0- -0- -0- 10,761
FHLB Advances -0- -0- -0- 43 43
Non-Interest Bearing
Liabilities and
Shareholders'
Equity 8,173 -0- -0- -0- 8,173
Total Liabilities
& Shareholders
Equity $ 52,613 $ 15,661 $14,456 $ 60 $82,790
Interest Rate
Sensitivity Gap $(14,202)$ (5,118)$18,819 $ 501 $ -0-
Cumulative Interest
Rate Sensitivity
Gap $(14,202)$(19,320)$ (501) $ -0- $ -0-
SCHEDULE IV
NONPERFORMING ASSETS
(IN THOUSANDS)
December 31,
1997 1996
Non-Accrual Loan* $-0- -0-
Loans Past Due > 90 Days 39 4
Restructured Loans -0- -0-
Total Non-Performing Assets $ 39 $ 4
*The Bank's policy is that no loans will be placed on non-accrual
status. Any loan or asset that is considered uncollectible is
charged-off and handled through the charge-off/collection process.
SCHEDULE V
ANALYSIS OF LOAN LOSS RESERVE
(IN THOUSANDS)
December 31,
1997 1996
Balance at Beginning of Period $563 $434
Charge-Offs:
Commercial, Financial & Agricultural 2 8
Real Estate - Construction -0- 5
Real Estate - Mortgages -0- -0-
Installment - Consumer 207 109
Other -0- -0-
Total Charge-Offs 209 122
Recoveries:
Commercial, Financial & Agricultural 1 13
Real Estate - Construction -0- -0-
Real Estate - Mortgages -0- -0-
Installment - Consumer 54 26
Other -0- -0-
Total Recoveries 55 39
Net Charge-Offs 154 83
Provision for Loan Losses 178 212
Balance at the End of the Period $587 $563
Ratio of Net Charge-Offs to
Average Loans Outstanding $0.25% 0.16%
SCHEDULE VI
ALLOCATION OF LOAN LOSS RESERVE
(IN THOUSANDS)
December 31,
1997% of Total 1996% of Total
Commercial, Financial &
Agricultural $ 87 15% $ 64 11%
Real Estate - Construction 126 22% 78 14%
Real Estate - Mortgages 140 24% 169 30%
Installment - Consumer 150 26% 108 19%
Other 83 14% -0- 0%
Unallocated -0- 0% 144 26%
$586 100% $563 100%
SCHEDULE VII
RETURN ON ASSETS & EQUITY
(IN THOUSANDS)
1997 1996
Return on Average Assets 1.49% 1.05%
Return on Average Equity 16.99% 13.05%
Dividend Payout Ratio 0.00% 0.00%
Average Equity to Average Assets 8.77% 8.07%
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
There have been no disagreements with the Company's independent
accountants on any matter of accounting or financial statement
disclosure.
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act
(a) Directors and Executive Officers
The information appearing under the caption "Election of
Directors" on pages 3 and 4 of the Proxy Statement relating to the
1997 Annual Meeting of the Stockholders is incorporated herein by
reference. The Proxy Statement is included with this report as
Exhibit 99.
Item 10. Executive Compensation
The information appearing under the caption "Compensation of
Executive Officers and Directors" on page 5 of the Proxy Statement
is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and
Management
The information appearing under the caption "Information Regarding
Certain Beneficial Owners" on page 2 of the Proxy Statement is
incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
The information appearing under the caption "Certain Relationships
and Related Transactions" on page 6 of the Proxy Statement is
incorporated herein by reference.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Selected Financial Data
EXHIBIT 27
SELECTED FINANCIAL DATA
(IN THOUSANDS)
December 31, 1997
Cash $ 3,032
Federal Funds Sold 5,650
Investments Available for Sale 11,215
Loans, Net of Unearned Fees and Interest 58,623
Allowance for Losses 587
Other Assets 4,857
Total Assets 82,790
Deposits 74,574
Short-Term Borrowings 43
Other Liabilities 692
Common Stock 2,334
Other Stockholders' Equity 5,147
Total Liabilities & Stockholders' Equity 82,790
Interest on Loans 5,902
Interest on Investments 740
Other Interest Income 124
Total Interest Income 6,766
Interest on Deposits 3,034
Total Interest Expense 3,034
Net Interest Income 3,732
Provision for Loan Losses 178
Securities Gain/Loss -0-
Noninterest Income 761
Noninterest Expense 2,473
Income Before Tax 1,842
Income Taxes 715
Net Income 1,127
Earnings Per Share 2.42
Net Interest Yield - EA 4.37%
Loans - Non Accrual -0-
Loans Past Due > 90 Days 39
Troubled Debt Restructuring -0-
Potential Problem Loans -0-
Allowance - Beginning 563
Total Charge-Offs 209
Total Recoveries 55
Allowance - End of Period 587
Loan Loss - Domestic 587
Loan Loss - Foreign -0-
Loan Loss - Unallocated -0-
(b) Exhibit 99 - Proxy Statement
FIRST CENTRAL BANCSHARES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, APRIL 16, 1998
THIS PROXY STATEMENT, together with the enclosed proxy, which is
first being mailed to shareholders on or about March 16, 1998, is
furnished in connection with the solicitation of proxies by the
Board of Directors of First Central Bancshares, Inc., a Tennessee
corporation (the "Corporation"), for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, April
16, 1998, at 7:00 p.m. local time, in the main office of First
Central Bank at 725 Highway 321 North, Lenoir City, Tennessee
37771.
