<PAGE> 1
Filed Pursuant to Rule 424(b)(5)
Registration No. 333-39283
SOUTH FLORIDA BANKING CORP.
27975 OLD 41 ROAD, SE
BONITA SPRINGS, FLORIDA 34135
January 7, 1998
Dear Shareholder:
On behalf of the Board of Directors, we cordially invite you to attend a
Special Meeting of the Shareholders (the "Special Meeting") of South Florida
Banking Corp. ("South Florida"), to be held at the First National Bank of
Florida at Bonita Springs headquarters at 27975 Old 41 Road, SE, Bonita Springs,
Florida 34135, on February 9, 1998, at 4:00 p.m., local time.
As described in the enclosed Proxy Statement-Prospectus, South Florida
shareholders will be asked to consider and vote upon a proposal to approve the
Agreement and Plan of Merger dated as of September 4, 1997 (the "Merger
Agreement") among The Colonial BancGroup, Inc. ("BancGroup") and South Florida,
providing for the merger (the "Merger") of South Florida with and into
BancGroup, with BancGroup being the corporation surviving the Merger. Upon
consummation of the Merger, each issued and outstanding share of South Florida
common stock, $1.00 par value ("South Florida Common Stock") will be converted
into the right to receive 1.5746 shares of BancGroup common stock, $2.50 par
value ("BancGroup Common Stock"), which is expected to result in the issuance of
approximately 1,910,722 shares, or approximately 4.35% of the total outstanding
shares of BancGroup Common Stock (based on the numbers of shares of South
Florida Common Stock and BancGroup Common Stock outstanding as of September 30,
1997). Cash will be issued in lieu of fractional shares.
Further information concerning the Merger is contained in the accompanying
Notice of Special Meeting and the Proxy Statement-Prospectus. The Proxy
Statement-Prospectus contains a detailed description of the Merger Agreement,
its terms and conditions, and the transactions contemplated thereby. PLEASE
REVIEW THESE MATERIALS CAREFULLY AND CONSIDER THOUGHTFULLY THE INFORMATION SET
FORTH THEREIN.
THE BOARD OF DIRECTORS OF SOUTH FLORIDA BELIEVES THE MERGER IS IN THE BEST
INTERESTS OF SOUTH FLORIDA'S SHAREHOLDERS, HAS APPROVED UNANIMOUSLY THE MERGER
AGREEMENT AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER
AGREEMENT.
YOUR VOTE IS IMPORTANT! South Florida's management team would greatly
appreciate your attendance at the Special Meeting. However, since the
affirmative vote of the holders of a majority of the outstanding South Florida
Common Stock is necessary to adopt the Merger Agreement and to approve the
merger, it is important that your shares be represented at the Special Meeting,
whether or not you plan to attend. Accordingly, we urge you to complete, sign,
and date the enclosed proxy card and return it in the enclosed prepaid envelope
as soon as possible, even if you currently plan to attend the Special Meeting.
Submitting a proxy will not prevent you from voting in person, but will assure
that your vote is counted if you should be unable to attend the Special Meeting.
If you do attend the Special Meting and desire to vote in person, you may do so
by withdrawing your proxy at that time. Your prompt cooperation will be greatly
appreciated.
Very truly yours,
/s/ MATHEW W. WOOD
Matthew W. Wood
President
<PAGE> 2
SOUTH FLORIDA BANKING CORP.
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY 9, 1998
To the Shareholders of
South Florida Banking Corp.:
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of South Florida Banking Corp. ("South Florida"), will be
held at the First National Bank of Florida at Bonita Springs headquarters at
27975 Old 41 Road, SE, Bonita Springs, Florida 34135, on February 9, 1998, at
4:00 p.m., local time, for the following purposes:
(1) The Merger. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger dated as of September 4, 1997 (the "Merger
Agreement"), among The Colonial BancGroup, Inc. ("BancGroup") and South
Florida, providing for the merger (the "Merger") of South Florida with and
into BancGroup, and in which each issued and outstanding South Florida
common share will be converted into the right to receive 1.5746 shares of
BancGroup Common Stock. Cash will be issued in lieu of fractional shares.
(2) Other Business. To transact such other business as may properly
come before the Special Meeting or any adjournment thereof.
The Merger Agreement is more completely described in the accompanying Proxy
Statement-Prospectus, and a copy of the Merger Agreement is attached as Appendix
A to the accompanying Proxy Statement-Prospectus.
Notice of Right to Dissent. If Proposal 1 above is approved, and the
Merger is consummated, each holder of South Florida Common Shares would have the
right to dissent from the approval of Proposal 1 and would be entitled to the
rights and remedies of dissenting shareholders provided in Title 36, Chapter
607, Sections 1301, 1302 and 1320 of the Florida Statutes ("sec.sec. 607.1301,
1302, and 1320"). The right of any dissenting shareholder to such rights and
remedies is contingent upon strict compliance with such provisions of the
Florida Statutes which require, among other things, that prior to the Special
Meeting the shareholder give South Florida written notice of such shareholder's
intention to demand payment for his shares, and that he not vote his respective
shares in favor of Proposal 1. FOR A SUMMARY OF THE REQUIREMENTS OF SEC.SEC.
607.1301, 1302, AND 1320, SEE "THE MERGER -- DISSENTERS' RIGHTS OF SOUTH FLORIDA
SHAREHOLDERS" IN THE ACCOMPANYING PROXY-STATEMENT PROSPECTUS.
Action may be taken on the foregoing proposal at the Special Meeting on the
date specified above or on any date or dates to which the Special Meeting may be
adjourned. Only holders of record of South Florida Common Shares at the close of
business on December 19, 1997 will be entitled to notice of, and to vote at, the
Special Meeting or any adjournments or postponements thereof. The affirmative
vote of the holders of a majority of the outstanding South Florida common shares
is required for adoption of the Merger Agreement.
Each shareholder, whether or not he or she plans to attend the Special
Meeting in person, is requested to complete, sign, and date the enclosed proxy
and return it promptly in the enclosed postage prepaid envelope. This will
assure your representation at the Special Meeting and may avoid the costs of
additional communications. This will not prevent a shareholder from voting in
person at the Special Meeting. Your proxy may be revoked at any time before it
is voted by signing and returning a later dated proxy with respect to the same
shares, by filing with the Secretary of South Florida a written revocation
bearing a later date, or by attending and voting at the Special Meeting.
By Order of the Board of Directors,
/s/ MATTHEW W. WOOD
Matthew W. Wood
President
Bonita Springs, Florida
January 7, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THIS MEETING, PLEASE COMPLETE, SIGN, DATE AND
RETURN THE ENCLOSED PROXY CARD.
<PAGE> 3
PROSPECTUS
COMMON STOCK, $2.50 PAR VALUE
THE COLONIAL BANCGROUP, INC.
PROXY STATEMENT
FOR SPECIAL MEETING OF SHAREHOLDERS OF
SOUTH FLORIDA BANKING CORP.
TO BE HELD ON MONDAY, FEBRUARY 9, 1998
This Proxy Statement and Prospectus (the "Prospectus") relates to the
proposed merger (the "Merger") of South Florida Banking Corp., a Florida
corporation ("South Florida"), with and into The Colonial BancGroup, Inc., a
Delaware corporation ("BancGroup"). This Prospectus is being furnished to the
shareholders of South Florida in connection with the solicitation of proxies by
the Board of Directors of South Florida for use at a special meeting of the
shareholders of South Florida (the "Special Meeting") to be held on Monday,
February 9, 1998, at 4:00 p.m., local time, at the offices of South Florida,
27975 Old 41 Road, SE, Bonita Springs, Florida, including any adjournments or
postponements thereof. At the Special Meeting, shareholders of South Florida
will consider and vote upon the matters set forth in the preceding Notice of
Special Meeting of the Shareholders, as more fully described in this Prospectus.
The Merger will be consummated pursuant to the terms of a certain Agreement
and Plan of Merger dated as of September 4, 1997 by and between BancGroup and
South Florida (the "Agreement"). The Agreement provides that, subject to the
approval of the Agreement by the shareholders of South Florida at the Special
Meeting and the satisfaction (or waiver, to the extent that such waiver is
permitted by law) of other conditions contained in the Agreement, South Florida
will be merged with and into BancGroup and BancGroup will be the surviving
corporation. Each issued and outstanding share of common stock, par value $1.00
per share, of South Florida (the "South Florida Common Stock"), shall be
converted into 1.5746 shares of the common stock (the number of which shall be
calculated in accordance with the terms of the Agreement), par value $2.50 per
share, of BancGroup (the "BancGroup Common Stock"). See "THE
MERGER -- Conversion of South Florida Common Stock." The shares of BancGroup
Common Stock are listed on the New York Stock Exchange ("NYSE"). The closing
price per share of the BancGroup Common Stock on the NYSE on December 26, 1997
was $34.5625.
Consummation of the Merger requires, among other things, the affirmative
vote of the holders of at least a majority of the outstanding shares of South
Florida Common Stock.
BancGroup has filed a Registration Statement pursuant to the Securities Act
of 1933, as amended (the "Securities Act"), to register the shares of the
BancGroup Common Stock to be issued in connection with the Merger as well as to
register shares of BancGroup Common Stock to be issued upon the exercise of
employee stock options respecting South Florida Common Stock assumed by
BancGroup as part of the Merger. This document constitutes a Proxy Statement of
South Florida in connection with the solicitation of proxies by South Florida
for the Special Meeting, and any adjournments or postponements thereof, and a
Prospectus of BancGroup with respect to the BancGroup Common Stock to be issued
in the Merger and with respect to the BancGroup Common Stock to be issued upon
the exercise of employee stock options assumed in the Merger. This Prospectus
and accompanying form of proxy are first being mailed to shareholders of South
Florida on or about the date set forth below.
THE BOARD OF DIRECTORS OF SOUTH FLORIDA UNANIMOUSLY RECOMMENDS APPROVAL OF
THE AGREEMENT.
---------------------
THE SECURITIES TO WHICH THIS PROSPECTUS RELATES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
THE SHARES OF BANCGROUP COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR
DEPOSITS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY
OTHER GOVERNMENTAL AGENCY.
The principal office and mailing address of South Florida are 27975 Old 41
Road, SE, Bonita Springs, Florida 34135, P.O. Drawer 2648, Bonita Springs,
Florida 34133 (telephone (941) 992-2201), and the principal office and mailing
address of BancGroup are Colonial Financial Center, One Commerce Street, Post
Office Box 1108, Montgomery, Alabama 36101 (telephone 334-240-5000).
THE DATE OF THIS PROSPECTUS IS DECEMBER 29, 1997.
<PAGE> 4
AVAILABLE INFORMATION
BancGroup is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports and other information with the Securities and Exchange
Commission (the "Commission"). Such reports and other information filed by
BancGroup, including proxy and information statements, can be inspected and
copied at the public reference facilities of the Commission, Judiciary Plaza,
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at certain
regional offices: 7 World Trade Center, 13th Floor, New York, New York 10048;
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511; 1401 Brickell Avenue, Suite 200, Miami, Florida 33131; 1801
California Street, Suite 4800, Denver, Colorado 80202-2648; and 5670 Wilshire
Boulevard, 11th Floor, Los Angeles, California 90036-3648. Copies of such
material can be obtained from the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
The Commission also maintains a Web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
registrants, such as BancGroup, that file electronically with the Commission.
The BancGroup Common Stock is listed for trading on the NYSE. Reports,
including proxy and information statements, of BancGroup and other information
may be inspected at the NYSE, 20 Broad Street, New York, New York 10005.
BancGroup has filed with the Commission a Registration Statement under the
Securities Act to register the shares of BancGroup Common Stock being offered in
connection with the Merger. This Prospectus omits certain information contained
in the Registration Statement and exhibits thereto. Such Registration Statement,
including the exhibits thereto, can be inspected at the Public Reference Section
of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of
such Registration Statement can be obtained at prescribed rates from the
Commission at that address.
The information in this Prospectus concerning BancGroup and its
subsidiaries has been furnished by BancGroup, and the information concerning
South Florida and its subsidiary has been furnished by South Florida.
This Prospectus contains certain forward-looking statements with respect to
the financial condition, results of operations, and business of BancGroup
following the consummation of the Merger and the proposed acquisition of other
banking institutions (the "Other Pending Acquisitions"), including statements
relating to the expected impact of the Merger and the Other Pending Acquisitions
on BancGroup's financial performance. These forward-looking statements involve
certain risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward-looking statements include,
among other things, the following possibilities: (i) expected cost savings from
the Merger and the Other Pending Acquisitions, if any or all of such
transactions are consummated, cannot be fully realized; (ii) deposit attrition,
customer loss, or revenue loss following the Merger and the Other Pending
Acquisitions is greater than expected; (iii) competitive pressure in the banking
industry increases significantly; (iv) costs or difficulties related to the
integration of the businesses of BancGroup and the institutions to be acquired
are greater than expected; (v) changes in the interest rate environment reduce
margins; (vi) general economic conditions, either nationally or regionally, are
less favorable than expected, resulting in, among other things, a deterioration
in credit quality; (vii) changes occur in the regulatory environment; (viii)
changes occur in business conditions and the rate of inflation; and (ix) changes
occur in the securities markets. Forward-looking earnings estimates (if any)
included in this Prospectus have not been examined or compiled by the
independent public accountants of BancGroup and South Florida, nor have such
accountants applied any procedures thereto. Accordingly, such accountants do not
express an opinion or any other form of assurance on them. When used in this
Prospectus, the words "believes," "estimates," "plans," "expects," "should,"
"may," "might," "outlook," and "anticipates," and similar expressions as they
relate to BancGroup (including its subsidiaries), or its management are intended
to identify forward-looking statements. Further information on other factors
that could affect the financial results of BancGroup after the Merger and the
Other Pending Acquisitions is included in the filings with the Commission
incorporated by reference herein.
i
<PAGE> 5
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE SOLICITATION OF PROXIES OR THE OFFERING OF
SECURITIES MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY BANCGROUP OR SOUTH FLORIDA.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY, IN ANY
JURISDICTION, TO OR FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE
ANY SUCH OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF BANCGROUP OR SOUTH FLORIDA SINCE THE DATE OF THIS PROSPECTUS OR THAT
INFORMATION IN THIS PROSPECTUS OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THE DATES
THEREOF.
ii
<PAGE> 6
DOCUMENTS INCORPORATED BY REFERENCE
THIS PROSPECTUS INCORPORATES DOCUMENTS OF BANCGROUP BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS ARE AVAILABLE,
WITHOUT CHARGE, UPON REQUEST FROM THE PERSONS SPECIFIED BELOW. IN ORDER TO
ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE RECEIVED BY
BANCGROUP NO LATER THAN FIVE BUSINESS DAYS PRIOR TO THE SPECIAL MEETING.
The following documents filed by BancGroup with the Commission are hereby
incorporated by reference into this Prospectus:
(1) BancGroup's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996;
(2) BancGroup's Quarterly Reports on Form 10-Q for the quarters ended
March 31, 1997, June 30, 1997 and September 30, 1997;
(3) BancGroup's Report on Form 8-K dated January 3, 1997;
(4) BancGroup's Report on Form 8-K dated January 20, 1997;
(5) BancGroup's Report on Form 8-K dated March 10, 1997;
(6) BancGroup's Report on Form 8-K dated April 15, 1997;
(7) BancGroup's Report on Form 8-K dated June 11, 1997;
(8) BancGroup's Report on Form 8-K dated June 24, 1997;
(9) BancGroup's Report on Form 8-K/A dated August 13, 1997 (replacing a
Form 8-K filed on August 12, 1997);
(10) BancGroup's Report on Form 8-K dated October 30, 1997;
(11) BancGroup's Report on Form 8-K dated November 17, 1997;
(12) The description of the current management and Board of Directors
contained in the Proxy Statement distributed pursuant to Section
14(a) of the Exchange Act for BancGroup's Annual Meeting of
shareholders held on April 16, 1997; and
(13) BancGroup's Registration Statement on Form 8-A dated November 22,
1994, effective February 22, 1995, containing a description of the
BancGroup Common Stock.
All documents filed by BancGroup pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
Special Meeting, or, in the case of the exercise of employee stock options that
are being assumed by BancGroup, prior to the exercise of such options, shall be
deemed incorporated by reference in this Prospectus and made a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed incorporated herein by reference will be deemed to be
modified or superseded for the purpose of this Prospectus to the extent that a
statement contained herein or in another subsequently filed document which also
is, or is deemed to be, incorporated herein by reference modifies or supersedes
such statement. Any such statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
BancGroup has entered into the Agreement with South Florida regarding the
Merger described herein. Various provisions of the Agreement are summarized or
referred to in this Prospectus, and the Agreement is incorporated by reference
into this Prospectus and attached hereto as Appendix A.
BancGroup will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the request of any
such person, a copy of any and all of the documents which have been incorporated
herein by reference but not delivered herewith (other than the exhibits to such
documents unless specifically incorporated herein). Such request, in writing or
by telephone, should be directed to W. Flake Oakley, IV, Secretary, The Colonial
BancGroup, Inc., One Commerce Street, Post Office Box 1108, Montgomery, Alabama
36192 (telephone 334-240-5000).
iii
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SUMMARY..................................................... 1
THE SPECIAL MEETING......................................... 10
General................................................... 10
Record Date; Shares Entitled to Vote; Vote Required for
the Merger............................................. 10
Solicitation, Voting and Revocation of Proxies............ 10
Effect of Merger on Outstanding BancGroup Common Stock.... 11
THE MERGER.................................................. 12
General................................................... 12
Background of the Merger.................................. 12
South Florida's Board of Directors' Reasons for Approving
the Merger............................................. 13
Recommendation of the Board of Directors of South
Florida................................................ 13
BancGroup's Reasons for the Merger........................ 14
Related Transactions -- Stock Option...................... 14
Interests of Certain Persons in the Merger................ 15
Conversion of South Florida Common Stock.................. 15
Surrender of South Florida Common Stock Certificates...... 16
Certain Federal Income Tax Consequences................... 16
Other Possible Consequences............................... 18
Conditions to Consummation of the Merger.................. 18
Amendment or Termination of Agreement..................... 19
Regulatory Approvals...................................... 19
Conduct of Business Pending the Merger.................... 21
Commitments with Respect to Other Offers.................. 23
Rights of Dissenting Shareholders......................... 23
Resale of BancGroup Common Stock Issued in the Merger..... 25
Accounting Treatment...................................... 25
NYSE Reporting of BancGroup Common Stock Issued in the
Merger................................................. 26
Treatment of South Florida Options........................ 26
COMPARATIVE MARKET PRICES AND DIVIDENDS..................... 28
BancGroup................................................. 28
South Florida............................................. 29
BANCGROUP CAPITAL STOCK AND DEBENTURES...................... 29
BancGroup Common Stock.................................... 29
Preference Stock.......................................... 30
1986 Debentures........................................... 30
Other Indebtedness........................................ 31
Changes in Control........................................ 31
COMPARATIVE RIGHTS OF SHAREHOLDERS.......................... 33
Director Elections........................................ 33
Removal of Directors...................................... 33
Voting.................................................... 33
Preemptive Rights......................................... 34
Directors' Liability...................................... 34
Indemnification........................................... 34
Special Meetings of Shareholders; Action Without a
Meeting................................................ 35
Mergers, Share Exchanges and Sales of Assets.............. 35
Amendment of Certificate of Incorporation and Bylaws...... 36
Rights of Dissenting Shareholders......................... 36
Preferred Stock........................................... 37
</TABLE>
iv
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Effect of the Merger on South Florida Shareholders........ 37
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES............... 38
Condensed Pro Forma Statement of Condition (Unaudited).... 38
Condensed Pro Forma Statements of Income (Unaudited)...... 43
Selected Financial and Operating Information.............. 48
SOUTH FLORIDA BANKING CORP.................................. 51
Summary Condensed Consolidated Financial Information...... 51
Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Nine Months
Ended September 30, 1997 and 1996, and for the Fiscal
Years Ended December 31, 1996, 1995, 1994, 1993 and
1992................................................... 53
BUSINESS OF BANCGROUP....................................... 69
General................................................... 69
Recently Completed and Other Proposed Business
Combinations........................................... 69
Year 2000 Compliance...................................... 70
Voting Securities and Principal Shareholders.............. 70
Security Ownership of Management.......................... 71
Management Information.................................... 72
BUSINESS OF SOUTH FLORIDA................................... 73
General................................................... 73
Market Area............................................... 73
Deposit Activities........................................ 73
Lending Activities........................................ 74
Investments............................................... 75
Competition............................................... 75
Employees................................................. 75
Description of Properties................................. 75
Legal Proceedings......................................... 76
Security Ownership of Certain Beneficial Owners and
Management............................................. 77
Certain Relationships and Related Transactions............ 77
ADJOURNMENT OF SPECIAL MEETING.............................. 78
OTHER MATTERS............................................... 78
DATE FOR SUBMISSION OF BANCGROUP SHAREHOLDER PROPOSALS...... 78
LEGAL MATTERS............................................... 78
EXPERTS..................................................... 78
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS.................. F-1
APPENDIX A -- Agreement and Plan of Merger.................. A-1
APPENDIX B -- Sections 607.1301, 607.1302 and 607.1320 of
the Florida Business Corporation Act Regarding Dissenter's
Rights.................................................... B-1
APPENDIX C -- Stock Option Agreement........................ C-1
</TABLE>
v
<PAGE> 9
SUMMARY
The following provides a summary of certain information included in this
Prospectus. This summary is qualified in its entirety by the more detailed
information appearing elsewhere herein, the Appendices hereto and the documents
incorporated herein by reference. Shareholders of South Florida are urged to
read this Prospectus in full.
GENERAL
This Prospectus relates to the issuance of shares of BancGroup Common Stock
in connection with the proposed Merger of South Florida with and into BancGroup.
THE SPECIAL MEETING
This Prospectus is being furnished to the holders of South Florida Common
Stock in connection with the solicitation by the South Florida Board of
Directors of proxies for use at the Special Meeting and at any and all
adjournments and postponements thereof at which South Florida shareholders will
be asked to vote upon (i) a proposal to approve the Agreement; and (ii) such
other business as may properly come before the meeting. The Special Meeting will
be held at the offices of South Florida, 27975 Old 41 Road, SE, Bonita Springs,
Florida on Monday, February 9, 1998, at 4:00 p.m., local time, for the purpose
of considering and voting upon the Merger and the Agreement. Only holders of
record of South Florida Common Stock at the close of business on December 19,
1997 (the "Record Date") are entitled to the notice of and to vote at the
Special Meeting. As of the Record Date, 1,219,465 shares of South Florida Common
Stock were issued and outstanding. See "THE SPECIAL MEETING."
THE COMPANIES
BancGroup. BancGroup is a bank holding company within the meaning of the
Bank Holding Company Act of 1956, as amended (the "BHCA"). It was organized in
Delaware in 1974 and has operated under its current name and management since
1981. BancGroup operates a wholly owned commercial banking subsidiary, Colonial
Bank, in the states of Alabama, Florida, Georgia and Tennessee. Colonial Bank
conducts a full service commercial banking business through 119 branches in
Alabama, five branches in Tennessee, 14 branches in Georgia and 56 branches in
Florida. BancGroup has also entered into agreements to acquire four additional
banks. Colonial Mortgage Company, a subsidiary of the Colonial Bank in Alabama,
is a mortgage banking company which services approximately $12.5 billion in
residential loans and which originates residential mortgages in 37 states
through four divisional offices. At September 30, 1997, BancGroup had
consolidated total assets of $6.6 billion and consolidated shareholders' equity
of $472.4 million. Since September 30, 1997, BancGroup has acquired one banking
institution with assets of $65.0 million and shareholders' equity of $6.3
million. This acquisition is included in the pro forma statements included
herein. See "BUSINESS OF BANCGROUP."
South Florida. South Florida, a Florida corporation, organized on October
1, 1983, is a one-bank holding company registered under the BHCA, whose sole
banking subsidiary and principal asset is First National Bank of Florida at
Bonita Springs, a national banking association (the "Bank"). Through its
ownership of the Bank, South Florida is engaged in a general commercial banking
business and its primary source of earnings is derived from income generated by
the Bank. The principal executive and administrative offices of South Florida,
located at 27975 Old 41 Road, SE, Bonita Springs, Florida 34135 serve as the
Bank's primary banking facility. In addition, banking operations are carried on
through eleven branch offices located in Lee, Collier and Hendry Counties,
Florida. As of September 30, 1997, South Florida, on a consolidated basis, had
total assets of $246.0 million, net portfolio loans of $167.7 million, total
deposits of $215.9 million, and shareholders' equity of $16.9 million. Unless
the context otherwise requires, references herein to South Florida include South
Florida and the Bank on a consolidated basis. See "BUSINESS OF SOUTH FLORIDA."
1
<PAGE> 10
THE MERGER
The Agreement provides for the Merger of South Florida with and into
BancGroup, with BancGroup to be the surviving corporation. Upon the date of
consummation of the Merger (the "Effective Date"), each outstanding share of
South Florida Common Stock (except shares as to which dissenters' rights are
perfected) shall be converted by operation of law and without any action by any
holder thereof into shares of BancGroup Common Stock. Each outstanding share of
South Florida Common Stock shall be converted into 1.5746 (the "Exchange Ratio"
or the "Merger Consideration") shares of BancGroup Common Stock. See "THE
MERGER -- Conversion of South Florida Common Stock."
No fractional shares of BancGroup Common Stock will be issued in connection
with the Merger. To the extent that a fractional interest arises as a result of
the BancGroup Common Stock issuable in the Merger, cash (without interest) will
be paid in lieu thereof based upon the Market Value. The "Market Value" shall
represent the per share market value of the BancGroup Common Stock at the
Effective Date and shall be determined by calculating the average of the closing
prices of the BancGroup Common Stock as reported by the NYSE on each of the ten
trading days ending on the trading day five calendar days immediately preceding
the Effective Date.
As of the date of this Prospectus, South Florida had granted options (the
"South Florida Options") which entitle the holders thereof to acquire up to
28,408 shares of South Florida Common Stock. On the Effective Date, BancGroup
shall assume all South Florida Options outstanding that have not been converted
to BancGroup Common Stock in accordance with the immediately following
paragraph, and each such option shall represent the right to acquire BancGroup
Common Stock on substantially the same terms applicable to the South Florida
Options. The number of shares of BancGroup Common Stock to be issued pursuant to
such options shall equal the number of shares of South Florida Common Stock
subject to such South Florida Options multiplied by the Exchange Ratio, provided
that no fractional shares of BancGroup Common Stock shall be issued. The number
of shares of BancGroup Common Stock to be issued upon the exercise of South
Florida Options, if a fractional share exists, shall equal the number of whole
shares obtained by rounding to the nearest whole number, giving account to such
fraction, or by paying for such fraction in cash. The exercise price for the
acquisition of BancGroup Common Stock shall be the exercise price for each share
of South Florida Common Stock subject to such options divided by the Exchange
Ratio, adjusted appropriately for any rounding to whole shares that may be
required.
The Agreement provides that, no later than five days prior to the Effective
Date, the holders of South Florida Options that have vested for such holders may
provide written notice to South Florida (in form and substance reasonably
satisfactory to BancGroup) that they wish to surrender their South Florida
Options to BancGroup, effective at the Effective Date, and, in lieu of having
their South Florida Options being assumed by BancGroup as set forth in the
immediately preceding paragraph, to receive an amount of BancGroup Common Stock
in exchange therefor equal to the difference between the total value of the
shares of BancGroup Common Stock to be issued pursuant to such South Florida
Options (based upon the number of shares of BancGroup Common Stock to be issued
pursuant to the South Florida Options multiplied by the Market Value) less the
aggregate exercise price of such South Florida Options at the Effective Date,
divided by the Market Value (the "Cashless Exchange"). No fractions of shares
shall be issued and fractions shall be paid in cash at the Market Value. See
"THE MERGER -- Cashless Exchange of Options."
Promptly after the Effective Date, South Florida shareholders will be given
notice of the consummation of the Merger and instructions for the exchange of
such shareholders' certificates representing shares of South Florida Common
Stock for certificates representing BancGroup Common Stock. Certificates for the
shares of BancGroup Common Stock issued will not be distributed and dividends
will not be paid on such shares until shareholders surrender their certificates
representing their shares of South Florida Common Stock in accordance with those
instructions. SOUTH FLORIDA SHAREHOLDERS SHOULD NOT SEND IN THEIR SOUTH FLORIDA
STOCK CERTIFICATES UNTIL THEY HAVE RECEIVED SUCH INSTRUCTIONS.
See "THE MERGER -- Conversion of South Florida Common Stock," "-- Surrender
of South Florida Common Stock Certificates," and "-- Treatment of South Florida
Options."
2
<PAGE> 11
For certain information concerning dissenters' rights, voting at the
Special Meeting, and management of BancGroup and South Florida, see "THE
MERGER -- Rights of Dissenting Shareholders," "-- Conversion of South Florida
Common Stock;" "THE SPECIAL MEETING -- Solicitation, Voting and Revocation of
Proxies," "-- Record Date; Shares Entitled to Vote; Vote Required;" "BUSINESS OF
BANCGROUP -- Voting Securities and Principal Shareholders," "-- Security
Ownership of Management," and "BUSINESS OF SOUTH FLORIDA -- Principal Holders of
Common Stock."
RECOMMENDATION OF SOUTH FLORIDA'S BOARD OF DIRECTORS
The Board of Directors of South Florida has unanimously approved the
Agreement. THE BOARD OF DIRECTORS OF SOUTH FLORIDA BELIEVES THAT THE MERGER IS
FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF SOUTH FLORIDA AND
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE APPROVAL OF THE AGREEMENT. For a
discussion of the factors considered by the Board of Directors in reaching its
conclusions, see "THE MERGER -- Background of the Merger" and "-- South
Florida's Board of Directors' Reasons for Approving the Merger."
RELATED TRANSACTIONS -- STOCK OPTION
In connection with the Agreement, South Florida has granted to BancGroup
the option to purchase up to 19% of the South Florida Common Stock at a purchase
price of $38.00 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of South Florida by another party. The option was granted by South
Florida as a condition of, and in consideration for, BancGroup's entering into
the Agreement, and the option is intended to increase the likelihood that the
Merger will be consummated by making it more difficult and expensive for any
third party to acquire control of South Florida while BancGroup is seeking to
consummate the Merger. See "THE MERGER -- Related Transactions -- Stock Option."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain of the directors and executive officers of South Florida own
252,457 shares of South Florida Common Stock and hold options which entitle them
to purchase, in the aggregate, up to 10,908 additional shares. Under the terms
of the Agreement, any South Florida Options which are not exercised prior to the
Effective Date or exchanged for BancGroup Common Stock in the Cashless Exchange
(as hereinafter defined) will be assumed by BancGroup. See "THE
MERGER -- Conversion of South Florida Common Stock," "-- Treatment of South
Florida Options," and "-- Cashless Exchange of Options."
The Agreement stipulates that it is a condition to BancGroup's obligation
to close the Merger that Richard Garner, an executive officer of the Bank, enter
into an employment agreement with Colonial Bank. Mr. Garner's employment
agreement will provide for (i) a term of three years, (ii) an annual salary of
$145,000, which represents his current salary, (iii) an option to buy 19,300
shares of BancGroup Common Stock at an exercise price of $15.17 per share, such
option vesting ratably over a three-year period, and (iv) a non-competition
agreement to run concurrently with the three-year term. Joel Whittenhall, an
officer of the Bank, will receive upon the Effective Date an option to buy
12,700 shares of BancGroup Common Stock at an exercise price of $15.17 per
share, such option to vest ratably over a five-year period.
On the Effective Date and subject to the proposed agreements referenced
above, all employees of South Florida shall, at BancGroup's option, either
become employees of BancGroup or its subsidiaries or be entitled to severance
benefits in accordance with Colonial Bank's severance policy as of the date of
the Agreement. All employees of South Florida who become employees of BancGroup
or its subsidiaries on the Effective Date shall be entitled, to the extent
permitted by applicable law, to participate in all benefit plans of BancGroup to
the same extent as BancGroup's employees.
Except as indicated above, none of the directors or executive officers of
South Florida and no associate of any such person, has any substantial direct or
indirect interest in the Merger, other than an interest arising from the
ownership of South Florida Common Stock.
3
<PAGE> 12
See "THE MERGER -- Interests of Certain Persons in the Merger."
VOTE REQUIRED
Under Florida law, the Agreement must be approved by the affirmative vote
of the holders of at least a majority of the outstanding shares of South Florida
Common Stock. Each share of South Florida Common Stock is entitled to one vote
on the Agreement. Approval of the Agreement and the Merger by BancGroup
shareholders is not required under Delaware, Florida or other applicable law, or
the rules of the NYSE on which the BancGroup Common Stock is listed. See "THE
SPECIAL MEETING."
Only holders of record of South Florida Common Stock at the close of
business on the Record Date are entitled to notice of and to vote at the Special
Meeting. As of such date, 1,219,465 shares of South Florida Common Stock were
issued and outstanding. As of the Record Date, the directors and executive
officers of South Florida and the Bank held approximately 23% of the outstanding
shares of South Florida Common Stock. As of the same date, the directors,
executive officers and affiliates of BancGroup held no shares of South Florida
Common Stock. See "THE SPECIAL MEETING."
The directors of South Florida own 240,461 shares of South Florida Common
Stock representing approximately 20% of the outstanding shares and have agreed
with BancGroup to vote their shares in favor of the Agreement. See "THE SPECIAL
MEETING." As of September 30, 1997, Directors and executive officers of
BancGroup beneficially owned in the aggregate 4,574,597 shares of BancGroup
Common Stock representing approximately 11.18% of BancGroup's outstanding
shares.
Proxies should be returned to South Florida in the envelope enclosed
herewith. Shareholders of South Florida submitting proxies may revoke their
proxies by (i) giving notice of such revocation in writing to the Secretary of
South Florida at or prior to the Special Meeting, (ii) by executing and
delivering a proxy bearing a later date to the Secretary of South Florida at or
prior to the Special Meeting, or (iii) by attending the Special Meeting and
voting in person. Because approval of the Agreement requires the approval of at
least a majority of the outstanding shares of South Florida Common Stock,
failure to submit a proxy or failure to vote in person at the Special Meeting
will have the same effect as a negative vote. See "THE SPECIAL
MEETING -- Solicitation, Voting and Revocation of Proxies."
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of South Florida Common Stock as of the Record Date are entitled to
dissenters' rights of appraisal pursuant to Sections 607.1301, 607.1302 and
607.1320 of the FBCA. The FBCA, as described in greater detail in "THE
MERGER -- Rights of Dissenting Shareholders," permits a shareholder to dissent
from the Merger and obtain payment for the fair value of his shares. Such "fair
value" may be determined in a judicial proceeding, the result of which cannot be
predicted. Shareholders wishing to exercise dissenters' rights must follow
strictly all requirements for the exercise of such rights as set forth in
Sections 607.1301, 607.1302 and 607.1320 of the FBCA, a copy of which is
attached as Appendix B to this Prospectus. See "THE MERGER -- Rights of
Dissenting Shareholders." Any shareholder who properly exercises dissenters'
rights and receives cash for his or her shares will encounter income tax
treatment different from the tax treatment of shareholders who do not exercise
dissenters' rights. See "THE MERGER -- Rights of Dissenting Shareholders."
CONDITIONS TO THE MERGER
The parties' respective obligations to consummate the Merger are subject to
the satisfaction (or waiver, to the extent permitted by law) of various
conditions set forth in the Agreement.
The mutual obligations of the parties to consummate the Merger are subject
to the following conditions, among others: (i) the approval of the Agreement by
the holders of at least a majority of the outstanding shares of South Florida
Common Stock; (ii) the notification to or approval of the Merger by The Board of
Governors of the Federal Reserve System (the "Federal Reserve") and the approval
of the merger of the Bank with Colonial Bank (the "Bank Merger") by the Alabama
Banking Department (the "Alabama Department")
4
<PAGE> 13
and the Federal Reserve; (iii) the absence of any pending or threatened
litigation which seeks to restrain or prohibit the Merger; (iv) the consummation
of the Merger on or before February 28, 1998 (or under certain circumstances,
April 30, 1998); (v) receipt of opinions of counsel as to certain matters; and
(vi) receipt of an opinion from Coopers & Lybrand L.L.P. as to certain tax
matters.
The obligation of South Florida to consummate the Merger is further subject
to several conditions, including: (i) the absence of any material adverse
changes in the financial condition or affairs of BancGroup; and (ii) the shares
of BancGroup Common Stock to be issued under the Agreement having been approved
for listing on the NYSE.
The obligations of BancGroup to consummate the Merger are subject to
various conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of South Florida; (ii) the number of shares
as to which holders of South Florida Common Stock exercise dissenters' rights
not exceeding 10% of the outstanding shares of South Florida Common Stock; (iii)
the receipt of a letter from Coopers & Lybrand L.L.P., BancGroup's independent
accountants, to the effect that the independent accountants concur with the
conclusions of BancGroup's and South Florida's respective managements that no
conditions exist with respect to each company which would preclude accounting
for the Merger as a pooling of interests; and (iv) the satisfaction of BancGroup
with the results at a second due diligence to be undertaken by BancGroup
approximately 30 days before the Effective Date on matters arising or occurring
since the completion of BancGroup's first due diligence investigation conducted
prior to the execution of the Agreement.
Applications for appropriate regulatory approvals by the Federal Reserve
and the Alabama Banking Department were filed with such agencies on October 17,
1997. The Federal Reserve approved the Merger as of November 19, 1997. Such
approval did not contain any terms or conditions that would cause the parties to
abandon the Merger. The Alabama Banking Department is expected to approve the
Bank Merger within two weeks after the Special Meeting. NO ASSURANCE CAN BE
PROVIDED THAT THE NECESSARY SHAREHOLDER AND REGULATORY APPROVALS CAN BE OBTAINED
OR THAT THE OTHER CONDITIONS PRECEDENT TO THE MERGER CAN OR WILL BE SATISFIED.
BANCGROUP AND SOUTH FLORIDA ANTICIPATE THAT THE MERGER WILL BE CONSUMMATED
DURING THE FIRST QUARTER OF 1998. HOWEVER, DELAYS IN THE CONSUMMATION OF THE
MERGER COULD OCCUR.
See "THE MERGER -- Conditions to Consummation of the Merger" and
"-- Regulatory Approvals."
AMENDMENT OR TERMINATION OF AGREEMENT
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and approval of the Merger by the holders of South Florida Common Stock, no
amendment decreasing the consideration to be received by South Florida
shareholders may be made without the further approval of such shareholders. Such
amendments may require the filing with the Commission of an amendment of the
Registration Statement, of which this Prospectus forms a part. The Agreement may
be terminated at any time prior to or on the Effective Date, whether before or
after adoption of the Agreement by the shareholders of South Florida, by the
mutual consent of the respective Boards of Directors of South Florida and
BancGroup, or by the Board of Directors of either BancGroup or South Florida
under certain circumstances including, but not limited to, the failure of the
transactions contemplated by the Agreement to be consummated on or prior to
February 28, 1998 (or under certain circumstances, April 30, 1998), if such
failure to consummate is not caused by any breach of the Agreement by the party
electing to terminate. See "THE MERGER -- Amendment or Termination of
Agreement."
COMPARATIVE RIGHTS OF SHAREHOLDER
The rights of the holders of the South Florida Common Stock may be
different from the rights of the holders of the BancGroup Common Stock. A
discussion of these rights and a comparison thereof is set forth at "COMPARATIVE
RIGHTS OF SHAREHOLDERS."
5
<PAGE> 14
FEDERAL INCOME TAX CONSEQUENCES
No ruling with respect to the federal income tax consequences of the Merger
to South Florida's shareholders will be requested from the Internal Revenue
Service (the "IRS"). South Florida has received an opinion from Coopers &
Lybrand L.L.P., that, among other things, a shareholder of South Florida who
exchanges shares of South Florida Common Stock for BancGroup Common Stock shall
not recognize gain except that, shareholders of South Florida will recognize
gain to the extent such shareholders receive cash in lieu of fractional shares
of BancGroup Common Stock. Shareholders who receive cash for their shares of
South Florida Common Stock upon perfection of dissenters' rights will realize
gain or loss for federal income tax purposes with respect to such shares. See
"THE MERGER -- Certain Federal Income Tax Consequences." South Florida
shareholders are urged to consult their own tax advisors as to the specific tax
consequences to them of the Merger.
ACCOUNTING TREATMENT
The merger of South Florida into BancGroup will be treated as a
"pooling-of-interests" transaction by BancGroup for accounting purposes. See
"THE MERGER -- Accounting Treatment."
RECENT PER SHARE MARKET PRICES
South Florida. The shares of South Florida Common Stock are not actively
traded. However, the following table sets forth the trading prices for the
shares of South Florida Common Stock that have occurred since July 7, 1995 in
transactions for which the trading prices are known to management of South
Florida:
<TABLE>
<CAPTION>
PRICE PER SHARE OF COMMON STOCK
-------------------------------
DIVIDENDS
HIGH LOW PER SHARE
------- ------- ---------
<S> <C> <C> <C> <C> <C>
1995
Third Quarter.......................................... $16 9/16 $15 11/16 $.09
Fourth Quarter......................................... 16 3/4 15 11/16 .09
1996
First Quarter.......................................... 17 1/2 16 3/16 .09
Second Quarter......................................... 19 16 3/4 .09
Third Quarter.......................................... 19 5/16 18 .10
Fourth Quarter......................................... 24 18 5/16 .10
1997
First Quarter.......................................... 25 19 3/16 .10
Second Quarter......................................... 23 21 .10
Third Quarter.......................................... 39 21 .10
Fourth Quarter (through December 15, 1997)............. 45 40 .12
</TABLE>
The Agreement limits South Florida's ability to pay dividends prior to the
Effective Date to cash dividend payments at its current rate (subject to a rate
increase of not more than $0.02 per share per year) and at times consistent with
past practice. See "THE MERGER -- Conduct of Business Pending the Merger."
The last transaction prior to the announcement of the Merger was on July 21,
1997 at $23.00 per share.
BancGroup. BancGroup Common Stock is listed for trading on the NYSE under
the symbol "CNB." The following table indicates the high and low closing prices
of the BancGroup Class A Common Stock and the BancGroup Common Stock as reported
on the Nasdaq National Market System (the "Nasdaq NMS") and the NYSE,
respectively, for the last two full fiscal years. Prior to February 21, 1995,
BancGroup had two classes of Common Stock outstanding, Class A and Class B.
Class B Common Stock was not publicly traded. Class A Common Stock was traded on
the Nasdaq NMS under the symbol "CLBGA" until February 24, 1995. On February 21,
1995, the BancGroup Class A and Class B Common Stock were reclassified into the
BancGroup Common Stock.
6
<PAGE> 15
<TABLE>
<CAPTION>
PRICE PER SHARE
OF
COMMON
STOCK(1)
-----------------
HIGH LOW
------- -------
<S> <C> <C> <C> <C>
1995
First Quarter(2)............................................ $11 13/16 $ 9 3/4
Second Quarter.............................................. 13 5/8 11 9/16
Third Quarter............................................... 14 15/16 13 3/4
Fourth Quarter.............................................. 16 7/16 14 1/4
1996
First Quarter............................................... 18 1/4 15
Second Quarter.............................................. 18 1/16 15 5/8
Third Quarter............................................... 17 15/16 15 5/8
Fourth Quarter.............................................. 20 1/8 17 3/8
1997
First Quarter............................................... 24 18 2/3
Second Quarter.............................................. 24 7/8 22
Third Quarter............................................... 29 3/16 24 1/4
Fourth Quarter (through December 26, 1997).................. 35 1/16 28 15/16
</TABLE>
- ---------------
(1) Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.