Voting
Shareholders of the Corporation of record at the close of business
on March 10, 1998, the record date designated by the Board of
Directors, will be entitled to notice of and to vote at the Annual
Meeting. On that date, the Corporation had outstanding 513,281
shares of $5.00 par value per share common stock (the "Common
Shares").
The presence in person or by proxy of the holders of a majority of
the issued and outstanding Common Shares entitled to vote at the
Annual Meeting is necessary in order to constitute a quorum. The
election of each of the nominees to the Board of Directors of the
Corporation will require the affirmative vote of a majority of the
Common Shares voting at the Annual Meeting. The affirmative vote
of a majority of the Common Shares voting at the Annual Meeting is
required for the ratification of the selection of the independent
accountants and auditors.
Each holder of the Common Shares is entitled to one vote for each
Common Share held on all matters submitted before the Annual
Meeting or any adjournment or adjournments thereof. Cumulative
voting is not provided for in the election of directors.
Common Shares represented by properly executed proxies, unless
previously revoked, will be voted in accordance with the
instructions on such proxies. If no instruction is indicated on
the proxy, the named holders of the proxies will vote such Common
Shares in favor of all nominees named in this Proxy Statement and
the ratification of the selection of independent accountants and
auditors. The named holders of proxies also will use their
discretion in voting the Common Shares in connection with any
other business that properly may come before the Annual Meeting.
Any shareholder who sends in a proxy has the power to revoke that
proxy any time prior to the exercise of the proxy by giving
written notice to the Secretary of the Corporation at its
executive offices located at 725 Highway 321 North, Lenoir City,
Tennessee 37771. Shareholders also may revoke proxies either by a
later dated proxy, if the Corporation receives such proxy prior to
the exercise of the prior proxy, or by attending the Annual
Meeting and voting in person.
Information Regarding Certain Beneficial Owners
The following table sets forth certain information concerning the
beneficial ownership (as defined by certain rules of the
Securities and Exchange Commission) of the Common Shares by (a)
directors and persons nominated to become directors of the
Corporation, and (b) directors and officers of the Corporation as
a group. There are no persons known to the Corporation to be the
beneficial owners of more than 5% of the outstanding Common Shares
of the Corporation. The information shown in this Proxy Statement,
unless otherwise indicated, is based on information provided to
the Corporation as of March 1, 1998.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of
Class(2)
(a) Ed F. Bell 10,883 2.12%
Barry H. Gordon 14,439 (3)(4) 2.81%
Robert H. Grimes 10,711 (3)(5) 2.09%
Jack Hammontree 549 (3) 0.11%
Gary Kimsey 17,383 (3) 3.39%
G. Bruce Martin 7,150 1.39%
Willard D. Price 10,648 (3) 2.07%
Benny L. Shubert 6,655 (3) 1.30%
Peter G. Stimpson 15,306 (3) 2.98%
Guilford F. (Tim) Tyler, Jr. 8,058 (3)(4)(5) 1.57%
Ted L. Wampler, Jr. 8,651 1.68%
James W. Wilburn, III 8,738 (3)(4) 1.71%
(b) Directors and officers as a 123,427 24.05%
group (12 persons)
(1) Includes Common Shares as to which each shareholder, directly
or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares
voting power and/or investment power. Unless otherwise
indicated, each listed shareholder possesses sole voting and
investment power With respect to all of the Common Shares
shown opposite his name.
(2) Based upon 513,281 Common Shares issued and outstanding.
(3) Includes share held by and/or joint with spouse.
(4) Includes shares held by the named individuals' children
and/or dependents.
(5) Includes shares held by Mr. Tyler's and Mr. Grime's
individual retirement accounts.
Election of Directors (Proposal 1)
The Board of Directors of the Corporation is divided into three
classes with the three-year term of office of each class expiring
in succeeding years. At the Annual Meeting the following four
persons, all of whom are members of the present Board of Directors
are nominees for election. Each director elected at the Annual
Meeting will hold office until the annual meeting of shareholders
held in 2000 or until their successors are elected and qualified.
Two-Year Term Expiring 2000
Jack Hammontree
Three-Year Term Expiring 2001
Ed F. Bell
Gary Kimsey
Dr. Petter Stimpson
James W. Wilburn, III
Unless contrary instructions are received, the enclosed proxy will
be voted in favor of the election as directors of the nominees
listed above. Each nominee has consented to be a candidate and to
serve, if elected. While the Board has no reason to believe that
any nominee will be unable to accept nomination or election as a
director, if such an event should occur, the proxy will be voted
with discretionary authority for a substitute or substitutes as
shall be designated by the current Board of Directors.
The following table contains certain information concerning the
directors of the Corporation including the nominees, which
information has been furnished to the Corporation by the
Individuals named:
Year First
Name and Positions Became a
With the Corporation Age Principal Occupation
Director
Ed F. Bell 62 Banker 1991
President and Chief
Executive Officer
Barry Gordon 51 Veterinarian, Lenior City Animal1991
Clinic
Robert D. Grimes 60 Robert D. Grimes Construction Co. 1991
Jack Hammontree 56 Vice President, Baker Realty1997
Gary Kimsey 55 President, Gemtron Corp. 1991
G. Bruce Martin 46 Agent, State Farm Insurance Co. 1991
Willard D. Price 51 Banker 1991
Executive Vice
President and Cashier
Benny Shubert 64 Owner, Shubert Motors 1991
Dr. Peter Stimpson 49 Physician 1991
Guilford F. (Tim) 50 Banker 1991
Tyler, Jr.
Senior Vice President
Ted Wampler 39 President, Wampler's Farm Sausage1991
Co.