(2) Trading on the NYSE commenced on February 24, 1995.
On July 22, 1997, the business day immediately prior to the public
announcement of the Merger, the closing price of the BancGroup Common Stock on
the NYSE was $26.375 per share. The following table presents the market value
per share of BancGroup Common Stock on that date, and the market value and
equivalent per share value of South Florida Common Stock on that date:
<TABLE>
<CAPTION>
EQUIVALENT
BANCGROUP SOUTH FLORIDA PRICE PER
COMMON COMMON SOUTH FLORIDA
STOCK(1) STOCK(2) SHARE(3)
------------ ------------- -------------
<S> <C> <C> <C>
Comparative Market Value...................... $26.375 $ 23.00 $41.53(3)
</TABLE>
- ---------------
(1) Closing price as reported by the NYSE on July 22, 1997.
(2) There is no established public trading market for the shares of South
Florida Common Stock. The value shown is the price at which shares of South
Florida Common Stock were sold on July 21, 1997, which was the last sale
price prior to the public announcement of the Merger on July 23, 1997, of
which management of South Florida is aware.
(3) If the Merger had closed on July 22, 1997, 1.5746 shares of BancGroup Common
Stock would have been exchanged for each share of South Florida Common
Stock.
See "COMPARATIVE MARKET PRICES AND DIVIDENDS."
CERTAIN LEGAL RESTRICTIONS ON ACQUISITIONS OF CONTROL
Certain restrictions under Delaware law prevent a person who beneficially
owns 15% or more of the BancGroup Common Stock from engaging in a "business
combination" with BancGroup unless certain conditions are satisfied. Also, the
Change in Bank Control Act of 1978 prohibits a person from acquiring "control"
of BancGroup unless certain notice provisions with the Federal Reserve have been
satisfied.
BancGroup's Restated Certificate of Incorporation (the "BancGroup
Certificate") and Bylaws also contain provisions which may deter or prevent a
takeover of BancGroup that is not supported by BancGroup's Board of Directors.
These provisions include: (1) a classified Board of Directors, (2)
super-majority voting requirements for certain "business combinations" that
exceed the provisions of Delaware law described above,
7
<PAGE> 16
(3) flexibility for the Board of Directors to consider non-economic and other
factors in evaluating a "business combination," (4) inability of shareholders to
call special meetings and act by written consent, and (5) certain advance notice
provisions for the conduct of business at shareholder meetings.
See "BANCGROUP CAPITAL STOCK AND DEBENTURES" and "COMPARATIVE RIGHTS OF
SHAREHOLDERS."
PER SHARE DATA
The table below presents on a per share basis the book value, cash
dividends and income from continuing operations of BancGroup historical basis
and on a proforma equivalent basis assuming consummation of the Merger. Certain
information from the table has been taken from the condensed pro forma
statements of condition and income included elsewhere in this document. The
table should be read in conjunction with those pro forma statements.
PER SHARE DATA
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER DECEMBER DECEMBER
1997 1996 1996 1995 1994
------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BANCGROUP -- HISTORICAL (AS RESTATED):
Net Income
Primary*............................. $ 1.32 $ 1.11 $ 1.26 $ 1.23 $ 0.96
Fully diluted*....................... 1.31 1.10 1.25 1.19 0.95
Book value at end of period*........... 11.26 10.11 10.29 9.43 7.93
Dividends per share:
Common Stock*........................ 0.45 0.405 0.54 0.3375
Common A*............................ 0.1125 0.40
Common B*............................ 0.0625 0.20
SOUTH FLORIDA
Net Income
Historical:
Primary........................... 1.26 1.16 1.75 1.00 1.46
Fully diluted..................... 1.26 1.16 1.75 1.00 1.46
Pro forma equivalent assuming
combination with South Florida and
completed business combination(a):
Primary........................... 2.05 1.72 1.97 1.84 1.50
Fully diluted..................... 2.03 1.70 1.95 1.80 1.48
Pro forma equivalent assuming
combination with South Florida,
completed business combination and
other probable business
combinations(a):
Primary........................... 2.02 1.72 1.98 1.86 1.50
Fully diluted..................... 2.00 1.71 1.97 1.81 1.50
Book value at end of period
Historical........................... 13.91 12.21 13.15 12.60 10.58
Pro forma equivalent assuming
combination with South Florida and
completed business
combination(a).................... 17.58 N/A N/A N/A N/A
Pro forma equivalent assuming
combination with South Florida,
completed business combination and
other probable business
combinations(a):.................. 17.86 N/A N/A N/A N/A
</TABLE>
8
<PAGE> 17
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
ENDED ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, DECEMBER DECEMBER DECEMBER
1997 1996 1996 1995 1994
------------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Dividends per share
Historical........................... .30 .28 .38 .36 .34
Pro forma equivalent assuming
combination with South Florida and
completed business
combination(b).................... 0.71 0.64 0.85 0.71 0.63
Pro forma equivalent assuming
combination with South Florida,
completed business combination and
other probable business
combinations(b):.................. 0.71 0.64 0.85 0.71 0.63
BANCGROUP-PRO FORMA COMBINED (SOUTH
FLORIDA AND COMPLETED BUSINESS
COMBINATIONS):
Net Income
Primary.............................. 1.30 1.09 1.25 1.17 0.95
Fully diluted........................ 1.29 1.08 1.24 1.14 0.94
Book value at end of period............ 11.16 N/A N/A N/A N/A
BANCGROUP-PRO FORMA COMBINED (SOUTH
FLORIDA, COMPLETED BUSINESS
COMBINATION AND OTHER PROBABLE
BUSINESS COMBINATIONS):
Net Income
Primary.............................. 1.28 1.09 1.26 1.18 0.95
Fully diluted........................ 1.27 1.08 1.25 1.15 0.95
Book value at end of period............ 11.34 N/A N/A N/A N/A
</TABLE>
- ---------------
* Restated to reflect the impact of a two-for-one stock split effected in the
form of a 100% stock dividend paid February 11, 1997.
N/A Not applicable due to pro forma balance sheet being presented only at
September 30, 1997 which assumes the transaction was consummated on the
latest balance sheet date in accordance with Rule 11.02(b) of Regulation
S-X.
(a) Pro forma equivalent per share amounts are calculated by multiplying the
pro forma combined total income per share and the pro forma combined total
book value per share of BancGroup by the conversion ratio (1.5746 shares of
BancGroup Common Stock for each share of South Florida Common Stock) so
that the per share amounts are equated to the respective values for one
share of South Florida.
(b) Pro forma equivalent dividends per share are shown at BancGroup's Common
Stock dividend per share rate multiplied by the 1.5746 conversion ratio per
share of South Florida common stock (see note (a)). BancGroup presently
contemplates that dividends will be declared in the future. However, the
payment of cash dividends is subject to BancGroup's actual results of
operations as well as certain other internal and external factors.
Accordingly, there is no assurance that cash dividends will either be
declared and paid in the future, or, if declared and paid, that such
dividends will approximate the pro forma amounts indicated.
9
<PAGE> 18
THE SPECIAL MEETING
GENERAL
This Prospectus is being furnished to the shareholders of South Florida in
connection with the solicitation of proxies by the Board of Directors of South
Florida for use at the Special Meeting and at any adjournment or postponements
thereof. The purpose of the Special Meeting is to consider and vote upon the
Agreement which provides for the proposed Merger of South Florida with and into
BancGroup. BancGroup will be the surviving corporation in the Merger.
THE BOARD OF DIRECTORS OF SOUTH FLORIDA BELIEVES THAT THE MERGER IS IN THE
BEST INTERESTS OF SOUTH FLORIDA AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE AGREEMENT (ITEM 1 ON THE PROXY CARD).
This Prospectus is also furnished by BancGroup in connection with the offer
of shares of BancGroup Common Stock to be issued in the Merger. No vote of
BancGroup shareholders is required to approve the Merger.
RECORD DATE; SHARES ENTITLED TO VOTE; VOTE REQUIRED FOR THE MERGER
The Board of Directors of South Florida has fixed the close of business on
December 19, 1997, as the Record Date for determination of shareholders entitled
to vote at the Special Meeting. There were 311 record holders of South Florida
Common Stock and 1,219,465 shares of South Florida Common Stock outstanding,
each entitled to one vote per share, as of the Record Date. South Florida is
obligated to issue an additional 28,408 shares of South Florida Common Stock
upon the exercise of outstanding South Florida Options.
The presence at the Special Meeting, in person or by proxy, of the holders
of a majority of the outstanding shares of South Florida Common Stock on the
Record Date is necessary to constitute a quorum for the transaction of business
at the Special Meeting. In the absence of a quorum, the Special Meeting may be
postponed from time to time until South Florida shareholders holding the
requisite number of shares of South Florida Common Stock are represented in
person or by proxy. If a quorum is present, the affirmative vote of the holders
of at least a majority of the outstanding shares of South Florida Common Stock,
whether or not present or represented at the Special Meeting, is required to
approve the Agreement. Broker nonvotes and abstentions will not be counted as
votes cast "FOR" or "AGAINST" the proposal to approve the Agreement, and, as a
result, such non-votes will have the same effect as votes cast "AGAINST" the
Agreement. Each holder of record of shares of South Florida Common Stock is
entitled to cast, for each share registered in his or her name, one vote on the
Agreement as well as on each other matter presented to a vote of shareholders at
the Special Meeting.
As of the Record Date, directors of South Florida owned 240,461 shares of
South Florida Common Stock representing approximately 20% of the outstanding
shares. These individuals have agreed with BancGroup to vote their shares in
favor of the Merger.
If the Agreement is approved at the Special Meeting, South Florida is
expected to merge with and into BancGroup promptly after the other conditions to
the Agreement are satisfied. See "THE MERGER -- Conditions of Consummation of
the Merger."
THE BOARD OF DIRECTORS OF SOUTH FLORIDA URGES THE SHAREHOLDERS OF SOUTH
FLORIDA TO EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS SOON AS POSSIBLE AND
UNANIMOUSLY RECOMMENDS THAT THE SHARES REPRESENTED BY THE PROXY BE VOTED IN
FAVOR OF THE AGREEMENT.
SOLICITATION, VOTING AND REVOCATION OF PROXIES
In addition to soliciting proxies by mail, directors, officers and other
employees of South Florida, without receiving special compensation therefor, may
solicit proxies from South Florida's shareholders by telephone, by telegram or
in person. Arrangements will also be made with brokerage firms and other
custodians,
10
<PAGE> 19
nominees and fiduciaries, if any, to forward solicitation materials to any
beneficial owners of shares of South Florida Common Stock.
South Florida will bear the cost of assembling and mailing this Prospectus
and other materials furnished to shareholders of South Florida. It will also pay
all other expenses of solicitation, including the expenses of brokers,
custodians, nominees, and other fiduciaries who, at the request of South
Florida, mail material to, or otherwise communicate with, beneficial owners of
the shares held by them. BancGroup will pay all expenses incident to the
registration of the BancGroup Common Stock to be issued in connection with the
Merger.
Shares of South Florida Common Stock represented by a proxy properly signed
and received at or prior to the Special Meeting, unless properly revoked, will
be voted in accordance with the instructions on the proxy. If a proxy is signed
and returned without any voting instructions, shares of South Florida Common
Stock represented by the proxy will be voted "FOR" the proposal to approve the
Agreement and in accordance with the determination of the majority of the Board
of Directors of South Florida as to any other matter which may properly come
before the Special Meeting, including any adjournment or postponement thereof. A
shareholder may revoke any proxy given pursuant to this solicitation by: (i)
delivering to the Secretary of South Florida, prior to or at the Special
Meeting, a written notice revoking the proxy; (ii) delivering to the Secretary
of South Florida, at or prior to the Special Meeting, a duly executed proxy
relating to the same shares and bearing a later date; or (iii) voting in person
at the Special Meeting. Attendance at the Special Meeting will not, in and of
itself, constitute a revocation of a proxy. All written notices of revocation
and other communications with respect to the revocation of South Florida's
proxies should be addressed to:
SOUTH FLORIDA BANKING CORP.
27975 Old 41 Road, SE
Bonita Springs, Florida 34135
Attention: Josephine Hogue, Secretary
Proxies marked as abstentions and shares held in street name which have
been designated by brokers on proxy cards as not voted will not be counted as
votes cast. Such proxies will, however, be counted for purposes of determining
whether a quorum is present at the Special Meeting.
The Board of Directors of South Florida is not aware of any business to be
acted upon at the Special Meeting other than consideration of the Agreement
described herein. If, however, other matters are properly brought before the
Special Meeting, or any adjournments or postponements thereof, the persons
appointed as proxies will have the discretion to vote or act on such matters
according to their best judgment. Proxies voted in favor of approval of the
Agreement, or proxies as to which no voting instructions are given, will be
voted to adjourn the Special Meeting, if necessary, in order to solicit
additional proxies in favor of approval of the Agreement. Proxies voted against
approval of the Agreement and abstentions will not be voted for an adjournment.
See "ADJOURNMENT OF THE SPECIAL MEETING."
EFFECT OF MERGER ON OUTSTANDING BANCGROUP COMMON STOCK
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, no South Florida Options are exercised prior to the Merger or exchanged
in the Cashless Exchange, and based upon 1,213,465 shares of South Florida
Common Stock outstanding as of September 30, 1997, BancGroup would issue
1,910,722 shares of BancGroup Common Stock to the shareholders of South Florida
pursuant to the Merger. Based on those assumptions, the shares of BancGroup
Common Stock will represent approximately 4.35% of the total number of shares of
BancGroup Common Stock outstanding following the Merger, not counting any
additional shares BancGroup may issue, including shares to be issued pursuant to
other pending acquisitions.
11
<PAGE> 20
THE MERGER
The following sets forth a summary of the material provisions of the
Agreement and the Option Agreement and the transactions contemplated thereby.
The description does not purport to be complete and is qualified in its entirety
by reference to the Agreement and the Option Agreement attached hereto as
Appendix A and Appendix C, respectively, and certain provisions of Florida law
relating to the rights of dissenting shareholders, a copy of which is attached
hereto as Appendix B. All South Florida shareholders are urged to read the
Appendices in their entirety.
GENERAL
The Agreement provides that, subject to approval by the shareholders of
South Florida, receipt of necessary regulatory approvals and satisfaction of
certain other conditions described below at "-- Conditions to Consummation of
the Merger," South Florida will merge with and into BancGroup. Upon completion
of the Merger, the corporate existence of South Florida will cease, and
BancGroup will succeed to the business formerly conducted by South Florida.
BACKGROUND OF THE MERGER
In late November 1996, representatives of BancGroup met with Mr. Richard
Garner, a Director of South Florida and President and Chief Executive Officer of
the Bank. The meeting was arranged as an introduction to Colonial Bank, a
subsidiary of BancGroup, and to determine a level of interest in pursuing a
possible business combination. At this meeting BancGroup's business goals and
philosophy were outlined, including its interest in combining well-run community
banks in Florida's premier markets. Mr. Garner suggested that BancGroup contact
Mr. David Crockett, Sr., a director of South Florida and Chairman of the Board
of the Bank.
Following several telephone conversations, on February 19, 1997, certain
officers of BancGroup met in Philadelphia with Mr. David Crockett, Sr. and Mr.
David Crockett, Jr., a director of the Bank. At this meeting, the operating
philosophies of BancGroup and its desire to enter the Southwest Florida market
were discussed. Mr. Crockett, Sr. indicated that the Bank was not on the market
and that a significant premium would be necessary for South Florida seriously to
consider a merger proposal. In early March 1997, a meeting was held at the
Bank's offices in Bonita Springs at which two members of senior management of
BancGroup met with certain directors of South Florida further to discuss
operating and financial issues relative to BancGroup and the Bank. On March 10,
1997, BancGroup submitted a written proposal to Mr. Crockett, Sr. and proposed
an exchange of 1.47 shares of BancGroup Common Stock for each outstanding share
of common stock and option of South Florida. Based on the current market price
of BancGroup's Common Stock ($23 per share), this offer represented a value of
approximately $39.2 million for the outstanding South Florida Common Stock and
South Florida Options. South Florida's management responded by indicating that
the proposed consideration was inadequate. As a result of subsequent
discussions, BancGroup proposed an exchange ratio of 1.6089 shares of BancGroup
Common Stock for each outstanding share of Common Stock and option of South
Florida. This offer represented a value of approximately $45.0 million for the
outstanding South Florida Common Stock and South Florida Options. The proposal
was subject to, among other contingencies, a satisfactory due diligence.
On June 23, 1997, the Board of Directors of South Florida met in
Philadelphia to discuss the proposal. At this meeting recent Florida bank
acquisitions were discussed. It was also noted that the BancGroup proposal was
approximately three times South Florida's December 31, 1996 net equity,
considerably above the average of recent Florida transactions. Lengthy
discussions were held relating to BancGroup's financial performance and the
improved liquidity offered by its NYSE listing. Other issues discussed related
to the possible negative impact of interstate banking on bank prices, the
increased competition in the markets served by the Bank and the resulting
declining margins.
A further meeting was held in Boston on July 8, 1997, at which certain
officers of BancGroup met with certain of the directors of South Florida. This
meeting centered around BancGroup's practice of allowing local management to
operate with a high degree of autonomy.
12
<PAGE> 21
On July 20, 1997 the South Florida Board of Directors met in Bonita Springs
to review the latest proposal. This meeting was attended by counsel for South
Florida who was engaged to advise the Board of Directors of its duties and
responsibilities in light of the proposed business combination. After
discussion, the Board unanimously resolved to execute a Letter of Intent with
BancGroup and proceed with the preparation of a definitive agreement. After
further negotiation, it was agreed that each share of Common Stock of South
Florida on the Effective date would be converted into 1.5746 shares of BancGroup
Common Stock. The Agreement, dated as of September 4, 1997, was then unanimously
approved by the Board of Directors of South Florida. Based on the market price
of BancGroup's shares of Common Stock on such date, the aggregate value of the
merger approximated $54 million.
SOUTH FLORIDA'S BOARD OF DIRECTORS' REASONS FOR APPROVING THE MERGER
South Florida's Board of Directors considered a number of factors in
deciding to approve the Merger and recommend the terms of the Agreement to South
Florida's shareholders. These factors included, among other things: (i) as
discussed below, the consideration to be received by the shareholders of South
Florida upon the consummation of the Merger; (ii) that it is expected that the
Merger will be a tax-free transaction (except to the extent cash is received by
shareholders); (iii) the fact that the Merger will enable South Florida
shareholders to exchange their shares of South Florida Common Stock (for which
there is no established public trading market) for shares of BancGroup Common
Stock, which are listed on a national exchange and in which there has been an
active trading market; (iv) the fact that, within the last two years at least
nine competing banks, some of which are substantially larger than South Florida,
have constructed new offices in South Florida's primary markets with the result
that increased competition has had a negative impact on South Florida's profit
margins; (v) changes in the regulatory environment (particularly in regard to
interstate banking) that have further increased competitive pressures on
community banks; (vi) the historical market prices of BancGroup Common Stock and
BancGroup's dividend payment history; (vii) the appeal of BancGroup's philosophy
of maintaining the community-oriented style of banking among its acquired banks,
including BancGroup's history of maintaining local management and allowing local
management to retain a high level of autonomy, particularly as to loan
decisions; (viii) the prospect of minimal job displacement among South Florida's
employees; and (ix) the impact of the Merger on South Florida's customers and
the communities that it serves.
In evaluating whether the terms of the Merger would be fair to the
shareholders of South Florida from a financial point of view, the Board of
Directors reviewed publicly available reports of consideration paid for Florida
financial institutions similar in size to South Florida. In general, the Board
of Directors found that consideration equivalent to two to three times book
value had been paid for institutions similar in size to, and having performance
records comparable with, South Florida. At the time the Board of Directors
considered approving the Agreement, the value of the consideration being offered
by BancGroup was in excess of three times the book value of South Florida Common
Stock.
In the course of the various negotiations from March 1997 until the
Agreement was signed on September 4, 1997, numerous factors were discussed and
considered by the South Florida Board of Directors. Prominent among those
factors were the increasing market value of the BancGroup's common stock during
the period of negotiations, due diligence results, management compensation and
the continuation of management after the merger. The final exchange ratios were
the result of these factors and negotiations with BancGroup.
The Board of Directors validated its conclusion through informal
discussions with investment advisors. In addition, the Board of Directors
reviewed, in discussions with investment advisors and through the published
reports of investment banking firms, the performance of BancGroup Common Stock
and its dividend policies and payment histories. Based on this review, the Board
of Directors concluded that the consideration to be received by the shareholders
in the Merger would be fair from a financial point of view.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF SOUTH FLORIDA
The Board of Directors has determined that the Merger is in the best
interests of South Florida and its shareholders. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT THE
13
<PAGE> 22
SHAREHOLDERS OF SOUTH FLORIDA VOTE IN FAVOR OF AND ADOPTION OF THE AGREEMENT AND
APPROVAL OF THE MERGER.
BANCGROUP'S REASONS FOR THE MERGER
The Board of Directors of BancGroup has unanimously approved the Agreement
and the Merger. BancGroup has been seeking to expand its banking operations in
Florida. BancGroup currently operates a commercial bank with branches in the
Orlando, Ormond Beach, Tampa, Ft. Myers, Winter Haven, Miami and the Miami Beach
areas, with acquisitions pending in the Orlando and St. Petersburg areas. The
Board of Directors of BancGroup believes that the combination with South Florida
and the Bank is consistent with that expansion strategy.
In approving the Merger and the Agreement, the Board of Directors of
BancGroup took into account: (i) the financial performance and condition of
South Florida, including its capital and asset quality; (ii) similarities in the
philosophies of BancGroup and South Florida, including South Florida's
commitment to delivering high quality personalized financial services to its
customers; and (iii) South Florida's management's knowledge of and experience in
the Bonita Springs, Florida market.
RELATED TRANSACTIONS -- STOCK OPTION
South Florida and BancGroup have entered into a stock option agreement
dated as of September 4, 1997 (the "Option Agreement") whereby South Florida has
granted to BancGroup an option to purchase up to 230,292 shares of South Florida
Common Stock at a purchase price of $38.00 per share. The Option Agreement is
attached hereto as Appendix C. Both the number of shares subject to the option
and the purchase price per option share are subject to adjustment in certain
circumstances. The Option Agreement was entered into as an inducement for and as
a condition to BancGroup's execution of the Agreement. The Option Agreement is
intended to increase the likelihood that the Merger will be consummated by
making it more difficult and expensive for a third party to acquire control of
South Florida while BancGroup is seeking to consummate the Merger.
The option granted under the Option Agreement may be exercised by
BancGroup, in whole or in part, in the event a "Purchase Event" precedes the
termination of the Agreement. If the option becomes exercisable, South Florida
may be required to repurchase the option or any shares issued thereunder at a
price calculated in accordance with the Option Agreement. In addition, under
certain circumstances, the option may be converted into a similar option to
acquire shares of an entity engaging in certain transactions with South Florida.
The term "Purchase Event" is defined to include: (i) South Florida's
agreement, without BancGroup's prior written consent, to effect an "Acquisition
Transaction" with any person other than BancGroup, or South Florida's
authorization, recommendation, or public proposal (or public announcement of its
intention to authorize, recommend, or propose) such an agreement; or (ii) the
acquisition by any person of beneficial ownership of 25% or more of the
outstanding shares of South Florida Common Stock. The term "Acquisition
Transaction" is defined to include: (i) a merger, consolidation, or other
business combination involving South Florida; (ii) the disposition, by sale,
exchange, lease, or otherwise, of substantially all of the consolidated assets
of South Florida; or (iii) the issuance of securities representing 25% or more
of the voting power of South Florida.
The Option Agreement and the option granted thereunder terminate upon the
earliest to occur of: (i) the Effective Date; (ii) termination of the Agreement
in accordance with its terms prior to the occurrence of a Purchase Event or a "
Preliminary Purchase Event" (generally, a tender offer or exchange offer by a
third party to acquire more than 25% of the outstanding shares of South Florida
Common Stock or the failure of South Florida's shareholders to approve the
Merger following the public announcement of a proposed Acquisition Transaction
or tender offer); (iii) termination of the Agreement by BancGroup prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event for reasons other
than a breach of the Agreement by South Florida or the failure to occur of
certain conditions precedent to the Merger; or (iv) the anniversary of
termination of the Agreement by BancGroup because of either a material breach of
the
14
<PAGE> 23
Agreement by South Florida, or the failure to occur of certain conditions
precedent to the consummation of the Merger.
To the knowledge of South Florida, no event that would permit the exercise
of the option has occurred as of the date hereof. The rights and obligations of
South Florida and BancGroup under the Option Agreement are subject to receipt of
any required regulatory approval, including approval by the Federal Reserve
under the BHCA.
The Option Agreement, together with South Florida's agreement not to
negotiate or entertain any proposals for the sale of South Florida or its
subsidiaries to another party (see "THE MERGER -- Commitments with Respect to
Other Offers"), have the effect of discouraging persons who might now, or prior
to the Effective Date, be interested in acquiring all of or a significant
interest in, South Florida from considering or proposing such an acquisition,
even if such persons were prepared to pay a higher price per share for the South
Florida Common Stock than the price per share to be paid by BancGroup in the
Merger. The option granted to BancGroup under the Option Agreement will become
exercisable in the event of the occurrence of certain proposals to acquire South
Florida or the Bank. The possibility that BancGroup might exercise the option,
and thus acquire a substantial block of South Florida Common Stock, might deter
offers of other bidders interested in such an acquisition.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of South Florida and the Bank hold
South Florida Options which entitle them to purchase, in the aggregate, up to
15,908 shares of South Florida Common Stock. Under the terms of the Agreement,
any South Florida Options which are not exercised prior to the Effective Date or
exchanged in the Cashless Exchange will be assumed by BancGroup and will give
the holders of South Florida Options the right to acquire shares of BancGroup
Common Stock. See "-- Conversion of South Florida Common Stock" and
"-- Treatment of South Florida Options."
The Agreement provides as a condition precedent to BancGroup's obligation
to consummate the Merger that Richard Garner, an executive officer of the Bank,
enter into an employment agreement with Colonial Bank. Such employment agreement
will provide for (i) a term of three years, (ii) an annual salary of $145,000,
which is equal to his current salary, (iii) an option to buy 19,300 shares of
BancGroup Common Stock at an exercise price of $15.17 per share, such option
vesting ratably over a three-year period, and (iv) a non-competition agreement
to run concurrently with the three-year term. Joel Whittenhall, an officer of
the Bank, will receive as of the Effective Date a stock option agreement
granting from the option to buy 12,700 shares of BancGroup Common Stock at an
exercise price of $15.17 per share, such option vesting ratably over a five-year
period.
On the Effective Date, subject to the agreements described above, all
employees of South Florida (including its executive officers) shall, at
BancGroup's option, either become employees of BancGroup or its subsidiaries or
be entitled to severance benefits in accordance with the severance policy of
Colonial Bank, as of the date of the Agreement. All employees of South Florida
who become employees of BancGroup or its subsidiaries on the Effective Date
shall be entitled, to the extent permitted by applicable law, to participate in
all benefit plans of BancGroup to the same extent as BancGroup's employees.
CONVERSION OF SOUTH FLORIDA COMMON STOCK
On the Effective Date, each share of South Florida Common Stock outstanding
and held by South Florida's shareholders (except shares as to which dissenters'
rights are perfected) shall be converted by operation of law and without any
action by any holder thereof into 1.5746 shares of BancGroup Common Stock.
Accordingly, the number of shares of BancGroup Common Stock to be issued in the
Merger will be approximately 1,920,170 based upon the 1,219,465 shares of South
Florida Common Stock outstanding as of the Record Date.
No fractional shares of BancGroup Common Stock will be issued in the
Merger. Each shareholder of South Florida having a fractional interest arising
upon the conversion of South Florida Common Stock into BancGroup Common Stock
will, at the time of surrender of the certificates representing South Florida
15
<PAGE> 24
Common Stock, be paid by BancGroup an amount of cash equal to such fractional
interest multiplied by the Market Value.
The Agreement provides that if, prior to the Effective Date, BancGroup
Common Stock shall be changed into a different number of shares or a different
class of shares by reason of any recapitalization or reclassification, stock
dividend, combination, stock split, or reverse stock split of the BancGroup
Common Stock, an appropriate and proportionate adjustment shall be made in the
number of shares of BancGroup Common Stock into which the South Florida Common
Stock shall be converted in the Merger.
For a description of the assumption of South Florida Options, see
"-- Treatment of South Florida Options."
SURRENDER OF SOUTH FLORIDA COMMON STOCK CERTIFICATES
On the Effective Date and subject to the conditions described at
"-- Conditions to Consummation of the Merger," South Florida's shareholders
(except to the extent that such holders perfect dissenters' rights under
applicable law) will automatically, and without further action by such
shareholders or by BancGroup, become owners of BancGroup Common Stock as
described herein. Outstanding certificates representing shares of the South
Florida Common Stock shall represent shares of BancGroup Common Stock.
Thereafter, upon surrender of the certificates formerly representing shares of
South Florida Common Stock, the holders will be entitled to receive certificates
for the BancGroup Common Stock. Dividends on the shares of BancGroup Common
Stock will accumulate without interest and will not be distributed to any former
shareholder of South Florida unless and until such shareholder surrenders for
cancellation his certificate for South Florida Common Stock. SunTrust Bank,
Atlanta, Atlanta, Georgia, transfer agent for BancGroup Common Stock, will act
as the Exchange Agent with respect to the shares of South Florida Common Stock
surrendered in connection with the Merger. A detailed explanation of these
arrangements will be mailed to South Florida shareholders promptly following the
Effective Date. STOCK CERTIFICATES SHOULD NOT BE SENT TO THE EXCHANGE AGENT
UNTIL SUCH NOTICE IS RECEIVED.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Merger is intended to qualify as a "reorganization" for federal income
tax purposes under Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"). The obligation of South Florida to consummate the Merger
is conditioned on the receipt by BancGroup of an opinion from Coopers & Lybrand
L.L.P., which serves as BancGroup's independent public accountant, to the effect
that the Merger will constitute such a reorganization. The opinion has been
delivered to BancGroup. In delivering its opinion, Coopers & Lybrand L.L.P., has
received and relied upon certain representations contained in certificates of
officers of BancGroup and South Florida and certain other information, data,
documentation and other materials as it deems necessary. The tax opinion is
based upon customary assumptions contained therein, including the assumption
that South Florida has no knowledge of any plan or intention on the part of the
South Florida shareholders to sell or dispose of BancGroup Common Stock that
would reduce their holdings to the number of shares having in the aggregate a
fair market value of less than 50% of the total fair market value of the South
Florida Common Stock outstanding immediately prior to the Merger.
Neither South Florida nor BancGroup intends to seek a ruling from the IRS
as to the federal income tax consequences of the Merger. South Florida's
shareholders should be aware that the opinion will not be binding on the IRS or
the courts. South Florida's shareholders also should be aware that some of the
tax consequences of the Merger are governed by provisions of the Code as to
which there are no final regulations and little or no judicial or administrative
guidance. There can be no assurance that future legislation, administrative
rulings, or court decisions will not adversely affect the accuracy of the
statements contained herein.
The tax opinion states that, provided the assumptions stated therein are
satisfied, the Merger will constitute a reorganization as defined in Section
368(a) of the Code, and the following federal income tax consequences will
result to South Florida's shareholders who exchange their shares of South
Florida Common Stock for shares of BancGroup Common Stock:
16
<PAGE> 25
(i) No gain or loss will be recognized by South Florida's shareholders
on the exchange of shares of South Florida Common Stock for shares of
BancGroup Common Stock;
(ii) The aggregate basis of BancGroup Common Stock received by each
South Florida shareholder (including any fractional shares of BancGroup
Common Stock deemed received, but not actually received), will be the same
as the aggregate tax basis of the shares of South Florida Common Stock
surrendered in exchange therefor;
(iii) The holding period of the shares of BancGroup Common Stock
received by each South Florida shareholder will include the period during
which the shares of South Florida Common Stock exchanged therefor were
held, provided that the shares of South Florida Common Stock were a capital
asset in the holder's hands as of the Effective Date;
(iv) Cash payments received by each South Florida shareholder in lieu
of a fractional share of BancGroup Common Stock will be treated for federal
income tax purposes as if the fractional share had been issued in the
exchange and then redeemed by BancGroup. Gain or loss will be recognized on
the redemption of the fractional share and generally will be capital gain
or loss if the South Florida Common Stock is a capital asset in the hands
of the holder;
(vi) No gain or loss will be recognized by South Florida upon the
transfer of its assets and liabilities to BancGroup. No gain or loss will
be recognized by BancGroup upon the receipt of the assets and liabilities
of South Florida;
(vii) The basis of the assets of South Florida acquired by BancGroup
will be the same as the basis of the assets in the hands of South Florida
immediately prior to the Merger;
(viii) The holding period of the assets of South Florida in the hands
of BancGroup will include the period during which such assets were held by
South Florida;
(ix) No gain or loss will be recognized by South Florida's
shareholders on the assumption and conversion of South Florida options into
BancGroup options;
(x) The Cashless Exchange will result in the South Florida option
holders recognizing ordinary income equal to the fair market value of
BancGroup Common Stock received in the Cashless exchange; and
(xi) A South Florida shareholder who dissents and receives only cash
pursuant to dissenters' rights will recognize gain or loss. Such gain or
loss will, in general, be treated as capital gain or loss, measured by the
difference between the amount of cash received and the tax basis of the
shares of South Florida Common Stock converted, if the shares of South
Florida Common Stock were held as capital assets. However, a South Florida
shareholder who receives only cash may need to consider the effects of
Section 302 and 318 of the Code in determining the federal income tax
consequences of the transaction.
Each South Florida shareholder will be required to report on such
shareholder's federal income tax return for the fiscal year of such shareholder
in which the Merger occurs that such shareholder has received BancGroup Common
Stock in a reorganization.
FOREGOING DISCUSSION IS INTENDED ONLY AS A SUMMARY OF MATERIAL FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO THE SHAREHOLDERS OF SOUTH FLORIDA, TO
SOUTH FLORIDA AND TO BANCGROUP AND DOES NOT PURPORT TO BE A COMPLETE DESCRIPTION
OF ALL POTENTIAL TAX EFFECTS OF THE MERGER. THE DISCUSSION DOES NOT ADDRESS THE
TAX CONSEQUENCES THAT MAY BE RELEVANT TO A PARTICULAR SHAREHOLDER SUBJECT TO
SPECIAL TREATMENT UNDER CERTAIN FEDERAL INCOME TAX LAWS, SUCH AS DEALERS IN
SECURITIES, BANKS, INSURANCE COMPANIES, TAX-EXEMPT ORGANIZATIONS, NON-UNITED
STATES PERSONS, SHAREHOLDERS WHO DO NOT HOLD THEIR SHARES OF SOUTH FLORIDA
COMMON STOCK AS "CAPITAL ASSETS" WITHIN THE MEANING OF SECTION 1221 OF THE CODE,
AND SHAREHOLDERS WHO ACQUIRED THEIR SHARES OF SOUTH FLORIDA
17
<PAGE> 26
COMMON STOCK PURSUANT TO THE EXERCISE OF OPTIONS OR OTHERWISE AS COMPENSATION,
NOR ANY CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCALITY OR FOREIGN
JURISDICTION; MOREOVER, THE TAX CONSEQUENCES TO HOLDERS OF SOUTH FLORIDA OPTIONS
ARE NOT DISCUSSED. THE DISCUSSION IS BASED UPON THE CODE, TREASURY REGULATIONS
THEREUNDER AND ADMINISTRATIVE RULINGS AND COURT DECISIONS AS OF THE DATE HEREOF.
ALL OF THE FOREGOING IS SUBJECT TO CHANGE AND ANY SUCH CHANGE COULD AFFECT THE
CONTINUING VALIDITY OF THIS DISCUSSION. SOUTH FLORIDA SHAREHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS CONCERNING THE PARTICULAR FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.
OTHER POSSIBLE CONSEQUENCES
If the Merger is consummated, the shareholders of South Florida, a Florida
corporation, will become shareholders of BancGroup, a Delaware business
corporation.
For a discussion of the differences, if any, in the rights, preferences,
and privileges attaching to South Florida Common Stock as compared with
BancGroup Common Stock, see "COMPARATIVE RIGHTS OF SHAREHOLDERS."
CONDITIONS TO CONSUMMATION OF THE MERGER
The respective parties' obligations to consummate the Merger are subject to
the satisfaction (or waiver, to the extent permitted by law) of various
conditions set forth in the Agreement.
The obligations of South Florida and BancGroup to consummate the Merger are
conditioned upon, among other things, (i) the approval of the Agreement by the
holders of at least a majority of the outstanding shares of South Florida Common
Stock; (ii) the notification to, or approval of, the Merger by the Federal
Reserve and approval of the Bank Merger by the Alabama Department and the
Federal Reserve; (iii) the absence of pending or threatened litigation with a
view to restraining or prohibiting consummation of the Merger or in which it is
sought to obtain divestiture, rescission or damages in connection with the
Merger; (iv) the absence of any investigation by any governmental agency which
might result in any such proceeding; (v) consummation of the Merger no later
than February 28, 1998, provided that if all federal regulatory approvals
(including the Registration Statement, of which this Prospectus forms a part,
having been declared effective by the SEC) have not been granted prior to
December 31, 1997, then the February 28, 1998 deadline shall be extended to
April 30, 1998; and (vi) receipt of opinions of counsel regarding certain
matters.
The obligation of South Florida to consummate the Merger is further subject
to several other conditions, including: (i) the absence of any material adverse
change in the financial condition or affairs of BancGroup; (ii) the shares of
BancGroup Common Stock to be issued under the Agreement shall have been approved
for listing on the NYSE; and (iii) the accuracy in all material respects of the
representations and warranties of BancGroup contained in the Agreement and the
performance by BancGroup of all of its covenants and agreements under the
Agreement.
The obligation of BancGroup to consummate the Merger is subject to several
other conditions, including: (i) the absence of any material adverse change in
the financial condition or affairs of South Florida; (ii) the number of shares
as to which holders of South Florida Common Stock exercise dissenters' rights
not exceeding 10% of the outstanding shares of South Florida Common Stock; (iii)
the receipt of a letter from Coopers & Lybrand L.L.P. concurring with the
conclusions of BancGroup's and South Florida's management that no conditions
exist with respect to each company which would preclude accounting for the
Merger as a pooling of interests; (iv) the accuracy in all material respects of
the representations and warranties of South Florida contained in the Agreement,
and the performance by South Florida of all of its covenants and agreements
under the Agreement; (v) the satisfaction of BancGroup with the results of a
second due diligence to be undertaken by BancGroup approximately 30 days before
the Effective Date on matters arising or occurring since the completion of
BancGroup's first due diligence investigation conducted prior to the
18
<PAGE> 27
execution of the Agreement; and (vi) the receipt by BancGroup of certain
undertakings from holders of South Florida Common Stock who may be deemed to be
"affiliates" of South Florida pursuant to the rules of the Commission.
It is anticipated that the foregoing conditions, as well as certain other
conditions contained in the Agreement, such as the receipt of certificates of
officers of each party as to compliance with the Agreement, and satisfaction of
each party of all representations, warranties and covenants, will be satisfied.
The Agreement provides that each of South Florida and BancGroup may waive all
conditions to its respective obligation to consummate the Merger, other than the
receipt of the requisite approvals of regulatory authorities and approval of the
Agreement by the Shareholders of South Florida. In making any decision regarding
a waiver of one or more conditions to consummation of the Merger or an amendment
of the Agreement, the Boards of Directors of South Florida and BancGroup would
be subject to the fiduciary duty standards imposed upon such boards by relevant
law that would require such boards to act in the best interests of their
respective shareholders.
AMENDMENT OR TERMINATION OF AGREEMENT
To the extent permitted by law, the Agreement may be amended by a
subsequent writing signed by each of the parties upon the approval of the Boards
of Directors of each of the parties. However, after adoption of the Agreement
and approval of the Merger by the holders of South Florida Common Stock, no
amendment decreasing the consideration to be received by South Florida
shareholders may be made without the further approval of such shareholders. Such
amendments may require the filing with the Commission of an amendment of the
Registration Statement, of which this Prospectus forms a part. The Agreement may
be terminated at any time prior to or on the Effective Date, whether before or
after adoption of the Agreement by the shareholders of South Florida, by the
mutual consent of the respective Boards of Directors of South Florida and
BancGroup, or by the Board of Directors of either BancGroup or South Florida
under certain circumstances including, but not limited to, the failure of the
transactions contemplated by the Agreement to be consummated on or prior to
February 28, 1998 (or under certain circumstances, April 30, 1998), if such
failure to consummate is not caused by any breach of the Agreement by the party
electing to terminate.
REGULATORY APPROVALS
Prior to the Merger, a notification of the Merger will be provided to the
Federal Reserve pursuant to Section 3 of the BHCA and the regulations
promulgated pursuant thereto. It is contemplated that the Merger will occur
simultaneously with the Bank Merger. The approval of the Federal Reserve and the
Alabama Department must be obtained prior to consummation of the Bank Merger. In
addition, notification of the Bank Merger must be filed with the Office of the
Comptroller of the Currency (the "OCC"). Applications were filed with the
Federal Reserve and the Alabama Department, and notification was filed with the
OCC, on October 17, 1997. The Federal Reserve approved the Merger as of November
19, 1997. Such approval did not contain any terms or conditions that would cause
the parties to abandon the Merger. The Alabama Banking Department is expected to
approve the Bank Merger within two weeks of the Special Meeting.
Federal Reserve Notification. Under limited circumstances, approval of the
Merger by the Federal Reserve under Section 3 of the BHCA is not required. More
specifically, the Merger would not require Federal Reserve approval if: (1) the
Bank is merged into a BancGroup bank subsidiary simultaneously with the Merger;
(2) the Bank's merger into a BancGroup bank subsidiary requires the prior
approval of a federal supervisory agency under the Bank Merger Act; (3) the
transaction does not involve an acquisition subject to Section 4 of the BHCA;
(4) both before and after the transaction, BancGroup meets the Federal Reserve's
capital adequacy guidelines; and (5) BancGroup provides written notice of the
transaction to the Federal Reserve at least ten days prior to the transaction,
and during that period, the Federal Reserve does not require an application
under Section 3 of the BHCA. It is anticipated that BancGroup will satisfy the
foregoing requirements, and, absent Federal Reserve action pursuant to item (5)
above, an application with the Federal Reserve pursuant to Section 3 of the BHCA
will not be required.
In the event the Federal Reserve requires an application pursuant to
Section 3 of the BHCA, approval of the Federal Reserve would be required prior
to the Merger. Pursuant to Section 3 of the BHCA, and the
19
<PAGE> 28
regulations promulgated pursuant thereto, the Federal Reserve must withhold
approval of the Merger if it finds that the transaction will result in a
monopoly or be in furtherance of any combination or conspiracy to monopolize or
attempt to monopolize the business of banking in any part of the United States.
In addition, the Federal Reserve may not approve the Merger if it finds that the
effect thereof may be substantially to lessen competition in any section of the
country, or tend to create a monopoly, or would in any other manner be in
restraint of trade, unless it finds that the anti-competitive effects of the
Merger are clearly outweighed by the probable effect of the Merger in meeting
the convenience and needs of the communities to be served. The Federal Reserve
will also take into consideration the financial condition and managerial
resources of BancGroup, its subsidiaries, any banks related to BancGroup through
common ownership or management, and the Bank. Finally, the Federal Reserve will
consider the compliance records of BancGroup's subsidiaries under the Community
Reinvestment Act.
In addition, the Federal Reserve is expressly permitted to approve
applications under Section 3 of the BHCA for a bank holding company that is
adequately capitalized and adequately managed to acquire control of a bank
located in a state other than the home state of such bank holding company (an
"Interstate Acquisition"), without regard to whether such transaction is
prohibited under the law of any state. However, if the law of the state in which
the target bank is located requires the target bank to have been in existence
for some minimum period of time, the Federal Reserve is prohibited from
approving an application by a bank holding company to acquire such target bank
if such target bank does not satisfy this state law requirement, so long as the
state law specifying such minimum period of time does not specify a period of
more than five years.
Also, the Federal Reserve is prohibited from approving an Interstate
Acquisition if the acquiring bank holding company controls, or upon consummation
of the acquisition, would control, more than 10% of the total amount of deposits
of insured depository institutions in the United States. Finally, subject to
certain exceptions, the Federal Reserve may not approve an application
pertaining to an Interstate Acquisition if, among other things, the bank holding
company, upon consummation of the acquisition, would control 30% or more of the
total amount of deposits of insured depository institutions in the state where
the target bank is located.
The BHCA provides for the publication of notice and public comment on the
application and authorizes the Federal Reserve to permit interested parties to
intervene in the proceedings. If an interested party is permitted to intervene,
such intervention could delay the regulatory approvals required for consummation
of the Merger. Section 11 of the BHCA imposes a waiting period which prohibits
the consummation of the Merger, in ordinary circumstances, for a period ranging
from 15 to 30 days following the Federal Reserve's approval of the Merger.
During such period, the United States Department of Justice, should it object to
the Merger for antitrust reasons, may challenge the consummation of the Merger.
Pursuant to Section 18(c) of the Federal Deposit Insurance Act (the "Bank
Merger Act"), the Federal Reserve's approval also must be obtained prior to the
Bank Merger. The Federal Reserve is prohibited from approving the Bank Merger if
it would result in a monopoly or would be in furtherance of any combination or
conspiracy to monopolize or to attempt to monopolize the business of banking in
any part of the United States. In addition, the Federal Reserve is prohibited
from approving the Bank Merger if its effect, in any section of the country,
would be substantially to lessen competition, or to tend to create a monopoly,
or which in any other manner would be in restraint of trade, unless it finds
that the anti-competitive effects of the Bank Merger are clearly outweighed in
the public interest by the probable effect of the Bank Merger in meeting the
convenience and needs of the community to be served. The Federal Reserve is
required to take into consideration the financial and managerial resources and
future prospects of the existing and proposed institutions, and the convenience
and needs of the community to be served.
In that the Bank Merger constitutes an interstate bank merger, certain
additional requirements are applicable to the Bank Merger. For example, the
Federal Reserve is prohibited from approving the Bank Merger if the bank
resulting from the Bank Merger, including all insured depository institutions
which are affiliates of such resulting bank, upon consummation of the
transaction, would control more than 10% of the total amount of deposits of
insured depository institutions in the United States. The Federal Reserve is
also prohibited from approving the Bank Merger if either party to the Bank
Merger has a branch in any state in
20
<PAGE> 29
which any other bank involved in the Bank Merger has a branch, and the resulting
bank, upon consummation of the Bank Merger, would control 30% or more of the
total amount of deposits of insured depository institutions in any such state.
Finally, the Federal Reserve may approve the interstate bank merger only if each
bank involved in the transaction is adequately capitalized as of the date the
application is filed, and the Federal Reserve determines that the resulting bank
will continue to be adequately capitalized and adequately managed upon
consummation of the Bank Merger.
The Bank Merger Act imposes a waiting period which prohibits consummation
of the Bank Merger, in ordinary circumstances, for a period ranging from 15 to
30 days following the Federal Reserve's approval of the Bank Merger. During such
period, the United States Department of Justice, should it object to the Merger
for antitrust reasons, may challenge the consummation of the Merger.
Alabama Department Approval. The Bank Merger must be approved by the
Alabama Department pursuant to applicable provisions of the Alabama Banking
Code. If the Superintendent of the Alabama Department finds that (1) the
proposed transaction will not be detrimental to the safety and soundness of the
bank resulting from the Bank Merger, (2) any new officers and directors of the
resulting bank are qualified by character, experience, and financial
responsibility to direct and manage the resulting bank, and (3) the proposed
Bank Merger is consistent with the convenience and needs of the communities to
be served by the resulting bank in the State of Alabama and is otherwise in the
public interest, the Bank Merger shall be approved by the Superintendent.
The Agreement provides that the obligation of each of BancGroup and South
Florida to consummate the Merger is conditioned upon the receipt of all
necessary regulatory approvals. There can be no assurance that the applications
necessary for BancGroup to consummate the Merger with South Florida will be
approved, and, if such approvals are received, that such approvals will not be
conditioned upon terms and conditions that would cause the parties to abandon
the Merger.
CONDUCT OF BUSINESS PENDING THE MERGER
The Agreement contains certain restrictions on the conduct of the business
of South Florida pending consummation of the Merger. The Agreement prohibits
South Florida from taking, without the prior written consent of BancGroup, any
of the following actions prior to the Effective Date, subject to certain limited
exceptions previously agreed to by BancGroup and South Florida:
(i) Issuing, delivering or agreeing to issue or deliver any stock,
bonds or other corporate securities (whether authorized and unissued or
held in the treasury), except shares of South Florida Common Stock issued
upon the exercise of South Florida Options;
(ii) Borrowing or agreeing to borrow any funds or incurring or
becoming subject to, any liability (absolute or contingent) except
borrowings, obligations and liabilities incurred in the ordinary course of
business and consistent with past practice;
(iii) Paying any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
most recent balance sheet and current liabilities incurred since that date
in the ordinary course of business and consistent with past practice;
(iv) Declaring or making or agreeing to declare or make, any payment
of dividends or distributions of any assets of any kind whatsoever to
shareholders, or purchasing or redeeming or agreeing to purchase or redeem,
any of its outstanding securities, except that South Florida may pay a cash
dividend to its shareholders at its current rate and at times consistent
with past practice, and provided further that such dividend rate may be
increased by $0.02 per share per year;
(v) Except in the ordinary course of business, selling or transferring
or agreeing to sell or transfer, any of its assets, property or rights or
canceling, or agreeing to cancel, any debts or claims;
(vi) Except in the ordinary course of business, entering or agreeing
to enter into any agreement or arrangement granting any preferential rights
to purchase any of its assets, property or rights or requiring the consent
of any party to the transfer and assignment of any of its assets, property
or rights;
21
<PAGE> 30
(vii) Waiving any rights of value which in the aggregate are material;
(viii) Except in the ordinary course of business, making or permitting
any amendment or termination of any contract, agreement or license to which
it is a party if such amendment or termination is material considering its
business as a whole;
(ix) Except in accordance with past practice, making any accrual or
arrangement for or payment of bonuses or special compensation of any kind
or any severance or termination pay to any present or former officer or
employee;
(x) Except in accordance with past practice, increasing the rate of
compensation payable to or to become payable to any of its officers or
employees or making any material increase in any profit-sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(xi) Failing to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations; and
(xii) Entering into any other material transaction other than in the
ordinary course of business.
The Agreement provides that, prior to the Effective Date, no director or
officer of South Florida or any of its subsidiaries shall, directly or
indirectly, own, manage, operate, join, control, be employed by or participate
in the ownership, proposed ownership, management, operation or control of or be
connected in any manner with, any business, corporation or partnership which is
competitive to the business of South Florida or its subsidiaries.
The Agreement also provides that (i) South Florida will consult with
BancGroup and advise it in advance of all loan requests outside the ordinary
course of business or in excess of $250,000 that are not single-family
residential loan requests (ii) South Florida will furnish to BancGroup copies of
all minutes of loan committee meetings of the Bank for meetings occurring after
the date of the execution of the Agreement; and (iii) South Florida will consult
with BancGroup to coordinate various business issues on a basis mutually
satisfactory to South Florida and BancGroup. To aid in these consultations, the
Agreement provides that South Florida will make available to BancGroup office
space for one representative of BancGroup to use from time to time during the
term of the Agreement, and that BancGroup will reimburse South Florida for all
expenses reasonably associated with such space. BancGroup's representative in
the South Florida Office will respond on behalf of BancGroup to matters arising
under clauses (i) and (iii) of the first sentence of this paragraph and will be
available to attend, when appropriate, meetings of the board of directors or
loan committee of the Bank.
The Agreement also provides that South Florida will update monthly the list
provided to BancGroup of all loans of South Florida or the Bank to any person
affiliated directly or indirectly with South Florida or the Bank, or any officer
or employee of South Florida or the Bank, showing the identity of the borrower,
identifying the collateral, and summarizing the material terms thereof. South
Florida and the Bank may not alter the terms of any such loan, or exchange or
modify the collateral for such loans, except as may be required by Law, without
prior notice to, and consultation with, BancGroup.
The Agreement provides that South Florida and the Bank will not release
from pledge any shares of South Florida Common Stock which serve as collateral
for any loan or alter the terms of such loans or exchange or modify collateral
for such loans, except as may be required by law, without prior notice to and
consultation with BancGroup. The Agreement further provides that South Florida
will have collected all stock powers or endorsements relating to, and undertake
all other actions necessary to perfect the security interest in, such loans
prior to the Effective Date.
The Agreement also provides that South Florida will not make purchases for
its investment portfolio without the prior written consent of BancGroup, except
that such consent shall not be required for purchases of U.S. Treasuries, Agency
Notes and Bonds, investment grade corporate notes with due dates of less than
three years and Fed Funds.
22
<PAGE> 31
COMMITMENTS WITH RESPECT TO OTHER OFFERS
Until the termination of the Agreement, and except for the Merger, neither
South Florida nor any of its directors or officers (or any person representing
any of the foregoing) shall solicit or encourage inquiries or proposals with
respect to, furnish any information relating to or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or of
a substantial portion of the assets of, or of a substantial equity interest in,
South Florida or any business combination involving South Florida (collectively,
an "Acquisition Proposal") other than as contemplated by the Agreement. South
Florida will notify BancGroup immediately if any such inquiries or proposals are
received by South Florida, if any such information is requested from South
Florida, or if any such negotiations or discussions are sought to be initiated
with South Florida. South Florida shall instruct its officers, directors, agents
or affiliates or their subsidiaries to refrain from doing any of the above.
South Florida may communicate information about an Acquisition Proposal to its
shareholders if and to the extent that legal counsel provides a written opinion
to South Florida that it is required to do so in order to comply with its legal
obligations.
In connection with the Agreement, South Florida has granted to BancGroup
the option to purchase up to 19% of the South Florida Common Stock at a purchase
price of $38.00 per share. The option will become exercisable upon the
occurrence of certain events which are generally related to the potential
acquisition of South Florida by another party. The option is intended to
increase the likelihood that the Merger will be consummated by making it more
difficult and expensive for any third party to acquire control of South Florida
while BancGroup is seeking to consummate the Merger. See "THE MERGER -- Related
Transactions" " -- Stock Option."
RIGHTS OF DISSENTING SHAREHOLDERS
Holders of South Florida Common Stock as of the Record Date are entitled to
dissenters' rights of appraisal under Florida law. Consummation of the Merger is
subject to, among other things, the holders of no more than 10% of the
outstanding South Florida Common Stock electing to exercise their dissenters'
rights. Pursuant to Section 607.1320 of the FBCA, a South Florida shareholder
who does not wish to accept the shares of BancGroup Common Stock to be received
pursuant to the terms of the Agreement may dissent from the Merger and elect to
receive the fair value of his shares as of the day prior to the date the Merger
is approved by South Florida shareholders. Such fair value is exclusive of any
appreciation or depreciation in anticipation of the Merger, unless exclusion
would be inequitable.
In order to exercise appraisal rights, a dissenting shareholder of South
Florida (a "Dissenting Shareholder") must strictly comply with the statutory
procedures of Sections 607.1320, 607.1301 and 607.1302 of the FBCA, which are
summarized below. A copy of the full text of those Sections is attached hereto
as Appendix B. SHAREHOLDERS OF SOUTH FLORIDA ARE URGED TO READ APPENDIX B IN ITS
ENTIRETY AND TO CONSULT WITH THEIR LEGAL ADVISORS. EACH SHAREHOLDER OF SOUTH
FLORIDA WHO DESIRES TO ASSERT HIS OR HER APPRAISAL RIGHTS IS CAUTIONED THAT
FAILURE ON HIS OR HER PART TO ADHERE STRICTLY TO THE REQUIREMENTS OF FLORIDA LAW
IN ANY REGARD WILL CAUSE A FORFEITURE OF ANY APPRAISAL RIGHTS.
Procedures for Exercising Dissenters' Rights of Appraisal. The following
summary of Florida law is qualified in its entirety by reference to the full
text of the provisions of the FBCA attached hereto as Appendix B.
1. A Dissenting Shareholder must file with South Florida, prior to the
taking of the vote on the Merger, a written notice of intent to demand payment
for his or her shares if the Merger is effectuated. A vote against the Merger
will not alone be deemed to be the written notice of intent to demand payment. A
Dissenting Shareholder need not vote against the Merger, but cannot vote for the
Merger.
2. Within ten days after the vote on the Merger is taken, South Florida
must give written notice of the authorization of the Merger, if obtained, to
each South Florida shareholder who filed notice of intent to demand payment for
his shares. WITHIN 20 DAYS AFTER THE GIVING OF THE FOREGOING NOTICE BY SOUTH
FLORIDA, EACH DISSENTING SHAREHOLDER MUST FILE WITH SOUTH FLORIDA A NOTICE OF
ELECTION TO DISSENT, STATING HIS OR HER NAME AND
23
<PAGE> 32
ADDRESS, THE NUMBER OF SHARES AS TO WHICH HE OR SHE DISSENTS AND A DEMAND FOR
PAYMENT OF THE FAIR VALUE OF HIS OR HER SHARES. ANY DISSENTING SHAREHOLDER
FAILING TO FILE SUCH ELECTION WITHIN THE PERIOD WILL LOSE HIS OR HER APPRAISAL
RIGHTS AND BE BOUND BY THE TERMS OF THE AGREEMENT. A Dissenting Shareholder
filing an election to dissent must also deposit the certificate(s) representing
his or her shares with South Florida simultaneously with the filing of the
election.
3. Upon filing a notice of election to dissent, a Dissenting Shareholder
shall thereafter be entitled only to payment pursuant to the procedure set forth
in the applicable sections of FBCA and shall not be entitled to vote or to
exercise any other rights of a shareholder. A notice of election may be
withdrawn in writing by the Dissenting Shareholder at any time before an offer
is made by South Florida to pay for shares. Upon such withdrawal, the right of
the Dissenting Shareholder to be paid the fair value of his or her shares will
cease, and he or she will be reinstated as a shareholder.
4. Within ten days after the expiration of the period in which a Dissenting
Shareholder may file notice of election to dissent, or within ten days after the
Effective Date of the Merger, whichever is later (but in no event later than 90
days after the Merger is approved), South Florida (or BancGroup after the
Effective Date) must make a written offer to each Dissenting Shareholder who has
made demand for appraisal for his or her shares at a price deemed by South
Florida to be the fair value thereof.
5. If, within 30 days after the making of such offer, the Dissenting
Shareholder accepts the offer, payment for the shares of the Dissenting
Shareholder is to be made within 90 days after the making of such offer or the
effective date of the Merger, whichever is later. Upon payment of the agreed
value, the Dissenting Shareholder will cease to have any interest in such
shares.
6. If South Florida (or BancGroup, if appropriate) fails to make such offer
within the period specified above or if it makes an offer and a Dissenting
Shareholder fails to accept the same within a period of 30 days thereafter, then
South Florida, within 30 days after receipt of written demand from any
Dissenting Shareholder given within 60 days after the date on which the Merger
was effected, shall, or at its election at any time within such period of 60
days may, file an action in any court of competent jurisdiction in Lee County
requesting that the fair value of such shares be determined by the Court.
7. If South Florida fails to institute such proceeding within the
above-prescribed period, any Dissenting Shareholder may do so in the name of
South Florida. A copy of the initial pleading will be served on each Dissenting
Shareholder. South Florida is required to pay each Dissenting Shareholder the
amount found to be due within ten days after final determination of the
proceedings. The judgment of the court is payable only upon and concurrently
with the surrender to South Florida of the certificate(s) representing the
shares. Upon payment of the judgment, the Dissenting Shareholder ceases to have
any interest in such shares.
8. The costs and expenses of the court proceeding are determined by the
court and will be assessed against South Florida (or BancGroup, if appropriate)
except that all or any part of such costs and expenses may be apportioned and
assessed against any Dissenting Shareholders who are parties to the proceeding
and to whom South Florida has made an offer to pay for their shares, if the
court finds their refusal to accept such offer to have been arbitrary, vexatious
or not in good faith. Expenses include reasonable compensation for, and expenses
of, appraisers, but shall exclude the fees and expenses of counsel for, and
experts employed by, any party. If the value of the shares, as determined by the
court, materially exceeds the amount that South Florida offered to pay for the
shares then the court may, in its discretion, award to any Dissenting
Shareholder who is a party to the proceedings, such sum as the court may
determine to be reasonable compensation to any expert(s) employed by the
Dissenting Shareholder in the proceeding.
The foregoing discussion is only a summary of the provisions of Florida law
and does not purport to be complete and is qualified in its entirety by
reference to the provisions of Florida law, which are attached hereto as
Appendix B. Successful assertion by South Florida shareholders of their
dissenters' appraisal rights is dependent upon compliance with the requirements
described above. Non-compliance with any provision will result in a failure to
perfect those rights and the loss of any opportunity to receive payment for
shares pursuant to an appraisal.
24
<PAGE> 33
BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF THE FLORIDA LAW RELATING TO
DISSENTERS' APPRAISAL RIGHTS, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM
THE MERGER ARE URGED TO CONSULT THEIR OWN LEGAL ADVISERS.
RESALE OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
The issuance of the shares of BancGroup Common Stock pursuant to the Merger
(including any shares to be issued pursuant to South Florida Options) has been
registered under the Securities Act of 1933 (the "Securities Act"). As a result,
shareholders of South Florida who are not "affiliates" of South Florida (as such
term is defined under the Securities Act) may resell, without restriction, all
shares of BancGroup Common Stock which they receive in connection with the
Merger. Under the Securities Act, only affiliates of South Florida are subject
to restrictions on the resale of the BancGroup Common Stock which they receive
in the Merger.
The BancGroup Common Stock received by affiliates of South Florida who do
not also become affiliates of BancGroup after the consummation of the Merger may
not be sold except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. Generally, Rule 145 permits BancGroup Common
Stock held by such shareholders to be sold in accordance with certain provisions
of Rule 144 under the Securities Act. In general, these provisions of Rule 144
permit a person to sell on the open market in brokers' or certain other
transactions within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of BancGroup Common
Stock or the average weekly trading volume in BancGroup Common Stock reported on
the NYSE during the four calendar weeks preceding such sale. Sales under Rule
144 are also subject to the availability of current public information about
BancGroup. The restrictions on sales will cease to apply under most
circumstances once the former South Florida affiliate has held the BancGroup
Common Stock for at least one year. BancGroup Common Stock held by affiliates of
South Florida who become affiliates of BancGroup, if any, will be subject to
additional restrictions on the ability of such persons to resell such shares.
South Florida will provide BancGroup with such information as may be
reasonably necessary to determine the identity of those persons (primarily
officers, directors and principal shareholders) who may be deemed to be
affiliates of South Florida. South Florida will also obtain from each such
person a written undertaking to the effect that no sale or transfer will be made
of any shares of BancGroup Common Stock by such person except pursuant to Rule
145 or pursuant to an effective registration statement or an exemption from
registration under the Securities Act. Receipt of such an undertaking is a
condition to BancGroup's obligation to close the Merger. The undertaking also
will require each affiliate to agree that such person will not sell or otherwise
reduce risk relative to any shares of BancGroup Common Stock received in the
Merger until financial results concerning at least 30 days of post-Merger
combined operations have been published by BancGroup within the meaning of
section 201.01 of the Commission's Codification of Financial Reporting Policies.
If such undertakings are not received and BancGroup waives receipt of such
condition, the certificates for the shares of BancGroup Common Stock to be
issued to such person will contain an appropriate restrictive legend and
appropriate stock transfer orders will be given to BancGroup's stock transfer
agent.
ACCOUNTING TREATMENT
BancGroup will account for the Merger as a pooling-of-interests transaction
in accordance with generally accepted accounting principles, which, among other
things, require that the number of shares of South Florida Common Stock acquired
for cash pursuant to the exercise of dissenters' rights or in lieu of fractional
shares not exceed 10% of the outstanding shares of South Florida Common Stock.
Under this accounting treatment, assets and liabilities of South Florida would
be added to those of BancGroup at their recorded book values, and the
shareholders' equity of the two companies would be combined in BancGroup's
consolidated balance sheet. Financial statements of BancGroup issued after the
Effective Date of the Merger may be restated to reflect the consolidated
operations of BancGroup and South Florida as if the Merger had taken place prior
to the periods covered by the financial statements.
25
<PAGE> 34
NYSE REPORTING OF BANCGROUP COMMON STOCK ISSUED IN THE MERGER
Sales of BancGroup Common Stock to be issued in the Merger in exchange for
South Florida Common Stock will be reported on the NYSE.
TREATMENT OF SOUTH FLORIDA OPTIONS
CASHLESS EXCHANGE OF OPTIONS. As of the date of this Prospectus, South
Florida had granted options (the "South Florida Options"), which entitle the
holders thereof to acquire up to 28,408 shares of South Florida Common Stock.
The Agreement provides that, no later than five days prior to the Effective
Date, the holders of South Florida Options that have vested for such holders may
provide written notice to South Florida (in form and substance reasonably
satisfactory to BancGroup) that they wish to surrender their South Florida
Options to BancGroup, effective at the Effective Date, and, in lieu of having
their South Florida Options being assumed by BancGroup as detailed in the
immediately following paragraph, to receive an amount of BancGroup Common Stock
in exchange therefor equal to the difference between the total value of the
shares of BancGroup Common Stock to be issued pursuant to such South Florida
Options (based upon the number of shares of BancGroup Common Stock to be issued
pursuant to the South Florida Options multiplied by the Market Value) less the
aggregate exercise price of such South Florida Options at the Effective Date,
divided by the Market Value (the "Cashless Exchange"). No fractions of shares
shall be issued, and holders of options otherwise entitled to receive fractional
shares shall receive instead a cash payment (without interest) equal to such
fractional share multiplied by the Market Value. Any South Florida Options that
have not vested at the Effective Date shall be assumed by BancGroup in
accordance with the immediately following paragraph.
ASSUMPTION OF OPTIONS. Except for the South Florida Options surrendered in
the Cashless Exchange and options which terminate in accordance with their
terms, on the Effective Date, BancGroup will assume all South Florida Options
outstanding, and each such option will represent the right to acquire BancGroup
Common Stock on substantially the same terms applicable to the South Florida
Options. The Registration Statement registering the shares of BancGroup Common
Stock issued pursuant to the Merger also registers the shares of BancGroup
Common Stock to be issued upon the exercise of the South Florida Options assumed
by BancGroup. The number of shares of BancGroup Common Stock to be issued
pursuant to such options will equal the number of shares of South Florida Common
Stock subject to such South Florida Options multiplied by the Exchange Ratio,
provided that no fraction of shares of BancGroup Common Stock will be issued and
the number of shares of BancGroup Common Stock to be issued upon the exercise of
South Florida Options, if a fractional share exists, will equal the number of
whole shares obtained by rounding to the nearest whole number, giving account to
such fraction, or else such fractional interest shall be paid in cash. The
exercise price for the acquisition of BancGroup Common Stock will be the
exercise price for each share of South Florida Common Stock subject to such
options divided by the Exchange Ratio, adjusted appropriately for any rounding
to whole shares that may be done.
The South Florida Options are issuable pursuant to the South Florida
Banking Corp. Incentive Stock Option Plan (the "Incentive Option Plan") and the
Non-Qualified Stock Option Plan for Directors (Non-Employees) (the "NQSO Plan")
(collectively, the "Option Plans"). The shares of stock to be delivered upon the
exercise of South Florida Options granted under the Option Plans shall be made
available, after the Merger, from the authorized but unissued shares of
BancGroup Common Stock. BancGroup has reserved sufficient authorized but
unissued shares for issuance pursuant to South Florida Options under the Option
Plans and does not anticipate acquiring any shares in the open market.
Purpose of the Option Plans. The purpose of the Option Plans is to advance
the interests of South Florida and the Bank by affording to key management
employees, officers and non-employee directors an opportunity to acquire or
increase their propriety interest in South Florida and, thus, to motivate,
retain and attract highly competent individuals for the benefit of South
Florida. BancGroup believes that its assumption of the South Florida Options
will be consistent with this purpose. No further options will be granted under
the Option Plans after the Merger. A total of six persons currently hold South
Florida Options.
26
<PAGE> 35
Tax Consequences -- Incentive Options. Options issued under the Incentive
Option Plan are intended to qualify as "incentive stock options," under Section
422 of the Internal Revenue Code of 1986, as amended. Under the Internal Revenue
Code no income will result to a grantee of any such option upon the granting or
exercising of an option by the grantee.
If, after exercising the option, the grantee holds the stock obtained
through exercise for at least two years after the date of option grant and at
least one year after the stock was obtained, the grantee's gain (if any) on
selling the stock will generally be treated as a long term capital gain.
Generally, the grantee's alternative minimum taxable income for minimum tax
purposes will be increased by the difference between the option price and the
fair market value of the stock on the date of exercise.
If the holding period requirements just stated are not met, then any gain
on the sale of the stock will be taxed partly or entirely at ordinary income tax
rates. If the stock is held for less than the required holding period, then the
difference between the option exercise price and the fair market value of the
stock on the date of exercise will be taxed at ordinary income tax rates. The
gain equal to the increase in the fair market value of the stock after the date
of exercise of the option will generally be taxed as capital gain. It should be
understood that the holding periods herein relate only to federal income tax
treatment and not to any securities law restrictions that may apply to the sale
of shares obtained through an option.
An optionee does not realize taxable income upon the grant of a
Non-Qualified Stock Option if the exercise price is equal to the fair market
value on the date of grant. If the exercise price is less than the fair market
value, the optionee will realize income equal to the difference between the
exercise price of the option and the fair market value on the date of exercise.
The Company is entitled to a deduction at the same time and in a corresponding
amount.
THE FOREGOING STATEMENTS CONCERNING FEDERAL INCOME TAX TREATMENT ARE
NECESSARILY GENERAL AND MAY NOT APPLY IN A PARTICULAR INSTANCE. OPTION HOLDERS
SHOULD CONTACT THEIR OWN PROFESSIONAL TAX ADVISORS FOR ADVICE CONCERNING THEIR
PARTICULAR TAX SITUATION AND ANY CHANGES IN THE TAX LAW SINCE THE DATE OF THIS
PROSPECTUS.
Administration. The Option Plans are to be administered, after the Merger, by
the Personnel and Compensation Committee (the "Committee") of the Board of
Directors of BancGroup. All members of the Committee are directors of BancGroup.
The Chairman of the Committee, John C. H. Miller, Jr., receives employee-related
compensation from BancGroup and holds options under BancGroup's stock option
plans. Mr. Miller is a member of a law firm that performs legal services for
BancGroup. See "LEGAL OPINIONS." Another member of the Committee, Jack H.
Rainer, is Chairman of Bankers Credit Life Insurance Company, which provides
credit life insurance on certain loans made by Colonial Bank, BancGroup's
Alabama bank subsidiary. The members of the Committee serve at the pleasure of
the Board of Directors of BancGroup. The Committee shall interpret the Option
Plans and resolve questions presented by holders of options under the Option
Plans. Requests for information or questions about the Option Plans should be
directed to W. Flake Oakley, IV, Secretary, Post Office Box 1108, One Commerce
Street, Montgomery, Alabama 36101 telephone: (334) 240-5000.
Exercise of Options. After a South Florida Option becomes exercisable in
accordance with its terms, it may be exercised by the holder by giving written
notice to BancGroup on a form provided by BancGroup and by paying to BancGroup
in cash the exercise price of the shares to be acquired under such option.
Payment may be made to BancGroup by cash, check, bank draft, or money order, or,
by delivering BancGroup stock already owned by the option holder. The period
during which an option may be exercised is stated in the agreement respecting
each grant of options but in no case may be more than ten years from the date
the option is granted. The holder must be in the continuous employ of South
Florida or BancGroup from the date of grant through the date of exercise, except
as stated below.
Amendment and Other Matters. BancGroup's Board of Directors may at any
time amend the Option Plans, except that no amendment may make any change in any
option already granted which would adversely affect the rights of any
participant.
27
<PAGE> 36
It is not anticipated that BancGroup will make any reports to holders of
South Florida Options regarding the amount or status of South Florida Options
held. Such holders may obtain such information from BancGroup at the address
given above.
COMPARATIVE MARKET PRICES AND DIVIDENDS
BANCGROUP
BancGroup Common Stock is listed for trading on the NYSE. The Common Stock
was first listed on the NYSE on February 24, 1995. Prior to February 21, 1995,
BancGroup had two classes of common stock outstanding, Class A and Class B. The
Class B Common Stock was not publicly traded. The Class A Common Stock was
traded in the over-the-counter market and quoted on the Nasdaq NMS. The
BancGroup Class A Common Stock had more limited voting rights than the BancGroup
Class B Common Stock. The Class A and Class B Common Stock were reclassified
into BancGroup Common Stock on February 21, 1995, and the Class A Common Stock
ceased to be quoted on the Nasdaq NMS on February 24, 1995.
The following table shows the dividends paid per share and indicates the
high and low closing prices for the BancGroup Class A Common Stock as reported
by the Nasdaq NMS up to February 24, 1995, and the same information reported by
the NYSE for the BancGroup Common Stock commencing February 24, 1995.
<TABLE>
<CAPTION>
PRICE(1)
------------------- DIVIDENDS
HIGH LOW PER SHARE(1)
-------- ------- ------------
<S> <C> <C> <C> <C> <C>
1995
1st Quarter................................................. $11 13/16 $ 9 3/4 $0.1125
2nd Quarter................................................. 13 5/8 11 9/16 0.1125
3rd Quarter................................................. 14 15/16 13 3/4 0.1125
4th Quarter................................................. 16 7/16 14 1/4 0.1125
1996
1st Quarter................................................. 18 1/4 15 0.135
2nd Quarter................................................. 18 1/16 15 5/8 0.135
3rd Quarter................................................. 17 15/16 15 5/8 0.135
4th Quarter................................................. 20 1/8 17 3/8 0.135
1997
1st Quarter................................................. 24 18 2/3 0.15
2nd Quarter................................................. 24 7/8 22 0.15
3rd Quarter................................................. 29 3/16 24 1/4 0.15
4th Quarter (through December 26, 1997)..................... 35 1/16 28 15/16 0.15
</TABLE>
- ---------------
(1) Prices and dividends have been restated to reflect the impact of a
two-for-one stock split effected in the form of a 100% stock dividend paid
February 11, 1997.
On July 22, 1997, the business day immediately prior to the public
announcement of the Merger, the closing price as reported on the NYSE of the
BancGroup Common Stock was $26.375 per share.
At December 31, 1996, BancGroup's subsidiaries accounted for approximately
98% of BancGroup's consolidated assets. BancGroup derives substantially all of
its income from dividends received from its subsidiaries. Various statutory
provisions and regulatory policies limit the amount of dividends the subsidiary
bank may pay without regulatory approval. In addition, federal statutes restrict
the ability of subsidiary bank to make loans to BancGroup, and regulatory
policies may also restrict such dividends.
28
<PAGE> 37
SOUTH FLORIDA
The shares of South Florida Common Stock are not actively traded. However,
the following table sets forth the trading prices for the shares of South
Florida Common Stock that have occurred since July 7, 1995 for transactions in
which the trading prices are known to management of South Florida:
<TABLE>
<CAPTION>
PRICE PER SHARE OF
COMMON STOCK
-----------------------------
DIVIDENDS
PER
HIGH LOW SHARE
------- ------- ---------
<S> <C> <C> <C> <C> <C>
1995
Third Quarter........................................... $16 9/16 $15 11/16 $.09
Fourth Quarter.......................................... 16 3/4 15 11/16 .09
1996
First Quarter........................................... 17 1/2 16 3/16 .09
Second Quarter.......................................... 19 16 3/4 .09
Third Quarter........................................... 19 5/16 18 .10
Fourth Quarter.......................................... 24 18 5/16 .10
1997
First Quarter........................................... 25 19 3/16 .10
Second Quarter.......................................... 23 21 .10
Third Quarter........................................... 39 21 .10
Fourth Quarter (through December 15, 1997).............. 45 40 .12
</TABLE>
The Agreement limits South Florida's ability to pay dividends prior to the
Effective Date to cash dividend payments at its current rate and at times
consistent with past practice, provided that such dividend rate may be increased
by $0.02 per share per year. See "THE MERGER -- Conduct of Business Pending the
Merger." The last transaction prior to the announcement of the Merger was on
July 21, 1997 at $23.00 per share.
BANCGROUP CAPITAL STOCK AND DEBENTURES
BancGroup's authorized capital stock consists of 100,000,000 shares of
BancGroup Common Stock, par value $2.50 per share, and 1,000,000 shares of its
Preference Stock, par value $2.50 per share. As of September 30, 1997, there
were issued and outstanding a total of 41,964,197 shares of BancGroup Common
Stock. No shares of Preference Stock are issued and outstanding. BancGroup
issued in 1986 $28,750,000 in principal amount of its 7 1/2% Convertible
Subordinated Debentures due 2011 (the "1986 Debentures") of which $5,012,686
were outstanding as of September 30, 1997 and convertible at any time into
358,049 shares of BancGroup Common Stock, subject to adjustment. There are
1,774,988 shares of BancGroup Common Stock subject to issue upon exercise of
options under BancGroup's stock option plans. In addition to BancGroup Common
Stock to be issued in the Merger, BancGroup will issue additional shares of
BancGroup Common Stock in pending acquisitions. On January 29, 1997, BancGroup
issued, through a special purpose trust, $70 million of Trust Preferred
Securities. See "BUSINESS OF BANCGROUP -- Proposed Affiliate Banks."
The following statements with respect to BancGroup Common Stock and
Preference Stock are brief summaries of material provisions of Delaware law, the
BancGroup Certificate, as amended, and Bylaws of BancGroup, do not purport to be
complete and are qualified in their entirety by reference to the foregoing.
BANCGROUP COMMON STOCK
Dividends. Subject to the rights of holders of Preference Stock, if any,
to receive certain dividends prior to the declaration of dividends on shares of
BancGroup Common Stock, when and as dividends, payable in cash, stock or other
property, are declared by the BancGroup Board of Directors, the holders of
BancGroup Common Stock are entitled to share ratably in such dividends.
29
<PAGE> 38
Voting Rights. Each holder of BancGroup Common Stock has one vote for each
share held on matters presented for consideration by the shareholders.
Preemptive Rights. The holders of BancGroup Common Stock have no
preemptive rights to acquire any additional shares of BancGroup.
Issuance of Stock. The BancGroup Certificate authorizes the Board of
Directors of BancGroup to issue authorized shares of BancGroup Common Stock
without shareholder approval. However, BancGroup's Common Stock is listed on the
NYSE, which requires shareholder approval of the issuance of additional shares
of BancGroup Common Stock under certain circumstances.
Liquidation Rights. In the event of liquidation, dissolution or winding-up
of BancGroup, whether voluntary or involuntary, the holders of BancGroup Common
Stock will be entitled to share ratably in any of its assets or funds that are
available for distribution to its shareholders after the satisfaction of its
liabilities (or after adequate provision is made therefor) and after preferences
of any outstanding Preference Stock.
PREFERENCE STOCK
Preference Stock may be issued from time to time as a class without series,
or if so determined by the Board of Directors of BancGroup, either in whole or
in part in one or more series. The voting rights, and such designations,
preferences and relative, participating, optional or other special rights, if
any, and the qualifications, limitations or restrictions thereof, if any,
including, but not limited to, the dividend rights, conversion rights,
redemption rights and liquidation preferences, if any, of any wholly unissued
series of Preference Stock (or of the entire class of Preference Stock if none
of such shares has been issued), the number of shares constituting any such
series and the terms and conditions of the issue thereof may be fixed by
resolution of the Board of Directors of BancGroup. Preference Stock may have a
preference over the BancGroup Common Stock with respect to the payment of
dividends and the distribution of assets in the event of the liquidation or
winding-up of BancGroup and such other preferences as may be fixed by the Board
of Directors of BancGroup.
1986 DEBENTURES
BancGroup issued the 1986 Debentures in the total principal amount of
$28,750,000. The 1986 Debentures were issued under a trust indenture (the "1986
Indenture") between BancGroup and SunTrust Bank, Atlanta, Atlanta, Georgia, as
trustee.
The 1986 Debentures will mature on March 31, 2011, and are convertible at
any time into shares of BancGroup Common Stock at the option of a holder
thereof, at the conversion price of $14 principal amount of the 1986 Debentures
for each share of BancGroup Common Stock. The conversion price is, however,
subject to adjustment upon the occurrence of certain events as described in the
1986 Indenture. In the event all of the outstanding 1986 Debentures are
converted into shares of BancGroup Common Stock in accordance with the 1986
Indenture, a total of 512,800 shares of such BancGroup Common Stock will be
issued. The 1986 Debentures are redeemable, in whole or in part, at the option
of BancGroup at certain premiums until 1996, when the redemption price shall be
equal to 100% of the face amount of the 1986 Debentures plus accrued interest.
The payment of principal and interest on the 1986 Debentures is subordinate, to
the extent provided in the 1986 Indenture, to the prior payment when due of all
Senior Indebtedness of BancGroup. "Senior Indebtedness" is defined as any
indebtedness of BancGroup for money borrowed, or any indebtedness incurred in
connection with an acquisition or with a merger or consolidation, outstanding on
the date of execution of the 1986 Indenture as originally executed, or
thereafter created, incurred or assumed, and any renewal, extension,
modification or refunding thereof, for the payment of which BancGroup (which
term does not include BancGroup's consolidated or unconsolidated subsidiaries)
is at the time of determination responsible or liable as obligor, guarantor or
otherwise. Senior Indebtedness does not include (i) indebtedness as to which, in
the instrument creating or evidencing the same or pursuant to which the same is
outstanding, it is provided that such indebtedness is subordinate in right of
payment to any other indebtedness of BancGroup, and (ii) indebtedness which by
its terms states that such indebtedness is subordinate to or equally subordinate
with the 1986 Debentures.
30
<PAGE> 39
At December 31, 1996, BancGroup's Senior Indebtedness as defined in the
1986 Indenture aggregated approximately $870.0 million. Such debt includes all
short-term debt consisting of federal funds purchased, securities purchased
under repurchase agreements and borrowings with the Federal Home Loan Bank but
excludes all federally insured deposits. BancGroup may from time to time incur
additional indebtedness constituting Senior Indebtedness. The 1986 Indenture
does not limit the amount of Senior Indebtedness which BancGroup may incur, nor
does such indenture prohibit BancGroup from creating liens on its property for
any purpose.
OTHER INDEBTEDNESS
On January 29, 1997, BancGroup issued, through a special purpose trust, $70
million of Trust Preferred Securities. The securities bear interest at 8.92% and
are subject to redemption in whole or in part any time after January 2017
through January 2027. The securities are subordinated to substantially all of
BancGroup's indebtedness. In BancGroup's consolidated statement of condition,
these securities will be shown as long-term debt.
BancGroup has contracted to enter into a merger with ASB Bancshares, Inc.
("ASB"), a Delaware corporation wherein BancGroup would be the surviving
corporation. As part of the consideration for the Common Stock of ASB, BancGroup
intends to issue debentures to three ASB shareholders. It is anticipated that
the aggregate principal amount of these debentures will be $7,724,813.
The debentures would pay a rate of interest equal to the New York Prime
Rate minus 1% (but in no event less than 7% per annum) and would be due and
payable ten years from the date of issuance. They are senior to the BancGroup
Common Stock upon liquidation, but would be subordinate to BancGroup's Senior
Indebtedness. See "BancGroup Capital Stock and Debentures." The Debentures are
redeemable by BancGroup with the consent of the holders thereof. A holder of a
Debenture may, subject to BancGroup's right to decline, request redemption of
any or all of the Debentures held by him or her.
CHANGES IN CONTROL
Certain provisions of the BancGroup Certificate and bylaws may have the
effect of preventing, discouraging or delaying any change in control of
BancGroup. The authority of the BancGroup Board of Directors to issue BancGroup
Preference Stock with such rights and privileges, including voting rights, as it
may deem appropriate may enable BancGroup's Board of Directors to prevent a
change in control despite a shift in ownership of the BancGroup Common Stock.
See "General" and "Preference Stock." In addition, the power of BancGroup's
Board of Directors to issue additional shares of BancGroup Common Stock may help
delay or deter a change in control by increasing the number of shares needed to
gain control. See "BancGroup Common Stock." The following provisions also may
deter any change in control of BancGroup.
Classified Board. BancGroup's Board of Directors is classified into three
classes, as nearly equal in number as possible, with the members of each class
elected to three-year terms. Thus, one-third of BancGroup's Board of Directors
is elected by shareholders each year. With this provision, two annual elections
are required in order to change a majority of the Board of Directors. There are
currently 22 directors of BancGroup. This provision of the BancGroup Certificate
also stipulates that (i) directors can be removed only for cause upon a vote of
80% of the voting power of the outstanding shares entitled to vote in the
election of directors, voting as a class, (ii) vacancies in the Board of
Directors may only be filled by a majority vote of the directors remaining in
office, (iii) the maximum number of directors shall be fixed by resolution of
the Board of Directors, and (iv) the provisions relating to the classified Board
of Directors can only be amended by the affirmative vote of the holders of at
least 80% of the voting power of the outstanding shares entitled to vote in the
election of directors, voting as a class.
Business Combinations. Certain "Business Combinations" of BancGroup with a
"Related Person" may only be undertaken with the affirmative vote of at least
75% of the outstanding shares of "Voting Stock," plus the affirmative vote of at
least 67% of the outstanding shares of Voting Stock, not counting shares owned
by the Related Person, unless the Continuing Directors of BancGroup approve such
Business Combination. A "Related Person" is a person, or group, who owns or
acquires 10% or more of the outstanding shares of
31
<PAGE> 40
BancGroup Common Stock, provided that no person shall be a Related Person if
such person would have been a Related Person on the date of approval of this
provision by BancGroup's Board of Directors, i.e., April 20, 1994. An effect of
this provision may be to exclude Robert E. Lowder, the current Chairman and
President of BancGroup, and certain members of his family from the definition of
Related Person. A "Continuing Director" is a director who was a member of the
Board of Directors immediately prior to the time a person became a Related
Person. This provision may not be amended without the affirmative vote of the
holders of at least 75% of the outstanding shares of Voting Stock, plus the
affirmative vote of the outstanding shares of at least 67% of the outstanding
Voting Stock, excluding shares held by a Related Person. This provision may have
the effect of giving the incumbent Board of Directors a veto over a merger or
other Business Combination that could be desired by a majority of BancGroup's
shareholders. As of April 30, 1997, the Board of Directors of BancGroup owned
approximately 10.64% of the outstanding shares of BancGroup Common Stock.
Board Evaluation of Mergers. The BancGroup Certificate permits the Board
of Directors to consider certain factors such as the character and financial
stability of the other party, the projected social, legal, and economic effects
of a proposed transaction upon the employees, suppliers, regulatory agencies and
customers and communities of BancGroup, and other factors when considering
whether BancGroup should undertake a merger, sale of assets, or other similar
transaction with another party. This provision may not be amended except by the
affirmative vote of at least 80% of the outstanding shares of BancGroup Common
Stock. This provision may give greater latitude to the Board of Directors in
terms of the factors which the board may consider in recommending or rejecting a
merger or other Business Combination of BancGroup.