James Wilburn, III 47 President, Wilburn Hardware 1991
Description of the Board and Committees
The Board holds monthly meetings and special meetings as called.
Each director receives $750 for each meeting of the Board of
Directors attended and receives no compensation for committee
meetings attended. During the fiscal year ended December 31, 1996,
the Board of Directors held 13 meetings. All incumbent directors
attended more than 75% of the aggregate number of meetings of the
Board and committees of the Board on which they served. The Board
of Directors has three (3) standing committees consisting of the
Executive, Audit, and Investment Committees. The Board of
Directors does not have a nominating or compensation committee.
The Executive Committee is composed of Messrs. Bell, Gordon,
Martin, Kimsey, Tyler, and Wampler. The Executive Committee
reviews corporate activities, loan requests, makes recommendations
to the Board on policy matters and makes executive decisions on
matters that do not require a meeting of the Full Board of
Directors. The Executive Committee met 16 times in 1997.
The Audit Committee, composed of Messrs. Martin, Wilburn, Stimpson
and Schubert, reviews annual and interim reports of independent
auditors and provides the recommendation of independent auditors.
The Audit Committee met 2 times during 1997.
The Investment Committee is composed of Messrs. Price, Hammontree,
Grimes, and Wilburn. The Investment Committee reviews and directs
the investment portfolio of the Bank. The Investment Committee
held 2 meetings in 1997.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth the aggregate compensation paid by
the Corporation and its subsidiaries to the President of the
Corporation and the four most highly compensated executive
officers of the Corporation or its subsidiaries, for services
rendered in all capacities during the fiscal years ended December
31, 1997, 1996 and 1995. No executive officer compensation
exceeded $100,000 during such years.
Annual Compensation
Year Salary Bonus Other Annual
Name and Principal Position ($) ($) ($) ($)
Ed F. Bell President and CEO1997 73,00017,504 29,183
1996 67,000 6,527 24,172
1995 60,000 5,886 4.800
Certain and Related Transactions
Some directors and officers of First Central Bank, the principal
banking subsidiary of the Corporation ("the Bank") at present, as
in the past, are customers of the Bank and have had and expect to
have loan transactions with the Bank in the ordinary course of
business. In addition, some of the directors and officers of the
Bank are at present, as in the past, affiliated with businesses
which are customers of the Bank and which have had and expect to
have loan transactions with the Bank in the ordinary course of
business. These loans were made in ordinary course of business and
were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other parties. In the opinion of the
Board of Directors, these loans do not involve more than a normal
risk of collectibility or present other unfavorable features.
The following directors were indebted to the Bank as of December
31, 1997 as follows: Gordon: $119,000; Wampler: $90,189; Shubert:
$418,383*; Stimpson: $325,831. No other director or executive
officer (or their affiliate) was indebted $60,000 or more to the
bank.
* Direct liability: $357,806; Indirect liability: $60,577
The Bank entered into a construction agreement with Robert Grimes
Construction, Inc., of which Robert D. Grimes is sole owner, to
build the Bank's Kingston office. For the Kingston office, Grimes'
fee amounted to approximately $37,500 according to the contract
which was cost of construction plus 10%. The project was completed
in December.
Approval of Independent Public Accountants (Proposal 2)
The Board of Directors of the Bank has selected Pugh and Company,
P.C., CPAs as its independent public accountants for 1998. Pugh
and Company, P.C., CPAs were also employed by the Bank in this
capacity in 1997. A representative from Pugh and Company,
P.C.,CPAs is expected to be present at the Annual Meeting and will
have an opportunity to make a statement if he desires to do so.
The representative is also expected to be available to respond to
appropriate questions.
Expenses of Solicitation
The Corporation will pay the total expense of preparing,
assembling, printing, and mailing proxies and proxy solicitation
materials. It may be that, following the original solicitation,
some further solicitation will be made by officers and directors
of the Corporation, who will not receive additional compensation
for such activities.
Shareholder Proposals
Shareholders' proposals intended to be presented at the 1998
Annual Meeting of Shareholders must be received by the Corporation
at its executive offices on or before December 31, 1998 to be
included in the proxy statement and form of proxy relating to that
meeting.
Other Matters
At the time of preparation of this Proxy Statement, the Board of
Directors of the Corporation has not been informed and is not
aware of any matters to be presented for action at the Annual
Meeting other than the matters listed in the notice of meeting
included with this Proxy Statement. If any other matters should
come before the Annual Meeting, or any adjournment thereof, it is
intended that the persons named in the enclosed proxy will have
discretionary authority to vote on such matters according to their
best judgment.
Availability of Annual Report on Form 10-K
A copy of the Corporation's Annual Report on Form 10-K, including
the financial statements and schedule thereto, which is filed with
the Securities and Exchange Commission, is available without
charge to each shareholder of record upon written request to First
Central Bancshares, inc., Attn: Willard D. Price, Chief Financial
Officer, 725 Hwy. 325 North, Lenoir City, Tennessee 37771. Each
such written request must set forth a good faith representation
that as of the record date, March 10, 1998 the person making the
request was a beneficial owner of Common Shares entitled to vote
at the Annual Meeting. Exhibits to the Form 10-K will also be
supplied upon the written request to the Chief Financial
Officer and payment to the Corporation of its cost of furnishing
the requested exhibits. The copy of the Form 10-K furnished
without charge to the requesting
shareholder will be accompanied by a list briefly describing all
of the exhibits and indicating the cost of furnishing the
exhibits.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ Ed F. Bell
Ed F. Bell, President and CEO
March 16, 1998
(c) Reports on Form 8-K, None.