Director Authority. The BancGroup Certificate prohibits shareholders from
calling special shareholders' meetings and acting by written consent. It also
provides that only BancGroup's Board of Directors has the authority to undertake
certain actions with respect to governing BancGroup such as appointing
committees, electing officers, and establishing compensation of officers, and it
allows the Board of Directors to act by majority vote.
Bylaw Provisions. BancGroup's Bylaws provide that shareholders wishing to
propose nominees for the Board of Directors or other business to be taken up at
an annual meeting of BancGroup shareholders must comply with certain advance
written notice provisions. These bylaw provisions are intended to provide for
the more orderly conduct of shareholder meetings but could make it more
difficult for shareholders to nominate directors or introduce business at
shareholder meetings.
Delaware Business Combination Statute. Subject to some exceptions,
Delaware law prohibits BancGroup from entering into certain "business
combinations" (as defined) involving persons beneficially owning 15% or more of
the outstanding BancGroup Common Stock (or who is an affiliate of BancGroup and
has over the past three years beneficially owned 15% or more of such stock)
(either, for the purpose of this paragraph, an "Interested Shareholder"), unless
the BancGroup's Board of Directors has approved either (i) the business
combination or (ii) prior to the stock acquisition by which such person's
beneficial ownership interest reached 15% (a "Stock Acquisition"), the Stock
Acquisition. The prohibition lasts for three years from the date of the Stock
Acquisition. Notwithstanding the preceding, Delaware law allows BancGroup to
enter into a business combination with an Interested Shareholder if (i) the
business combination is approved by BancGroup's Board of Directors and
authorized by an affirmative vote of at least 66 2/3% of the outstanding voting
stock of BancGroup which is not owned by the Interested Shareholder or (ii) upon
consummation of the transaction which resulted in the shareholder becoming an
Interested Shareholder, such shareholder owned at least 85% of the outstanding
BancGroup Common Stock (excluding BancGroup Common Stock held by officers and
directors of BancGroup or by certain BancGroup stock plans). These provisions of
Delaware law apply simultaneously with the provisions of the BancGroup
Certificate relating to business combinations with a related person, described
above at "Business Combinations," but they are generally less restrictive than
the BancGroup Certificate.
Control Acquisitions. As it relates to BancGroup, the Change in Bank
Control Act of 1978 prohibits a person or group of persons from acquiring
"control" of a bank holding company unless the Federal Reserve has been given 60
days' prior written notice of such proposed acquisition and within that time
period the
32
<PAGE> 41
Federal Reserve has not issued a notice disapproving the proposed acquisition or
extending for up to another 30 days the period during which such a disapproval
may be issued. An acquisition may be made prior to the expiration of the
disapproval period if the Federal Reserve issues written notice of its intent
not to disapprove the action. Under a rebuttable presumption established by the
Federal Reserve, the acquisition of more than 10% of a class of voting stock of
a bank holding company with a class of securities registered under Section 12 of
the Exchange Act, such as BancGroup, would, under the circumstances set forth in
the presumption, constitute the acquisition of control. The receipt of revocable
proxies, provided the proxies terminate within a reasonable time after the
meeting to which they relate, is not included in determining percentages for
change in control purposes.
COMPARATIVE RIGHTS OF SHAREHOLDERS
If the Merger is consummated, shareholders of South Florida (except those
perfecting dissenters' rights) will become holders of BancGroup Common Stock.
The rights of the holders of the South Florida Common Stock who become holders
of the BancGroup Common Stock following the Merger will be governed by the
BancGroup Certificate and Bylaws, as well as the laws of Delaware, the state in
which BancGroup is incorporated.
The following summary compares the rights of the holders of South Florida
Common Stock with the rights of the holders of the BancGroup Common Stock. For a
more detailed description of the rights of the holders of BancGroup Common
Stock, including certain provisions of the BancGroup Certificate and the DGCL
that might limit the circumstances under which a change in control of BancGroup
could occur, see "BancGroup Capital Stock and Debentures."
The following information is qualified in its entirety by the BancGroup
Certificate and Bylaws, and South Florida's Articles of Incorporation and
Bylaws, the DGCL and the FBCA.
DIRECTOR ELECTIONS
South Florida. South Florida's directors are elected annually by a
plurality of the votes cast by the shareholders of its Common Stock. South
Florida shareholders do not have the right to cumulate their votes for
directors.
BancGroup. BancGroup's directors are elected to terms of three years with
approximately one-third of the Board to be elected annually. There is no
cumulative voting in the election of directors. See "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control -- Classified Board."
REMOVAL OF DIRECTORS
South Florida. Pursuant to South Florida's Bylaws, a South Florida
director may be removed for cause by vote of the shareholders or by action of
the Board of Directors. Directors may be removed without cause only by vote of
the shareholders.
BancGroup. The BancGroup Certificate provides that a director may be
removed from office, but only for cause and by the affirmative vote of the
holders of at least 80% of the voting shares then entitled to vote at an
election of directors.
VOTING
South Florida. Each shareholder of South Florida is entitled to one vote
for each share of South Florida Common Stock held, and such holders are not
entitled to cumulative voting rights in the election of directors.
BancGroup. Each shareholder of BancGroup is entitled to one vote for each
share of BancGroup Common Stock held, and such holders are not entitled to
cumulative voting rights in the election of directors.
33
<PAGE> 42
PREEMPTIVE RIGHTS
South Florida. The shareholders of South Florida do not have a preemptive
right to acquire South Florida's unissued shares.
BancGroup. The holders of BancGroup Common Stock have no preemptive rights
to acquire any additional shares of BancGroup Common Stock or any other shares
of BancGroup capital stock.
DIRECTORS' LIABILITY
South Florida. The FBCA provides that a director of a corporation will not
be personally liable for monetary damages to the corporation or any other person
for any statement, vote, decision or failure to act, regarding corporate
management or policy, by a director unless the director breached or failed to
perform his or her duties as a director, and the director's breach of, or
failure to perform those duties constitutes a violation of criminal law,
self-dealing, willful misconduct or recklessness. This provision would not
absolve South Florida directors from damages to South Florida which result from
breaches of their trust.
BancGroup. The BancGroup Certificate provides that a director of BancGroup
will have no personal liability to BancGroup or its shareholders for monetary
damages for breach of fiduciary duty as a director except (i) for any breach of
the director's duty of loyalty to the corporation or its shareholders, (ii) for
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (iii) for the payment of certain unlawful dividends
and the making of certain stock purchases or redemptions, or (iv) for any
transaction from which the director derived an improper personal benefit. This
provision would absolve directors of personal liability for negligence in the
performance of duties, including gross negligence. It would not permit a
director to be exculpated, however, for liability for actions involving
conflicts of interest or breaches of the traditional "duty of loyalty" to
BancGroup and its shareholders, and it would not affect the availability of
injunctive or other equitable relief as a remedy.
INDEMNIFICATION
South Florida. The FBCA permits a corporation to indemnify a director and
officer who was or is a party to any threatened, pending or completed action,
suit or other type of proceeding, whether civil, criminal, administrative or
investigative, whether formal or informal (other than an action by or any right
of the corporation) by reason of the fact that he or she is or was a director or
officer or is now serving at the request of the corporation as a director or
officer of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement, actually and reasonably incurred by
him in connection with such action, suit or proceeding. Indemnification of
officers and directors in connection with an action brought by or in the right
of the corporation is more restrictive. These indemnification rights apply if
the director or officer acted in good faith and in a manner in which he or she
reasonably believed to be in or not opposed to the best interest of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful.
Under Florida law, the provisions for indemnification and advancement of
expenses are not exclusive. South Florida's Articles provide that all
determinations by South Florida of whether indemnification is permissible, and
of the reasonableness of the expenses, shall be final, and any court-ordered
indemnification shall be of no force and effect. The South Florida Bylaws
provide that its directors and officers, or any former director or officer,
shall be indemnified to the fullest extent permitted by law.
Florida law permits a corporation to purchase and maintain insurance on
behalf of any director or officer of the corporation against any liability
asserted against the director or officer and incurred in such capacity, whether
or not the corporation would have the power to indemnify the director or officer
against such liability.
BancGroup. The BancGroup Certificate provides that directors, officers,
employees and agents of BancGroup shall be indemnified to the full extent
permitted under the DGCL. Section 145 of the DGCL contains detailed and
comprehensive provisions providing for indemnification of directors and officers
of Delaware corporations against expenses, judgments, fines and settlements in
connection with litigation. Under
34
<PAGE> 43
the DGCL, other than an action brought by or in the right of BancGroup, such
indemnification is available if it is determined that the proposed indemnitee
acted in good faith and in a manner he or she reasonably believed to be in or
not opposed to the best interests of BancGroup and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. In actions brought by or in the right of BancGroup, such
indemnification is limited to expenses (including attorneys' fees) actually and
reasonably incurred in the defense or settlement of such action if the
indemnitee acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of BancGroup and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person has been adjudged to be liable to BancGroup unless and only to
the extent that the Delaware Court of Chancery or the court in which the action
was brought determines upon application that in view of all the circumstances of
the case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper.
To the extent that the proposed indemnitee has been successful on the
merits or otherwise in defense of any action, suit or proceeding (or any claim,
issue or matter therein), he or she must be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection therewith.
BancGroup maintains an officers' and directors' insurance policy and a
separate indemnification agreement pursuant to which officers and directors of
BancGroup would be entitled to indemnification against certain liabilities,
including reimbursement of certain expenses that extends beyond the minimum
indemnification provided by Section 145 of the DGCL.
SPECIAL MEETINGS OF SHAREHOLDERS; ACTION WITHOUT A MEETING
South Florida. The South Florida Bylaws provide that special meetings of
shareholders may be called by the president, or by the directors, and shall be
called by the president at the request of the holders of not less than 20% of
the outstanding shares of South Florida entitled to vote at the meeting.
The FBCA provides that any action required to be taken at any annual or
special meeting of shareholders, or any action which may be taken at any annual
or special meeting of such shareholders, may be taken without a meeting, without
prior notice, and without a vote if a consent in writing, setting forth the
actions so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted.
BancGroup. Under the BancGroup Certificate, a special meeting of
BancGroup's shareholders may only be called by a majority of the BancGroup Board
of Directors or by the chairman of the Board of Directors of BancGroup. Holders
of BancGroup Common Stock may not call special meetings or act by written
consent.
MERGERS, SHARE EXCHANGES AND SALES OF ASSETS
South Florida. Under the FBCA, generally, a merger, consolidation, share
exchange, dissolution or sale of substantially all of a corporation's assets
other than in the ordinary course of business must be approved by the
affirmative vote of the holders of a majority of the shares entitled to vote
thereon. The South Florida Articles of Incorporation and Bylaws have no
provisions governing voting approval for extraordinary corporate transactions.
The FBCA contains a number of provisions which require supermajority
approval for certain affiliate transactions. If any person who together with his
affiliates and associates beneficially owns 5% or more of any voting stock of a
corporation (an "Interested Person"), is a party to any merger, consolidation,
disposition of all or a substantial part of the assets of the corporation or a
subsidiary of the corporation, or exchange of securities requiring shareholder
approval (a "Business Combination"), such business combinations shall be
approved by the affirmative vote of the holders of two-thirds of the voting
shares other than the shares beneficially owned by the Interested Person;
provided, however, such approval is not required if under certain circumstances.
BancGroup. The DGCL provides that mergers and sales of substantially all
of the assets of Delaware corporations must be approved by a majority of the
outstanding stock of the corporation entitled to vote
35
<PAGE> 44
thereon. The DGCL also provides, however, that the shareholders of the
corporation surviving a merger need not approve the transaction if: (i) the
agreement of merger does not amend in any respect the certificate of
incorporation of such corporation; (ii) each share of stock of such corporation
outstanding immediately prior to the effective date of the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
effective date of the merger; and (iii) either no shares of common stock of the
surviving corporation and no shares, securities or obligations convertible into
such stock are to be issued or delivered under the plan of merger, or the
authorized unissued shares or the treasury shares of common stock of the
surviving corporation to be issued or delivered under the plan of merger plus
those initially issuable upon conversion of any other shares, securities or
obligations to be issued or delivered under such plan do not exceed 20% of the
shares of common stock of such corporation outstanding immediately prior to the
effective date of the merger. See also "BANCGROUP CAPITAL STOCK AND
DEBENTURES -- Changes in Control" for a description of the statutory provisions
and the provisions of the BancGroup Certificate relating to changes of control
of BancGroup.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BYLAWS
South Florida. The FBCA generally requires the affirmative vote of the
holders of at least a majority of the votes actually cast on an amendment to the
articles of incorporation; provided, however, a majority of the votes entitled
to be cast on the amendment is required with respect to an amendment that would
create dissenters' rights. Under Florida corporate law, shareholder approval is
not required for certain non-material amendments.
Under Florida law, a corporation's bylaws may be amended or repealed by the
board of directors or shareholders; provided, however, that the board may not
amend or repeal the corporation's bylaws if the articles of incorporation
reserve such power to the shareholders, or the shareholders, in amending or
appealing the bylaws, expressly provide that the board of directors may not
amend or repeal the bylaws or a particular bylaw provision. The South Florida
Bylaws provided that the South Florida Bylaws may be amended, or repealed and
new bylaws may be adopted, by the vote of a majority of shareholders present and
voting, in person or by proxy, at an annual meeting or at a special meeting
provided a statement of the proposed amendment(s) was included in the notice of
such meeting.
BancGroup. Under the DGCL, a Delaware corporation's certificate of
incorporation may be amended by the affirmative vote of the holders of a
majority of the outstanding shares entitled to vote thereon, and a majority of
the outstanding stock of each class entitled to vote as a class, unless the
certificate requires the vote of a larger portion of the stock. The BancGroup
Certificate requires "supermajority" shareholder approval to amend or repeal any
provision of, or adopt any provision inconsistent with, certain provisions in
the BancGroup Certificate governing (i) the election or removal of directors,
(ii) business combinations between BancGroup and a Related Person, and (iii)
board of directors evaluation of business combination procedures. See "BANCGROUP
CAPITAL STOCK AND DEBENTURES -- Changes in Control."
As is permitted by the DGCL, the BancGroup Certificate gives the Board of
Directors the power to adopt, amend or repeal the bylaws. The shareholders
entitled to vote have concurrent power to adopt, amend or repeal the BancGroup
Bylaws.
RIGHTS OF DISSENTING SHAREHOLDERS
South Florida. Under the FBCA, dissenters' appraisal rights are available
in connection with corporate actions involving certain mergers, share exchanges,
consolidations, sales or other dispositions of all or substantially all of the
property of a corporation (other than in the ordinary course of business), the
approval of certain control-share acquisitions, and amendments of the articles
of incorporation where such amendment would adversely affect the rights attached
to a shareholder's shares, including preemptive rights, voting rights,
percentage of equity in the corporation, redemption provisions, dividends, or
preferences.
Under the corporate laws of Florida, dissenters' rights generally are
denied in the case of a merger or share exchange or a proposed sale or exchange
of property when a corporation's shares are listed on a national securities
exchange or the Nasdaq National Market or held of record by at least 2,000
persons.
36
<PAGE> 45
BancGroup. Under the DGCL, a shareholder has the right, in certain
circumstances, to dissent from certain corporate transactions and receive the
fair value of his or her shares in cash in lieu of the consideration he or she
otherwise would have received in the transaction. For this purpose, "fair value"
may be determined by all generally accepted techniques of valuation used in the
financial community, excluding any element of value arising from the
accomplishment or expectation of the transaction, but including elements of
future value that are known or susceptible of proof. Such fair value is
determined by the Delaware Court of Chancery if a petition for appraisal is
timely filed. Appraisal rights are not available, however, to shareholders of a
corporation (i) if the shares are listed on a national securities exchange (as
is BancGroup Common Stock) or quoted on the Nasdaq NMS, or held of record by
more than 2,000 shareholders (as is BancGroup Common Stock), and (ii)
shareholders are permitted by the terms of the merger or consolidation to accept
in exchange for their shares (a) shares of stock of the surviving or resulting
corporation, (b) shares of stock of another corporation listed on a national
securities exchange or held of record by more than 2,000 shareholders, (c) cash
in lieu of fractional shares of such stock, or (d) any combination thereof.
Shareholders are not permitted appraisal rights in a merger if such corporation
is the surviving corporation and no vote of its shareholders is required.
PREFERRED STOCK
South Florida. The South Florida Articles of Incorporation do not
authorize the issuance of any preferred stock.
BancGroup. The BancGroup Certificate authorizes the issuance of 1,000,000
shares of Preference Stock from time to time by resolution of the BancGroup
Board of Directors. Currently, no shares of Preference Stock are issued and
outstanding. See "BANCGROUP CAPITAL STOCK AND DEBENTURES -- Preference Stock."
EFFECT OF THE MERGER ON SOUTH FLORIDA SHAREHOLDERS
As of December 19, 1997, South Florida had 311 shareholders of record and
1,219,465 outstanding shares of common stock. As of September 30, 1997, there
were 41,964,197 shares of BancGroup Common Stock outstanding held by 8,007
shareholders of record.
Assuming that no dissenters' rights of appraisal are exercised in the
Merger, and no South Florida Options are exercised prior to the Merger, an
aggregate amount of 1,910,722 shares of BancGroup Common Stock would be issued
to the shareholders of South Florida pursuant to the Merger (based on the number
of shares of South Florida Common Stock outstanding as of September 30, 1997).
These shares would represent approximately 4.35% of the total shares of
BancGroup Common Stock outstanding after the Merger, not counting any shares of
BancGroup Common Stock to be issued in other pending acquisitions.
The issuance of the BancGroup Common Stock pursuant to the Merger will
reduce the percentage interest of the BancGroup Common Stock currently held by
each principal shareholder and each director and officer of BancGroup. Based
upon the foregoing assumptions and additional shares issued pursuant to business
combinations completed since April 30, 1997, as a group, the directors and
officers of BancGroup who own approximately 10.34% of BancGroup's outstanding
shares would own approximately 9.91% after the Merger. See "BUSINESS OF
BANCGROUP -- Voting Securities and Principal Shareholders."
BancGroup has entered into agreements pursuant to which additional shares
of BancGroup Common Stock will be issued. See "BUSINESS OF BANCGROUP -- Proposed
Affiliate Banks."
37
<PAGE> 46
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENT OF CONDITION (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statement of
condition of BancGroup and subsidiaries as of September 30, 1997, (ii) the
condensed consolidated statement of condition of the completed business
combination with First Independence Bank of Florida ("Completed Business
Combination") as of September 30, 1997, (iii) adjustments to give effect to the
completed pooling-of-interests method business combination with First
Independence, (iv) the condensed consolidated statement of condition of South
Florida Banking Corp., (v) adjustments to give effect to the proposed
pooling-of-interests method business combination with South Florida, (vi)
combined presentation of the condensed consolidated statements of condition of
the other probable business combinations with BancGroup; ASB Bancshares, Inc.,
United American Holding Corp. and First Central ("Other Probable Business
Combinations") as of September 30, 1997, (vii) adjustments to give effect to the
proposed pooling-of-interests method business combinations with United American
and First Central and the proposed purchase method business combination with
ASB, (viii) the pro forma combined condensed statement of condition of BancGroup
and subsidiaries as if such combinations had occurred on September 30, 1997.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of condition of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided below may not be indicative of future results.
38
<PAGE> 47
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
--------------------------------------------------------------------------------------------------------
OTHER
CONSOLIDATED COMPLETED SOUTH FLORIDA PROBABLE
COLONIAL BUSINESS ADJUSTMENTS/ BANKING ADJUSTMENTS/ BUSINESS
BANCGROUP COMBINATION (DEDUCTIONS) CORPORATION (DEDUCTIONS) SUBTOTAL COMBINATIONS
------------ ----------- ------------ ------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Assets:
Cash and due from
banks.................. $ 221,463 $ 3,432 $ 8,543 $ 233,438 $ 18,728
Interest-bearing
deposits in banks...... 14,013 14,013 290
Federal funds sold...... 2,470 949 2,435 5,854 12,047
Securities available for
sale................... 524,740 7,318 57,259 589,317 51,800
Investment securities... 311,796 311,796 25,153
Mortgage loans held for
sale................... 182,878 182,878
Loans, net of unearned
income................. 4,970,765 50,699 169,553 5,191,017 333,882
Less: Allowance for
possible loan losses... (61,913) (680) (1,860) (64,453) (3,968)
---------- -------- ------- -------- -------- ---------- --------
Loans, net.............. 4,908,852 50,019 167,693 5,126,564 329,914
Premises and equipment,
net.................... 123,776 2,137 6,695 132,608 12,826
Excess of cost over
tangible and identified
intangible assets
acquired, net.......... 68,849 68,849 2,089
Mortgage servicing
rights................. 134,118 134,118
Other real estate
owned.................. 12,612 394 716 13,722 1,276
Accrued interest and
other assets........... 100,360 799 2,689 103,848 7,841
---------- -------- ------- -------- -------- ---------- --------
Total Assets............ $6,605,927 $ 65,048 $246,030 $6,917,005 $461,964
========== ======== ======= ======== ======== ========== ========
Liabilities and
Shareholders' Equity:
Deposits................ $5,136,556 $ 58,283 $215,914 $5,410,753 $404,450
FHLB short-term
borrowings............. 610,000 610,000
Other short-term
borrowings............. 185,333 10,039 195,372 8,120
Subordinated debt....... 6,208 6,208
Trust preferred
securities............. 70,000 70,000
Other long-term debt.... 24,891 1,600 26,491 2,331
Other liabilities....... 100,586 449 1,602 $ 120(2) 102,757 3,418
---------- -------- ------- -------- -------- ---------- --------
Total liabilities....... 6,133,574 58,732 229,155 120 6,421,581 418,319
Common Stock............ 104,910 3,203 $(3,203)(1) 1,213 (1,213)(2) 110,947 1,657
1,260(1) 4,777(2)
Additional paid in
capital................ 187,260 3,130 (3,130)(1) 8,716 (8,716)(2) 197,485 21,151
5,073(1) 5,152(2)
Retained earnings....... 180,778 (15) 6,673 (120)(2) 187,316 21,358
Treasury Stock.......... (534)
Unearned compensation... (1,796) (1,796) (69)
Unrealized gain (loss)
on securities available
for sale, net of
taxes.................. 1,201 (2) 273 1,472 82
---------- -------- ------- -------- -------- ---------- --------
Total equity............ 472,353 6,316 16,875 (120) 495,424 43,645
---------- -------- ------- -------- -------- ---------- --------
Total liabilities and
equity................. $6,605,927 $ 65,048 $246,030 $6,917,005 $461,964
========== ======== ======= ======== ======== ========== ========
Capital Ratios:
Capital Ratio.......... 8.11%
Tangible Leverage
Ratio................ 7.28%
Tier One Capital
Ratio*............... 9.93%
Total Capital Ratio*... 11.31%
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
PRO FORMA
ADJUSTMENTS/ COMBINED
(DEDUCTIONS) TOTAL
------------ ----------
<S> <C> <C>
Assets:
Cash and due from
banks.................. $ 252,166
Interest-bearing
deposits in banks...... 14,303
Federal funds sold...... 17,901
Securities available for
sale................... 641,117
Investment securities... 336,949
Mortgage loans held for
sale................... 182,878
Loans, net of unearned
income................. 5,524,899
Less: Allowance for
possible loan losses... (68,421)
-------- ----------
Loans, net.............. 5,456,478
Premises and equipment,
net.................... $ (115)(3) 145,319
Excess of cost over
tangible and identified
intangible assets
acquired, net.......... 8,937(3) 79,875
Mortgage servicing
rights................. 134,118
Other real estate
owned.................. 14,998
Accrued interest and
other assets........... 235(3) 111,924
-------- ----------
Total Assets............ $ 9,057 $7,388,026
======== ==========
Liabilities and
Shareholders' Equity:
Deposits................ $5,815,203
FHLB short-term
borrowings............. 610,000
Other short-term
borrowings............. 203,492
Subordinated debt....... $ 7,725(3) 13,933
Trust preferred
securities............. 70,000
Other long-term debt.... 28,822
Other liabilities....... 967 (3,4,5 107,142
-------- ----------
Total liabilities....... 8,692 6,848,592
Common Stock............ 1,168(3) 118,880
(2)(3)
5,043(4)
(17)(4)
1,722(5)
(1,638)(5)
Additional paid in
capital................ 11,740(3) 224,218
(1,048)(3)
13,939(4)
(18,965)(4)
1,054(5)
(1,138)(5)
Retained earnings....... (11,961)(3,4,5) 196,713
Treasury Stock.......... 534(3)
Unearned compensation... (1,865)
Unrealized gain (loss)
on securities available
for sale, net of
taxes.................. (66)(3) 1,488
-------- ----------
Total equity............ 365 539,434
-------- ----------
Total liabilities and
equity................. $ 9,057 $7,388,026
======== ==========
Capital Ratios:
Capital Ratio.......... 8.34%
Tangible Leverage
Ratio................ 7.30%
Tier One Capital
Ratio*............... 9.91%
Total Capital Ratio*... 11.43%
</TABLE>
- ---------------
* Based on risk weighted assets.
39
<PAGE> 48
COMPLETED BUSINESS COMBINATION
FIRST INDEPENDENCE BANK OF FLORIDA
(pooling of interests)
(1) To record the issuance of 504,075 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of First Independence:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Independence outstanding shares....................... 640,674
First Independence warrants (converted according to merger
agreement)................................................ 104,285
Conversion ratio -- shares.................................. 0.7257
Conversion ratio -- warrants................................ 0.3753
BancGroup shares to be issued............................... 504,075
Par value of 504,075 shares issued at $2.50 per share....... $ 1,260
Shares issued at par value.................................. $ 1,260
Total capital stock of First Independence................... 6,333
Excess recorded as an increase to contributed capital....... 5,073
-------
6,333
To eliminate First Independence
Common stock, at par value................................ $(3,203)
Contributed capital....................................... (3,130)
-------
(6,333)
-------
Net change in equity.............................. $ --
=======
</TABLE>
PENDING BUSINESS COMBINATIONS
SOUTH FLORIDA BANKING CORP.
(pooling of Interests)
(2)(A) To record the issuance of 1,910,722 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of South Florida Banking Corp.
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
South Florida outstanding shares............................ 1,213,465
Conversion ratio............................................ 1.5746
BancGroup shares to be issued............................... 1,910,722
Par value of 1,910,722 shares issued at $2.50 per share..... $ 4,777
Shares issued at par value.................................. $ 4,777
Total capital stock of South Florida........................ 9,929
Excess recorded as an increase to contributed capital....... 5,152
----------
9,929
To eliminate South Florida
Common stock, at par value................................ $ (1,213)
Contributed capital....................................... (8,716)
----------
(9,929)
----------
Net change in equity.............................. $ --
==========
(B) To record possible non-recurring charges associated with
severance payable to terminated employees, net of
taxes................................................... $ 120
==========
</TABLE>
40
<PAGE> 49
ASB BANCSHARES, INC.
(purchase)
(3) (A) To assign the amount by which the estimated value of BancGroup's
investment in ASB is in excess of the historical carrying value amount
of the net assets acquired, based on their estimated fair value of such
assets:
<TABLE>
<S> <C>
Equity in carrying value of net assets of ASB............... $12,115
Adjustments to state assets at fair value:
Write-off computer software and hardware.................. (115)
Acquisition accruals:
Present value of deferred compensation (calculated
assuming retirement in 1998, monthly payments of
$8,333.33, beginning January 1, 2002 for 84 months
discounted at 8%)...................................... (393)
Litigation accrual........................................ (15)
Legal, accounting and professional........................ (15)
Potential severance payable upon acquisition.............. (116)
Tax effect of purchase adjustments.......................... 235
Goodwill.................................................... 8,937
-------
8,518
-------
Adjusted equity in carrying value of net assets............. $20,633
=======
Allocated as follows:
Subordinated Debentures for 31,506 shares of ASB.......... $ 7,725
Shares to be issued at par value 467,387 X 2.50........... 1,168
Additional Paid in Capital................................ 11,740
-------
Total purchase price to be paid in stock and debt........... $20,633
=======
</TABLE>
UNITED AMERICAN HOLDING CORPORATION
(pooling of interests)
(4) (A) To record the issuance of 2,017,177 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of United American:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
United American outstanding shares.......................... 1,779,600
Conversion ratio............................................ 1.1335
BancGroup shares to be issued............................... 2,017,177
Par value of 2,017,177 shares issued at $2.50 per share..... $ 5,043
Shares issued at par value.................................. $ 5,043
Total capital stock of United American...................... 18,982
Excess recorded as an increase to contributed capital....... 13,939
---------
18,982
To eliminate United
Common stock, at par value................................ $ (17)
Contributed capital....................................... (18,965)
---------
(18,982)
---------
Net change in equity.............................. $ --
=========
(B) To record possible non-recurring charges associated
with severance payable to terminated employees and
salary continuation agreements, net of taxes........... $ 317
=========
</TABLE>
41
<PAGE> 50
FIRST CENTRAL BANK
(pooling of interests)
(5) (A) To record the issuance of 688,742 shares of BancGroup Common Stock in
exchange for all of the outstanding shares of First Central:
<TABLE>
<CAPTION>
OUTSTANDING
SHARES
-----------
<S> <C> <C>
First Central outstanding shares............................ 327,500
Conversion ratio............................................ 2.103
BancGroup shares to be issued............................... 688,742
Par value of 688,742 shares issued at $2.50 per share....... $ 1,722
Shares issued at par value.................................. $ 1,722
Total capital stock of First Central........................ 2,776
Excess recorded as a decrease to contributed capital........ 1,054
-------
2,776
To eliminate First Central
Common stock, at par value................................ $(1,638)
Contributed capital....................................... (1,138)
-------
(2,776)
-------
Net change in equity.............................. $ --
=======
(B) To record possible non-recurring charges associated
with severance payable to terminated employees and
salary continuation agreements, net of taxes........... $ 111
=======
</TABLE>
42
<PAGE> 51
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
CONDENSED PRO FORMA STATEMENTS OF INCOME (UNAUDITED)
(IN THOUSANDS)
The following summary includes (i) the condensed consolidated statements of
income of BancGroup and subsidiaries on a historical basis for the nine months
ended September 30, 1997 and 1996 and the years ended December 31, 1996, 1995,
and 1994, (ii) the condensed statements of income of the completed business
combination with First Independence Bank of Florida ("Completed Business
Combination"), for the nine months ended September 30, 1997 and 1996 and the
years ended December 31, 1996, 1995 and 1994, (iii) adjustments to give effect
to the pooling-of-interests method business combination with First Independence,
(iv) the condensed consolidated statements of income of South Florida Banking
Corp. for the nine months ended September 30, 1997 and 1996 and the years ended
December 31, 1996, 1995 and 1994, (v) adjustments to give effect to the proposed
pooling-of-interests method business combination with South Florida, (vi) the
combined presentation of condensed consolidated statements of other probable
business combinations with BancGroup: United American Holding Corp., First
Central Bank and ASB Bancshares, Inc., ("Other Probable Business Combinations"),
for the nine months ended September 30, 1997 and 1996 and the years ended
December 31, 1996, 1995 and 1994, (vii) adjustments to give effect to the
probable pooling-of-interests method business combinations with United American
and First Central and the probable purchase method business combination with
ASB, (viii) the pro forma statements of income of BancGroup and subsidiaries as
if such business combinations had occurred on January 1, 1994. Note that for the
purchase method combination, Article 11 of Regulation S-X requires the pro forma
statements of income to be presented only for the most recent fiscal year and
interim period. Accordingly, only the condensed consolidated statements of
income for the nine months ended September 30, 1997 and the year ended December
31, 1996 are included in (vi) and (vii) above for ASB.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated statements of income of
BancGroup and subsidiaries, incorporated by reference herein. The pro forma
information provided may not necessarily be indicative of future results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------------------------------
CONSOLIDATED COMPLETED SOUTH FLORIDA
COLONIAL BUSINESS ADJUSTMENTS/ BANKING ADJUSTMENTS/
BANCGROUP COMBINATIONS (DEDUCTIONS) CORPORATION (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Interest income............ $ 362,830 $ 3,935 $ $ 13,606 $ $ 380,371
Interest expense........... 182,497 1,606 6,157 190,260
---------- ------- -------- --------- ---------- ----------
Net interest income........ 180,333 2,329 7,449 190,111
Provision for loan
losses.................... 8,833 -- 257 9,090
---------- ------- -------- --------- ---------- ----------
Net interest income after
provision for loan
losses.................... 171,500 2,329 7,192 181,021
---------- ------- -------- --------- ---------- ----------
Noninterest income......... 61,623 355 1,625 63,603
Noninterest expense........ 143,609 2,023 6,701 152,333
---------- ------- -------- --------- ---------- ----------
Income before income
taxes..................... 89,514 661 2,116 92,291
Applicable income taxes.... 33,460 -- 582 34,042
---------- ------- -------- --------- ---------- ----------
Net income................. $ 56,054 $ 661 $ -- $ 1,534 $ $ 58,249
========== ======= ======== ========= ========== ==========
Average primary shares
outstanding............... 42,370,000 640,674 (640,674) 1,209,805 (1,209,805) 44,801,385
494,904 1,936,481
Average fully-diluted
shares outstanding........ 42,963,000 640,674 (640,674) 1,209,805 (1,209,805) 45,407,815
503,935 1,940,880
Earnings per share:
Primary................. $ 1.32 $ 1.30
Fully diluted........... $ 1.31 $ 1.29
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
-------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ----------
<S> <C> <C> <C>
Interest income............ $ 26,219 $ 406,590
Interest expense........... 10,814 $ 435(1) 201,509
--------- ---------- ----------
Net interest income........ 15,405 (435) 205,081
Provision for loan
losses.................... 543 9,633
--------- ---------- ----------
Net interest income after
provision for loan
losses.................... 14,862 (435) 195,448
--------- ---------- ----------
Noninterest income......... 2,674 66,277
Noninterest expense........ 10,627 (17)(1) 163,390
447(1)
--------- ---------- ----------
Income before income
taxes..................... 6,909 (865) 98,335
Applicable income taxes.... 2,573 (163)(1) 36,452
--------- ---------- ----------
Net income................. $ 4,336 $ (702) $ 61,883
========= ========== ==========
Average primary shares
outstanding............... 2,095,515 (2,095,515) 48,333,694
3,532,309
Average fully-diluted
shares outstanding........ 2,095,515 (2,095,515) 48,954,127
3,546,312
Earnings per share:
Primary................. $ 1.28
Fully diluted........... $ 1.27
</TABLE>
- ---------------
43
<PAGE> 52
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
--------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED SOUTH FLORIDA
BANCGROUP BUSINESS ADJUSTMENTS/ BANKING ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) CORPORATION (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income................... $ 300,943 $ 2,870 $ $ 12,231 $ $ 316,044
Interest expense.................. 151,547 1,172 5,290 158,009
---------- --------- ---------- --------- ---------- ----------
Net interest income............... 149,396 1,698 6,941 158,035
Provision for loan losses......... 6,292 43 456 6,791
---------- --------- ---------- --------- ---------- ----------
Net interest income after
provision for loan losses........ 143,104 1,655 6,485 151,244
---------- --------- ---------- --------- ---------- ----------
Noninterest income................ 53,900 383 1,211 55,494
Noninterest expense............... 129,378 1,616 5,568 136,562
---------- --------- ---------- --------- ---------- ----------
Income before income taxes........ 67,626 422 2,128 70,176
Applicable income taxes........... 23,794 -- 731 24,525
---------- --------- ---------- --------- ---------- ----------
Net income........................ $ 43,832 $ 422 $ -- $ 1,397 $ -- $ 45,651
========== ========= ========== ========= ========== ==========
Average primary shares
outstanding**.................... 39,525,000 529,107 (529,107) 1,201,326 (1,201,326) 41,847,452
411,220 1,911,232
Average fully-diluted shares
outstanding**.................... 40,204,000 529,107 (529,107) 1,201,326 (1,201,326) 42,528,324
411,832 1,912,492
Earnings per share:
Primary**...................... $ 1.11 $ 1.09
Fully diluted**................ $ 1.10 $ 1.08
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATIONS (DEDUCTIONS) TOTAL
-------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income................... $ 13,776 $ $ 329,820
Interest expense.................. 4,715 162,724
--------- ---------- ----------
Net interest income............... 9,061 167,096
Provision for loan losses......... 325 7,116
--------- ---------- ----------
Net interest income after
provision for loan losses........ 8,736 159,980
--------- ---------- ----------
Noninterest income................ 1,643 57,137
Noninterest expense............... 5,799 142,361
--------- ---------- ----------
Income before income taxes........ 4,580 74,756
Applicable income taxes........... 1,755 26,280
--------- ---------- ----------
Net income........................ $ 2,825 $ -- $ 48,476
========= ========== ==========
Average primary shares
outstanding**.................... 1,799,427 (1,799,427) 44,328,894
2,481,442
Average fully-diluted shares
outstanding**.................... 1,799,427 (1,799,427) 45,013,888
2,485,564
Earnings per share:
Primary**...................... $ 1.09
Fully diluted**................ $ 1.08
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED SOUTH FLORIDA
BANCGROUP BUSINESS ADJUSTMENTS/ BANKING ADJUSTMENTS/
(RESTATED)* COMBINATION (DEDUCTIONS) CORPORATION (DEDUCTIONS)
------------ ------------ ------------ ------------- ------------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income............ $ 406,838 $ 3,916 $ $ 16,565 $
Interest expense........... 205,843 1,692 7,158
----------- -------- --------- ---------- ----------
Net interest income........ 200,995 2,224 9,407
Provision for loan
losses.................... 12,545 108 569
----------- -------- --------- ---------- ----------
Net interest income after
provision for loan
losses.................... 188,450 2,116 8,838
----------- -------- --------- ---------- ----------
Noninterest income......... 72,382 602 1,627
Noninterest expense........ 183,316 2,244 7,508
----------- -------- --------- ---------- ----------
Income before income
taxes..................... 77,516 474 2,957
Applicable income taxes.... 27,303 (13) 856
----------- -------- --------- ---------- ----------
Net income................. $ 50,213 $ 487 $ -- $ 2,101 $ --
=========== ======== ========= ========== ==========
Average primary shares
outstanding**............. 39,764,000 529,153 (529,153) 1,200,375 (1,200,375)
418,580 1,912,773
Average fully-diluted
shares outstanding**...... 40,623,000 529,153 (529,153) 1,200,375 (1,200,375)
437,602 1,917,650
Earnings per share:
Primary**............... $ 1.26
Fully diluted**......... $ 1.25
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
SUBTOTAL COMBINATIONS (DEDUCTIONS) TOTAL
----------- -------------- ------------ -----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Interest income............ $ 427,319 $ 29,427 $ 456,746
Interest expense........... 214,693 11,634 $ 579(1) 226,906
----------- ---------- ----------- -----------
Net interest income........ 212,626 17,793 (579) 229,840
Provision for loan
losses.................... 13,222 510 13,732
----------- ---------- ----------- -----------
Net interest income after
provision for loan
losses.................... 199,404 17,283 (579) 216,108
----------- ---------- ----------- -----------
Noninterest income......... 74,611 3,207 77,818
Noninterest expense........ 193,068 11,861 (23)(1) 205,502
596(1)
----------- ---------- ----------- -----------
Income before income
taxes..................... 80,947 8,629 (1,152) 88,424
Applicable income taxes.... 28,146 3,214 (217)(1) 31,143
----------- ---------- ----------- -----------
Net income................. $ 52,801 $ 5,415 $ (935) $ 57,281
=========== ========== =========== ===========
Average primary shares
outstanding**............. 42,095,353 1,934,332 (1,934,332) 45,357,294
3,261,941
Average fully-diluted
shares outstanding**...... 42,978,252 1,934,332 (1,934,332) 46,253,793
3,275,541
Earnings per share:
Primary**............... $ 1.25 $ 1.26
Fully diluted**......... $ 1.24 $ 1.25
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation,
Inc..
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
44
<PAGE> 53
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
--------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED SOUTH FLORIDA
BANCGROUP BUSINESS ADJUSTMENTS/ BANKING ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) CORPORATION (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income................... $ 341,826 $ 3,275 $ 14,219 $ 359,320
Interest expense.................. 170,483 1,357 6,350 178,190
---------- ------- -------- --------- ---------- ----------
Net interest income............... 171,343 1,918 7,869 181,130
Provision for loan losses......... 8,986 18 504 9,508
---------- ------- -------- --------- ---------- ----------
Net interest income after
provision for loan losses........ 162,357 1,900 7,365 171,622
---------- ------- -------- --------- ---------- ----------
Noninterest income................ 60,527 411 1,248 62,186
Noninterest expense............... 150,654 3,008 7,141 160,803
---------- ------- -------- --------- ---------- ----------
Income before income taxes........ 72,230 (697) 1,472 73,005
Income taxes...................... 25,765 271 26,036
---------- ------- -------- --------- ---------- ----------
Net Income........................ $ 46,465 $ (697) $ -- $ 1,201 $ 46,969
========== ======= ======== ========= ========== ==========
Average primary shares
outstanding**.................... 37,912,000 479,792 (479,792) 1,197,251 (1,197,251) 40,156,494
348,185 1,896,309
Average fully-diluted shares
outstanding**.................... 39,796,000 479,792 (479,792) 1,197,251 (1,197,251) 42,068,973
370,394 1,902,579
Earnings per share:
Net Income:
Primary**...................... $ 1.23 $ 1.17
Fully diluted**................ $ 1.19 $ 1.14
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATION (DEDUCTIONS) TOTAL
-------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income................... $ 15,940 $ 375,260
Interest expense.................. 5,608 183,798
--------- ---------- ----------
Net interest income............... 10,332 191,462
Provision for loan losses......... 690 10,198
--------- ---------- ----------
Net interest income after
provision for loan losses........ 9,642 181,264
--------- ---------- ----------
Noninterest income................ 1,705 63,891
Noninterest expense............... 6,944 167,747
--------- ---------- ----------
Income before income taxes........ 4,403 77,408
Income taxes...................... 1,426 27,462
--------- ---------- ----------
Net Income........................ $ 2,977 $ 49,946
========= ========== ==========
Average primary shares
outstanding**.................... 1,732,535 (1,732,535) 42,488,573
2,332,079
Average fully-diluted shares
outstanding**.................... 1,732,535 (1,732,535) 44,423,421
2,354,448
Earnings per share:
Net Income:
Primary**...................... $ 1.18
Fully diluted**................ $ 1.15
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
--------------------------------------------------------------------------------------
CONSOLIDATED
COLONIAL COMPLETED SOUTH FLORIDA
BANCGROUP BUSINESS ADJUSTMENTS/ BANKING ADJUSTMENTS/
(RESTATED)* COMBINATIONS (DEDUCTIONS) CORPORATION (DEDUCTIONS) SUBTOTAL
------------ ------------ ------------ ------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Interest income................... $ 255,758 $ 2,786 $ 11,337 $ 269,881
Interest expense.................. 105,797 965 4,308 111,070
---------- ------- -------- --------- ---------- ----------
Net interest income............... 149,961 1,821 7,029 158,811
Provision for loan losses......... 8,254 132 199 8,585
---------- ------- -------- --------- ---------- ----------
Net interest income after
provision for loan losses........ 141,707 1,689 6,830 150,226
---------- ------- -------- --------- ---------- ----------
Noninterest income................ 54,149 322 1,007 55,478
Noninterest expense............... 144,119 2,191 5,393 151,703
---------- ------- -------- --------- ---------- ----------
Income before income taxes........ 51,737 (180) 2,444 54,001
Income taxes...................... 17,243 707 17,950
---------- ------- -------- --------- ---------- ----------
Net Income........................ $ 34,494 $ (180) $ -- $ 1,737 $ 36,051
========== ======= ======== ========= ========== ==========
Average primary shares
outstanding**.................... 35,907,000 329,107 (329,107) 1,187,567 (1,187,567) 38,027,523
238,833 1,881,690
Average fully-diluted shares
outstanding**.................... 37,383,000 329,107 (329,107) 1,187,567 (1,187,567) 39,503,523
238,833 1,881,690
Earnings per share:
Net Income:
Primary**...................... $ 0.96 $ 0.95
Fully diluted**................ $ 0.95 $ 0.94
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
------------------------------------------
OTHER PROBABLE PRO FORMA
BUSINESS ADJUSTMENTS/ COMBINED
COMBINATION (DEDUCTIONS) TOTAL
-------------- ------------ ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Interest income................... $ 11,128 $ 281,009
Interest expense.................. 3,609 114,679
--------- ---------- ----------
Net interest income............... 7,519 166,330
Provision for loan losses......... 491 9,076
--------- ---------- ----------
Net interest income after
provision for loan losses........ 7,028 157,254
--------- ---------- ----------
Noninterest income................ 1,411 56,889
Noninterest expense............... 5,919 157,622
--------- ---------- ----------
Income before income taxes........ 2,520 56,521
Income taxes...................... 660 18,610
--------- ---------- ----------
Net Income........................ $ 1,860 $ 37,911
========= ========== ==========
Average primary shares
outstanding**.................... 1,179,463 (1,179,463) 39,706,731
1,679,208
Average fully-diluted shares
outstanding**.................... 1,179,463 (1,179,463) 41,182,731
1,679,208
Earnings per share:
Net Income:
Primary**...................... $ 0.95
Fully diluted**................ $ 0.95
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interests business combination with Fort Brooke Bancorporation,
Inc.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid on February 11, 1997.
45
<PAGE> 54
PRO FORMA ADJUSTMENTS:
PENDING BUSINESS COMBINATIONS
Adjustments applicable to the purchase method business combination with ASB
Bancshares:
(1) To amortize the assignment of estimated fair value in excess of the carrying
amount of assets acquired. The amortization consists of the following:
<TABLE>
<CAPTION>
NINE MONTHS YEAR ENDED
ENDED DECEMBER 31,
SEPTEMBER 30, 1997 1996
------------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Increase in income:
Amortization of write-down on fixed assets (5 year
period)............................................. $ 17 $ 23
------- -------
Total.......................................... 17 23
------- -------
Increase in expense:
Interest on subordinated debentures (assumed at
7.5%)............................................... (435) (579)
Amortization of goodwill (15 year period).............. (447) (596)
------- -------
Total.......................................... (882) (1,175)
------- -------
Net decrease in income before tax........................ (865) (1,152)
------- -------
Tax effect of the pro forma adjustments (other than
goodwill amortization)................................. 163 217
------- -------
Net decrease in income......................... $(702) $ (935)
======= =======
</TABLE>
NONRECURRING CHARGES
(In thousands)
Nonrecurring charges and related tax effects which result directly from the
business combinations and which will be included in BancGroups' results are set
forth below. These changes are not reflected in the condensed pro forma
statements of income.
(1) Possible adjustments applicable to the purchase method business combination
with ASB.
<TABLE>
<S> <C> <C>
Increase in expense:
Potential severance payable to terminated employees.... $ (87)
-------
Net decrease in income before taxes...................... (87)
Tax effect of the pro forma adjustments.................. 32
-------
Net decrease in income......................... $ (55)
=======
</TABLE>
(2) Possible adjustments applicable to the pooling-of-interests method business
combination with South Florida:
<TABLE>
<S> <C> <C>
Increase in expense:
Potential severance payable to terminated employees.... $(188)
-------
Net decrease in income before tax........................ (188)
-------
Tax effect of the pro forma adjustments.................. 68
=======
Net decrease in income......................... $(120)
=======
</TABLE>
46
<PAGE> 55
(3) Possible adjustments applicable to the pooling-of-interests method business
combination with United American:
<TABLE>
<S> <C> <C>
Increase in expense:
Adjustment for immediate vesting under salary
continuation agreement.............................. $(424)
Potential severance payable to terminated employees.... (76)
-------
Net decrease in income before tax........................ (500)
-------
Tax effect of the pro forma adjustments.................. 182
-------
Net decrease in income......................... $(318)
=======
</TABLE>
(4) Possible adjustments applicable to the pooling-of-interests method business
combination with First Central:
<TABLE>
<S> <C> <C>
Increase in expense:
Adjustment for immediate vesting under salary
continuation agreement.............................. $(169)
Potential severance payable to terminated employees.... (6)
-------
Net decrease in income before tax........................ (175)
-------
Tax effect of the pro forma adjustments.................. 64
-------
Net decrease in income......................... $(111)
=======
</TABLE>
47
<PAGE> 56
THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL AND OPERATING INFORMATION
The following tables present certain financial information for BancGroup on
a historical basis for the nine months ended September 30, 1997 and 1996, as of
September 30, 1997 and, years ended December 31, 1996, 1995, 1994, 1993 and 1992
and as of December 31, 1996, 1995, 1994, 1993 and 1992 and on a pro forma basis
for the nine months ended September 30, 1997 and 1996, as of September 30, 1997
and, years ended December 31, 1996, 1995 and 1994.
The pro forma information includes consolidated BancGroup and subsidiaries
and consolidated First Independence, South Florida, United American, ASB and
First Central. The pro forma balance sheet data gives effect to the combinations
as if they had occurred on December 31, 1996 and the pro forma operating data
gives effect to the combinations as if they occurred at the beginning of the
earliest period presented. Note that for the purchase method combination,
Article 11 of Regulation S-X requires pro forma statements to be presented for
only the most recent fiscal year and interim period. Accordingly, ASB is only
included in the pro forma information as of and for the nine months ended
September 30, 1997 and the year ended December 31, 1996.
The following selected financial information should be read in conjunction
with the discussion set forth in "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and all of the financial
statements included elsewhere in this Prospectus and incorporated by reference.
The pro forma information provided below may not be indicative of future
results.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL PRO FORMA HISTORICAL
1997 1997 1996 1996
--------- ---------- --------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income.................................... $406,590 $362,830 $329,820 $300,943
Interest expense................................... 201,509 182,497 162,724 151,547
-------- -------- -------- --------
Net interest income................................ 205,081 180,333 167,096 149,396
Provision for loan losses.......................... 9,633 8,833 7,116 6,292
-------- -------- -------- --------
Net interest income after provision for loan
losses........................................... 195,448 171,500 159,980 143,104
Noninterest income................................. 66,277 61,623 57,137 53,900
Noninterest expense................................ 163,390 143,609 142,361 129,378
-------- -------- -------- --------
Income before income taxes......................... 98,335 89,514 74,756 67,626
Applicable income taxes............................ 36,452 33,460 26,280 23,794
-------- -------- -------- --------
Net income......................................... $ 61,883 $ 56,054 $ 48,476 $ 43,832
======== ======== ======== ========
EARNINGS PER SHARE
Net income:
Primary.......................................... $ 1.28 $ 1.32 $ 1.09 $ 1.11
Fully-diluted.................................... $ 1.27 $ 1.31 $ 1.08 $ 1.10
Average shares outstanding
Primary.......................................... 48,334 42,370 44,329 39,525
Fully-diluted.................................... 48,954 42,963 45,014 40,204
Cash dividends:
Common........................................... $ 0.45 $ 0.45 $ 0.405 $ 0.405
</TABLE>
48
<PAGE> 57
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED DECEMBER 31,
--------------------------------------------------------- -----------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA PRO FORMA PRO FORMA PRO FORMA PRO FORMA HISTORICAL HISTORICAL
1996 1995 1994 1993 1992 1996* 1995*
--------- --------- --------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF INCOME
Interest income............. $456,746 $375,260 $281,009 $236,084 $226,057 $406,838 $341,826
Interest expense............ 226,906 183,798 114,679 92,813 100,932 205,843 170,483
-------- -------- -------- -------- -------- -------- --------
Net interest income......... 229,840 191,462 166,330 143,271 125,125 200,995 171,343
Provision for possible loan
losses.................... 13,732 10,198 9,076 15,234 18,207 12,545 8,986
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan
losses.................... 216,108 181,264 157,254 128,037 106,918 188,450 162,357
Noninterest income.......... 77,818 63,891 56,889 55,649 50,217 72,382 60,527
Noninterest expense......... 201,037 167,747 157,622 144,335 129,476 178,851 150,654
SAIF special
assessment(1)............. 4,465 -- -- 4,465
-------- -------- -------- -------- -------- -------- --------
Income before income
taxes..................... 88,424 77,408 56,521 39,351 27,659 77,516 72,230
Applicable income taxes..... 31,143 27,462 18,610 12,265 7,793 27,303 25,765
-------- -------- -------- -------- -------- -------- --------
Income before extraordinary
items..................... 57,281 49,946 37,911 27,086 19,866 50,213 46,465
Extraordinary items......... -- -- -- (396)
Cumulative effect of change
in accounting............. -- -- -- 3,933
-------- -------- -------- -------- -------- -------- --------
Net income.................. $ 57,281 $ 49,946 $ 37,911 $ 30,623 $ 19,866 $ 50,213 $ 46,465
======== ======== ======== ======== ======== ======== ========
EARNINGS PER SHARE
Income before extraordinary
items:
Primary**................. $ 1.26 $ 1.18 $ 0.95 $ 0.73 $ 0.61 $ 1.26 $ 1.23
Fully Diluted**........... 1.25 1.15 0.95 0.73 0.61 1.25 1.19
Net income:
Primary**................. 1.26 1.18 0.95 0.82 0.61 1.26 1.23
Fully Diluted**........... 1.25 1.15 0.95 0.82 0.61 $ 1.25 $ 1.19
Average shares outstanding
Primary**................. 45,357 42,489 39,707 37,194 32,361 39,764 37,912
Fully Diluted**........... 46,254 44,423 41,183 39,380 35,025 40,623 39,796
Cash dividends:
Common**.................. $ 0.54 $ 0.338 -- $ 0.540 $ 0.338
Class A**................. -- 0.113 $ 0.400 $ 0.355 $ 0.335 0.113
Class B**................. -- 0.063 0.200 0.155 0.135 0.063
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------
BANCGROUP BANCGROUP BANCGROUP
HISTORICAL HISTORICAL HISTORICAL
1994* 1993* 1992*
---------- ---------- ----------
<S> <C> <C> <C>
STATEMENT OF INCOME
Interest income............. $255,758 $204,322 $192,526
Interest expense............ 105,797 81,008 86,283
-------- -------- --------
Net interest income......... 149,961 123,314 106,243
Provision for possible loan
losses.................... 8,254 11,767 14,625
-------- -------- --------
Net interest income after
provision for loan
losses.................... 141,707 111,547 91,618
Noninterest income.......... 54,149 50,990 46,226
Noninterest expense......... 144,119 125,901 112,340
SAIF special
assessment(1).............
-------- -------- --------
Income before income
taxes..................... 51,737 36,636 25,504
Applicable income taxes..... 17,243 11,249 6,960
-------- -------- --------
Income before extraordinary
items..................... 34,494 25,387 18,544
Extraordinary items......... (396)
Cumulative effect of change
in accounting............. 3,890
-------- -------- --------
Net income.................. $ 34,494 $ 28,881 $ 18,544
======== ======== ========
EARNINGS PER SHARE
Income before extraordinary
items:
Primary**................. $ 0.96 $ 0.81 $ 0.67
Fully Diluted**........... 0.95 0.81 0.67
Net income:
Primary**................. 0.96 0.92 0.67
Fully Diluted**........... $ 0.95 $ 0.91 $ 0.67
Average shares outstanding
Primary**................. 35,907 31,272 27,785
Fully Diluted**........... 37,383 33,458 30,407
Cash dividends:
Common**..................
Class A**................. $ 0.040 $ 0.355 $ 0.335
Class B**................. 0.020 0.155 0.135
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interest business combination with Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid February 11, 1997.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,874,000 net of applicable income taxes in
1996.
49
<PAGE> 58
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
----------------------- --------------------------------------------------------------
BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP BANCGROUP
PRO FORMA HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL HISTORICAL
1997 1997 1996* 1995* 1994* 1993* 1992*
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF CONDITION
DATA
At year end:
Total assets............. $7,388,026 $6,605,927 $5,672,537 $4,960,165 $3,865,936 $3,728,270 $2,658,833
Loans, net of unearned
income............... 5,524,899 4,970,765 4,215,802 3,645,727 2,736,041 2,289,233 1,657,604
Mortgage loans held for
sale................. 182,878 182,878 157,966 112,203 61,556 368,515 150,835
Deposits............... 5,815,203 5,136,556 4,299,821 3,869,012 3,067,500 2,990,190 2,251,299
Long-term debt......... 112,755 101,099 39,092 47,688 86,662 57,397 22,979
Shareholders' equity... 539,434 472,353 402,708 352,731 275,319 256,866 165,142
Average daily balances
Total assets........... 6,695,111 5,956,312 5,286,587 4,373,227 3,708,350 3,015,787 2,592,966
Interest-earning
assets............... 6,142,738 5,462,405 4,835,713 3,985,649 3,349,026 2,681,428 2,294,670
Loans, net of unearned
income............... 5,000,795 4,479,967 3,931,084 3,123,407 2,477,768 1,813,569 1,615,713
Mortgage loans held for
sale................. 127,862 127,862 135,135 98,785 135,046 248,502 121,820
Deposits............... 4,485,524 3,913,525 4,032,610 3,420,881 2,994,868 2,407,015 2,181,233
Shareholders' equity... 485,780 424,886 383,401 308,532 269,353 200,217 159,785
Book value per share**... $ 11.34 $ 11.26 $ 10.29 $ 9.43 $ 7.93 $ 7.69 $ 6.34
Tangible book value per
share**................ $ 9.71 $ 9.66 $ 9.51 $ 8.62 $ 7.35 $ 7.18 $ 6.06
SELECTED RATIOS
Income before
extraordinary items and
the cumulative effect
of a change in
accounting for income
taxes to:
Average assets....... 1.23% 1.21% 0.95% 1.06% 0.93% 0.84% 0.72%
Average shareholders'
equity............. 16.99 16.84 13.09 15.06 12.81 12.68 11.61
Net income to:
Average assets....... 1.23 1.21 0.95 1.06 0.93 0.96 0.72
Average shareholders'
equity............. 16.99 16.84 13.09 15.06 12.81 14.42 11.61
Efficiency ratio(1)...... 62.44 58.92 64.94 64.39 69.83 71.96 73.16
Dividend payout.......... 30.14 33.28 42.86 36.59 41.67 38.59 50.00
Average equity to average
assets................. 7.26 7.13 7.25 7.06 7.26 6.64 6.16
Allowance for possible
loan losses to total
loans (Net of unearned
income)................ 1.24% 1.25% 1.27% 1.29% 1.55% 1.61% 1.50%
</TABLE>
- ---------------
* Restated to give retroactive effect to the April 22, 1997
pooling-of-interest business combinations with Fort Brooke Bancorporation.
** Restated to reflect the impact of a two-for-one stock split in the form of a
100% stock dividend paid February 11, 1997.
(1) Legislation approving a one-time special assessment to recapitalize the
Savings Association Insurance Fund ("SAIF") resulted in $4,465,000 in
expense before income taxes and $2,874,000 net of applicable income taxes in
1996.
50
<PAGE> 59
SOUTH FLORIDA BANKING CORP.
SUMMARY CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following tables present selected historical financial data for South
Florida Banking Corp. With respect to the information for the nine-month periods
ended September 30, 1997 and 1996, which is unaudited, such interim results are
not necessarily indicative of results for the entire year, but include all
adjustments (none of which were other than normal recurring accruals) which, in
the opinion of management, are necessary for a fair presentation of such
results. These tables should be read in conjunction with the historical
financial statements and notes thereto included elsewhere in this Joint Proxy
Statement and Prospectus.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED ----------------------------------------------------------
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
At Period End:
Cash and cash equivalents................ $ 10,978 $ 10,831 $ 11,621 $ 10,194 $ 7,534 $ 8,162 $ 13,221
Investment securities.................... 57,259 61,797 63,190 58,960 64,137 58,415 48,830
Loans, net............................... 167,693 148,387 152,941 126,524 104,995 90,656 81,893
All other assets......................... 10,100 8,273 9,322 11,451 6,909 4,552 5,518
---------- ---------- ---------- ---------- ---------- -------- --------
Total assets....................... $ 246,030 $ 229,288 $ 237,074 $ 207,129 $ 183,575 $161,785 $149,462
========== ========== ========== ========== ========== ======== ========
Deposit accounts........................... $ 215,914 $ 197,960 $ 208,208 $ 179,095 $ 162,674 $141,439 $136,183
All other liabilities...................... 13,241 17,342 13,798 14,328 10,072 8,655 3,800
Shareholders' equity....................... 16,875 13,986 15,068 13,706 10,829 11,691 9,479
---------- ---------- ---------- ---------- ---------- -------- --------
Total liabilities and shareholders'
equity........................... $ 246,030 $ 229,288 $ 237,074 $ 207,129 $ 183,575 $161,785 $149,462
========== ========== ========== ========== ========== ======== ========
For the Period:
Total interest income.................... $ 13,606 12,230 $ 16,566 $ 14,219 $ 11,337 $ 10,221 $ 10,844
Total interest expense................... 6,157 5,290 7,158 6,350 4,308 3,958 4,825
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income........................ 7,449 6,940 9,408 7,869 7,029 6,263 6,019
Provision for credit losses................ 257 456 569 504 199 110 176
---------- ---------- ---------- ---------- ---------- -------- --------
Net interest income after provision for
credit losses............................ 7,192 6,484 8,839 7,365 6,830 6,153 5,843
Other income............................... 1,625 1,211 1,626 1,248 1,007 1,298 1,350
Other expenses............................. 6,701 5,568 7,508 7,141 5,393 5,441 5,645
---------- ---------- ---------- ---------- ---------- -------- --------
Earnings before income tax provisions and
extraordinary item....................... 2,116 2,127 2,957 1,472 2,444 2,010 1,548
Income tax provision....................... 582 730 856 271 707 403 282
---------- ---------- ---------- ---------- ---------- -------- --------
Net earnings before extraordinary item..... 1,534 1,397 2,101 1,201 1,737 1,607 1,266
Extraordinary item (1)..................... 35
---------- ---------- ---------- ---------- ---------- -------- --------
Net earnings............................... $ 1,534 $ 1,397 $ 2,101 $ 1,201 $ 1,737 $ 1,607 $ 1301
========== ========== ========== ========== ========== ======== ========
Earnings (loss) per share before
extraordinary item....................... $ 1.26 $ 1.16 $ 1.75 $ 1.00 $ 1.46 $ 1.40 $ 1.16
========== ========== ========== ========== ========== ======== ========
Net earnings per share..................... $ 1.26 $ 1.16 $ 1.75 $ 1.00 $ 1.46 $ 1.40 $ 1.19
========== ========== ========== ========== ========== ======== ========
Weighted average number of shares
outstanding.............................. 1,209,805 1,201,326 1,200,375 1,197,251 1,187,567 1,143,882 1,094,553
Ratios and Other Data:
Return on average assets................. .83% .84% .94% .62% 1.00% 1.02% .91%
Return on average equity................. 13.03 13.48 15.02 9.69 14.96 15.83 14.40
Average equity to average assets......... 6.39 6.24 6.26 6.35 6.70 6.41 6.35
Interest-rate spread during the period... 3.95 4.08 4.13 3.88 3.93 3.92 4.29
Net yield on average interest-earning
assets................................. 4.38 4.51 4.55 4.31 4.31 4.27 4.62
Noninterest expense to average assets.... 3.64 3.35 3.36 3.66 3.11 3.44 3.96
Ratio of average interest-earning assets
to average interest-bearing
liabilities............................ 1.12 1.12 1.12 1.13 1.14 1.13 1.09
Dividends declared....................... $ 387,780 $ 320,236 $ 434,770 $ 391,445 $ 346,534 $240,961 $ 87,371
Actual number of shares.................. 1,213,465 1,145,183 1,145,683 1,088,044 1,023,960 950,421 909,759
Earnings per share....................... $ 1.26 $ 1.16 $ 1.75 $ 1.00 $ 1.46 $ 1.40 $ 1.19
</TABLE>
51
<PAGE> 60
<TABLE>
<CAPTION>
AT OR FOR THE
NINE MONTHS ENDED ----------------------------------------------------------
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
----------------------- ----------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
Dividend payout ratio:
Actual................................. 0.25 0.24 0.22 0.36 0.23 0.18 0.08
Weighted average....................... 0.25 0.23 0.22 0.34 0.21 0.18 0.08
Nonperforming loans, in-substance
foreclosed loans and real estate owned
as a percentage of total assets at end
of period.............................. 1.80 1.40 0.72 1.55 2.01 1.54 1.99
Allowance for credit losses as a
percentage of total loans at end of
period................................. 1.10 1.04 1.09 1.09 1.00 1.05 1.14
Total number of banking offices.......... 12 11 10 8 4 3 3
Total shares outstanding at end of
period................................. 1,213,465 1,145,183 1,145,683 1,088,044 1,023,960 950,421 909,759
Book value per share at end of period.... $ 13.91 $ 12.21 $ 13.15 $ 12.60 $ 10.58 $ 12.30 $ 10.42
</TABLE>
- ---------------
(1) Reduction of income taxes arising from carryforward of prior years' net
operating loss.
52
<PAGE> 61
SOUTH FLORIDA BANKING CORP.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion is provided to afford the reader an understanding
of the major elements of the Bank's financial condition, results of operation,
capital resources and liquidity. It should be read in conjunction with the
financial statements and notes thereto and other information appearing elsewhere
in this Joint Proxy Statement and Prospectus.
GENERAL
South Florida Banking Corp. is a one-bank holding company, and its only
current business is the ownership and operation of the Bank. On October 1, 1983,
the common shareholders of the Bank exchanged their common shares for shares of
South Florida Banking Corp. Common Stock, and at that time the Bank became a
wholly-owned subsidiary of South Florida Banking Corp. The formation of South
Florida Banking Corp. and exchange of shares has been accounted for as a
combination of interests under common control in a manner similar to a pooling
of interests. Shares held by dissenting shareholders were settled for cash.
The Bank is a FDIC-insured, nationally-chartered commercial bank
headquartered in Bonita Springs, Florida. It is also a member of the Federal
Reserve System. The Bank commenced operations in November 1963. The Bank has
twelve branch offices located in Lee, Collier, and Hendry Counties, and its main
business is to attract deposits and to invest those funds in loans, including
both secured and unsecured commercial loans, consumer loans, construction and
permanent residential mortgage loans, and the origination of loans secured by
commercial real estate properties.
At September 30, 1997, South Florida Banking Corp. had total assets of $246
million (an increase of 3.75% over the $237.1 million recorded at December 31,
1996) and total stockholders' equity of $16.9 million (up 11.9% over the $15.1
million at December 31, 1996). For the nine months ended September 30, 1997, it
had consolidated net earnings of $1,534,000, an increase of 9.8% from the nine
months ending September 30, 1996 of $1,397,000.
During the nine months ended September 30, 1997, net loans receivable
increased to $167.7 million from $152.9 million, or 9.7% as of December 31,
1996. The Bank's portfolio of investment securities decreased to $57.3 million
as of September 30, 1997 from $61.8 million at September 30, 1996. The Bank's
deposits increased to $215.9 million as of September 30, 1997 from $208.2
million as of December 31, 1996. The 3.7% increase in deposits reflected the
Bank's strategy of not paying up for deposits and continuing to accept and
retain deposit accounts for which funds can be prudently invested.
At December 31, 1996, the Bank had total assets of $237.1 million (an
increase of 14.5% over the $207.1 million recorded at December 31, 1995 and
total shareholders' equity of $15.1 million (up 10.2% over the $13.7 million at
December 31, 1995). For the year ended December 31, 1996, it had consolidated
net earnings of $2,101,000, an increase of 75% from the previous year's total of
$1,201,000.
During the year ended December 31, 1996, net loans receivable increased
$21.9 million, or 16.7%. The Bank's portfolio of investment securities increased
to $63.2 million as of December 31, 1996 from $59 million as of December 31,
1995. The Bank's deposits increased to $208.2 million as of December 31, 1996
from $179.1 as of December 31, 1995.
PENDING ACQUISITION OF SOUTH FLORIDA
On September 4, 1997, management entered into an agreement to merge South
Florida Banking Corp. into Colonial BancGroup. Each share of common stock of
South Florida Banking Corp. outstanding and held of record shall be converted
into 1.5746 shares of Colonial BancGroup Common Stock. This transaction is
subject to the approval of shareholders and various regulatory authorities.
53
<PAGE> 62
REGULATION AND LEGISLATION
As a nationally-chartered commercial bank, the Bank is subject to extensive
regulation by the Office of the Comptroller of the Currency (OCC). South Florida
Banking Corp. is subject to regulation by the Federal Reserve. The Bank files
reports with the OCC concerning its activities and financial condition, in
addition to obtaining regulatory approvals prior to entering into certain
transactions such as mergers with or acquisitions of other financial
institutions. Periodic examinations are performed by the OCC to monitor the
Bank's compliance with the various regulatory requirements.
CREDIT RISK
The Bank's business activity entails potential loan losses, the magnitude
of which depend on a variety of economic factors affecting borrowers which are
beyond the control of the Bank. While the bank has instituted underwriting
guidelines and credit review procedures to protect the Bank from avoidable
credit losses, some losses will inevitably occur.
The following table sets forth certain information regarding non-accrual
loans and real estate owned, the ratio of such loans and real estate owned to
total assets as of the dates indicated, and certain other related information:
<TABLE>
<CAPTION>
AT SEPTEMBER 30, AT DECEMBER 31,
----------------- -----------------------------------------------
1997 1996 1996 1995 1994 1993 1992
------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Nonaccrual loans:
Real estate loans:
Residential........................... $ 435 $ 106 $ 132 $ 443 $ 614 $ 549 $ 757
Commercial............................ 3,274 1,775 874 2,041 2,425 1,219 610
Consumer and other loans................ 4 0 0 0 0 5 70
------- ------- ------- ------- ------- ------- -------
Total nonperforming loans........ 3,713 1,881 1,006 2,484 3,039 1,773 1,437
Other real estate owned:
Real estate acquired by foreclosure or
deed in lieu of foreclosure........... 716 1,332 701 723 656 715 1,534
------- ------- ------- ------- ------- ------- -------
Total nonperforming loans, and
other real estate owned........ 4,429 3,213 1,707 3,207 3,695 2,488 2,971
Allowance for loan losses................. (1,860) (1,559) (1,678) (1,399) (1,062) (960) (944)
------- ------- ------- ------- ------- ------- -------
Total nonperforming loans and
other real estate owned, net... $ 2,569 $ 1,654 $ 29 $ 1,808 $ 2,633 $ 1,528 $ 2,027
======= ======= ======= ======= ======= ======= =======
Total nonperforming loans to
total assets................... 1.51% 0.82% 0.42% 1.20% 1.66% 1.10% 0.96%
======= ======= ======= ======= ======= ======= =======
Total nonperforming loans and
other real estate owned to
total assets................... 1.80% 1.40% 0.72% 1.55% 2.01% 1.54% 1.99%
======= ======= ======= ======= ======= ======= =======
Total nonperforming loans and
other real estate owned, net to
total assets................... 1.04% 0.72% 0.01% 0.87% 1.43% 0.94% 1.36%
======= ======= ======= ======= ======= ======= =======
</TABLE>
54
<PAGE> 63
The following table sets forth information with respect to activity in the
Bank's allowance for loan losses during the periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, AT DECEMBER 31,
------------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Average loans outstanding,
net........................ $161,392 $141,977 $144,335 $118,260 $ 92,377 $84,829 $78,714
Allowance at beginning
of period.................. 1,678 1,399 1,399 1,062 960 944 1,021
Charge-offs:
Residential real estate
loans.................... 43 49 49 39 40 27 76
Commercial real estate
loans.................... 0 190 201 100 0 0 109
Commercial loans........... 21 11 0 11 86 72 21
Consumer loans............. 19 58 54 21 4 28 7
-------- -------- -------- -------- -------- ------- -------
Total loans
charge-off........ 83 308 304 171 130 127 213
Recoveries................... 8 12 14 4 33 33 46
-------- -------- -------- -------- -------- ------- -------
Net charge-offs..... 75 296 290 167 97 94 167
Provision for loan losses
charged to operating
expenses................... 257 456 569 504 199 110 90
-------- -------- -------- -------- -------- ------- -------
Allowance at end of year..... $ 1,860 $ 1,559 $ 1,678 $ 1,399 $ 1,062 $ 960 $ 944
======== ======== ======== ======== ======== ======= =======
Ratio of net charge-offs to
average loans
outstanding................ 0.0005 0.0021 0.0020 0.0014 0.0011 0.0011 0.0021
======== ======== ======== ======== ======== ======= =======
Ratio allowance to period-end
loans...................... 0.0109 0.0104 0.0109 0.0109 0.0100 0.0105 0.0114
======== ======== ======== ======== ======== ======= =======
Period end total loans....... $169,553 $149,947 $154,620 $127,923 $105,822 $91,616 $82,837
======== ======== ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, AT DECEMBER 31,
------------------- --------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
-------- -------- -------- -------- -------- ------- -------
(IN THOUSANDS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
Gross loans by category:
Commercial................. $ 34,963 $ 31,302 $ 42,097 $ 37,161 $ 31,797 $30,063 $31,613
Real
estate -- construction... 15,874 10,831 13,936 11,637 14,012 7,910 3,905
Real estate -- mortgage.... 114,168 101,987 92,360 73,459 54,563 48,439 42,170
Installment................ 4,643 6,014 6,378 5,670 5,655 5,406 5,373
-------- -------- -------- -------- -------- ------- -------
Total loans
receivable........ 169,648 150,134 154,771 127,927 106,027 91,818 83,061
Less:
Unearned income and fees... (95) (188) (152) (204) (205) (202) (224)
Allowance for credit
losses................... (1,860) (1,559) (1,678) (1,399) (1,062) (960) (944)
-------- -------- -------- -------- -------- ------- -------
Loans, net.......... $167,693 $148,387 $152,941 $126,324 $104,760 $90,656 $81,893
======== ======== ======== ======== ======== ======= =======
Percent of loans in each
category to total loans:
Commercial................. 20.61% 20.85% 27.20% 29.00% 29.99% 32.74% 38.06%
Real
estate -- construction... 9.36% 7.21% 9.00% 9.24% 13.21% 8.61% 4.70%
Real estate -- mortgage.... 67.30% 67.93% 59.68% 57.33% 51.46% 52.76% 50.77%
Installment................ 2.73% 4.01% 4.12% 4.43% 5.34% 5.89% 6.47%
-------- -------- -------- -------- -------- ------- -------
Total loan
receivable........ 100.00% 100.00% 100.00% 100.00% 100.00% 100.00% 100.00%
======== ======== ======== ======== ======== ======= =======
</TABLE>
RESULTS OF OPERATIONS
The operating results of the Bank depend primarily on its interest income,
which is equal to the difference between interest income on interest-earning
assets and interest expense on interest-bearing liabilities, consisting
primarily of deposits. Net interest income is determined by reference to (i) the
difference between
55
<PAGE> 64
yields earned on interest-earning assets and rates paid on interest-bearing
liabilities ("interest-rate spread"), and (ii) the relative amounts of
interest-earning assets and interest-bearing liabilities. The Bank's
interest-rate spread is affected by regulatory, economic and competitive factors
that influence interest rates, loan demand and deposit flows. In addition, the
Bank's net earnings are also affected by the level of nonperforming loans and
real estate owned, as well as the level of its non-interest bearing income and
non-interest paying expenses, such as salaries and employee benefits, occupancy
and equipment costs and provisions for losses on real estate owned and income
taxes.
56
<PAGE> 65
The following table sets forth for the periods indicated information
regarding (i) the total dollar amount of interest and dividend income of the
Bank from interest-earning assets and the resultant average yields; (ii) the
total dollar amount of interest expense on interest-bearing liabilities and the
resultant average cost; (iii) net interest/dividend income; (iv) interest-rate
spread; and (v) interest margin. Average balances are based upon daily balances.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
NINE MONTHS ENDED SEPTEMBER 30,
---------------------------------------------------------------------
1997 1996
--------------------------------- ---------------------------------
INTEREST INTEREST
AVERAGE AND AVERAGE AND
BALANCE DIVIDENDS YIELD/RATE BALANCE DIVIDENDS YIELD/RATE
-------- --------- ---------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)................................................ $161,392 $10,552 8.74% $141,977 $9,271 8.78%
Investment securities................................... 64,798 3,001 6.19% 61,770 2,912 6.28%
Other interest-earning assets(2)........................ 1,324 53 5.35% 1,244 49 5.25%
-------- ------- -------- ------
Total............................................. 227,514 13,606 8.00% 204,991 12,232 7.95%
-------- ------- -------- ------
Noninterest-earning assets................................ 18,840 16,243
-------- --------
Total............................................. $246,354 $221,234
======== ========
Interest-bearing liabilities:
Savings and NOW accounts................................ 84,511 1,694 2.68% 78,391 1,498 2.51%
Money market deposits................................... 22,798 688 4.03% 14,151 334 3.16%
Certificates of deposit................................. 80,471 3,126 5.19% 78,327 2,996 5.14%
Borrowings.............................................. 15,575 649 5.57% 11,391 462 5.39%
-------- ------- -------- ------
Total interest-bearing liabilities................ 203,355 6,157 4.06% 182,260 5,290 3.85%
------- ------
Noninterest-bearing liabilities........................... 27,253 25,167
Stockholders' equity...................................... 15,746 13,807
-------- --------
Total liabilities and stockholders' equity........ $246,354 $221,234
======== ========
Net interest/dividend income.............................. $ 7,449 $6,942
======= ======
Interest-rate spread(3)................................... 3.95% 4.08%
Net yield on average interest-earning assets(4)... 4.38% 4.51%
Ratio of average interest-earning assets to average
interest-bearing liabilities............................ 1.12 1.12
======== ========
</TABLE>
- ---------------
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin is net interest income dividend by average
interest-earning assets.
57
<PAGE> 66
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------
1996 1995 1994
----------------------------- ----------------------------- -----------------------------
AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/ AVERAGE INTEREST YIELD/
BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE BALANCE DIVIDENDS RATE
-------- --------- ------ -------- --------- ------ -------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-earning assets:
Loans(1)........................ $144,335 $12,640 8.76% $118,260 $10,195 8.62% $ 92,377 $ 7,228 7.82%
Investment securities........... 61,114 3,851 6.30% 63,241 3,977 6.29% 67,186 3,973 5.91%
Other interest-earning
assets(2)..................... 1,468 75 5.11% 869 47 5.41% 3,376 136 4.03%
-------- ------- -------- ------- -------- -------
Total..................... 206,917 16,566 8.01% 182,370 14,219 7.80% 162,939 11,337 6.95%
------- ------- -------
Noninterest-earning assets........ 16,536 12,829 10,470
-------- -------- --------
Total..................... $223,453 $195,199 $173,409
======== ======== ========
Interest-bearing liabilities:
Savings and NOW accounts........ 79,095 2,028 2.56% 68,824 1,705 2.48% 57,874 1,142 1.97%
Money market deposits........... 14,505 470 3.24% 17,403 536 3.08% 24,935 690 2.77%
Certificates of deposit......... 79,431 4,053 5.10% 65,238 3,517 5.39% 53,069 2,216 4.18%
Borrowings...................... 11,356 607 5.35% 10,616 592 5.58% 6,725 260 3.87%
-------- ------- -------- ------- -------- -------
Total interest-bearing
liabilities............. 184,387 7,158 3.88% 162,081 6,350 3.92% 142,603 4,308 3.02%
Noninterest-bearing liabilities... 25,085 20,729 19,194
Shareholders' equity.............. 13,981 12,389 11,612
-------- -------- --------
Total liabilities and
shareholders' equity.... $223,453 $195,199 $173,409
======== ======== ========
Net interest/dividend
income.................. $ 9,408 $ 7,869 $ 7,029
======= ======= =======
Interest-rate spread(3)........... 4.13% 3.88% 3.93%
==== ==== ====
Net yield on average
interest-earning
assets(4)............... 4.55% 4.31% 4.31%
==== ==== ====
Ratio of average interest-earning
assets to average
interest-bearing liabilities.... 1.12 1.13 1.14
======== ======== ========
</TABLE>
- ---------------
(1) Includes nonaccrual loans.
(2) Includes interest-bearing deposits.
(3) Interest-rate spread represents the difference between the average yield on
interest-earning assets and the average cost of interest-bearing
liabilities.
(4) Net interest margin is net interest income dividend by average
interest-earning assets.
58
<PAGE> 67
RATE/VOLUME ANALYSIS
The following table sets forth certain information regarding changes in
interest income and interest expense of the Bank for the periods indicated. For
each category of interest-earning assets and interest-bearing liabilities,
information is provided on changes attributable to (1) changes in rate (change
in rate multiplied by prior volume), (2) changes in volume (changes in volume
multiplied by prior rate) and (3) changes in rate-volume (change in rate
multiplied by change in volume).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 VS. 1995
-------------------------------------
INCREASE (DECREASE) DUE TO
-------------------------------------
RATE VOLUME RATE/VOLUME TOTAL
----- ------ ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans................................................. $ 162 $2,248 $ 35 $2,445
Investment securities................................. 8 (134) 0 (126)
Other interest-earning assets......................... (3) 32 (1) 28
----- ------ ---- ------
Total......................................... 167 2,146 34 2,347
----- ------ ---- ------
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts........................... 60 254 9 323
Money market accounts.............................. 28 (89) (5) (66)
Certificate accounts............................... (188) 765 (41) 536
Borrowings............................................ (24) 41 (2) 15
----- ------ ---- ------
Total......................................... (124) 971 (39) 808
----- ------ ---- ------
Net change in net interest income....................... $ 291 $1,175 $ 73 $1,539
===== ====== ==== ======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 VS. 1994
-------------------------------------
INCREASE (DECREASE) DUE TO
-------------------------------------
RATE VOLUME RATE/VOLUME TOTAL
----- ------ ----------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Interest-earning assets:
Loans................................................. $ 736 $2,025 $206 $2,967
Investment securities................................. 252 (233) (15) 4
Other interest-earning assets......................... 47 (101) (35) (89)
----- ------ ---- ------
Total......................................... 1,035 1,691 156 2,882
----- ------ ---- ------
Interest-bearing liabilities:
Deposits:
Savings and NOW accounts........................... 292 216 55 563
Money market accounts.............................. 78 (208) (24) (154)
Certificate accounts............................... 645 508 148 1,301
Borrowings............................................ 115 150 67 332
----- ------ ---- ------
Total......................................... 1,130 666 246 2,042
----- ------ ---- ------
Net change in net interest income....................... $ (95) $1,025 $(90) $ 840
===== ====== ==== ======
</TABLE>
59
<PAGE> 68
The rates and yields are as follows:
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
YIELD OR RATE AT
----------------------------
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
Yields and Rates:
Loans..................................................... 8.45% 8.79%
Securities................................................ 5.89 6.10
All interest-bearing assets............................... 7.79 8.01
Savings and NOW accounts.................................. 2.74 2.59
Money market accounts..................................... 4.07 3.69
Certificates of deposit................................... 5.34 5.09
All interest-bearing liabilities.......................... 4.17 3.88
Interest-rate spread...................................... 3.62 4.13
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The following table sets forth the carrying value of the bank's investment
portfolio as of the dates indicated:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Investment securities available for sale:
U.S. Government and agency obligations.................. $10,074 $11,281 $12,003
Municipal bonds......................................... 14,504 11,262 0
Mortgage-backed securities.............................. 32,780 32,994 36,132
Other................................................... 5,832 3,423 4,460
------- ------- -------
Total available for sale........................ 63,190 58,960 52,595
------- ------- -------
Investment securities held-to-maturity:
Municipal bonds......................................... 0 0 11,542
------- ------- -------
Total........................................... $63,190 $58,960 $64,137
======= ======= =======
</TABLE>
The following table sets forth, by maturity distribution, certain
information pertaining to the Bank's investment securities portfolio at December
31, 1996:
<TABLE>
<CAPTION>
AFTER ONE YEAR
ONE YEAR OR TO AFTER FIVE YEARS
LESS FIVE YEARS TO TEN YEARS
------------------ ------------------ ------------------
CARRYING AVERAGE CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD VALUE YIELD
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
U.S. Government and agency
obligations.................... $3,610 6.27% $4,464 5.11% $2,000 6.50%
Municipal securities............. 0 0.00% 3,816 5.72% 4,969 5.54%
Mortgage-backed securities....... 325 6.39% 679 8.32% 2,774 6.79%
Other............................ 507 7.93% 515 7.87% 0 0.00%
------ ------ ------
Total.................... $4,442 6.47% $9,474 5.74% $9,743 6.09%
====== ==== ====== ==== ====== ====
<CAPTION>
DUE AFTER
TEN YEARS TOTAL
------------------ ------------------
CARRYING AVERAGE CARRYING AVERAGE
VALUE YIELD VALUE YIELD
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and agency
obligations.................... $ 0 0.00% $10,074 5.79%
Municipal securities............. 5,719 5.52% 14,504 5.58%
Mortgage-backed securities....... 29,002 6.56% 32,780 6.61%
Other............................ 4,810 6.90% 5,832 7.08%
------- -------
Total.................... $39,531 6.45% $63,190 6.29%
======= ==== ======= ====
</TABLE>
During the year ended December 31, 1996 and the nine-month period ended
September 30, 1997, the Bank's primary sources of funds consisted of principal
payments on loans and investment securities, proceeds from sales and maturities
of investment securities and net increase in deposits. The Bank used its capital
resources principally to purchase investment securities and fund existing and
continuing loan commitments. At December 31, 1996 and September 30, 1997, the
Bank had commitments to originate loans totaling respectively, $22.9 million and
$26.1 million. Scheduled maturities of certificates of deposit during the 12
months following December 31, 1996 and September 30, 1997 totaled $71.9 million
and $76.0 million as of those stated dates.
60
<PAGE> 69
REGULATORY CAPITAL REQUIREMENTS
For the purpose of evaluating what should constitute the minimum capital
adequacy of a financial institution, Federal banking regulators have adopted
regulations which make reference to the institution's "Tier 1 leverage" capital
and also to its "total" capital. In most instances, "Tier 1 leverage" capital
will consist solely of funds permanently committed to the institution (i.e.,
shareholders' equity), less net intangible assets. Conversely, "total" capital
(comprised of the sum of Tier 1 and supplementary, or Tier 2, capital) includes
not only shareholders' equity, but an allowance for loan losses (subject to
limitations). Under FDIC regulations, the Bank is required to meet certain
minimum capital thresholds. The requirement is not a valuation allowance and has
not been created by charges against earnings; rather it represents a restriction
on shareholders' equity. The following chart compares the minimum capital ratios
required by the FDIC to the ratios maintained by the Bank:
<TABLE>
<CAPTION>
REGULATORY RATIOS OF
REQUIREMENT THE BANK
----------- ---------
<S> <C> <C>
At December 31, 1996:
Total capital to risk weighted assets..................... 8.00% 14.10%
Tier 1 capital to risk weighted assets.................... 4.00 12.90
Tier 1 capital to risk weighted assets -- leverage
ratio.................................................. 4.00 7.10
At September 30, 1997:
Total capital to risk weighted assets..................... 8.00% 13.57%
Tier 1 capital to risk weighted assets.................... 4.00 12.31
Tier 1 capital to risk weighted assets -- leverage
ratio.................................................. 4.00 7.18
</TABLE>
ASSET AND LIABILITY MANAGEMENT
As part of its asset and liability management, the Bank has emphasized
establishing and implementing internal asset-liability decision processes, as
well as communications and control procedures to aid in managing the Bank's
earnings. Management believes that these processes and procedures provide the
Bank with better capital planning, asset mix and volume controls, loan-pricing
guidelines, and deposit interest-rate guidelines which should result in tighter
controls and less exposure to interest-rate risk.