FORM 1O-KSBA
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST CENTRAL BANCSHARES, INC.
Date: 3/30/98 By: /s/ Ed F. Bell
Ed. F. Bell Chairman, President and Chief
Executive Officer
Date: 3/30/98 By: /s/ Willard D. Price
Willard D. Price Executive Vice President
and
Chief Financial Officer
In accordance with Section 13 or 15(d) of the Exchange Act, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:
_________________________________
____________________________________
Ed F. Bell, Chairman, President Willard D. Price, Executive Vice
and Chief Financial Officer President and Chief Financial
Director Officer, Director
Date: 3/30/98
Date: 3/30/98
___________________________________
____________________________________
Jack Hammontree, Director Barry H. Gorden, Director
Date: Date:
___________________________________
____________________________________
Robert D. Grimes, Director Gary Kimsey, Director
Date: Date:
___________________________________
____________________________________
B.G. Bruce Martin, Director Peter G. Stimpson, Director
Date: Date:
___________________________________
____________________________________
Benny L. Shubert, Director Ted L. Wampler, Jr., Director
Date: Date:
___________________________________
____________________________________
Guilford F. Tyler, Jr., Director James W. Wilburn, III, Director
Date: Date:
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
SELECTED FINANCIAL DATA
(IN THOUSANDS)
December 31, 1997
Cash $ 3,032
Federal Funds Sold 5,650
Investments Available for Sale 11,215
Loans, Net of Unearned Fees and Interest 58,623
Allowance for Losses 587
Other Assets 4,857
Total Assets 82,790
Deposits 74,574
Short-Term Borrowings 43
Other Liabilities 692
Common Stock 2,334
Other Stockholders' Equity 5,147
Total Liabilities & Stockholders' Equity 82,790
Interest on Loans 5,902
Interest on Investments 740
Other Interest Income 124
Total Interest Income 6,766
Interest on Deposits 3,034
Total Interest Expense 3,034
Net Interest Income 3,732
Provision for Loan Losses 178
Securities Gain/Loss -0-
Noninterest Income 761
Noninterest Expense 2,473
Income Before Tax 1,842
Income Taxes 715
Net Income 1,127
Earnings Per Share 2.42
Net Interest Yield - EA 4.37%
Loans - Non Accrual -0-
Loans Past Due > 90 Days 39
Troubled Debt Restructuring -0-
Potential Problem Loans -0-
Allowance - Beginning 563
Total Charge-Offs 209
Total Recoveries 55
Allowance - End of Period 587
Loan Loss - Domestic 587
Loan Loss - Foreign -0-
Loan Loss - Unallocated -0-
(b) Exhibit 99 - Proxy Statement
FIRST CENTRAL BANCSHARES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, APRIL 16, 1998
THIS PROXY STATEMENT, together with the enclosed proxy, which is
first being mailed to shareholders on or about March 16, 1998, is
furnished in connection with the solicitation of proxies by the
Board of Directors of First Central Bancshares, Inc., a Tennessee
corporation (the "Corporation"), for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, April
16, 1998, at 7:00 p.m. local time, in the main office of First
Central Bank at 725 Highway 321 North, Lenoir City, Tennessee
37771.
Voting
Shareholders of the Corporation of record at the close of business
on March 10, 1998, the record date designated by the Board of
Directors, will be entitled to notice of and to vote at the Annual
Meeting. On that date, the Corporation had outstanding 513,281
shares of $5.00 par value per share common stock (the "Common
Shares").
The presence in person or by proxy of the holders of a majority of
the issued and outstanding Common Shares entitled to vote at the
Annual Meeting is necessary in order to constitute a quorum. The
election of each of the nominees to the Board of Directors of the
Corporation will require the affirmative vote of a majority of the
Common Shares voting at the Annual Meeting. The affirmative vote
of a majority of the Common Shares voting at the Annual Meeting is
required for the ratification of the selection of the independent
accountants and auditors.
Each holder of the Common Shares is entitled to one vote for each
Common Share held on all matters submitted before the Annual
Meeting or any adjournment or adjournments thereof. Cumulative
voting is not provided for in the election of directors.
Common Shares represented by properly executed proxies, unless
previously revoked, will be voted in accordance with the
instructions on such proxies. If no instruction is indicated on
the proxy, the named holders of the proxies will vote such Common
Shares in favor of all nominees named in this Proxy Statement and
the ratification of the selection of independent accountants and
auditors. The named holders of proxies also will use their
discretion in voting the Common Shares in connection with any
other business that properly may come before the Annual Meeting.
Any shareholder who sends in a proxy has the power to revoke that
proxy any time prior to the exercise of the proxy by giving
written notice to the Secretary of the Corporation at its
executive offices located at 725 Highway 321 North, Lenoir City,
Tennessee 37771. Shareholders also may revoke proxies either by a
later dated proxy, if the Corporation receives such proxy prior to
the exercise of the prior proxy, or by attending the Annual
Meeting and voting in person.