The matching of assets and liabilities may be analyzed by examining the
extent to which such assets and liabilities are "interest-rate sensitive" and by
monitoring an institution's interest rate sensitivity "gap." An asset or
liability is said to be interest-rate sensitive within a specific time period if
it will mature or reprice within that time period. The interest-rate sensitivity
gap is defined as the difference between interest-earning assets and
interest-bearing liabilities maturing or repricing within a given time period.
The gap ratio is computed as rate-sensitive assets to rate-sensitive
liabilities. A gap ratio of 1.0% represents perfect matching. A gap is
considered positive when the amount of interest-rate sensitive assets exceeds
interest-rate sensitive liabilities. A gap is considered negative when the
amount of interest-rate sensitive liabilities exceeds interest-rate sensitive
assets. During a period of rising interest rates, a negative gap would adversely
affect net interest income, while a positive gap would result in an increase in
net interest income. During a period of falling interest rates, a negative gap
would result in an increase in net interest income, while a positive gap would
adversely affect net interest income.
In order to minimize the potential for adverse effect of material and
prolonged increases in interest rates on the Bank's results of operations,
management continues to monitor asset and liability management policies to
better match the maturities and repricing terms of the Bank's interest-earning
assets and interest-bearing liabilities. Such policies have consisted primarily
of (i) emphasizing the origination of adjustable-rate loans; (ii) maintaining a
stable core deposit base; and (iii) maintaining a significant portion of liquid
assets (cash and short-term investments).
The Bank seeks to maintain a large stable core deposit base by providing
quality service to its customers without significantly increasing its cost of
funds or operating expenses. The success of the Bank's core deposit strategy is
demonstrated by the stability of its money-market deposit accounts, savings
accounts and NOW
61
<PAGE> 70
accounts, which, in the aggregate, totaled $103.5 million, representing 49.6% of
total deposits at December 31, 1996, and $100.9 million or 46.7% of such
deposits at September 30, 1997. These accounts bore a weighted-average nominal
rate of 2.67% at December 31, 1996 and 3.05% at September 30, 1997. Management
anticipates that these accounts will continue to increase and in the future
comprise a significant portion if its deposit base.
As of December 31, 1996, the Bank's cumulative one-year interest-rate
sensitivity gap was a negative 18.11%, and at September 30, 1997 it was a
negative 19.6%. Although management believes that the implementation of the
referenced strategies has reduced the potential adverse effects of changes in
interest rates on the Bank's results of operations, any substantial and
prolonged increase in market interest rates could have an adverse impact on the
Bank's results of operations. Management monitors the Bank's interest-rate
sensitivity gap on a quarterly basis, using National Bank of Commerce to provide
both a practical and a theoretical gap report. The practical gap report is based
on the Federal Reserve Board's March 26, 1993 draft for incorporating
Interest-Rate Risk into Risk-Based Capital Standards. Management believes that
its present gap position is appropriate for the current interest-rate
environment.
The following table sets forth certain information relating to the bank's
interest-earning assets and interest-bearing liabilities at December 31, 1996
that are estimated to mature or are scheduled to reprice within the period
shown:
<TABLE>
<CAPTION>
MORE THAN
ONE YEAR TO MORE THAN
ONE YEAR FIVE YEARS FIVE YEARS TOTAL
-------- ----------- ---------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Mortgage and commercial loans(1)(2):
Adjustable rate (all property types)... $117,223 $ 7,173 $ 2,526 $126,922
Fixed rate............................. 3,695 5,978 10,793 20,466
-------- -------- -------- --------
Total mortgage loans........... 120,918 13,151 13,319 147,388
Consumer and other loans................. 4,976 1,385 17 6,378
Interest-bearing deposits................ 30 0 0 30
Investments(3)(4)........................ 17,650 7,567 37,973 63,190
-------- -------- -------- --------
Total rate-sensitive assets.... 143,574 22,103 51,309 216,986
-------- -------- -------- --------
Deposit accounts(5):
Certificates of deposit................ 71,918 9,754 0 81,672
Savings and NOW accounts............... 84,960 0 0 84,960
Money market accounts.................. 18,490 0 0 18,490
Other borrowings....................... 11,143 1,425 0 12,568
-------- -------- -------- --------
Total rate-sensitive
liabilities.................. 186,511 11,179 0 197,690
-------- -------- -------- --------
GAP (repricing differences).............. $(42,937) $ 10,924 $ 51,309 $ 19,296
======== ======== ======== ========
Cumulative GAP........................... $(42,937) $(32,013) $ 19,296
======== ======== ========
Cumulative GAP/total assets.............. (18.11)% (13.50)% 8.14%
======== ======== ========
</TABLE>
- ---------------
(1) In preparing the table above, adjustable-rate loans are included in the
period in which the interest rates are next scheduled to adjust rather than
in the period in which the loans mature. Fixed-rate loans are scheduled,
including repayment, according to their maturities.
(2) Excludes nonaccrual loans.
(3) Investments are scheduled through repricing and maturity dates.
(4) Includes Federal Home Loan Bank common stock, and preferred stock in FHLMC,
FNMA, SLMA
(5) Checking accounts, NOW accounts, and savings accounts are regarded as ready
accessible withdrawable accounts. All other time accounts are scheduled
through the maturity dates.
Loan Maturities. The table below sets forth the contractual maturity of
the Bank's total loan portfolio at December 31, 1996. Demand loans,
collateralized exclusively by passbook savings or CD's and having no
62
<PAGE> 71
stated schedule of repayments, and no stated maturity, are reported as due
within one year. The table does not reflect anticipated prepayments.
<TABLE>
<CAPTION>
0-12 MONTHS 1-5 YEARS OVER 5 YEARS TOTAL
----------- --------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Real Estate....................................... $ 1,606 $ 2,406 $ 94,991 $ 99,003
Commercial........................................ 19,597 19,040 9,748 48,385
Consumer and other loans.......................... 981 3,238 2,159 6,378
------- ------- -------- --------
Total................................... $22,184 $24,684 $106,898 $153,766
======= ======= ======== ========
Fixed interest rate............................... 4,638 7,362 10,809 22,809
======= ======= ======== ========
Variable interest rate............................ 17,546 17,322 96,089 130,957
======= ======= ======== ========
</TABLE>
The following table shows the distribution of, and certain other
information relating to, South Florida Banking Corp. deposit accounts by type:
<TABLE>
<CAPTION>
AT DECEMBER 31,
------------------------------------------------------------
1996 1995 1994
------------------ ------------------ ------------------
% OF % OF % OF
AMOUNT DEPOSIT AMOUNT DEPOSIT AMOUNT DEPOSIT
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Demand deposits.................. $ 23,085 11.1% $ 21,073 11.8% $ 18,703 11.5%
Savings and NOW deposits......... 84,960 40.8 75,684 42.2 62,963 38.7
Money market deposits............ 18,490 8.9 13,807 7.7 19,385 11.9
-------- ----- -------- ----- -------- -----
Subtotal............... 126,535 60.8 110,564 61.7 101,051 62.1
-------- ----- -------- ----- -------- -----
Certificate of deposits:
2.00%-3.99%.................... 545 0.3 999 0.6 6,719 4.1
4.00%-5.99%.................... 76,938 36.9 50,120 28.0 50,693 31.2
6.00%-7.99%.................... 4,134 2.0 16,640 9.3 3,179 2.0
8.00%-9.99%.................... 43 0.0 277 0.1 526 0.3
10.00%-11.99%.................. 12 0.0 495 0.3 505 0.3
-------- ----- -------- ----- -------- -----
Total certificates of
deposit(1)........... 81,672 39.2 68,531 38.3 61,622 37.9
-------- ----- -------- ----- -------- -----
Total deposits......... $208,207 100.0% $179,095 100.0% $162,673 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
- ---------------
(1) Includes individual retirement accounts (IRAs) totaling $4,550,000,
$4,136,000 and $3,048,000 at December 31, 1996, 1995 and 1994, respectively,
all of which are in the form of certificates of deposit.
The following table shows the average amount of and the average rate paid
on each of the following deposit account categories during the periods
indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1996 1995 1994
------------------ ------------------ ------------------
AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE AVERAGE
BALANCE YIELD BALANCE YIELD BALANCE YIELD
-------- ------- -------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Noninterest bearing checking
accounts....................... $ 23,603 0.00% $ 19,832 0.00% $ 18,048 0.00%
NOW and savings accounts......... 79,095 2.56% 68,824 2.48% 57,874 1.97%
Money market deposits............ 14,505 3.24% 17,403 3.08% 24,935 2.77%
Certificates of deposit.......... 79,431 5.10% 65,238 5.39% 53,069 4.18%
-------- -------- --------
Total deposits......... $196,634 3.33% $171,297 3.36% $153,926 2.63%
======== ==== ======== ==== ======== ====
</TABLE>
63
<PAGE> 72
The following table presents for various interest rate categories the
amounts of outstanding certificates of deposit at December 31, 1996 which mature
during the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------------------------------------
2001 AND
1997 1998 1999 2000 THEREAFTER TOTAL
------- ------ ------ ---- ---------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
December 31, 1996:
2.00%-3.99%........................ $ 545 $ 0 $ 0 $ 0 $ 0 $ 545
4.00%-5.99%........................ 69,398 5,441 1,503 246 350 76,938
6.00%-7.99%........................ 1,474 2,042 236 268 114 4,134
8.00%-9.99%........................ 43 0 0 0 0 43
10.00%-11.99%...................... 0 12 0 0 0 12
------- ------ ------ ---- ---- -------
Total certificates of
deposit.................. $71,460 $7,495 $1,739 $514 $464 $81,672
======= ====== ====== ==== ==== =======
</TABLE>
Jumbo certificates ($100,000 and over) outstanding as of December 31, 1996
mature as follows:
<TABLE>
<CAPTION>
DOLLARS IN
THOUSANDS
----------
<S> <C>
Due within three months or less............................. $ 6,480
Due over three months to six months......................... 3,985
Due over six months to one year............................. 300
Due over one year........................................... 2,267
-------
$13,032
=======
</TABLE>
COMPARISON OF NINE-MONTH PERIODS ENDED SEPTEMBER 30, 1997 AND 1996
General. Net earnings for the nine months ended September 30, 1997 were
$1,534,000, or $1.26 per share compared to $1,397,000, or $1.16 per share for
1996. The increase in earnings was primarily due to an increase in net interest
income, an increase in service charge income, and a decrease in provision for
loan losses. However, it was partially offset by the increase in noninterest
expense during 1997.
Interest Income and Expense. Interest income increased by $1,375,000 to
$13.6 million for the nine-month period ended September 30, 1997 compared to
$12.2 million for the nine months ended September 30, 1996. Interest on loans
increased $1,282,000 to $10.5 million due to an increase in the average loan
portfolio balance for the nine months ended September 30, 1997, to $167.7
million compared to $148.4 million during the 1996 period. This increase was
partially helped by an increase in the weighted-average yield from 8.70% in 1996
to 8.74% in 1997. Interest on investment securities increased $89,000 to $3.0
million for the nine months ended September 30, 1997, due to an increase in the
average balance of the investment securities portfolio from $61.7 million in
1996 to $64.8 million in 1997. Interest on other interest-earning assets
increased from $50,000 for the nine months ended September 30, 1996 to $53,000
for the nine months ended September 30, 1997, due to an increase in the average
federal funds sold during the period, compared to a year ago.
Interest expense on deposit accounts increased $680,000 to $5.5 million for
the nine months ended September 30, 1997 from $4.8 million in 1996. The increase
is due to an increase in the average rate paid on deposits and an increase in
average funds borrowed during the period compared to a year ago.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The provision for loan losses decreased $200,000 for the nine-month
period ended September 30, 1997 compared to the same period for 1996 because
there were fewer loans for which specific reserves were needed. The allowance
for credit losses is $1.86 million at September 30, 1997. While management
believes the allowance for credit losses is adequate as of September 30, 1997
future
64
<PAGE> 73
adjustments may be necessary if economic conditions differ substantially from
the assumptions used in making the initial determination.
Noninterest Expense. Total noninterest expense increased $1.1 million to
$6.7 million for the nine months ended September 30, 1997 from $5.6 million in
1996. The increase was primarily due to opening three new branches. There were
also increases in employee compensation, occupancy expense, and professional
fees. These were due to the opening of the new branches and merit salary raises.
Income Tax Provision. The income tax provision for the nine months ended
September 30, 1997 and September 30, 1996 was $582,000 and $730,000,
respectively. The reason for the lower tax provision is due to an increase in
the Bank's tax-exempt securities and tax-preferred stocks of $4.3 million and
$2.5 million, respectively, during 1997.
COMPARISON OF YEARS ENDED DECEMBER 1996 AND 1995
General. Net earnings for the year ended December 31, 1996 were $2.1
million, or $1.84 per share compared to $1.2 million, or $1.00 per share for
1995. The increase in earnings was due primarily to an increase in net interest
income as well as holding the line on noninterest expense.
Interest Income and Expense. Interest income increased $2.3 million or
16.5% to $16.6 million during the year ended December 31, 1996. Interest on
loans increased $2.4 million to $12.6 million due to an increase in the average
loan portfolio from $118.2 million during 1995 to $144.3 million during 1996.
Interest on investment securities decreased $126,000 to $3.9 million due to a
decrease in the average portfolio from $63.2 million during 1995 to $61.1
million during 1996.
Interest expense on deposit accounts increased from $5.8 million for the
year ended December 31, 1995 to $6.6 million for the year ended December 31,
1996. This increase was primarily the result of an increase in the average
deposit balance of $21.6 million from 1995 to 1996.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The provision for loan losses increased from $504,000 for the year
ended December 31, 1995 to $569,000 during 1996. The allowance for loan losses
increased from $1.4 million at December 31, 1995 to $1.7 million at December 31,
1996. Nonperforming assets to total assets decreased to 0.72% at December 31,
1996 from 1.55% at December 31, 1995. While management believes that its
allowance for loan losses is adequate as of December 31, 1996, future
adjustments to the Bank's allowance for loan losses may be necessary if economic
conditions differ substantially from the assumptions used in making the
determination.
Noninterest Expense. Total noninterest expense increased $367,000 for the
year ended December 31, 1996 from the year ended December 31, 1995. The increase
is attributable to the full impact in 1996 of opening four Winn-Dixie branches
in 1995. This increase was offset by a reduction of $183,000 in FDIC insurance
premiums.
Income Tax Provision. The income tax provision increased from $271,000 for
the year ended December 31, 1995 to $856,000 for 1996, due to increased earnings
before income taxes.
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
General. Net earnings for the year ended December 31, 1995 were $1.2
million, or $1.00 per share compared to $1.7 million, or $1.46 per share for
1994. The decrease in earnings was primarily due to increased noninterest
expenses from opening four Winn Dixie branches and the full effect of the North
Naples office, opened in September 1994.
Interest Income and Expense. Interest income increased $2.9 million or
25.4% to $14.2 million during the year ended December 31, 1995. Interest on
loans increased $3.0 million to $10.2 million due to an increase
65
<PAGE> 74
in the weighted average yield from 7.82% during the year ended December 31, 1994
to 8.62% during the year ended December 31, 1995 and an increase in the average
loan portfolio balance, $25.9 million. Interest on investment securities
remained relatively unchanged despite a decrease in the average amounts invested
in securities during 1995 compared to 1994. This decrease was partially offset
by an increase in the average yield earned in 1995.
Interest expense on deposit accounts increased from $4.0 million for the
year ended December 31, 1994 to $5.8 million for the year ended December 31,
1995. This increase was primarily the result of an increase in the average
deposit balances of $15.6 million and the rates paid on deposits.
Provision for Credit Losses. The provision for credit losses is charged to
earnings to bring the total allowance to a level deemed appropriate by
management and is based upon historical experience, the volume and type of
lending conducted by the Bank, industry standards, the amount of nonperforming
loans, general economic conditions, particularly as they relate to the Bank's
market areas, and other factors related to the collectibility of the Bank's loan
portfolio. The provision for credit losses increased from $199,000 for the year
ended December 31, 1994 to $504,000 during 1995. The reason for this increase
was due to an average loan growth of $26.1 million in 1995 compared to $7.6
million in 1994. Net charge-offs were also higher in 1995; $167,000 in 1995 as
opposed to $98,000 in 1994. The allowance for loan losses increased from $1.1
million at December 31, 1994 to $1.4 million at December 31, 1995.
Noninterest Expense. Total noninterest expense increased $1.7 million for
the year ended December 31, 1995 from the year ended December 31, 1994. This
increase is attributable to the full impact in 1995 of opening the North Naples
office in September 1994. Four Winn-Dixie branches were also opened during 1995.
Salaries and benefits increased $754,000, occupancy expense increased $497,000,
and all other related expenses increased $150,000. Expenses incurred on other
real estate property increased $174,000. A rebate of $142,000 in FDIC
assessments helped to partially offset the increase in non-interest expense for
1995.
Income Tax Provision. The income tax provision decreased from $707,000 for
the year ended December 31, 1994 to $271,000 for 1995, primarily because of a
decrease in earnings before income taxes.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with GAAP, which requires the measurement of financial
position and operating results in terms of historical dollars, without
considering changes in the relative purchasing power of money over time due to
inflation. Unlike most industrial companies, substantially all of the assets and
liabilities of the Bank are monetary in nature. As a result, interest rates have
a more significant impact on the Bank's performance than the effects of general
levels of inflation. Interest rates do not necessarily move in the same
direction or in the same magnitude as the prices of goods and services, since
such prices are affected by inflation to a larger extent than interest rates.
66
<PAGE> 75
SELECTED QUARTERLY FINANCIAL DATA
The following tables present summarized quarterly data:
<TABLE>
<CAPTION>
FIRST SECOND THIRD
QUARTER QUARTER QUARTER TOTAL
--------- --------- --------- ---------
(DOLLAR IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Nine Months Ended September 30, 1997
Interest income.............................. $4,428 $4,642 $4,536 $13,606
Interest expense............................. 1,930 2,094 2,133 6,157
------ ------ ------ -------
Net interest income.......................... 2,498 2,548 2,403 7,449
Provision for credit losses.................. 70 117 70 257
------ ------ ------ -------
Net interest income after provision for
credit losses............................. 2,428 2,431 2,333 7,192
Other income................................. 465 547 613 1,625
Other expense................................ 2,215 2,244 2,242 6,701
------ ------ ------ -------
Earnings before income tax provision......... 678 734 704 2,116
Income tax provision......................... 189 204 189 582
------ ------ ------ -------
Net earnings......................... $ 489 $ 530 $ 515 $ 1,534
====== ====== ====== =======
Earnings per share................... 0.41 0.43 0.42 1.26
====== ====== ====== =======
</TABLE>
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1996
Interest income............................ $3,914 $4,179 $4,138 $4,335 $16,566
Interest expense........................... 1,654 1,814 1,822 1,868 7,158
------ ------ ------ ------ -------
Net interest income........................ 2,260 2,365 2,316 2,467 9,408
Provision for credit losses................ 121 235 100 113 569
------ ------ ------ ------ -------
Net interest income after provision for
credit losses........................... 2,139 2,130 2,216 2,354 8,839
Other income............................... 384 405 422 415 1,626
Other expense.............................. 1,893 1,832 1,843 1,940 7,508
------ ------ ------ ------ -------
Earnings before income tax provision....... 630 703 795 829 2,957
Income tax provision....................... 200 230 301 125 856
------ ------ ------ ------ -------
Net earnings....................... $ 430 $ 473 $ 494 $ 704 $ 2,101
====== ====== ====== ====== =======
Earnings per share................. $ 0.36 $ 0.39 $ 0.41 $ 0.59 $ 1.75
====== ====== ====== ====== =======
</TABLE>
67
<PAGE> 76
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER TOTAL
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1995
Interest income............................ $3,361 $3,556 $3,561 $3,741 $14,219
Interest expense........................... 1,396 1,594 1,681 1,679 6,350
------ ------ ------ ------ -------
Net interest income........................ 1,965 1,962 1,880 2,062 7,869
Provision for credit losses................ 95 85 148 176 504
------ ------ ------ ------ -------
Net interest income after provision for
credit losses........................... 1,870 1,877 1,732 1,886 7,365
Other income............................... 243 300 396 309 1,248
Other expense.............................. 1,699 1,823 1,747 1,872 7,141
------ ------ ------ ------ -------
Earnings before income tax provision....... 414 354 381 323 1,472
Income tax provision (benefit)............. 94 86 104 (13) 271
------ ------ ------ ------ -------
Net earnings....................... $ 320 $ 268 $ 277 $ 336 $ 1,201
====== ====== ====== ====== =======
Earnings per share................. $ 0.27 $ 0.22 $ 0.24 $ 0.27 $ 1.00
====== ====== ====== ====== =======
</TABLE>
68
<PAGE> 77
BUSINESS OF BANCGROUP
GENERAL
BancGroup is a bank holding company registered under the BHCA. It was
organized in 1974 under the laws of Delaware and has operated under its current
name and management since 1981. BancGroup operates Colonial Bank as its wholly
owned commercial banking subsidiary in the states of Alabama, Georgia, Florida
and Tennessee. Colonial Bank, an Alabama banking corporation, conducts a full
service banking business through 119 branches in Alabama, five branches in
Tennessee, 14 branches in Georgia and 56 branches in Florida. Colonial Mortgage
Company, a subsidiary of Colonial Bank in Alabama, is a mortgage banking company
which services approximately $12.5 billion in residential loans and which
originates mortgages in 37 states through four divisional offices. BancGroup's
commercial banking loan portfolio is comprised primarily of commercial real
estate loans (24%) and residential real estate loans (45%), a significant
portion of which is located within the States of Alabama and Florida.
BancGroup's growth in loans over the past several years has been concentrated in
commercial and residential real estate loans.
RECENTLY COMPLETED AND OTHER PROPOSED BUSINESS COMBINATIONS
Since September 30, 1997, BancGroup has acquired one banking institution,
First Independence, with assets and shareholders' equity acquired of $65.0
million and $6.3 million, respectively. This acquisition is included in the pro
forma statements contained herein. See "THE COLONIAL BANCGROUP, INC. AND
SUBSIDIARIES -- Condensed Pro Forma Statements of Condition (Unaudited)."
See "THE COLONIAL BANCGROUP, INC. AND SUBSIDIARIES -- Condensed Pro Forma
Statements of Condition (Unaudited)."
BancGroup has entered into a definitive agreement dated as of August 28,
1997, to acquire ASB Bancshares, Inc. ("ASB"). ASB is a Delaware corporation and
is a holding company for Ashville Savings Bank located in Ashville, Alabama. ASB
will merge with BancGroup and following such merger Ashville Savings Bank will
merge with BancGroup's existing bank subsidiary, Colonial Bank. BancGroup will
issue a maximum of 632,362 shares of BancGroup Common Stock, depending on the
market value at the time of the merger, and $7,724,813 of BancGroup's
Subordinated Acquisition Debentures, Series A, would be issued to the
shareholders of ASB. This transaction is subject to, among other things,
approval by the shareholders of ASB and approval by appropriate regulatory
authorities. At September 30, 1997, ASB had assets of $144.5 million, deposits
of $130.9 million and shareholders' equity of $12.1 million.
BancGroup has entered into a definitive agreement dated as of September 8,
1997, to acquire United American Holding Corporation ("United American"). United
American is a Florida corporation and is a holding company for United American
Bank located in Orlando, Florida. United American will merge with BancGroup and,
following such merger, United American Bank will merge with Colonial Bank.
BancGroup will issue a maximum of 2,729,218 shares of BancGroup Common Stock to
the shareholders of United American in the merger. The actual number of shares
of BancGroup Common Stock to be issued in this transaction will depend upon the
market value of such Common Stock at the time of the acquisition. This
transaction is subject to, among other things, approval by the shareholders of
United American and approval by appropriate regulatory authorities. At September
30, 1997, United American had assets of $260.8 million, deposits of $227.5
million and shareholders' equity of $21.5 million.
BancGroup has entered into a definitive agreement dated as of September 9,
1997, to acquire First Central Bank ("First Central"). First Central is a
Florida bank located in St. Petersburg, Florida. First Central will merge with
BancGroup's bank subsidiary, Colonial Bank. BancGroup will issue a maximum of
688,742 shares of BancGroup Common Stock, depending on the market value at the
time of such merger. The actual number of shares of BancGroup Common Stock to be
issued in this transaction will depend upon the market value of such Common
Stock at the time of the acquisition. This transaction is subject to, among
other things, approval by the shareholders of First Central and approval by
appropriate regulatory authorities. At September 30, 1997, First Central had
assets of $56.6 million, deposits of $46.0 million and shareholders' equity of
$10.1 million.
69
<PAGE> 78
YEAR 2000 COMPLIANCE
Most computer software programs and processing systems, including those
used by BancGroup and its subsidiaries in their operations, have not been
designed to accommodate entries beyond the year 1999 in date fields. Failure to
address the anticipated consequences of this design deficiency could have
material adverse effects on the business and operations of any business,
including BancGroup, that relies on computers and associated technologies. In
response to the challenges of addressing such consequences in the banking
industry, bank regulatory agencies, including the Federal Reserve, BancGroup's
primary regulator, have established a Year 2000 Supervision Program and
published guidelines for implementing procedures to bring the computer software
programs and processing systems into year 2000 compliance.
In compliance with the guidelines of the Federal Reserve, BancGroup has
assigned staff on a full time basis to assess the impact of year 2000 on all
areas of BancGroup, Colonial Bank and the bank's mortgage company subsidiary.
The staff is responsible for developing and implementing a strategy to ensure
that all critical systems are year 2000 compliant and testing has begun by
fourth quarter 1998. All critical Bank software and processing systems are
currently being upgraded to year 2000 compliant status. The anticipated cost of
upgrading those systems for Colonial Bank is presently estimated to be
approximately $800,000. The mortgage company servicing system is scheduled to be
rewritten into year 2000 compliant format by November 1998. The cost of the
mortgage company servicing system rewrite, in addition to other systems upgrades
is estimated to be $2.7 million spread over the next two to three years.
BancGroup anticipates that these modifications will bring added functionality
and capacity to BancGroup. Micro computer based systems are currently being
assessed, and the cost of bringing those systems into year 2000 compliance is
not currently ascertainable. The costs to bring other miscellaneous systems into
year 2000 compliance is not expected to be material.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
As of April 30, 1997, BancGroup had issued and outstanding 40,740,357
shares of BancGroup Common Stock with 7,729 shareholders of record. Each such
share is entitled to one vote. In addition, as of that date, 1,839,981 shares of
BancGroup Common Stock were subject to issue upon exercise of options pursuant
to BancGroup's stock option plans and up to 512,800 shares of BancGroup Common
Stock were issuable upon conversion of the 1986 Debentures. There are currently
100,000,000 shares of BancGroup Common Stock authorized.
The following table shows those persons who are known to BancGroup to be
beneficial owners as of June 30, 1997, of more than five percent of outstanding
BancGroup Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME AND ADDRESS STOCK OUTSTANDING(1)
- ---------------- --------- --------------
<S> <C> <C>
Robert E. Lowder(2).............................. 2,888,820(3) 6.78%
Post Office Box 1108
Montgomery, AL 36101
James K. Lowder.................................. 2,199,298 5.17%
Post Office Box 250
Montgomery, AL 36142
Thomas H. Lowder................................. 2,146,106 5.04%
Post Office Box 11687
Birmingham, AL 35202
</TABLE>
- ---------------
(1) Percentages are calculated assuming the issuance of 1,839,981 shares of
BancGroup Common Stock pursuant to BancGroup's stock option plans.
(2) Robert E. Lowder is the brother of James K. and Thomas H. Lowder. Robert E.
Lowder disclaims any beneficial ownership interest in the shares owned by
his brothers and the 85,442 shares owned by his mother.
(3) Includes 181,020 shares of BancGroup Common Stock subject to options under
BancGroup's stock option plans.
70
<PAGE> 79
SECURITY OWNERSHIP OF MANAGEMENT
The following table indicates for each director, executive officer, and all
executive officers and directors of BancGroup as a group the number of shares of
outstanding BancGroup Common Stock beneficially owned as of April 30, 1997.
<TABLE>
<CAPTION>
PERCENTAGE
COMMON OF CLASS
NAME STOCK OUTSTANDING(1)
- ---- --------- --------------
<S> <C> <C>
DIRECTORS
Lewis Beville............................................... 1,816 *
Young J. Boozer............................................. 15,256(2) *
William Britton............................................. 19,616 *
Jerry J. Chesser............................................ 147,428 *
Augustus K. Clements, III................................... 18,600 *
Robert S. Craft............................................. 11,994 *
Patrick F. Dye.............................................. 37,960(3) *
Clinton O. Holdbrooks....................................... 280,900(4) *
D. B. Jones................................................. 20,714(5) *
Harold D. King.............................................. 156,108 *
Robert E. Lowder**.......................................... 2,888,820(6) 6.78%
John Ed Mathison............................................ 28,454 *
Milton E. McGregor.......................................... -- *
John C. H. Miller, Jr....................................... 40,480(7) *
Joe D. Mussafer............................................. 20,264 *
William E. Powell, III...................................... 14,352 *
J. Donald Prewitt........................................... 244,940(8) *
Jack H. Rainer.............................................. 2,900 *
Jimmy Rane.................................................. -- *
Frances E. Roper............................................ 365,342 *
Samuel Sippial.............................................. 2,774 *
Ed V. Welch................................................. 30,454 *
EXECUTIVE OFFICERS WHO ARE NOT ALSO DIRECTORS
Young J. Boozer, III........................................ 46,920(9) *
W. Flake Oakley, IV......................................... 39,458(9) *
P.L. "Mac" McLeod, Jr....................................... 74,951(9)(10) *
Michelle Condon............................................. 18,586(9) *
All Executive Officers and Directors as a Group............. 4,529,087(11) 10.64%
</TABLE>
- ---------------
* Represents less than one percent.
** Executive Officer.
(1) Percentages are calculated assuming the issuance of 1,839,981 shares of
Common Stock pursuant to BancGroup's stock option plans.
(2) Includes 1,000 shares of Common Stock out of 2,000 shares owned by Young J.
Boozer, and Young J. Boozer, III EX U/W Phyllis C. Boozer.
(3) Includes 35,960 shares of Common Stock subject to options exercisable under
BancGroup's stock option plans.
(4) Includes 24,524 shares of Common Stock subject to options under BancGroup's
stock option plans, and 78,998 shares over which Mr. Holdbrooks serves as
trustee.
(5) Mr. Jones holds power to vote these shares as trustee.
(6) These shares include 181,020 shares of Common Stock subject to options
under BancGroup's stock option plans. See the table at "Voting Securities
and Principal Shareholders."
(7) Includes 20,000 shares subject to options.
(8) Includes 61,604 shares subject to stock options.
71
<PAGE> 80
(9) Young J. Boozer, III, W. Flake Oakley, IV, P.L. "Mac" McLeod, Jr. and
Michelle Condon, hold options respecting 25,000, 18,000, 26,000 and 11,000
shares of Common Stock, respectively, pursuant to BancGroup's stock option
plans.
(10) P.L. "Mac" McLeod, Jr. was nominated as President of BancGroup on August
12, 1997, and such nomination was approved by BancGroup's Board of
Directors on October 15, 1997.
(11) Includes shares subject to options.
MANAGEMENT INFORMATION
Certain information regarding the biographies of the directors and
executive officers of BancGroup, executive compensation and related party
transactions is included in (i) BancGroup's Annual Report on Form 10-K for the
fiscal year ending December 31, 1996, at item 10; (ii) BancGroup's Proxy
Statement for its 1997 Annual Meeting, at items 10, 11 and 13; and (iii)
BancGroup's Report on Form 8-K dated October 30, 1997; and is incorporated
herein by reference.
72
<PAGE> 81
BUSINESS OF SOUTH FLORIDA
GENERAL
South Florida, a Florida corporation organized on October 1, 1983, is a
one-bank holding company registered under the BHCA, whose sole banking
subsidiary and principal asset is First National Bank of Florida at Bonita
Springs, a national banking association (the "Bank"). Through its ownership of
the Bank, South Florida is engaged in a general commercial banking business and
its primary source of earnings is derived from income generated by the Bank. As
of September 30, 1997, South Florida, on a consolidated basis, had total assets
of $246.0 million, net portfolio loans of $167.7 million, total deposits of
$215.9 million, and shareholders' equity of $16.9 million. Unless the context
otherwise requires, references herein to South Florida include South Florida and
the Bank on a consolidated basis.
The business of the Bank consists primarily of accepting deposits from the
general public in the areas served by its banking offices and applying those
funds, together with funds derived from other sources, to the origination of
loans for various types of collateralized and uncollateralized consumer and
commercial loans, and loans for the purchase, construction, financing and
refinancing of commercial and residential real estate in the southwest Florida
Counties of Lee, Collier and Hendry. The revenues of the Bank are derived
primarily from interest on, and fees received in connection with, its lending
activities and from interest and dividends from investment securities and
short-term investments. The principal sources of funds for the Bank's lending
and investment activities are deposits, amortization and prepayment of loans,
and proceeds from the sale of investment securities. The principal expenses of
the Bank are the interest paid on deposits, and operating and general and
administrative expenses.
The Bank is subject to examination and regulation by the Office to the
Comptroller of the Currency ("OCC"), and the FDIC. As is the case with banking
institutions generally, the Bank's operations are materially and significantly
influenced by general economic conditions and by related monetary and fiscal
policies of financial institution regulatory agencies. Deposit flows and cost of
funds are influenced by interest rates on competing investments and general
market rates of interest. Lending activities are affected by the demand for
financing of real estate and other types of loans, which in turn are affected by
the interest rates at which such financing may be offered and other factors
affecting local demand and availability of funds. The Bank faces strong
competition in the attraction of deposits (its primary source of lendable funds)
and in the origination of loans.
MARKET AREA
The Bank's operations are based in Bonita Springs, Florida and its market
area covers Lee, Collier and Hendry Counties, which includes the cities of
Bonita Springs, Fort Myers, Naples, LaBelle and surrounding communities.
Management of South Florida believes that the Bank's principal markets have been
residential customers and small businesses. Specifically, the Bank has targeted
businesses with annual gross revenues up to $10 million, and all households
within the primary market areas. Business is derived from a number of sources,
including the personal efforts of South Florida's directors and officers, direct
solicitation by the Bank's loan officers, existing customers and borrowers,
advertising, walk-in customers, and, in some instances, referrals from brokers.
DEPOSIT ACTIVITIES
The Bank provides a variety of corporate and personal banking services to
individuals, businesses, and other institutions located in its market area.
Deposit services include certificates of deposit, individual retirement accounts
("IRAs") and other time deposits, checking and other demand deposit accounts,
interest paying checking accounts ("NOW accounts"), savings accounts and money
market accounts. The transaction accounts and time certificates are tailored to
the principal market areas at rates competitive to those in the area. All
deposit accounts are insured by the FDIC up to the maximum limits permitted by
law. The Bank also offers check cards, ATM cards (with access to local, state,
national, and international networks), safe deposit boxes, wire transfers,
direct deposit, and automatic drafts for various accounts. The Bank provides
73
<PAGE> 82
personal and corporate credit cards, VISA(TM) or MasterCard(TM) credit cards, as
issued by a correspondent bank which assumes all liabilities relating to
underwriting of the credit applicant. The Bank does not provide fiduciary or
appraisal services.
Deposits are the major source of the Bank's funds for lending and other
investment activities. The Bank considers the majority of its regular savings,
demand, NOW and money market deposit accounts to be its core deposits. At
September 30, 1997, these accounts comprised 59% of the Bank's total deposits,
and 41% of the Bank's deposits were certificates of deposit. Generally, the Bank
attempts to maintain the rates paid on its deposits at a competitive level. Time
deposits of $100,000 and over made up 7% of the Bank's total deposits at
September 30, 1997. The Bank does not accept brokered deposits in the normal
course of business.
LENDING ACTIVITIES
The Bank originates commercial, consumer, and real estate loans to
individuals and businesses. Commercial loans include both collateralized and
uncollateralized loans for working capital (including inventory and
receivables), seasonal lines of credit, business expansion (including real
estate acquisitions and improvements), and purchases of equipment and machinery.
Consumer loans include collateralized and uncollateralized loans for financing
automobiles, boats, home improvements, and personal investments. The Bank also
originates a variety of residential real estate loans, including conventional
mortgages collateralized by first mortgage liens to enable borrowers to
purchase, refinance, construct upon or improve real property. Such loans include
loans made to individual borrowers collateralized by first mortgage interests on
unimproved parcels of real estate zoned for residential homes on which such
borrower intends to erect a personal residence.
The Bank's commercial loans include loans to individuals and
small-to-medium sized businesses located primarily in southwest Florida for
working capital, equipment purchases, and various other business purposes. A
majority of the Bank's commercial loans are secured by equipment or similar
assets and in combination with real estate, but these loans may also be made on
an unsecured basis. Commercial loans may be made at variable- or fixed-interest
rates. Commercial lines of credit are typically granted on a one-year basis,
with loan covenants and monetary thresholds. Other commercial loans with terms
or amortization schedules of longer than one year will normally carry interest
rates which vary with the prime lending rate and will become payable in full and
are generally refinanced in three to five years.
The Bank's consumer loan portfolio consists primarily of loans to
individuals for various consumer purposes, but includes some business purpose
loans which are payable on an installment basis. The majority of these loans are
for terms of less than five years and are secured by liens on various personal
assets of the borrowers, but consumer loans may also be made on an unsecured
basis. Consumer loans are made at fixed-and variable-interest rates, and are
often based on up to a five-year amortization schedule.
The Bank's real estate loans are secured by mortgages and consist primarily
of loans to individuals and businesses for the purchase, improvement of or
investment in real estate and for the construction of single-family residential
units or the development of single-family residential building lots. These real
estate loans may be made at fixed- or variable-interest rates. The Bank
generally does not make fixed-interest rate commercial real estate loans for
terms exceeding five years. Loans in excess of three years generally have
adjustable-interest rates. The Bank's residential real estate loans generally
are repayable in monthly installments based on up to a 30-year amortization
schedule with variable-interest rates.
At September 30, 1997, the Bank's net loan portfolio consisted of 20.6%
commercial (consisting of commercial real estate mortgage loans and other
commercial loans) and financial loans, 67.3% residential real-estate mortgage
loans, 9.4% real estate construction and development loans, and 2.7% installment
or consumer loans. The Bank has no foreign loans or loans for highly leveraged
transactions. The interest rates charged on loans vary with the degree of risk,
maturity, and amount of the loan, and are further subject to competitive
pressures, money market rates, availability of funds and government regulations.
Emphasis has been placed on the borrower's ability to generate cash flow
sufficient to support its debt obligations and other cash-related expenses. The
Bank's loans receivable, net at September 30, 1997, were $167.7 million or 68.2%
of total assets.
74
<PAGE> 83
INVESTMENTS
The Bank invests a portion of its assets in U.S. Treasury and U.S.
Government agency obligations, GNMA, FHLMC and FNMA mortgage-backed securities,
state, county and municipal obligations, tax preferred stocks, collateralized
mortgage obligations ("CMO's"), and federal funds sold. The Bank's investments
are managed in relation to loan demand and deposit growth, and are generally
used to provide for the investment of excess funds at reduced yields and risks
relative to yields and risks of the loan portfolio, while providing liquidity to
fund increases in loan demand or to offset fluctuations in deposits.
COMPETITION
The Bank encounters competition both in making loans and attracting
deposits. The deregulation of the banking industry and the widespread enactment
of state laws which permit multi-bank holding companies as well as a degree of
interstate banking has created a highly competitive environment for commercial
banking in the Bank's primary market area. In one or more aspects of its
business, the Bank has competed with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, brokerage and investment banking companies and other financial
intermediaries operating in its market area and elsewhere. Most of these
competitors, some of which are affiliated with large bank holding companies,
have substantially greater resources and lending limits, and may offer certain
services, such as trust services, that the Bank does not provide.
The Bank's primary market area is served by commercial banks with 211
offices, and savings and loan associations with 11 offices. As of September 30,
1997, the total reported deposits in the primary market area were approximately
$8.6 billion.
Competition among financial institutions is based upon interest rates
offered on deposit accounts, interest rates charged on loans and other credit
and service charges, the quality of the services rendered, the convenience of
banking facilities and, in the case of loans to commercial borrowers, relative
lending limits.
EMPLOYEES
At September 30, 1997, the Bank employed 126 full-time and 10 part-time
employees. None of these employees are covered by a collective bargaining
agreement and management believes that its employee relations are good.
DESCRIPTION OF PROPERTIES
The principal executive and administrative offices of South Florida located
at 27975 Old 41 Road, SE, Bonita Springs, Florida 34135 serves as the Bank's
primary banking facility. This facility, consisting of approximately 23,032
square feet on 2 floors, is situated on a 9.15 acre parcel of land owned by
South Florida. The first floor, which is comprised of a lobby, executive and
customer service offices, Commercial Loan department, Residential Mortgage
department, EDP and Operations departments, Computer Room, Loan Servicing
department, 6 inside teller stations, safe deposit booths and related non-vault
area, and vault operations, is the location of the primary retail banking
operations at the main office. The second floor houses a conference room
facility and the executive offices of the Bank. The Bank's main office also
includes 3 outside drive-in teller operations.
The San Carlos Branch is a 4,339 square foot branch office located at
18031, South Tamiami Trail, Ft. Myers, Florida. The facility includes a lobby,
with 5 teller stations, 2 executive offices, a safe deposit/vault area and 3
outside drive-in teller operations. South Florida owns the land, consisting of
approximately 1 acre.
The Carillon Branch is a 400 square foot branch office located at
Winn-Dixie, 5010 Airport Pulling Road, Naples, Florida. The facility includes 3
teller stations and 1 executive office. South Florida leases the space.
The Summerlin Square Branch is a 400 square foot branch office located at
Winn-Dixie, 17105 San Carlos Boulevard, Ft. Myers, Florida. The facility
includes 3 teller stations and 1 executive office. South Florida leases the
space.
75
<PAGE> 84
The Golden Gate Branch is a 400 square foot branch office located at
Winn-Dixie, 4849 Golden Gate Parkway, Naples, Florida. The facility includes 3
teller stations and 1 executive office. South Florida leases the space.
The Vanderbilt Branch is a 2,294 square foot branch office located at 3987
Bonita Beach Road, Bonita Springs, Florida. The facility includes a lobby, with
4 teller stations, 1 executive office, a safe deposit/vault area and 3 outside
drive-in teller operations. South Florida owns the land, consisting of
approximately 1 acre.
The North Naples Branch is a 8,500 square foot branch office located at 889
111th Avenue N., Naples, Florida. The facility includes a lobby, with 3 teller
stations, 3 executive offices, a safe deposit/vault area and 4 outside drive-in
teller operations. South Florida leases the land, consisting of approximately 1
acre, but owns the building. The second floor is leased to a local business on a
short term basis.