Information Regarding Certain Beneficial Owners
The following table sets forth certain information concerning the
beneficial ownership (as defined by certain rules of the
Securities and Exchange Commission) of the Common Shares by (a)
directors and persons nominated to become directors of the
Corporation, and (b) directors and officers of the Corporation as
a group. There are no persons known to the Corporation to be the
beneficial owners of more than 5% of the outstanding Common Shares
of the Corporation. The information shown in this Proxy Statement,
unless otherwise indicated, is based on information provided to
the Corporation as of March 1, 1998.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of
Class(2)
(a) Ed F. Bell 10,883 2.12%
Barry H. Gordon 14,439 (3)(4) 2.81%
Robert H. Grimes 10,711 (3)(5) 2.09%
Jack Hammontree 549 (3) 0.11%
Gary Kimsey 17,383 (3) 3.39%
G. Bruce Martin 7,150 1.39%
Willard D. Price 10,648 (3) 2.07%
Benny L. Shubert 6,655 (3) 1.30%
Peter G. Stimpson 15,306 (3) 2.98%
Guilford F. (Tim) Tyler, Jr. 8,058 (3)(4)(5) 1.57%
Ted L. Wampler, Jr. 8,651 1.68%
James W. Wilburn, III 8,738 (3)(4) 1.71%
(b) Directors and officers as a 123,427 24.05%
group (12 persons)
(1) Includes Common Shares as to which each shareholder, directly
or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares
voting power and/or investment power. Unless otherwise
indicated, each listed shareholder possesses sole voting and
investment power With respect to all of the Common Shares
shown opposite his name.
(2) Based upon 513,281 Common Shares issued and outstanding.
(3) Includes share held by and/or joint with spouse.
(4) Includes shares held by the named individuals' children
and/or dependents.
(5) Includes shares held by Mr. Tyler's and Mr. Grime's
individual retirement accounts.
Election of Directors (Proposal 1)
The Board of Directors of the Corporation is divided into three
classes with the three-year term of office of each class expiring
in succeeding years. At the Annual Meeting the following four
persons, all of whom are members of the present Board of Directors
are nominees for election. Each director elected at the Annual
Meeting will hold office until the annual meeting of shareholders
held in 2000 or until their successors are elected and qualified.
Two-Year Term Expiring 2000
Jack Hammontree
Three-Year Term Expiring 2001
Ed F. Bell
Gary Kimsey
Dr. Petter Stimpson
James W. Wilburn, III
Unless contrary instructions are received, the enclosed proxy will
be voted in favor of the election as directors of the nominees
listed above. Each nominee has consented to be a candidate and to
serve, if elected. While the Board has no reason to believe that
any nominee will be unable to accept nomination or election as a
director, if such an event should occur, the proxy will be voted
with discretionary authority for a substitute or substitutes as
shall be designated by the current Board of Directors.
The following table contains certain information concerning the
directors of the Corporation including the nominees, which
information has been furnished to the Corporation by the
Individuals named:
Year First
Name and Positions Became a
With the Corporation Age Principal Occupation
Director
Ed F. Bell 62 Banker 1991
President and Chief
Executive Officer
Barry Gordon 51 Veterinarian, Lenior City Animal1991
Clinic
Robert D. Grimes 60 Robert D. Grimes Construction Co. 1991
Jack Hammontree 56 Vice President, Baker Realty1997
Gary Kimsey 55 President, Gemtron Corp. 1991
G. Bruce Martin 46 Agent, State Farm Insurance Co. 1991
Willard D. Price 51 Banker 1991
Executive Vice
President and Cashier
Benny Shubert 64 Owner, Shubert Motors 1991
Dr. Peter Stimpson 49 Physician 1991
Guilford F. (Tim) 50 Banker 1991
Tyler, Jr.
Senior Vice President
Ted Wampler 39 President, Wampler's Farm Sausage1991
Co.
James Wilburn, III 47 President, Wilburn Hardware 1991
Description of the Board and Committees
The Board holds monthly meetings and special meetings as called.
Each director receives $750 for each meeting of the Board of
Directors attended and receives no compensation for committee
meetings attended. During the fiscal year ended December 31, 1996,
the Board of Directors held 13 meetings. All incumbent directors
attended more than 75% of the aggregate number of meetings of the
Board and committees of the Board on which they served. The Board
of Directors has three (3) standing committees consisting of the
Executive, Audit, and Investment Committees. The Board of
Directors does not have a nominating or compensation committee.
The Executive Committee is composed of Messrs. Bell, Gordon,
Martin, Kimsey, Tyler, and Wampler. The Executive Committee
reviews corporate activities, loan requests, makes recommendations
to the Board on policy matters and makes executive decisions on
matters that do not require a meeting of the Full Board of
Directors. The Executive Committee met 16 times in 1997.
The Audit Committee, composed of Messrs. Martin, Wilburn, Stimpson
and Schubert, reviews annual and interim reports of independent
auditors and provides the recommendation of independent auditors.
The Audit Committee met 2 times during 1997.
The Investment Committee is composed of Messrs. Price, Hammontree,
Grimes, and Wilburn. The Investment Committee reviews and directs
the investment portfolio of the Bank. The Investment Committee
held 2 meetings in 1997.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth the aggregate compensation paid by
the Corporation and its subsidiaries to the President of the
Corporation and the four most highly compensated executive
officers of the Corporation or its subsidiaries, for services
rendered in all capacities during the fiscal years ended December
31, 1997, 1996 and 1995. No executive officer compensation
exceeded $100,000 during such years.
Annual Compensation
Year Salary Bonus Other Annual
Name and Principal Position ($) ($) ($) ($)
Ed F. Bell President and CEO1997 73,00017,504 29,183
1996 67,000 6,527 24,172
1995 60,000 5,886 4.800
Certain and Related Transactions
Some directors and officers of First Central Bank, the principal
banking subsidiary of the Corporation ("the Bank") at present, as
in the past, are customers of the Bank and have had and expect to
have loan transactions with the Bank in the ordinary course of
business. In addition, some of the directors and officers of the
Bank are at present, as in the past, affiliated with businesses
which are customers of the Bank and which have had and expect to
have loan transactions with the Bank in the ordinary course of
business. These loans were made in ordinary course of business and
were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other parties. In the opinion of the
Board of Directors, these loans do not involve more than a normal
risk of collectibility or present other unfavorable features.