The Labelle Branch is a 400 square foot branch office located at
Winn-Dixie, 906 South Main Street, Labelle, Florida. The facility includes 3
teller stations and 1 executive office. South Florida leases the space.
The Eagle Creek Branch is a 400 square foot branch office located at
Winn-Dixie, 12628 E. Tamiami Trail, Naples, Florida. The facility includes 3
teller stations and 1 executive office. South Florida leases the space.
The Lehigh Branch is a 3,000 square foot branch office located at 2511 Lee
Boulevard, Lehigh Acres, Florida. The facility includes a lobby, with 5 teller
stations, 2 executive offices, a safe deposit/vault area and 2 outside drive-in
teller operations. South Florida owns the land, consisting of approximately 1.5
acre.
The McGregor Branch is a 3,000 square foot branch office located at 12971
McGregor Boulevard, Ft. Myers, Florida. The facility includes a lobby, with 4
teller stations, 3 executive offices, a safe deposit/vault area and 2 outside
drive-in teller operations. South Florida owns the land, consisting of
approximately 1 acre.
The Corkscrew Branch is a 3,500 square foot branch office located at 8660
Corkscrew Road, Estero, Florida. The facility includes a lobby, with 3 teller
stations, 4 executive offices, a safe deposit/vault area and 3 outside drive-in
teller operations. South Florida owns the land, consisting of approximately 1
acre.
LEGAL PROCEEDINGS
South Florida has periodically been a party to or otherwise involved in
legal proceedings arising in the normal course of business such as claims to
enforce liens, foreclose on loan defaults, claims involving the making and
servicing of real property loans and other issues incident to the Bank's
business. South Florida's management is not aware of any proceeding threatened
or pending against South Florida which, if determined adversely, would have a
material effect on the business or financial position of South Florida.
76
<PAGE> 85
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of South Florida Common Stock as of December 19, 1997 by (i) each
person known to South Florida to own beneficially more than 5% of its Common
Stock, (ii) each director and executive officer of South Florida, and (iii) all
directors and executive officers as a group. Except as otherwise indicated, the
persons named in the table have sole voting and investment power with respect to
all of the South Florida Common Stock owned by them.
<TABLE>
<CAPTION>
PERCENT
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER OF BENEFICIAL OWNER(1) CLASS(2)
- ------------------------------------ ---------------------- --------
<S> <C> <C>
David C. Jones.............................................. 157,059 12.92%
3435 10th Street North
Naples, Florida 33940
David F. Crockett, Sr....................................... 89,516(3) 7.36
Crockett Mortgage Co.
202 Village at Eland
Route 113
Phoenixville, PA 19460
William G. Crockett......................................... 94,228(3) 7.74
Crockett Mortgage Co.
202 Village at Eland
Route 113
Phoenixville, PA 19460
Matthew W. Wood............................................. 60,752 5.00
Richard L. Garner........................................... 15,615 1.27
T. Harvey Haines............................................ 4,197 .34
John N. Elder............................................... 12,086 .99
All directors and executive officers as a group (6
persons).................................................. 257,455 21.06
</TABLE>
- ---------------
* Less than 1%
(1) In accordance with Rule 13d-3 promulgated pursuant to the Securities
Exchange Act of 1934, a person is deemed to be the beneficial owner of the
security for purposes of the rule if he or she has or shares voting power or
dispositive power with respect to such security or has the right to acquire
such ownership within sixty days. As used herein, "voting power" is the
power to vote or direct the voting of shares, and "dispositive power" is the
power to dispose or direct the disposition of shares, irrespective of any
economic interest therein.
(2) In calculating the percentage ownership for a given individual or group, the
number of shares of Common Stock outstanding includes unissued shares
subject to options, exercisable within sixty days held by such individual or
group, but are not deemed outstanding by any other person or group.
(3) Includes 15,689 shares owned by Crockett Mortgage Co., of which David
Crockett owns 51% and William Crockett owns 49% of the outstanding capital
stock.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
South Florida has had various loan and other banking transactions in the
ordinary course of business with the directors, executive officers and principal
shareholders of South Florida (or an associate of such person). All such
transactions: (i) have been made in the ordinary course of business; (ii) have
been made on substantially the same terms, including interest rates and
collateral on loans, as those prevailing at the time for comparable transactions
with unrelated persons; and (iii) in the opinion of management do not involve
more than the normal risk of collectibility or present other unfavorable
features. At September 30, 1997, the total dollar amount of extensions of credit
to directors and executive officers and principal shareholders of South Florida,
and any of their associates (excluding extensions of credit which were less than
$60,000 to any one
77
<PAGE> 86
such person and their associates) were $2,876,536 which represented
approximately 17% of total shareholders' equity.
ADJOURNMENT OF SPECIAL MEETING
Approval of the Agreement by South Florida's shareholders requires the
affirmative vote of at least a majority of the total votes eligible to be cast
at the Special Meeting. In the event there are an insufficient number of shares
of South Florida Common Stock present in person or by proxy at the Special
Meeting to approve the Agreement, South Florida's Board of Directors intends to
adjourn the Special Meeting to a later date provided a majority of the shares
present and voting on the motion have voted in favor of such adjournment. The
place and date to which the Special Meeting would be adjourned would be
announced at the Special Meeting. Proxies voted against the Agreement and
abstentions will not be voted to adjourn the Special Meeting. Abstentions and
broker non-votes will not be voted on this matter but will not count as "no
votes." If it is necessary to adjourn the Special Meeting and the adjournment is
for a period of not more than 30 days from the original date of the Special
Meeting, no notice of the time and place of the adjourned meeting need be given
the shareholders, other than an announcement made at the Special Meeting.
The effect of any such adjournment would be to permit South Florida to
solicit additional proxies for approval of the Agreement. While such an
adjournment would not invalidate any proxies previously filed as long as the
record date for the adjourned meeting remained the same, including proxies filed
by shareholders voting against the Agreement, an adjournment would afford South
Florida the opportunity to solicit additional proxies in favor of the Agreement.
OTHER MATTERS
The Board of Directors of South Florida is not aware of any business to
come before the Special Meeting other than those matters described above in this
Prospectus. If, however, any other matters not now known should properly come
before the Special Meeting, the proxy holders named in the accompanying proxy
will vote such proxy on such matters as determined by a majority of the Board of
Directors of South Florida.
DATE FOR SUBMISSION OF BANCGROUP SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in BancGroup's proxy solicitation
materials for its 1998 annual meeting of shareholders, any shareholder proposal
to take action at such meeting must be received at BancGroup's main office at
One Commerce Street, Post Office Box 1108, Montgomery, Alabama 36101, no later
than 120 calendar days in advance of the date of March 14, 1998.
LEGAL MATTERS
Certain legal matters regarding the shares of BancGroup Common Stock of
BancGroup offered hereby are being passed upon by the law firm of Miller,
Hamilton, Snider & Odom, L.L.C., Mobile, Alabama, of which John C. H. Miller,
Jr., a director of BancGroup, is a partner. Such firm received fees for legal
services performed in 1996 of $1,474,853. John C. H. Miller, Jr. beneficially
owns 38,352 shares of Common Stock. Mr. Miller also received employee-related
compensation from BancGroup in 1996 of $41,000. Certain legal matters relating
to the Merger are being passed upon for South Florida by the law firm of
Schifino & Fleischer, P.A., Tampa, Florida.
EXPERTS
Coopers & Lybrand L.L.P. serves as the independent accountants for
BancGroup. The consolidated financial statements of BancGroup and the
supplemental consolidated financial statements of BancGroup as of December 31,
1996 and 1995 and for each of the three years ended December 31, 1996 are
incorporated by reference in this Prospectus in reliance upon the report of such
firm, given on the authority of that firm as
78
<PAGE> 87
experts in accounting and auditing. It is not expected that a representative of
such firm will be present at the Special Meeting.
Coopers & Lybrand L.L.P., serves as the independent certified public
accountants for South Florida. South Florida's consolidated financial statements
as of December 31, 1996 and 1995 and for each of the three years ended December
31, 1996 are in this Prospectus in reliance upon the report of such firm, are
given on the authority of that firm as experts in accounting and auditing. It is
not expected that a representative of such firm will be present at the Special
Meeting.
PLEASE SIGN AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE
ACCOMPANYING ENVELOPE AS PROMPTLY AS POSSIBLE. YOU MAY REVOKE THE PROXY BY
GIVING WRITTEN NOTICE OF REVOCATION TO THE SECRETARY OF SOUTH FLORIDA PRIOR TO
THE SPECIAL MEETING, BY EXECUTING A LATER DATED PROXY AND DELIVERING IT TO THE
SECRETARY OF SOUTH FLORIDA PRIOR TO THE SPECIAL MEETING OR BY ATTENDING THE
SPECIAL MEETING VOTING IN PERSON.
79
<PAGE> 88
SOUTH FLORIDA BANKING CORP.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED YEAR-END FINANCIAL STATEMENTS -- SOUTH FLORIDA
BANKING CORP.
Report of Independent Accountants......................... F-2
Consolidated Balance Sheets -- December 31, 1996 and
1995................................................... F-3
Consolidated Statements of Operations for each of the
Three Years in the Period ended December 31, 1996...... F-4
Consolidated Statements of Changes in Shareholders' Equity
for each of the Three Years in the Period ended
December 31, 1996...................................... F-5
Consolidated Statements of Cash Flows for each of the
Three Years in the Period ended December 31, 1996...... F-6
Notes to Consolidated Financial Statements for each of the
Three Years in the Period ended December 31, 1996...... F-8
UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS -- SOUTH
FLORIDA BANKING CORP.
Condensed Consolidated Balance Sheet -- September 30, 1997
(unaudited)............................................ F-26
Condensed Consolidated Statements of Operations for the
Nine Months ended September 30, 1997 and 1996
(unaudited)............................................ F-27
Condensed Consolidated Statement of Changes in
Shareholders' Equity for the Nine Months ended
September 30, 1997 (unaudited)......................... F-28
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1997 and 1996
(unaudited)............................................ F-29
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................ F-30
</TABLE>
All schedules are omitted because of the absence of the conditions under
which they are required or because the required information is included in the
financial statements and related notes.
F-1
<PAGE> 89
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
South Florida Banking Corp. and Subsidiary
Bonita Springs, Florida
We have audited the accompanying consolidated balance sheets of South
Florida Banking Corp. and Subsidiary at December 31, 1996 and 1995, and the
related consolidated statements of operations, changes in stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1996. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of South Florida
Banking Corp. and Subsidiary at December 31, 1996, and 1995, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Fort Myers, Florida
January 24, 1997
F-2
<PAGE> 90
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
ASSETS
Cash and due from banks..................................... $ 11,620,734 $ 10,193,783
Investment securities available for sale.................... 63,189,663 58,959,702
Loans held for sale......................................... 0 4,484,614
Loans, net.................................................. 152,941,448 126,524,223
Premises and equipment, net................................. 5,836,223 4,250,553
Other real estate owned, net................................ 700,668 723,438
Other assets................................................ 2,785,014 1,992,216
------------ ------------
Total assets...................................... $237,073,750 $207,128,529
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits.................................................. $208,207,588 $179,094,854
Securities sold under agreement to repurchase............. 10,080,117 8,965,759
Note payable.............................................. 1,425,000 1,000,000
Other liabilities......................................... 2,293,001 4,362,266
------------ ------------
Total liabilities................................. 222,005,706 193,422,879
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 16)
SHAREHOLDERS' EQUITY
Common stock, $1 par value per share, 2,000,000 shares
authorized; 1,145,683 issued at December 31, 1996 and
1,088,044 shares issued at December 31, 1995........... 1,145,683 1,088,044
Additional paid-in capital................................ 7,435,959 6,469,671
Retained earnings......................................... 6,692,847 6,006,154
Unrealized holding gain (loss) on investment securities
available for sale, net................................ (193,505) 154,721
------------ ------------
15,080,984 13,718,590
Less treasury stock, at cost (647 shares)................. (12,940) (12,940)
------------ ------------
Total shareholders' equity........................ 15,068,044 13,705,650
------------ ------------
Total liabilities and shareholders' equity........ $237,073,750 $207,128,529
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE> 91
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
Interest income
Interest on loans..................................... $12,639,576 $10,194,654 $ 7,227,570
Interest on investment securities available for
sale............................................... 3,850,820 3,363,573 3,372,322
Interest on investment securities held to maturity.... 0 613,450 600,906
Other interest income................................. 75,029 46,859 135,805
----------- ----------- -----------
Total interest income......................... 16,565,425 14,218,536 11,336,603
----------- ----------- -----------
Interest expense
Interest on deposits.................................. 6,550,728 5,758,328 4,047,760
Interest on short-term borrowings..................... 606,981 592,076 259,859
----------- ----------- -----------
Total interest expense........................ 7,157,709 6,350,404 4,307,619
----------- ----------- -----------
Net interest income........................... 9,407,716 7,868,132 7,028,984
Provision for credit losses............................. 569,188 503,849 199,000
----------- ----------- -----------
Net interest income after provision for credit
losses...................................... 8,838,528 7,364,283 6,829,984
----------- ----------- -----------
Other operating income.................................. 1,626,533 1,248,229 1,007,321
----------- ----------- -----------
Other operating expenses................................ 7,507,577 7,141,009 5,392,985
----------- ----------- -----------
Income before income taxes.................... 2,957,484 1,471,503 2,444,320
Provision for income taxes.............................. 856,269 271,000 707,000
----------- ----------- -----------
Net income.................................... $ 2,101,215 $ 1,200,503 $ 1,737,320
=========== =========== ===========
Earnings per share...................................... $ 1.84 $ 1.05 $ 1.54
=========== =========== ===========
Weighted average number of shares outstanding........... 1,143,585 1,140,461 1,130,777
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE> 92
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
----------------------------------------------------------------------------------------------------
UNREALIZED
HOLDING
GAIN (LOSS)
ON INVESTMENT
COMMON STOCK ADDITIONAL TREASURY STOCK SECURITIES TOTAL
---------------------- PAID-IN RETAINED ----------------- AVAILABLE FOR SHAREHOLDERS'
SHARES PAR VALUE CAPITAL EARNINGS SHARES COST SALE, NET EQUITY
--------- ---------- ---------- ---------- ------ -------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31,
1993..................... 950,421 $ 950,421 $4,683,705 $5,478,401 0 $ 0 $ 578,834 $11,691,361
Issuance of common stock
on February 24, 1994
from the 5% stock
dividend declared on
January 28, 1994....... 48,257 48,257 741,710 (792,325) 0 0 0 (2,358)
Exercise of incentive
stock options, net of
6,668 shares previously
issued stock
surrendered and
reissued............... 25,282 25,282 125,787 0 0 0 0 151,069
Dividends declared....... 0 0 0 (346,584) 0 0 0 (346,584)
Change in unrealized
holding gain (loss) on
investment securities
available for sale,
net.................... 0 0 0 0 0 0 (2,401,432) (2,401,432)
Net income......... 0 0 0 1,737,320 0 0 0 1,737,320
--------- ---------- ---------- ---------- ----- -------- ----------- -----------
Balances at December 31,
1994..................... 1,023,960 1,023,960 5,551,202 6,076,812 0 0 (1,822,598) 10,829,376
Issuance of common stock
on February 24, 1995
from the 5% stock
dividend declared on
January 31, 1995....... 51,584 51,584 825,344 (879,716) 0 0 0 (2,788)
Exercise of incentive
stock options.......... 12,500 12,500 93,125 0 0 0 0 105,625
Dividends declared....... 0 0 0 (391,445) 0 0 0 (391,445)
Change in unrealized
holding gain (loss) on
investment securities
available for sale,
net.................... 0 0 0 0 0 0 1,977,319 1,977,319
Purchase of treasury
stock.................. 0 0 0 0 (647) (12,940) 0 (12,940)
Net income......... 0 0 0 1,200,503 0 0 0 1,200,503
--------- ---------- ---------- ---------- ----- -------- ----------- -----------
Balances at December 31,
1995..................... 1,088,044 1,088,044 6,469,671 6,006,154 (647) (12,940) 154,721 13,705,650
Issuance of common stock
on February 23, 1996
from the 5% stock
dividend declared on
January 30, 1996....... 54,289 54,289 922,913 (979,782) 0 0 0 (2,580)
Exercise of incentive
stock options.......... 3,350 3,350 43,375 0 0 0 0 46,725
Dividends declared....... 0 0 0 (434,740) 0 0 0 (434,740)
Change in unrealized
holding gain (loss) on
investment securities
available for sale,
net.................... 0 0 0 0 0 0 (348,226) (348,226)
Net income......... 0 0 0 2,101,215 0 0 0 2,101,215
--------- ---------- ---------- ---------- ----- -------- ----------- -----------
Balances at December 31,
1996..................... 1,145,683 $1,145,683 $7,435,959 $6,692,847 $(647) $(12,940) $ (193,505) $15,068,044
========= ========== ========== ========== ===== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE> 93
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income......................................... $ 2,101,215 $ 1,200,503 $ 1,737,320
------------ ------------ ------------
Adjustments to reconcile net income to net cash
used in operating activities
Deferred tax provision (credit)................. (112,000) (208,000) 147,000
Depreciation.................................... 779,851 638,327 415,710
Amortization on investment securities........... 38,596 14,736 58,041
Provision for credit losses..................... 569,188 503,849 199,000
Gain on sale of other real estate owned......... (108,109) (5,674) (23,090)
Gain on sale of investment securities available
for sale...................................... (92,835) (84,115) (2,719)
Gain on sale of loans........................... (93,901) (140,471) (148,661)
Loss on disposal of equipment................... 2,369 42,685 48,302
Proceeds from sale of loans held for sale....... 9,860,495 6,528,422 11,086,569
Net loans to customers.......................... (44,775,010) (37,233,036) (28,051,530)
Origination cost of loans held for sale......... (12,041) (4,188) (36,810)
Loans purchased................................. (259,110) 0 0
Increase in net deferred loan fees.............. 51,908 1,929 3,566
(Increase) decrease in other assets............. (792,798) 746,942 (1,006,400)
(Decrease) increase in other liabilities........ (2,069,265) 923,391 1,876,237
------------ ------------ ------------
Total adjustments.......................... (37,012,662) (28,275,203) (15,434,785)
------------ ------------ ------------
Net cash used in operating activities...... (34,911,447) (27,074,700) (13,697,465)
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of other real estate owned...... 1,063,355 9,400 293,880
Payments on other real estate owned................ (36,788) (143,438) 0
Proceeds from the sales of investment securities
available for sale.............................. 14,796,426 3,956,747 2,926,122
Proceeds from maturities of investment
securities...................................... 5,272,600 5,815,603 2,612,000
Proceeds from principal reductions of investment
securities...................................... 5,318,378 6,771,554 10,394,957
Purchase of investment securities.................. (18,006,736) (4,390,308) (21,826,465)
Purchase of premises and equipment................. (2,339,627) (1,732,566) (1,947,139)
------------ ------------ ------------
Net cash provided by (used in) investing
activities............................... 6,067,608 10,286,992 (7,546,645)
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE> 94
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options.......................... $ 39,375 $ 95,620 $ 144,957
Payment of dividends and fractional shares......... (420,682) (388,501) (323,337)
Purchase of treasury stock......................... 0 (12,940) 0
Net increase (decrease) in repurchase agreement.... 1,114,359 2,332,451 (440,806)
Net increase (decrease) in demand deposits, money
market and savings accounts..................... 15,972,168 9,512,325 (341,981)
Net increase in certificates of deposit............ 13,140,570 6,908,982 21,576,869
Proceeds from issuance of note payable............. 1,175,000 1,000,000 0
Repayment of debt.................................. (750,000) 0 0
------------ ------------ ------------
Net cash provided by financing
activities............................... 30,270,790 19,447,937 20,615,702
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents.............................. 1,426,951 2,660,229 (628,408)
Cash and cash equivalents at beginning of
year..................................... 10,193,783 7,533,554 8,161,962
------------ ------------ ------------
Cash and cash equivalents at end of year... $ 11,620,734 $ 10,193,783 $ 7,533,554
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................ $ 6,497,416 $ 6,241,404 $ 4,219,508
Income taxes.................................... 898,232 478,058 541,051
------------ ------------ ------------
$ 7,395,648 $ 6,719,462 $ 4,760,559
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Net loans transferred to other real estate owned... $ 1,123,000 $ 47,000 $ 275,800
============ ============ ============
Sale of other real estate owned financed by the
Company......................................... $ 743,985 $ 113,400 $ 131,785
============ ============ ============
Securitization of loans with FHLMC and FNMA
transferred to investment securities............ $ 11,635,404 $ 3,471,142 $ 3,288,539
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-7
<PAGE> 95
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION
South Florida Banking Corp. (Company) is a one-bank holding company,
operated under the laws of the State of Florida. Its wholly-owned banking
subsidiary is First National Bank of Florida at Bonita Springs (formerly known
as First National Bank of Bonita Springs) (Bank), a nationally chartered bank.
The Bank has two subsidiaries, First National Mortgage Group, Inc. and McDad,
Inc. Both of these entities were inactive at December 31, 1996, 1995 and 1994.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies of the Company and the Bank conform
to generally accepted accounting principles and to general practice within the
banking industry. Following is a description of the more significant of those
policies:
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, First National Bank of Florida at Bonita
Springs, and its wholly-owned subsidiaries, First National Mortgage Group, Inc.
and McDad, Inc., collectively referred to herein as the Company. All significant
intercompany accounts and transactions have been eliminated.
INVESTMENT SECURITIES
Investment securities are classified in the following categories:
Held to maturity. Investment securities that management has the intent and
the Company has the ability at the time of purchase to hold until maturity are
classified as securities held to maturity. Securities in this category are
carried at amortized cost adjusted for accretion of discounts and amortization
of premiums using the effective interest method over the estimated life of the
securities. If a security has a decline in fair value below its amortized cost
that is other than temporary, then the security will be written down to its new
cost basis by recording a loss in the consolidated statement of operations. The
Company currently has no securities classified as held to maturity securities.
Available for sale. Investment securities to be held for indefinite
periods of time and not intended to be held to maturity are classified as
available for sale. Assets included in this category are those assets that
management intends to use as part of its asset/liability management strategy and
that may be sold in response to changes in interest rates, resultant prepayment
risk and other factors related to interest rate and resultant prepayment risk
changes. Securities available for sale are recorded at fair value. Both
unrealized holding gains and losses on securities available for sale, net of
taxes, are included as a separate component of shareholders' equity in the
consolidated balance sheets until these gains or losses are realized. The cost
of investment securities sold is determined by the specific identification
method. If a security has a decline in fair value that is other than temporary,
then the security will be written down to its fair value by recording a loss in
the consolidated statement of operations.
Trading securities. Securities that are held principally for the purpose
of selling in the near future are classified as trading securities. These
securities are recorded at fair value. Both unrealized gains and losses are
included in the consolidated statement of operations. The Company currently has
no securities classified as trading securities.
LOANS
Loans are carried at the principal amount outstanding, net of deferred loan
fees. Interest is accrued on a simple-interest basis. Loans are charged to the
allowance for loan losses at such time as management
F-8
<PAGE> 96
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
considers them uncollectible in the normal course of business. Accrual of
interest on past due loans is discontinued when not well collateralized and in
the process of collection. Classification of a loan as nonaccrual is not
necessarily indicative of a potential loss of principal.
ALLOWANCE FOR CREDIT LOSSES
The allowance for credit losses is based upon the Company's current and
historical loss experience, management's overall evaluation of the inherent
risks in the loan portfolio and detailed evaluations of the collectibility and
underlying value of collateral. Ultimate losses may vary from the current
estimates and any adjustments, as they become necessary, are reported in
earnings in the periods in which they become known.
The allowance is an amount that management believes will be adequate to
absorb possible losses on existing loans that may become uncollectible, based on
evaluations of the collectibility of loans and prior loan loss experience. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, review of specific
problem loans, concentrations of credit and current economic conditions that may
affect the borrowers' ability to pay. Accrual of interest is discontinued on a
loan, including impaired loans, when management believes, after considering
economic and business conditions and collection efforts, that the borrowers'
financial condition is such that collection of interest is doubtful.
Classification of a loan as nonaccrual is not necessarily indicative of a
potential loss of principal. Collections of interest and principal on nonaccrual
loans are generally applied as a reduction to principal outstanding.
LOAN FEES
Loan origination and commitment fees and certain direct loan origination
costs are deferred and amortized to interest income using the interest method
over the life of the related loan. Net deferred loan fees on loans held for sale
are reversed at time of sale.
OTHER REAL ESTATE OWNED
Other real estate owned includes properties acquired through foreclosure or
acceptance of deeds in lieu of foreclosure. These properties are recorded on the
date acquired at the lower of fair value minus estimated costs to sell or the
recorded investment in the related loan. If the fair value minus estimated costs
to sell the property acquired is less than the recorded investment in the
related loan, the resulting loss is charged to the allowance for credit losses.
The resulting carrying value established at the date of foreclosure becomes the
new cost basis for subsequent accounting. After foreclosure, if the fair value
minus estimated costs to sell the property becomes less than its cost, the
deficiency is charged to the provision for losses on other real estate owned or
charged directly to the asset. Costs relating to the development and improvement
of the property are capitalized, whereas those relating to holding the property
for sale are charged to expense.
MORTGAGE LOAN ADMINISTRATION
The Company originates and sells real estate mortgage loans in the
secondary market as part of normal operations. Loans originated pending sale are
classified as loans held for sale. Such loans are valued at the lower of cost or
market. All loans sold are subject to a recourse provision relating only to
documentation deficiencies, which the Company may correct. Gains and losses
resulting from sales of these loans are recognized in the period the sale
occurs, as the recourse provisions are not considered to significantly affect
the earnings process. Mortgage loan servicing fees are earned concurrently with
the receipt of the related mortgage payments.
The Company adopted Statement of Financial Accounting Standards No. 122,
"Accounting for Mortgage Servicing Rights," (SFAS No. 122) effective January 1,
1996, which requires the Company to
F-9
<PAGE> 97
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
recognize an asset for rights to service mortgage loans for others regardless of
the manner in which those servicing rights are acquired. It also requires the
Company to assess its capitalized mortgage servicing rights for impairment based
on the fair value of those rights. The value of mortgage servicing rights
related to loans sold during 1996 was immaterial.
In June 1996, Statement of Financial Accounting Standards No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities," (SFAS No. 125) was issued. SFAS No. 125 provides accounting and
reporting standards based on a control-oriented "financial-components" approach.
Under that approach, after a transfer of financial assets, an entity recognizes
the financial and servicing assets it controls and liabilities it has incurred,
derecognizes financial assets when control has been surrendered, and
derecognizes liabilities when extinguished. SFAS No. 125 is effective on a
prospective basis January 1, 1997.
PREMISES AND EQUIPMENT
Land is stated at cost. The remaining premises and equipment are stated at
net depreciated cost. Depreciation is computed using the straight-line method
over the estimated useful lives of the related assets. Major improvements and
betterments of property are capitalized. Maintenance, repairs and minor
improvements are expensed as incurred. Upon retirement or other disposition of
the assets, the applicable net depreciated cost is removed from the accounts and
any gains or losses are included in income.
INCOME TAXES
The Company and its banking subsidiary file consolidated income tax
returns. Deferred tax assets or liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal tax rate. Deferred income tax expenses or credits are
based on the changes in the asset or liability from period to period. The effect
on deferred income taxes of a change in tax rates is recognized in income in the
period that includes the enactment date.
STATEMENT OF CASH FLOWS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, amounts due from banks and federal funds sold. Generally, federal
funds are sold for one-day periods.
EARNINGS PER SHARE
Earnings per share have been computed by dividing net income by the
weighted average number of shares outstanding each year, as restated to give
retroactive effect to stock dividends declared. Common stock equivalents in the
form of outstanding stock options have been included.
MANAGEMENT'S USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
RECLASSIFICATIONS
Certain amounts in the 1995 and 1994 financial statements have been
reclassified to conform to the current year presentation. These
reclassifications have no effect on the net income, shareholders' equity or
total cash flows balances previously reported.
F-10
<PAGE> 98
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(3) INVESTMENT SECURITIES
The amortized cost and fair values of investments are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities.............. $ 1,625,384 $ 1,168 $ (986) $ 1,625,566
U.S. Government agencies.............. 8,561,783 5,615 (119,340) 8,448,058
Mortgage-backed securities............ 33,519,533 115,428 (855,132) 32,779,829
Obligations of state and political
subdivisions....................... 14,044,664 459,892 (47) 14,504,509
Equity securities..................... 4,748,744 72,206 (11,250) 4,809,700
Other................................. 999,762 22,239 0 1,022,001
----------- -------- --------- -----------
$63,499,870 $676,548 $(986,755) $63,189,663
=========== ======== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------------------
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Available for sale:
U.S. Treasury securities.............. $ 3,098,709 $ 51,070 $ 0 $ 3,149,779
U.S. Government agencies.............. 8,363,657 0 (232,187) 8,131,470
Mortgage-backed securities............ 33,249,492 173,670 (429,545) 32,993,617
Obligations of state and political
subdivisions....................... 10,707,642 554,245 0 11,261,887
Equity securities..................... 2,291,326 84,723 0 2,376,049
Other................................. 999,509 47,391 0 1,046,900
----------- -------- --------- -----------
$58,710,335 $911,099 $(661,732) $58,959,702
=========== ======== ========= ===========
</TABLE>
The Company's investment securities which are available for sale are
recorded at fair value. Unrealized holding gains and losses on securities
available for sale, net of deferred taxes, are shown as a separate component of
shareholders' equity on the consolidated balance sheets. At December 31, 1996,
an unrealized holding loss of $310,207, net of deferred taxes of $116,702, was
shown as a component of shareholders' equity. At December 31, 1995, an
unrealized holding gain of $154,721, net of deferred tax assets of $94,646, was
shown as a component of shareholders' equity.
The amortized cost and fair value of investment securities available for
sale at December 31, 1996, by contractual maturity, are shown below. Expected
maturities will differ from contractual maturities because borrowers may have
the right to call or prepay obligations with or without call or prepayment
penalties.
F-11
<PAGE> 99
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Available for sale:
Due in one year or less................................... $ 4,102,350 $ 4,116,401
Due after one year through five years..................... 8,786,426 8,795,806
Due after five years through ten years.................... 6,763,265 6,969,067
Due after ten years....................................... 5,579,552 5,718,860
----------- -----------
25,231,593 25,600,134
Mortgage-backed securities................................ 33,519,533 32,779,829
Equity securities......................................... 4,748,744 4,809,700
----------- -----------
$63,499,870 $63,189,663
=========== ===========
</TABLE>
Proceeds from the sale of investment securities were $14,845,316,
$3,956,747 and $2,926,122 for the years ended December 31, 1996, 1995 and 1994,
respectively. Gross gains of $161,443, $99,139 and $18,993 and gross losses of
$68,608, $15,024 and $16,274 were realized on these sales in 1996, 1995 and
1994, respectively.
At December 31, 1996, the amortized cost and fair value of investment
securities pledged to secure public funds, short-term borrowings and other
purposes required by law were approximately $21,641,000 and $21,578,000,
respectively. The current value of the pledged securities is adequate to meet
the pledging requirements.
(4) LOANS AND ALLOWANCE FOR CREDIT LOSSES
The Company's loan portfolio consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Commercial................................................ $ 42,096,809 $ 37,161,222
Real estate construction.................................. 13,936,403 11,836,811
Real estate mortgage...................................... 92,360,395 73,459,247
Installment............................................... 6,377,929 5,669,566
------------ ------------
154,771,536 128,126,846
------------ ------------
Less:
Allowance for credit losses............................. (1,678,212) (1,398,840)
Deferred loan fees...................................... (151,876) (203,783)
------------ ------------
(1,830,088) (1,602,623)
------------ ------------
Loans, net...................................... $152,941,448 $126,524,223
============ ============
</TABLE>
An analysis of the Company's allowance for credit losses is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Balance at beginning of year....................... $1,398,840 $1,061,795 $ 960,362
Provision charged to operations.................... 569,188 503,849 199,000
Loans charged off.................................. (304,015) (171,198) (130,467)
Recoveries of loans charged off.................... 14,199 4,394 32,900
---------- ---------- ----------
Balance at end of year............................. $1,678,212 $1,398,840 $1,061,795
========== ========== ==========
</TABLE>
At December 31, 1996, the recorded investment in loans for which impairment
has been recognized totaled $1,226,044, none of which related to loans with no
valuation allowance because the loans have been
F-12
<PAGE> 100
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
partially written down through charge-offs, and $1,226,044 related to loans with
a corresponding valuation allowance of $146,085. For the year ended December 31,
1996, the average recorded investment in impaired loans was $1,272,812. The
Company recognized $3,938 of interest on impaired loans during the portion of
the year that they were impaired, none of which related to impaired loans for
which interest income is recognized on the cash basis.
At December 31, 1996, 1995 and 1994, the Company had approximately
$1,006,000, $3,464,000 and $3,208,000 in nonaccrual loans, respectively. For the
years ended December 31, 1996, 1995 and 1994 the amount of interest income not
recorded related to nonaccrual loans was approximately $152,000, $296,000 and
$254,000, respectively. At December 31, 1996, 1995 and 1994 there were no
accruing loans that were 90 days or more past due.
The Company sold loans under agreements containing recourse provisions. At
December 31, 1996, three loans sold remain outstanding with a remaining balance
of approximately $201,000. The recourse provisions require the Company to
repurchase the loans which become greater than 90 to 120 days delinquent.
Some of the Directors of the Company are also owners or executive officers
in other business organizations. The Company has made loans to these individuals
and related companies, as well as to executive officers of the Company.
Aggregate loans to these related parties, exclusive of loans to such persons
which, in aggregate, do not exceed $60,000, were as follows:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Balance at beginning of year................................ $ 3,965,079 $ 3,275,756
New loans................................................... 2,838,957 4,765,351
Repayment of loans.......................................... (522,404) (2,792,695)
Loan participations sold.................................... (1,133,333) (1,283,333)
----------- -----------
Balance at end of year...................................... $ 5,148,299 $ 3,965,079
=========== ===========
</TABLE>
(5) PREMISES AND EQUIPMENT
Premises and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Land........................................................ $ 1,337,319 $ 216,584
Land improvements........................................... 405,639 405,639
Buildings................................................... 3,952,268 3,393,076
Furniture, fixtures and equipment........................... 4,050,674 3,534,022
----------- -----------
Less accumulated depreciation............................... 9,745,900 7,549,321
(3,909,677) (3,298,768)
----------- -----------
$ 5,836,223 $ 4,250,553
=========== ===========
</TABLE>
(6) OTHER REAL ESTATE OWNED
Other real estate owned consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Seven residential lots...................................... $700,668 $723,438
======== ========
</TABLE>
Other real estate owned is recorded net of allowance for losses on other
real estate owned of $140,000 at December 31, 1995. No allowance for losses on
other real estate owned was recorded at December 31, 1996.
F-13
<PAGE> 101
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) DEPOSITS
Deposits consisted of the following at December 31:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
Non-interest-bearing demand deposits...................... $ 23,085,394 $ 21,072,625
------------ ------------
Interest-bearing deposits:
NOW..................................................... 63,993,333 58,775,702
Money market............................................ 18,489,881 13,806,507
Savings................................................. 20,967,001 16,908,610
Certificates of deposit................................. 81,671,979 68,531,410
------------ ------------
Total interest-bearing deposits................. 185,122,194 158,022,229
------------ ------------
$208,207,588 $179,094,854
============ ============
</TABLE>
The aggregate amount of certificates of deposit of $100,000 or more at
December 31, 1996 and 1995 was $12,939,000 and $9,257,000, respectively.
Interest on deposits was as follows for the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
NOW................................................ $1,605,100 $1,331,754 $ 718,008
Money market....................................... 470,005 536,460 690,265
Savings............................................ 423,190 372,907 424,333
Certificates of deposit............................ 4,052,433 3,517,207 2,215,154
---------- ---------- ----------
$6,550,728 $5,758,328 $4,047,760
========== ========== ==========
</TABLE>
(8) NOTE PAYABLE
The Company has a $3,000,000 revolving line of credit with a national
banking association which is collateralized by 188,310 shares of common stock
and 285,000 shares of preferred stock of the Bank. The revolving line of credit
matures October 2004 and had $1,425,000 and $1,000,000 outstanding at December
31, 1996 and 1995, respectively. The interest charged on the loan is the
lender's prime rate, 8.25% at December 31, 1996. Covenants include a minimum
capital and non-performing asset ratio and maximum aggregate dividend amounts,
which have been met.
(9) OTHER OPERATING INCOME
Other operating income consisted of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Service fees and charges........................... $1,249,956 $ 928,496 $ 797,704
Net gain on sale of mortgage loans................. 93,901 140,471 148,661
Net gain on sale of investment securities.......... 92,835 84,115 2,719
Net gain on sale of other real estate owned........ 108,109 5,674 23,090
Other.............................................. 81,732 89,473 35,147
---------- ---------- ----------
$1,626,533 $1,248,229 $1,007,321
========== ========== ==========
</TABLE>
F-14
<PAGE> 102
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(10) OTHER OPERATING EXPENSES
Other operating expenses consisted of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Salaries and employee benefits..................... $3,402,517 $3,254,672 $2,560,863
Furniture and equipment............................ 997,068 934,642 667,300
Occupancy.......................................... 680,372 647,404 398,062
Printing, postage and supplies..................... 385,983 362,263 253,247
Other real estate owned, net....................... 286,563 265,262 95,601
Insurance.......................................... 26,204 208,272 351,098
Other.............................................. 1,728,870 1,468,494 1,066,814
---------- ---------- ----------
$7,507,577 $7,141,009 $5,392,985
========== ========== ==========
</TABLE>
Salaries and employee benefits of $503,274, $412,000 and $352,000 in 1996,
1995 and 1994, respectively, have been included as part of loan origination
costs.
(11) INCOME TAXES
The Company's provision for income taxes consisted of the following for the
years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Current
Federal............................................ $ 828,000 $ 401,000 $475,000
State.............................................. 140,000 78,000 85,000
--------- --------- --------
Total current.............................. 968,000 479,000 560,000
--------- --------- --------
Deferred
Federal............................................ (95,000) (177,000) 115,000
State.............................................. (17,000) 31,000 32,000
--------- --------- --------
Total deferred............................. (112,000) (208,000) 147,000
--------- --------- --------
Total...................................... $ 856,000 $ 271,000 $707,000
========= ========= ========
</TABLE>
Deferred income tax provision (benefit) consisted of the following as of
December 31:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- --------
<S> <C> <C> <C>
Accretion on securities.............................. $ (59,000) $ 0 $ 0
Depreciation......................................... (11,000) (35,000) 0
Deferred loan fees................................... 32,000 (32,000) 93,000
Provision for loan losses............................ (89,000) (95,000) 0
Provision for other real estate owned................ 46,000 0 0
Accrued bonuses...................................... 0 0 39,000
Accrued interest on non-accrual loans................ (17,000) (45,000) 0
Other................................................ (14,000) (1,000) 15,000
--------- --------- --------
$(112,000) $(208,000) $147,000
========= ========= ========
</TABLE>
F-15
<PAGE> 103
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company's effective income tax rate before consideration of the
utilization of net operating loss carryforwards varies from the statutory
federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
Income tax expense at statutory federal rate........ $1,020,000 $ 500,000 $ 833,000
Tax-exempt interest income.......................... (244,000) (233,000) (207,000)
State income taxes, net of federal tax benefit...... 92,000 51,000 77,000
Other............................................... (12,000) (47,000) 4,000
---------- --------- ---------
$ 856,000 $ 271,000 $ 707,000
========== ========= =========
</TABLE>
Included in other assets at December 31, 1996 and 1995 is a net deferred
tax asset of $281,000 and $169,000, respectively. The tax effects of the
temporary differences that comprise the net deferred tax asset are as follows:
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred tax assets:
Provision for loan losses................................. $411,000 $321,000
Provision for other real estate owned..................... 0 46,000
Gain on loans held for sale............................... 32,000 32,000
Accrued interest on non-accrual loans..................... 69,000 52,000
Other..................................................... 13,000 62,000
Valuation allowance....................................... (75,000) (85,000)
-------- --------
450,000 428,000
-------- --------
Deferred tax liabilities:
Depreciation.............................................. 110,000 120,000
Accretion on securities................................... 32,000 135,000
Deferred loan fees........................................ 23,000 0
Other..................................................... 4,000 4,000
-------- --------
169,000 259,000
-------- --------
Net deferred tax asset............................ $281,000 $169,000
======== ========
</TABLE>
F-16
<PAGE> 104
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(12) COMMON STOCK DIVIDENDS
A summary of cash dividends declared and paid during the years ended
December 31, 1994, 1995 and 1996 is as follows:
<TABLE>
<CAPTION>
DATE OF DATE OF DIVIDEND PAYMENT TOTAL
DIVIDEND DIVIDEND DIVIDEND TO SHAREHOLDERS CASH
DECLARATION AMOUNT PAYMENT OF RECORD ON DIVIDENDS
- ---------------------------- -------- ---------------- ---------------------------- ---------
<S> <C> <C> <C> <C>
1994:
February 28, 1994......... $.08 April 20, 1994 March 10, 1994.............. $ 81,333
May 23, 1994.............. $.08 July 20, 1994 June 10, 1994............... 81,446
July 18, 1994............. $.09 October 20, 1994 September 12, 1994.......... 91,672
September 24, 1994........ $.09 January 20, 1995 December 12, 1994........... 92,133
--------
Total $346,584
========
1995:
February 28, 1995......... $.09 April 20, 1995 March 10, 1995.............. $ 97,789
May 22, 1995.............. $.09 July 20, 1995 July 10, 1995............... 97,924
July 17, 1995............. $.09 October 20, 1995 October 20, 1995............ 97,866
October 23, 1995.......... $.09 January 22, 1996 January 12, 1996............ 97,866
--------
Total $391,445
========
1996:
February 26, 1996......... $.09 April 22, 1996 April 12, 1996.............. $102,864
May 20, 1996.............. $.09 July 22, 1996 July 12, 1996............... 102,918
September 23, 1996........ $.10 October 21, 1996 October 11, 1996............ 114,454
December 16, 1996......... $.10 January 21, 1997 January 10, 1997............ 114,504
--------
$434,740
========
</TABLE>
See Note 13 for information relevant to dividend restrictions.
(13) DIVIDEND RESTRICTIONS
The primary source of funds for the cash dividends paid by the Company to
its shareholders is dividends received from its banking subsidiary. The Bank, as
a nationally chartered bank, is limited in the amount of cash dividends that may
be paid to its parent. The amount of cash dividends that may be paid is based on
the Bank's net profits of the current year combined with the Bank's retained net
profits of the preceding two years as defined by national banking regulations.
At December 31, 1996, the Bank had approximately $3,614,000 available for the
payment of cash dividends to its parent as determined by the applicable
regulations. This amount is net of cash dividends paid by the Bank to the
Company in the amounts of approximately $543,000, $448,000 and $399,000 for the
years ended December 31, 1996, 1995 and 1994, respectively.
(14) BENEFIT PLANS
The Bank has a defined contribution Profit Sharing Plan covering officers
and employees meeting certain eligibility requirements. Contributions to the
Profit Sharing Plan are determined annually at the discretion of the Bank's
Board of Directors. There were contributions of $84,000, $72,000 and $60,000 for
the years ended December 31, 1996, 1995 and 1994, respectively.