The following directors were indebted to the Bank as of December
31, 1997 as follows: Gordon: $119,000; Wampler: $90,189; Shubert:
$418,383*; Stimpson: $325,831. No other director or executive
officer (or their affiliate) was indebted $60,000 or more to the
bank.
* Direct liability: $357,806; Indirect liability: $60,577
The Bank entered into a construction agreement with Robert Grimes
Construction, Inc., of which Robert D. Grimes is sole owner, to
build the Bank's Kingston office. For the Kingston office, Grimes'
fee amounted to approximately $37,500 according to the contract
which was cost of construction plus 10%. The project was completed
in December.
Approval of Independent Public Accountants (Proposal 2)
The Board of Directors of the Bank has selected Pugh and Company,
P.C., CPAs as its independent public accountants for 1998. Pugh
and Company, P.C., CPAs were also employed by the Bank in this
capacity in 1997. A representative from Pugh and Company,
P.C.,CPAs is expected to be present at the Annual Meeting and will
have an opportunity to make a statement if he desires to do so.
The representative is also expected to be available to respond to
appropriate questions.
Expenses of Solicitation
The Corporation will pay the total expense of preparing,
assembling, printing, and mailing proxies and proxy solicitation
materials. It may be that, following the original solicitation,
some further solicitation will be made by officers and directors
of the Corporation, who will not receive additional compensation
for such activities.
Shareholder Proposals
Shareholders' proposals intended to be presented at the 1998
Annual Meeting of Shareholders must be received by the Corporation
at its executive offices on or before December 31, 1998 to be
included in the proxy statement and form of proxy relating to that
meeting.
Other Matters
At the time of preparation of this Proxy Statement, the Board of
Directors of the Corporation has not been informed and is not
aware of any matters to be presented for action at the Annual
Meeting other than the matters listed in the notice of meeting
included with this Proxy Statement. If any other matters should
come before the Annual Meeting, or any adjournment thereof, it is
intended that the persons named in the enclosed proxy will have
discretionary authority to vote on such matters according to their
best judgment.
Availability of Annual Report on Form 10-K
A copy of the Corporation's Annual Report on Form 10-K, including
the financial statements and schedule thereto, which is filed with
the Securities and Exchange Commission, is available without
charge to each shareholder of record upon written request to First
Central Bancshares, inc., Attn: Willard D. Price, Chief Financial
Officer, 725 Hwy. 325 North, Lenoir City, Tennessee 37771. Each
such written request must set forth a good faith representation
that as of the record date, March 10, 1998 the person making the
request was a beneficial owner of Common Shares entitled to vote
at the Annual Meeting. Exhibits to the Form 10-K will also be
supplied upon the written request to the Chief Financial
Officer and payment to the Corporation of its cost of furnishing
the requested exhibits. The copy of the Form 10-K furnished
without charge to the requesting
shareholder will be accompanied by a list briefly describing all
of the exhibits and indicating the cost of furnishing the
exhibits.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ Ed F. Bell
Ed F. Bell, President and CEO
March 16, 1998
(c) Reports on Form 8-K, None.
FORM 1O-KSBA
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
FIRST CENTRAL BANCSHARES, INC.
Date: 3/30/98 By: /s/ Ed F. Bell
Ed. F. Bell Chairman, President and Chief
Executive Officer
Date: 3/30/98 By: /s/ Willard D. Price
Willard D. Price Executive Vice President
and
Chief Financial Officer
In accordance with Section 13 or 15(d) of the Exchange Act, this
report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated:
_________________________________
____________________________________
Ed F. Bell, Chairman, President Willard D. Price, Executive Vice
and Chief Financial Officer President and Chief Financial
Director Officer, Director
Date: 3/30/98
Date: 3/30/98
___________________________________
____________________________________
Jack Hammontree, Director Barry H. Gorden, Director
Date: Date:
___________________________________
____________________________________
Robert D. Grimes, Director Gary Kimsey, Director
Date: Date:
___________________________________
____________________________________
B.G. Bruce Martin, Director Peter G. Stimpson, Director
Date: Date:
___________________________________
____________________________________
Benny L. Shubert, Director Ted L. Wampler, Jr., Director
Date: Date:
___________________________________
____________________________________
Guilford F. Tyler, Jr., Director James W. Wilburn, III, Director
Date: Date:
</TABLE>
(b) Exhibit 99 - Proxy Statement
FIRST CENTRAL BANCSHARES, INC.
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS, APRIL 16, 1998
THIS PROXY STATEMENT, together with the enclosed proxy, which is
first being mailed to shareholders on or about March 16, 1998, is
furnished in connection with the solicitation of proxies by the
Board of Directors of First Central Bancshares, Inc., a Tennessee
corporation (the "Corporation"), for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held on Thursday, April
16, 1998, at 7:00 p.m. local time, in the main office of First
Central Bank at 725 Highway 321 North, Lenoir City, Tennessee
37771.
Voting
Shareholders of the Corporation of record at the close of business
on March 10, 1998, the record date designated by the Board of
Directors, will be entitled to notice of and to vote at the Annual
Meeting. On that date, the Corporation had outstanding 513,281
shares of $5.00 par value per share common stock (the "Common
Shares").
The presence in person or by proxy of the holders of a majority of
the issued and outstanding Common Shares entitled to vote at the
Annual Meeting is necessary in order to constitute a quorum. The
election of each of the nominees to the Board of Directors of the
Corporation will require the affirmative vote of a majority of the
Common Shares voting at the Annual Meeting. The affirmative vote
of a majority of the Common Shares voting at the Annual Meeting is
required for the ratification of the selection of the independent
accountants and auditors.
Each holder of the Common Shares is entitled to one vote for each
Common Share held on all matters submitted before the Annual
Meeting or any adjournment or adjournments thereof. Cumulative
voting is not provided for in the election of directors.
Common Shares represented by properly executed proxies, unless
previously revoked, will be voted in accordance with the
instructions on such proxies. If no instruction is indicated on
the proxy, the named holders of the proxies will vote such Common
Shares in favor of all nominees named in this Proxy Statement and
the ratification of the selection of independent accountants and
auditors. The named holders of proxies also will use their
discretion in voting the Common Shares in connection with any
other business that properly may come before the Annual Meeting.
Any shareholder who sends in a proxy has the power to revoke that
proxy any time prior to the exercise of the proxy by giving
written notice to the Secretary of the Corporation at its
executive offices located at 725 Highway 321 North, Lenoir City,
Tennessee 37771. Shareholders also may revoke proxies either by a
later dated proxy, if the Corporation receives such proxy prior to
the exercise of the prior proxy, or by attending the Annual
Meeting and voting in person.
Information Regarding Certain Beneficial Owners
The following table sets forth certain information concerning the
beneficial ownership (as defined by certain rules of the
Securities and Exchange Commission) of the Common Shares by (a)
directors and persons nominated to become directors of the
Corporation, and (b) directors and officers of the Corporation as
a group. There are no persons known to the Corporation to be the
beneficial owners of more than 5% of the outstanding Common Shares
of the Corporation. The information shown in this Proxy Statement,
unless otherwise indicated, is based on information provided to
the Corporation as of March 1, 1998.
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership(1) Percent of
Class(2)
(a) Ed F. Bell 10,883 2.12%
Barry H. Gordon 14,439 (3)(4) 2.81%
Robert H. Grimes 10,711 (3)(5) 2.09%
Jack Hammontree 549 (3) 0.11%
Gary Kimsey 17,383 (3) 3.39%
G. Bruce Martin 7,150 1.39%
Willard D. Price 10,648 (3) 2.07%
Benny L. Shubert 6,655 (3) 1.30%
Peter G. Stimpson 15,306 (3) 2.98%
Guilford F. (Tim) Tyler, Jr. 8,058 (3)(4)(5) 1.57%
Ted L. Wampler, Jr. 8,651 1.68%
James W. Wilburn, III 8,738 (3)(4) 1.71%
(b) Directors and officers as a 123,427 24.05%
group (12 persons)
(1) Includes Common Shares as to which each shareholder, directly
or indirectly, through any contract, arrangement,
understanding, relationship, or otherwise has or shares
voting power and/or investment power. Unless otherwise
indicated, each listed shareholder possesses sole voting and
investment power With respect to all of the Common Shares
shown opposite his name.
(2) Based upon 513,281 Common Shares issued and outstanding.
(3) Includes share held by and/or joint with spouse.
(4) Includes shares held by the named individuals' children
and/or dependents.
(5) Includes shares held by Mr. Tyler's and Mr. Grime's
individual retirement accounts.
Election of Directors (Proposal 1)
The Board of Directors of the Corporation is divided into three
classes with the three-year term of office of each class expiring
in succeeding years. At the Annual Meeting the following four
persons, all of whom are members of the present Board of Directors
are nominees for election. Each director elected at the Annual
Meeting will hold office until the annual meeting of shareholders
held in 2000 or until their successors are elected and qualified.
Two-Year Term Expiring 2000
Jack Hammontree
Three-Year Term Expiring 2001
Ed F. Bell
Gary Kimsey
Dr. Petter Stimpson
James W. Wilburn, III
Unless contrary instructions are received, the enclosed proxy will
be voted in favor of the election as directors of the nominees
listed above. Each nominee has consented to be a candidate and to
serve, if elected. While the Board has no reason to believe that
any nominee will be unable to accept nomination or election as a
director, if such an event should occur, the proxy will be voted
with discretionary authority for a substitute or substitutes as
shall be designated by the current Board of Directors.
The following table contains certain information concerning the
directors of the Corporation including the nominees, which
information has been furnished to the Corporation by the
Individuals named:
Year First
Name and Positions Became a
With the Corporation Age Principal Occupation
Director
Ed F. Bell 62 Banker 1991
President and Chief
Executive Officer
Barry Gordon 51 Veterinarian, Lenior City Animal1991
Clinic
Robert D. Grimes 60 Robert D. Grimes Construction Co. 1991
Jack Hammontree 56 Vice President, Baker Realty1997
Gary Kimsey 55 President, Gemtron Corp. 1991
G. Bruce Martin 46 Agent, State Farm Insurance Co. 1991
Willard D. Price 51 Banker 1991
Executive Vice
President and Cashier
Benny Shubert 64 Owner, Shubert Motors 1991
Dr. Peter Stimpson 49 Physician 1991
Guilford F. (Tim) 50 Banker 1991
Tyler, Jr.
Senior Vice President
Ted Wampler 39 President, Wampler's Farm Sausage1991
Co.
James Wilburn, III 47 President, Wilburn Hardware 1991
Description of the Board and Committees
The Board holds monthly meetings and special meetings as called.
Each director receives $750 for each meeting of the Board of
Directors attended and receives no compensation for committee
meetings attended. During the fiscal year ended December 31, 1996,
the Board of Directors held 13 meetings. All incumbent directors
attended more than 75% of the aggregate number of meetings of the
Board and committees of the Board on which they served. The Board
of Directors has three (3) standing committees consisting of the
Executive, Audit, and Investment Committees. The Board of
Directors does not have a nominating or compensation committee.
The Executive Committee is composed of Messrs. Bell, Gordon,
Martin, Kimsey, Tyler, and Wampler. The Executive Committee
reviews corporate activities, loan requests, makes recommendations
to the Board on policy matters and makes executive decisions on
matters that do not require a meeting of the Full Board of
Directors. The Executive Committee met 16 times in 1997.
The Audit Committee, composed of Messrs. Martin, Wilburn, Stimpson
and Schubert, reviews annual and interim reports of independent
auditors and provides the recommendation of independent auditors.
The Audit Committee met 2 times during 1997.
The Investment Committee is composed of Messrs. Price, Hammontree,
Grimes, and Wilburn. The Investment Committee reviews and directs
the investment portfolio of the Bank. The Investment Committee
held 2 meetings in 1997.
COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
Summary Compensation Table
The following table sets forth the aggregate compensation paid by
the Corporation and its subsidiaries to the President of the
Corporation and the four most highly compensated executive
officers of the Corporation or its subsidiaries, for services
rendered in all capacities during the fiscal years ended December
31, 1997, 1996 and 1995. No executive officer compensation
exceeded $100,000 during such years.
Annual Compensation
Year Salary Bonus Other Annual
Name and Principal Position ($) ($) ($) ($)
Ed F. Bell President and CEO1997 73,00017,504 29,183
1996 67,000 6,527 24,172
1995 60,000 5,886 4.800
Certain and Related Transactions
Some directors and officers of First Central Bank, the principal
banking subsidiary of the Corporation ("the Bank") at present, as
in the past, are customers of the Bank and have had and expect to
have loan transactions with the Bank in the ordinary course of
business. In addition, some of the directors and officers of the
Bank are at present, as in the past, affiliated with businesses
which are customers of the Bank and which have had and expect to
have loan transactions with the Bank in the ordinary course of
business. These loans were made in ordinary course of business and
were made on substantially the same terms, including interest
rates and collateral, as those prevailing at the time for
comparable transactions with other parties. In the opinion of the
Board of Directors, these loans do not involve more than a normal
risk of collectibility or present other unfavorable features.
The following directors were indebted to the Bank as of December
31, 1997 as follows: Gordon: $119,000; Wampler: $90,189; Shubert:
$418,383*; Stimpson: $325,831. No other director or executive
officer (or their affiliate) was indebted $60,000 or more to the
bank.
* Direct liability: $357,806; Indirect liability: $60,577
The Bank entered into a construction agreement with Robert Grimes
Construction, Inc., of which Robert D. Grimes is sole owner, to
build the Bank's Kingston office. For the Kingston office, Grimes'
fee amounted to approximately $37,500 according to the contract
which was cost of construction plus 10%. The project was completed
in December.
Approval of Independent Public Accountants (Proposal 2)
The Board of Directors of the Bank has selected Pugh and Company,
P.C., CPAs as its independent public accountants for 1998. Pugh
and Company, P.C., CPAs were also employed by the Bank in this
capacity in 1997. A representative from Pugh and Company,
P.C.,CPAs is expected to be present at the Annual Meeting and will
have an opportunity to make a statement if he desires to do so.
The representative is also expected to be available to respond to
appropriate questions.
Expenses of Solicitation
The Corporation will pay the total expense of preparing,
assembling, printing, and mailing proxies and proxy solicitation
materials. It may be that, following the original solicitation,
some further solicitation will be made by officers and directors
of the Corporation, who will not receive additional compensation
for such activities.
Shareholder Proposals
Shareholders' proposals intended to be presented at the 1998
Annual Meeting of Shareholders must be received by the Corporation
at its executive offices on or before December 31, 1998 to be
included in the proxy statement and form of proxy relating to that
meeting.
Other Matters
At the time of preparation of this Proxy Statement, the Board of
Directors of the Corporation has not been informed and is not
aware of any matters to be presented for action at the Annual
Meeting other than the matters listed in the notice of meeting
included with this Proxy Statement. If any other matters should
come before the Annual Meeting, or any adjournment thereof, it is
intended that the persons named in the enclosed proxy will have
discretionary authority to vote on such matters according to their
best judgment.
Availability of Annual Report on Form 10-K
A copy of the Corporation's Annual Report on Form 10-K, including
the financial statements and schedule thereto, which is filed with
the Securities and Exchange Commission, is available without
charge to each shareholder of record upon written request to First
Central Bancshares, inc., Attn: Willard D. Price, Chief Financial
Officer, 725 Hwy. 325 North, Lenoir City, Tennessee 37771. Each
such written request must set forth a good faith representation
that as of the record date, March 10, 1998 the person making the
request was a beneficial owner of Common Shares entitled to vote
at the Annual Meeting. Exhibits to the Form 10-K will also be
supplied upon the written request to the Chief Financial
Officer and payment to the Corporation of its cost of furnishing
the requested exhibits. The copy of the Form 10-K furnished
without charge to the requesting
shareholder will be accompanied by a list briefly describing all
of the exhibits and indicating the cost of furnishing the
exhibits.
BY THE ORDER OF THE BOARD OF DIRECTORS
/s/ Ed F. Bell
Ed F. Bell, President and CEO
March 16, 1998
(c) Reports on Form 8-K, None.