Effective in 1990, the Bank adopted a savings plan (Plan) under Section
401(k) of the Internal Revenue Code for eligible employees. The Plan is designed
to provide eligible employees an opportunity for regular savings for their
retirement to supplement benefits provided under the Federal Social Security
Act. The Plan
F-17
<PAGE> 105
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
allows employees to defer up to $9,500 (effective January 1, 1996 as indexed for
cost of living increases by the Department of Treasury) of their income on a
pretax basis through contributions to the Plan. This limit applies to total
aggregate contributions made by the employee in any or all of the Bank's plans
within the taxable year. In accordance with the Plan, the Bank will contribute
an amount equal to 50% of the amount contributed by the employee up to 6% of the
employee's compensation. Employee contributions vest immediately. Employer
matching contributions vest after two years of service.
For the years ended December 31, 1996, 1995 and 1994 the Bank recorded
expense for the matching contributions of $49,500, $50,000 and $44,000,
respectively.
(15) STOCK OPTION PLANS
The Company has an Incentive Stock Option Plan (Incentive Plan) for key
employees in order to secure and retain employees of outstanding ability. The
Incentive Plan, as amended on March 28, 1995, authorized options for up to
140,000 shares of common stock. The Incentive Plan provides for the grant of
options at the discretion of a committee designated by the Board of Directors to
administer the Incentive Plan. No person may serve as a member of the committee
who is then eligible to receive stock options nor shall the member have been
eligible for a period of one year prior to his service on the committee. The
option exercise price must be at least 100% (110% in the case of a key employee
who owns 10% or more of the total combined voting power of all classes of stock)
of the fair market value of the stock on the date the option is granted and the
options are exercisable by the holder thereof in full at any time after they
become vested and prior to their expiration in accordance with the terms of the
Incentive Plan. Stock options granted pursuant to the Incentive Plan expire five
years from the date of grant.
A summary of the options granted and exercised is as follows:
<TABLE>
<CAPTION>
YEAR GRANTED
--------------------------------
1992 1995 1996 TOTAL
-------- --------- --------- ---------
<S> <C> <C> <C> <C>
Options granted and outstanding at
December 31, 1995............................. 1,250 25,000 0 26,250
Options granted in 1996......................... 0 0 7,000 7,000
Less: Options exercised......................... (1,250) (600) 0 (1,850)
Less: Options expired........................... 0 (1,000) 0 (1,000)
-------- --------- --------- ---------
Outstanding options at December 31, 1996........ 0 23,400 7,000 30,400
======== ========= ========= =========
Options exercisable at December 31, 1996........ 0 6,150 0 6,150
======== ========= ========= =========
Price range of options outstanding at December $19.25 to $17.25 to
1996............................................ $ 8.00 $ 17.25 $20.25 $20.25
======== ========= ========= =========
Price range of options exercised during the 17.25 to
year............................................ $ 8.00 $17.50 $ 0 $8 - 17.50
======== ========= ========= =========
</TABLE>
In 1994, the Company adopted a non-employee Non-Qualified Stock Option Plan
(the Plan) for Directors. The Plan's purpose is to attract and retain capable
non-employee Directors to the service of the Company and its subsidiaries. This
Plan authorizes options for up to 25,000 shares of common stock. On the date of
each annual meeting of shareholders, commencing in 1994, each Director of the
Company and its subsidiaries not employed by the Company or its subsidiaries,
continuing in office after the annual meeting shall automatically be granted an
option to purchase 500 shares of the common stock of the Company. The price
shall be determined and fixed by the Board at the lesser of the book value per
share as of the preceding December 31 or the market price of the shares at the
close of business on the day preceding the date of grant. The duration of each
option shall be five (5) years from the date of grant. No options may be granted
after
F-18
<PAGE> 106
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
December 31, 2003 provided, however, that the Plan and all outstanding options
shall remain in effect until such options have expired or are terminated in
accordance with the Plan.
A summary of options granted and exercised is as follows:
<TABLE>
<CAPTION>
YEAR GRANTED
------------------------
1994 1995 1996 TOTAL
------ ------ ------ --------------
<S> <C> <C> <C> <C>
Options granted and outstanding at December 31,
1995......................................... 2,000 2,500 0 4,500
Options granted in 1996........................ 0 0 4,000 4,000
Less: Options exercised........................ 0 0 (1,500) (1,500)
------ ------ ------ --------------
Outstanding options at December 31, 1996....... 2,000 2,500 2,500 7,000
====== ====== ====== ==============
Options exercisable at December 31, 1996....... 2,000 2,500 2,500 7,000
====== ====== ====== ==============
Price of options outstanding at December 31,
1996......................................... $12.30 $10.58 $12.60 $10.58 - 12.60
====== ====== ====== ==============
Price of options exercised during the year..... $ 0 $ 0 $12.60 $10.58 - 12.60
====== ====== ====== ==============
</TABLE>
The Company applies APB Opinion No. 25 and related interpretations in
accounting for its plans. Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" (SFAS No. 123), was effective January
1, 1996 and, if fully adopted, changes the methods for recognition of cost on
plans similar to those of the Company. Adoption of SFAS No. 123 is optional;
however, proforma disclosures as if the Company adopted the cost recognition
requirements under SFAS No. 123 in 1995 are not presented, as the effects were
immaterial.
(16) FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND OTHER COMMITMENTS
The Company is a party to financial instruments with off-balance sheet risk
in the normal course of business to meet the financing needs of its customers.
These financial instruments include primarily commitments to extend credit. The
instruments involve, to varying degrees, elements of credit and interest rate
risk in excess of the amount recognized in the consolidated balance sheets. The
contract amounts of these instruments reflect the extent of involvement the
Company has in particular classes of financial instruments. The Company has no
financial instruments with off-balance sheet risk that are held for trading
purposes.
The Company's exposure to credit loss in the event of nonperformance by the
counterparty to the financial instrument for commitments to extend credit is
represented by the contractual amount of those instruments. The Company uses the
same credit policies in making commitments and conditional obligations as it
does for on-balance sheet instruments.
Commitments to extend credit are commitments to lend to a customer as long
as there is no violation of any condition established in the contract.
Commitments generally have fixed expiration dates or other termination clauses
and may require payment of a fee. Since many of the commitments are expected to
expire without being drawn upon, the total commitment amounts do not necessarily
represent future cash requirements. Total commitments to extend credit at
December 31, 1996 and 1995 include $22,934,000 and $25,137,000, respectively, in
floating and fixed rate loan commitments. These commitments relate primarily to
unused equity lines of credit, with an average life of 5 years and unfunded
construction loans and commercial lines of credit, which normally expire within
one year. The average interest rate was 9% for all commitments. The Company
evaluates each customer's creditworthiness on a case-by-case basis. The amount
of collateral obtained, if deemed necessary by the Company upon extension of
credit, is based on management's credit evaluation of the counterparty.
Collateral held varies but may include accounts receivable, inventory, property,
plant and equipment, residential real estate, and income-producing commercial
properties.
F-19
<PAGE> 107
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company makes consumer, commercial and residential real estate loans to
customers located in Southwest Florida. The Company has no significant
concentration of credit risk with any individual counterparty to originate
loans. However, a substantial portion of the Company's loan portfolio is
collateralized by real estate located in Southwest Florida.
The Company has entered into various agreements with third parties to
establish bank branches at various Winn Dixie supermarket locations. Refundable
deposits totaling $10,000 have been made as of December 31, 1996.
Standby letters of credit are conditional commitments issued by the Company
to guarantee the performance of a customer to a third party. Those guarantees
are primarily issued to support public and private borrowing arrangements. The
credit risk involved in issuing letters of credit is essentially the same as
that involved in extending loan facilities to customers. The collateral varies
but may include accounts receivable, inventory, property, plant and equipment
and residential real estate for those commitments for which collateral is deemed
necessary. The Company had approximately $159,000 and $58,000 in irrevocable
standby letters of credit outstanding at December 31, 1996 and 1995,
respectively.
OPERATING LEASE
The Company has entered into several operating lease agreements at the
Bank's branch locations. The approximate future minimum rental payments under
the lease terms are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
- -----------------
<S> <C>
1997........................................................ $ 291,800
1998........................................................ 292,800
1999........................................................ 293,800
2000........................................................ 155,500
2001........................................................ 122,200
Thereafter.................................................. 1,255,000
----------
Total............................................. $2,411,100
==========
</TABLE>
Total rent expense for the year ended December 31, 1996 and 1995 was
approximately $287,000 and $218,000, respectively.
(17) FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate fair value of
each class of financial instrument for which it is practicable to estimate that
value:
CASH AND DUE FROM BANKS
For cash and due from banks, the carrying amount is a reasonable estimate
of fair value.
INVESTMENTS AND MORTGAGE-BACKED SECURITIES
The fair value of investments and mortgage-backed securities is estimated
based on bid prices published in financial newspapers or bid quotations received
from securities dealers.
LOANS
The estimated fair value of the Company's performing fixed rate loans was
calculated by discounting contractual cash flows adjusted for current prepayment
estimates. The discount rates were based on the interest rates charged to
current customers for comparable loans. The Company's performing adjustable rate
F-20
<PAGE> 108
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
loans reprice frequently at current market rates. Therefore, the fair value of
these loans has been estimated to be approximately equal to their carrying
amount.
The impact of delinquent loans on the estimation of the fair values
described above is not considered to have a material effect and, accordingly,
delinquent loans have been disregarded in the valuation methodologies used.
DEPOSIT LIABILITIES
The fair value of deposits with no stated maturity, such as demand, NOW,
money market and savings is equal to the amount payable on demand as of December
31, 1996. The fair value of time deposits is estimated using the rates currently
offered for deposits of similar remaining maturities.
SECURITIES SOLD UNDER REPURCHASE AGREEMENTS
At December 31, 1996, the Company had approximately $10,000,000 of
securities sold under repurchase agreements. The repurchase agreements
outstanding at December 31, 1996 are payable on demand. The estimated fair value
of these agreements approximates the carrying value.
COMMITMENTS TO EXTEND CREDIT, STANDBY LETTERS OF CREDIT, AND FINANCIAL
GUARANTEES WRITTEN
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. 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 financial guarantees written and 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.
The estimated fair values of the Bank's financial instruments are as
follows:
<TABLE>
<CAPTION>
1996
-------------------
CARRYING FAIR
AMOUNT VALUE
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Financial assets:
Cash and due from bank.................................... $ 11,621 $ 11,621
Investment securities available for sale.................. $ 63,090 $ 63,090
Loans, net of allowance................................... $152,235 $153,854
Financial liabilities:
Deposits.................................................. $208,551 $208,519
Securities sold not owned................................. $ 10,080 $ 10,080
</TABLE>
<TABLE>
<CAPTION>
CONTRACT
VALUE
--------
<S> <C> <C>
Unrecognized financial instruments:
Loan commitments.......................................... $ 22,934 $ 0
Standby letters of credit................................. $ 159 $ 0
</TABLE>
LIMITATIONS
The fair value estimates are made at a discrete point in time based on
relevant market information and information about the financial instrument.
Quoted market prices, when available, are used as the measure of fair value.
Where quoted market prices are not available, fair value estimates have been
based on judgments regarding future expected loss experience, current economic
conditions, risk characteristics of various financial
F-21
<PAGE> 109
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
instruments, and other factors. These estimates are inherently subjective,
involving uncertainties and matters of significant judgment, and, therefore, may
not be indicative of the value that could be realized in a current market
exchange. Changes in assumptions could significantly affect the estimates.
The fair value estimates are based on existing on- and off-balance sheet
financial instruments without attempting to estimate the value of anticipated
future business and the value of assets and liabilities that are not considered
financial instruments. Other significant assets and liabilities that are not
considered financial assets or liabilities include deferred tax assets and
property, plant and equipment. In addition, the tax ramifications related to the
realization of the unrealized gains and losses for investments and
mortgage-backed securities can have a significant effect on fair value estimates
and have not been considered in many of the estimates.
(18) REGULATORY CAPITAL
The Bank is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and 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, 1996, that the Bank
meets all capital adequacy requirements to which it is subject.
As of December 31, 1996, the most recent notification from the FDIC
categorized the Bank as well capitalized under the regulatory framework for
prompt corrective action. To be categorized as well capitalized, the Bank must
maintain minimum total risk-based, Tier I risk-based, and Tier I leverage ratios
as set forth in the table. There are no conditions or events since that
notification that management believes have changed the Bank's category.
F-22
<PAGE> 110
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Bank's actual capital amounts and ratios are also presented in the
table. There were no deductions of interest-rate risk in 1996 or 1995.
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
-------------------- -------------------- ----------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
------------ ----- ------------ ----- ------------ ------
<S> <C> <C> <C> <C> <C> <C>
As of December 31, 1996:
Total Capital (to Risk
Weighted Assets)..... $ 18,013,574 14.1% >=$10,249,406 >=8.0% >=$12,811,758 >=10.0%
Tier I Capital (to Risk
Weighted Assets)..... $ 16,400,387 12.9% >=$ 5,127,103 >=4.0% >=$ 7,687,055 >=6.0%
Tier I Capital (to
Averaged Assets)..... $ 16,400,387 7.1% >=$ 6,894,352 >=3.0% >=$11,490,587 >=5.0%
As of December 31, 1995:
Total Capital (to Risk
Weighted Assets)..... $ 15,225,733 13.5% >=$ 9,036,705 >=8.0% >=$11,295,881 >=10.0%
Tier I Capital (to Risk
Weighted Assets)..... $ 13,826,932 12.2% >=$ 4,518,352 >=4.0% >=$ 6,777,529 >=6.0%
Tier I Capital (to
Averaged Assets)..... $ 13,826,932 6.9% >=$ 6,036,869 >=3.0% >=$10,061,448 >=5.0%
</TABLE>
F-23
<PAGE> 111
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(19) CONDENSED PARENT COMPANY FINANCIAL STATEMENTS
The financial statements of South Florida Banking Corp., as the parent
organization, are presented as follows:
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents................................. $ 217,327 $ 481,791
Investment securities available for sale.................. 99,781 321,468
Investment in banking subsidiary.......................... 16,206,952 13,955,558
Other..................................................... 127,682 104,781
----------- -----------
Total assets...................................... $16,651,742 $14,863,598
=========== ===========
Liabilities
Note payable.............................................. $ 1,425,000 $ 1,000,000
Cash dividend payable..................................... 114,504 97,866
Other..................................................... 44,194 60,082
----------- -----------
Total liabilities................................. 1,583,698 1,157,948
----------- -----------
Shareholders' equity
Common stock.............................................. 1,145,683 1,088,044
Treasury stock............................................ (12,940) (12,940)
Additional paid-in capital................................ 7,435,959 6,469,671
Retained earnings......................................... 6,692,847 6,006,154
Unrealized holding gain (loss) on securities available for
sale, net.............................................. (193,505) 154,721
----------- -----------
Total shareholders' equity........................ 15,068,044 13,705,650
----------- -----------
Total liabilities and shareholders' equity........ $16,651,742 $14,863,598
=========== ===========
</TABLE>
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
Interest income............................................ $ 26,365 $ 7,846 $ 4,306
Dividends on investments................................... 5,892 14,552 7,056
Cash dividend from banking subsidiary...................... 543,190 448,411 399,392
Gain on sale of investments................................ 44,346 99,139 10,738
Interest expense........................................... (67,602) 0 0
Miscellaneous expenses..................................... (33,723) (62,326) (30,621)
---------- ---------- ----------
Income before income taxes and equity in undistributed
earnings of banking subsidiary........................ 518,468 507,622 390,871
Provision for income taxes................................. (9,290) 17,038 0
Income before equity in undistributed earnings of banking
subsidiary............................................ 527,758 490,584 390,871
Equity in undistributed earnings of banking subsidiary..... 1,573,457 709,919 1,346,449
---------- ---------- ----------
Net income....................................... $2,101,215 $1,200,503 $1,737,320
========== ========== ==========
</TABLE>
F-24
<PAGE> 112
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................ $ 2,101,215 $ 1,200,503 $ 1,737,320
----------- ----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities
Equity in undistributed earnings of banking
subsidiary....................................... (1,573,457) (709,919) (1,346,449)
Depreciation....................................... 2,358 1,857 0
Gain on sale of investment securities available for
sale............................................. (44,346) (99,139) (10,738)
Stock dividends.................................... (958) (3,461) (2,330)
Proceeds from sales of investment securities
available for sale............................... 295,026 338,912 80,147
Increase in other assets........................... (25,857) (7,383) (25,500)
Decrease in due to banking subsidiary.............. 3,660 0 (630)
Increase in other liabilities...................... 11,473 44,900 14,262
----------- ----------- -----------
Total adjustments............................. (1,332,101) (434,233) (1,291,238)
----------- ----------- -----------
Net cash provided by operating activities..... 769,114 766,270 446,082
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase investment in subsidiary..................... (1,000,000) (1,000,000) 0
Sale (purchase) of office equipment................... 1,000 (7,255) 0
Purchase of investment securities..................... (78,271) (125,746) (455,980)
----------- ----------- -----------
Net cash used in investing activities......... (1,077,271) (1,133,001) (455,980)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of note payable................ 1,175,000 1,000,000 0
Repayment of debt..................................... (750,000) 0 0
Issuance of common stock.............................. 39,375 95,620 144,956
Purchase of treasury stock............................ 0 (12,940) 0
Payment of dividends.................................. (420,682) (388,501) (323,337)
----------- ----------- -----------
Net cash provided by (used in) financing
activities.................................. 43,693 694,179 (178,381)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents................................. (264,464) 327,448 (188,279)
Cash and cash equivalents at beginning of
year........................................ 481,791 154,343 342,622
----------- ----------- -----------
Cash and cash equivalents at end of year...... $ 217,327 $ 481,791 $ 154,343
=========== =========== ===========
</TABLE>
F-25
<PAGE> 113
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
------------------
<S> <C>
ASSETS
Cash and due from banks..................................... $ 8,542,965
Federal funds sold.......................................... 2,435,000
Investment securities available for sale.................... 57,259,349
Loans, net.................................................. 167,693,424
Premises and equipment, net................................. 6,694,843
Other real estate owned, net................................ 715,668
Other assets................................................ 2,689,032
------------
Total assets...................................... $246,030,281
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Deposits.................................................. $215,913,577
Securities sold under agreement to repurchase............. 9,639,615
Short-term borrowing...................................... 400,000
Note payable.............................................. 1,600,000
Other liabilities......................................... 1,601,587
------------
Total liabilities................................. 229,154,779
------------
COMMITMENTS AND CONTINGENCIES (Note 16)
STOCKHOLDERS' EQUITY
Common stock, $1 par value per share, 2,000,000 shares
authorized; 1,213,465 issued at September 30, 1997..... 1,213,465
Additional paid-in capital................................ 8,716,387
Retained earnings......................................... 6,672,820
Unrealized holding gain on investment securities available
for sale, net.......................................... 272,830
------------
Total stockholders' equity........................ 16,875,502
------------
Total liabilities and stockholders' equity........ $246,030,281
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE> 114
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Interest income
Interest on loans......................................... $10,552,006 $ 9,270,415
Interest on investment securities available for sale...... 3,001,092 2,912,197
Other interest income..................................... 53,398 49,254
----------- -----------
Total interest income............................. 13,606,496 12,231,866
----------- -----------
Interest expense
Interest on deposits...................................... 5,508,207 4,828,250
Interest on short-term borrowings......................... 649,168 462,090
----------- -----------
Total interest expense............................ 6,157,375 5,290,340
----------- -----------
Net interest income............................... 7,449,121 6,941,526
Provision for credit losses................................. 256,700 456,288
----------- -----------
Net interest income after provision for credit
losses.......................................... 7,192,421 6,485,238
----------- -----------
Other operating income...................................... 1,624,922 1,210,714
----------- -----------
Other operating expenses.................................... 6,701,299 5,568,416
----------- -----------
Income before income taxes........................ 2,116,044 2,127,536
Provision for income taxes.................................. 582,267 730,310
----------- -----------
Net income........................................ $ 1,533,777 $ 1,397,226
=========== ===========
Earnings per share.......................................... $ 1.27 $ 1.16
=========== ===========
Weighted average number of shares outstanding............... 1,209,805 1,201,326
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE> 115
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
---------------------------------------------------------------------------------------------
COMMON STOCK ADDITIONAL UNREALIZED TOTAL
---------------------- PAID-IN RETAINED SECURITY TREASURY SHAREHOLDERS'
SHARES PAR VALUE CAPITAL EARNINGS GAINS/(LOSSES) STOCK EQUITY
--------- ---------- ---------- ----------- -------------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1996................ 1,145,683 $1,145,683 $7,435,959 $ 6,692,847 $(193,505) $(12,940) $15,068,044
Stock option.......... 10,992 10,992 187,058 198,050
5% stock dividend..... 56,790 56,790 1,093,370 (1,166,024) 12,940 (2,924)
Cash dividend......... (387,780) (387,780)
Net income year-
to-date............. 1,533,777 1,533,777
Change in unrealized
gains/(losses) on
investment
securities.......... 466,335 466,335
--------- ---------- ---------- ----------- --------- -------- -----------
Balance, September 30,
1997................ 1,213,465 $1,213,465 $8,716,387 $ 6,672,820 $ 272,830 $ 0 $16,875,502
========= ========== ========== =========== ========= ======== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE> 116
SOUTH FLORIDA BANKING CORP. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
---------------------------
1997 1996
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income................................................ $ 1,533,777 $ 1,397,226
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation............................................ 616,258 598,101
Amortization on investment securities................... 33,413 31,131
Provision for credit losses............................. 256,700 456,288
Gain on sale of other real estate owned................. (9,442) (49,136)
(Gain) loss on sale of investment securities available
for sale............................................... 18,051 (94,495)
(Gain) loss on sale of loans............................ (166,877) (45,657)
Loss on disposal of equipment........................... 0 465
Proceeds from sale of loans held for sale............... 8,885,994 7,075,122
Net loans to customers.................................. (22,961,359) (37,766,184)
Decrease in net deferred loan fees...................... (57,155) (15,631)
Decrease (increase) in other assets..................... 95,982 (346,686)
(Decrease) increase in other liabilities................ (291,414) 4,527,732
------------ ------------
Total adjustments.................................. (13,580,849) (25,628,950)
Net cash used in operating activities.............. (12,047,072) (24,231,724)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of other real estate owned............. 32,000 273,000
Payments on other real estate owned....................... 0 (36,788)
Proceeds from the sales of investment securities available
for sale................................................ 11,372,150 8,095,878
Proceeds from maturities of investment securities......... 2,000,000 4,635,000
Proceeds from principal reductions of investment
securities.............................................. 3,223,000 3,441,000
Purchase of investment securities......................... (11,008,649) (8,284,428)
Purchase of premises and equipment........................ (1,639,842) (1,052,107)
------------ ------------
Net cash provided by (used in) investing
activities....................................... 3,978,659 7,071,555
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options................................. $ 198,050 $ 37,975
Payment of dividends and fractional shares................ (359,642) (306,228)
Net increase (decrease) in repurchase agreement........... (440,502) (963,003)
Net increase (decrease) in demand deposits, money market
and savings accounts.................................... 107,810 3,487,599
Net increase in certificates of deposit................... 7,698,178 15,441,258
Proceeds from issuance of note payable.................... 175,000 100,000
------------ ------------
Net cash provided by financing activities.......... 7,278,894 17,797,601
------------ ------------
Net decrease in cash and cash equivalents.......... (789,519) 637,432
Cash and cash equivalents at January 1............. 11,620,734 10,193,783
------------ ------------
Cash and cash equivalents at June 30............... $ 10,831,215 $ 10,831,215
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest................................................ $ 5,977,647 $ 5,248,421
Income taxes............................................ 641,000 639,862
------------ ------------
$ 6,618,647 $ 5,888,283
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING
ACTIVITIES:
Net loans transferred to other real estate owned.......... $ 61,500 $ 1,123,000
============ ============
Sale of other real estate owned financed by the Company... $ 31,155 $ 416,000
============ ============
Securitization of loans with FHLMC and FNMA transferred to
investment securities................................... $ 0 $ 11,635,404
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-29
<PAGE> 117
SOUTH FLORIDA BANKING CORP.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 1 -- BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of the Bank, the financial
statements reflect all adjustments which are of a normal recurring nature and
which are necessary to present fairly the financial position of the Bank as of
September 30, 1997 and the results of operations for the nine months ended
September 30, 1997 and 1996, and cash flows for the nine months ended September
30, 1997 and 1996. The results of operations for the nine months ended September
30, 1997 are not necessarily indicative of the results which may be expected for
the entire fiscal year.
F-30
<PAGE> 118
APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
THE COLONIAL BANCGROUP, INC.,
AND
SOUTH FLORIDA BANKING CORP.
DATED AS OF
SEPTEMBER 4, 1997
A-1
<PAGE> 119
TABLE OF CONTENTS
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
ARTICLE 1 -- NAME
1.1 Name........................................................ A-5
ARTICLE 2 -- MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law.............................................. A-5
2.2 Corporate Existence......................................... A-5
2.3 Articles of Incorporation and Bylaws........................ A-6
2.4 Resulting Corporation's Officers and Board.................. A-6
2.5 Shareholder Approval........................................ A-6
2.6 Further Acts................................................ A-6
2.7 Effective Date and Closing.................................. A-6
2.8 Subsidiary Bank Merger...................................... A-6
ARTICLE 3 -- CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock.................... A-6
3.2 Surrender of Acquired Corporation Stock..................... A-7
3.3 Fractional Shares........................................... A-8
3.4 Adjustments................................................. A-8
3.5 BancGroup Stock............................................. A-8
3.6 Dissenting Rights........................................... A-8
ARTICLE 4 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
4.1 Organization................................................ A-8
4.2 Capital Stock............................................... A-8
4.3 Financial Statements; Taxes................................. A-9
4.4 No Conflict with Other Instrument........................... A-9
4.5 Absence of Material Adverse Change.......................... A-9
4.6 Approval of Agreements...................................... A-10
4.7 Tax Treatment............................................... A-10
4.8 Title and Related Matters................................... A-10
4.9 Subsidiaries................................................ A-10
4.10 Contracts................................................... A-10
4.11 Litigation.................................................. A-10
4.12 Compliance.................................................. A-11
4.13 Registration Statement...................................... A-11
4.14 SEC Filings................................................. A-11
4.15 Form S-4.................................................... A-11
4.16 Brokers..................................................... A-11
4.17 Government Authorization.................................... A-11
4.18 Absence of Regulatory Communications........................ A-11
4.19 Disclosure.................................................. A-11
ARTICLE 5 -- REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED
CORPORATION
5.1 Organization................................................ A-12
5.2 Capital Stock............................................... A-12
5.3 Subsidiaries................................................ A-12
5.4 Financial Statements; Taxes................................. A-12
5.5 Absence of Certain Changes or Events........................ A-13
5.6 Title and Related Matters................................... A-14
5.7 Commitments................................................. A-15
</TABLE>
A-2
<PAGE> 120
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
5.8 Charter and Bylaws.......................................... A-15
5.9 Litigation.................................................. A-15
5.10 Material Contract Defaults.................................. A-15
5.11 No Conflict with Other Instrument........................... A-15
5.12 Governmental Authorization.................................. A-15
5.13 Absence of Regulatory Communications........................ A-16
5.14 Absence of Material Adverse Change.......................... A-16
5.15 Insurance................................................... A-16
5.16 Pension and Employee Benefit Plans.......................... A-16
5.17 Buy-Sell Agreement.......................................... A-16
5.18 Brokers..................................................... A-16
5.19 Approval of Agreements...................................... A-16
5.20 Disclosure.................................................. A-17
5.21 Registration Statement...................................... A-17
5.22 Loans; Adequacy of Allowance for Loan Losses................ A-17
5.23 Environmental Matters....................................... A-17
5.24 Transfer of Shares.......................................... A-18
5.25 Collective Bargaining....................................... A-18
5.26 Labor Disputes.............................................. A-18
5.27 Derivative Contracts........................................ A-18
ARTICLE 6 -- ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup........................... A-18
6.2 Additional Covenants of Acquired Corporation................ A-19
ARTICLE 7 -- MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation................................... A-22
7.2 Press Release............................................... A-22
7.3 Mutual Disclosure........................................... A-22
7.4 Access to Properties and Records............................ A-22
7.5 Notice of Adverse Changes................................... A-23
7.6 Second Due Diligence........................................ A-23
ARTICLE 8 -- CONDITIONS TO OBLIGATIONS OF ALL PARTIES
8.1 Approval by Shareholders.................................... A-23
8.2 Regulatory Authority Approval............................... A-23
8.3 Litigation.................................................. A-23
8.4 Registration Statement...................................... A-23
8.5 Tax Opinion................................................. A-24
ARTICLE 9 -- CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
9.1 Representations, Warranties and Covenants................... A-24
9.2 Adverse Changes............................................. A-24
9.3 Closing Certificate......................................... A-24
9.4 Opinion of Counsel.......................................... A-25
9.5 NYSE Listing................................................ A-25
9.6 Other Matters............................................... A-25
9.7 Material Events............................................. A-25
ARTICLE 10 -- CONDITIONS TO OBLIGATIONS OF BANCGROUP
10.1 Representations, Warranties and Covenants................... A-25
10.2 Adverse Changes............................................. A-25
10.3 Closing Certificate......................................... A-26
10.4 Opinion of Counsel.......................................... A-26
10.5 Controlling Shareholders.................................... A-26
</TABLE>
A-3
<PAGE> 121
<TABLE>
<CAPTION>
CAPTION PAGE
- ------- ----
<C> <S> <C>
10.6 Other Matters............................................... A-26
10.7 Dissenters.................................................. A-26
10.8 Material Events............................................. A-27
10.9 Employment Agreement........................................ A-27
10.10 Pooling of Interest......................................... A-27
ARTICLE 11 -- TERMINATION OF REPRESENTATIONS AND WARRANTIES........... A-27
ARTICLE 12 -- NOTICES................................................. A-27
ARTICLE 13 -- AMENDMENT OR TERMINATION
13.1 Amendment................................................... A-27
13.2 Termination................................................. A-27
13.3 Damages..................................................... A-28
ARTICLE 14 -- DEFINITIONS............................................. A-28
ARTICLE 15 -- MISCELLANEOUS
15.1 Expenses.................................................... A-32
15.2 Benefit..................................................... A-32
15.3 Governing Law............................................... A-32
15.4 Counterparts................................................ A-33
15.5 Headings.................................................... A-33
15.6 Severability................................................ A-33
15.7 Construction................................................ A-33
15.8 Return of Information....................................... A-33
15.9 Equitable Remedies.......................................... A-33
15.10 Attorneys' Fees............................................. A-33
15.11 No Waiver................................................... A-33
15.12 Remedies Cumulative......................................... A-33
15.13 Entire Contract............................................. A-33
</TABLE>
A-4
<PAGE> 122
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made and entered into as of this the
4th day of September 1997, by and between SOUTH FLORIDA BANKING CORP. ("Acquired
Corporation"), a Florida corporation, and THE COLONIAL BANCGROUP, INC.
("BancGroup"), a Delaware corporation.
WITNESSETH
WHEREAS, Acquired Corporation operates as a bank holding company for its
wholly owned subsidiary, First National Bank of Florida at Bonita Springs (the
"Bank"), with its principal office in Bonita Springs, Florida; and
WHEREAS, BancGroup is a bank holding company whose subsidiary bank,
Colonial Bank, operates in Alabama, Florida, Georgia and Tennessee; and
WHEREAS, Acquired Corporation wishes to merge with BancGroup; and
WHEREAS, it is the intention of BancGroup and Acquired Corporation that
such Merger shall qualify for federal income tax purposes as a "reorganization"
within the meaning of section 368(a) of the Code, as defined herein;
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the Parties hereto agree as follows:
ARTICLE 1
NAME
1.1 Name. The name of the corporation resulting from the Merger shall be
"The Colonial BancGroup, Inc."
ARTICLE 2
MERGER -- TERMS AND CONDITIONS
2.1 Applicable Law. On the Effective Date, Acquired Corporation shall be
merged with and into BancGroup (herein referred to as the "Resulting
Corporation" whenever reference is made to it as of the time of merger or
thereafter). The Merger shall be undertaken pursuant to the provisions of and
with the effect provided in the DGCL and, to the extent applicable, the FBCA.
The offices and facilities of Acquired Corporation and of BancGroup shall become
the offices and facilities of the Resulting Corporation.
2.2 Corporate Existence. On the Effective Date, the corporate existence of
Acquired Corporation and of BancGroup shall, as provided in the DGCL and the
FBCA, be merged into and continued in the Resulting Corporation, and the
Resulting Corporation shall be deemed to be the same corporation as Acquired
Corporation and BancGroup. All rights, franchises and interests of Acquired
Corporation and BancGroup, respectively, in and to every type of property (real,
personal and mixed) and chooses in action shall be transferred to and vested in
the Resulting Corporation by virtue of the Merger without any deed or other
transfer. The Resulting Corporation on the Effective Date, and without any order
or other action on the part of any court or otherwise, shall hold and enjoy all
rights of property, franchises and interests, including appointments,
designations and nominations and all other rights and interests as trustee,
executor, administrator, transfer agent and registrar of stocks and bonds,
guardian of estates, assignee, and receiver and in every other fiduciary
capacity and in every agency, and capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or enjoyed by Acquired
Corporation and BancGroup, respectively, on the Effective Date.
A-5
<PAGE> 123
2.3 Articles of Incorporation and Bylaws. On the Effective Date, the
certificate of incorporation and bylaws of the Resulting Corporation shall be
the restated certificate of incorporation and bylaws of BancGroup as they exist
immediately before the Effective Date.
2.4 Resulting Corporation's Officers and Board. The board of directors and
the officers of the Resulting Corporation on the Effective Date shall consist of
those persons serving in such capacities of BancGroup as of the Effective Date.
2.5 Shareholder Approval. This Agreement shall be submitted to the
shareholders of Acquired Corporation at the Shareholders Meeting to be held as
promptly as practicable consistent with the satisfaction of the conditions set
forth in this Agreement. Upon approval by the requisite vote of the shareholders
of Acquired Corporation as required by applicable Law, the Merger shall become
effective as soon as practicable thereafter in the manner provided in section
2.7 hereof.
2.6 Further Acts. If, at any time after the Effective Date, the Resulting
Corporation shall consider or be advised that any further assignments or
assurances in law or any other acts are necessary or desirable (i) to vest,
perfect, confirm or record, in the Resulting Corporation, title to and
possession of any property or right of Acquired Corporation or BancGroup,
acquired as a result of the Merger, or (ii) otherwise to carry out the purposes
of this Agreement, BancGroup and its officers and directors shall execute and
deliver all such proper deeds, assignments and assurances in law and do all acts
necessary or proper to vest, perfect or confirm title to, and possession of,
such property or rights in the Resulting Corporation and otherwise to carry out
the purposes of this Agreement; and the proper officers and directors of the
Resulting Corporation are fully authorized in the name of Acquired Corporation
or BancGroup, or otherwise, to take any and all such action.
2.7 Effective Date and Closing. Subject to the terms of all requirements
of Law and the conditions specified in this Agreement, the Merger shall become
effective on the date specified in the Certificate of Merger to be issued by the
Secretary of State of the State of Delaware (such time being herein called the
"Effective Date"). Assuming all other conditions stated in this Agreement have
been or will be satisfied as of the Closing, the Closing shall take place at the
offices of BancGroup, in Montgomery, Alabama, at 5:00 p.m. on a date specified
by BancGroup that shall be as soon as reasonably practicable after the later to
occur of the Shareholder meeting or all required regulatory approvals under
Section 8.2, or at such other place and time that the Parties may mutually
agree; however, BancGroup anticipates that the closing will not occur prior to
January 1, 1998.
2.8 Subsidiary Bank Merger. BancGroup and Acquired Corporation anticipate
that immediately after the Effective Date the Bank will merge with and into
Colonial Bank, BancGroup's Subsidiary bank. The exact timing and structure of
such merger have not been finalized at this time, and BancGroup in its
discretion will finalize such timing and structure at a later date. Acquired
Corporation will cooperate with BancGroup, including the call of any special
meetings of the board of directors of the Bank and the filing of any regulatory
applications, in the execution of appropriate documentation relating to such
merger.
ARTICLE 3
CONVERSION OF ACQUIRED CORPORATION STOCK
3.1 Conversion of Acquired Corporation Stock. (a)(i) On the Effective
Date, and subject to Sections 3.3 and 3.1(a)(ii), each share of common stock of
Acquired Corporation outstanding and held of record by Acquired Corporation's
shareholders (the "Acquired Corporation Stock"), shall be converted by operation
of law and without any action by any holder thereof into 1.5746 shares of
BancGroup Common Stock (the "Merger Consideration").
(ii) Notwithstanding Section 3.1(a)(i), if prior to December 19, 1997
certain loans of the Bank, net of a $220,000 reserve, reflected on Schedule
3.1(a)(ii) have been repaid in full as reflected on Schedule 3.1(a)(ii), then
the Merger Consideration shall be adjusted so that on the Effective Date, each
share of Acquired Corporation Stock shall be converted into 1.5908 shares of
BancGroup Common Stock.
A-6
<PAGE> 124
(b)(i) On the Effective Date, and subject to section 3.1(c) below,
BancGroup shall assume all Acquired Corporation Options outstanding, and each
such option shall cease to represent a right to acquire Acquired Corporation
common stock and shall, instead, represent the right to acquire BancGroup Common
Stock on substantially the same terms applicable to the Acquired Corporation
Options except as specified below in this section. The number of shares of
BancGroup Common Stock to be issued pursuant to such options shall equal the
number of shares of Acquired Corporation common stock subject to such Acquired
Corporation Options multiplied by the Exchange Ratio, provided that no fractions
of shares of BancGroup Common Stock shall be issued and the number of shares of
BancGroup Common Stock to be issued upon the exercise of Acquired Corporation
Options, if a fractional share exists, shall equal the number of whole shares
obtained by rounding to the nearest whole number, giving account to such
fraction, or by paying for such fraction in cash, based upon the Market Value.
The exercise price for the acquisition of BancGroup Common Stock shall be the
exercise price for each share of Acquired Corporation common stock subject to
such options divided by the Exchange Ratio, adjusted appropriately for any
rounding to whole shares that may be done. It is intended that the assumption by
BancGroup of the Acquired Corporation Options shall be undertaken in a manner
that will not constitute a "modification" as defined in Section 424 of the Code
as to any stock option which is an "incentive stock option." Schedule 3.1 hereto
sets forth the names of all persons holding Acquired Corporation Options, the
number of shares of Acquired Corporation common stock subject to such options,
the exercise price and the expiration date of such options.
(ii) BancGroup shall file at its expense a registration statement with the
SEC on Form S-8 or such other appropriate form (including the Form S-4 to be
filed in connection with the Merger) with respect to the shares of BancGroup
Common Stock to be issued pursuant to such options and shall use its reasonable
best efforts to maintain the effectiveness of such registration statement for so
long as such options remain outstanding. Such shares shall also be registered or
qualified for sale under the securities laws of any state in which registration
or qualification is necessary.
(c) No later than five days prior to the Effective Date, the holders of
Acquired Corporation Options that have vested for such holders may provide
written notice to Acquired Corporation (in form and substance reasonably
satisfactory to BancGroup) that they wish to surrender their Acquired
Corporation Options to BancGroup, effective at the Effective Date, and, in lieu
of the treatment provided in Section 3.1(b) above, to receive an amount of
BancGroup Common Stock in exchange therefor equal to the difference between the
total value of the shares of BancGroup Common Stock to be issued pursuant to
such Acquired Corporation Options (based upon the number of shares of BancGroup
Common Stock to be issued pursuant to the Acquired Corporation Options
multiplied by the market value) less the aggregate exercise price of such
Acquired Corporation Options at the Effective Date, divided by the market value.
No fractions of shares shall be issued and fractions shall be paid in cash at
the market value. For purposes of this section 3.1(c), "market value" shall be
the average of the closing prices of the Common Stock of BancGroup as reported
by the NYSE on each of the ten trading days ending on the trading day five
calendar days immediately preceding the Effective Date. Any Acquired Corporation
Options that have not vested at the Effective Date shall be assumed by BancGroup
in accordance with Section 3.1(b)(i).
3.2 Surrender of Acquired Corporation Stock. After the Effective Date,
each holder of an outstanding certificate or certificates which prior thereto
represented shares of Acquired Corporation Stock who is entitled to receive
BancGroup Common Stock shall be entitled, upon surrender to BancGroup of their
certificate or certificates representing shares of Acquired Corporation Stock
(or an affidavit or affirmation by such holder of the loss, theft, or
destruction of such certificate or certificates in such form as BancGroup may
reasonably require and, if BancGroup reasonably requires, a bond of indemnity in
form and amount, and issued by such sureties, as BancGroup may reasonably
require), to receive in exchange therefor a certificate or certificates
representing the number of whole shares of BancGroup Common Stock into and for
which the shares of Acquired Corporation Stock so surrendered shall have been
converted, such certificates to be of such denominations and registered in such
names as such holder may reasonably request. Until so surrendered and exchanged,
each such outstanding certificate which, prior to the Effective Date,
represented shares of Acquired Corporation Stock and which is to be converted
into BancGroup Common Stock shall for all purposes evidence ownership of the
BancGroup Common Stock into and for which such shares shall have
A-7
<PAGE> 125
been so converted, except that no dividends or other distributions with respect
to such BancGroup Common Stock shall be paid until the certificates previously
representing shares of Acquired Corporation Stock shall have been properly
tendered.
3.3 Fractional Shares. No fractional shares of BancGroup Common Stock
shall be issued, and each holder of shares of Acquired Corporation Stock having
a fractional interest arising upon the conversion of such shares into shares of
BancGroup Common Stock shall, at the time of surrender of the certificates
previously representing Acquired Corporation Stock, be paid by BancGroup an
amount in cash equal to the Market Value of such fractional share.
3.4 Adjustments. In the event that prior to the Effective Date BancGroup
Common Stock shall be changed into a different number of shares or a different
class of shares by reason of any recapitalization or reclassification, stock
dividend, combination, stock split, or reverse stock split of the BancGroup
Common Stock, an appropriate and proportionate adjustment shall be made in the
number of shares of BancGroup Common Stock into which the Acquired Corporation
Stock shall be converted.
3.5 BancGroup Stock. The shares of Common Stock of BancGroup issued and
outstanding immediately before the Effective Date shall continue to be issued
and outstanding shares of the Resulting Corporation.
3.6 Dissenting Rights. Any shareholder of Acquired Corporation who shall
not have voted in favor of this Agreement and who has complied with the
applicable procedures set forth in the FBCA relating to rights of dissenting
shareholders, shall be entitled to receive payment for the fair value of his
Acquired Corporation Stock. If after the Effective Date a dissenting shareholder
of Acquired Corporation fails to perfect, or effectively withdraws or loses his
right to appraisal and payment for his shares of Acquired Corporation Stock,
BancGroup shall issue and deliver the consideration to which such holder of
shares of Acquired Corporation Stock is entitled under Section 3.1 (without
interest) upon surrender by such holder of the certificate or certificates
representing shares of Acquired Corporation Stock held by him or her.
ARTICLE 4
REPRESENTATIONS, WARRANTIES AND COVENANTS OF BANCGROUP
BancGroup represents, warrants and covenants to and with Acquired
Corporation as follows:
4.1 Organization. BancGroup is a corporation duly organized, validly
existing and in good standing under the Laws of the State of Delaware. BancGroup
has the necessary corporate powers to carry on its business as presently
conducted and is qualified to do business in every jurisdiction in which the
character and location of the Assets owned by it or the nature of the business
transacted by it requires qualification or in which the failure to qualify
could, individually or in the aggregate, have a Material Adverse Effect.
4.2 Capital Stock. (a) The authorized capital stock of BancGroup consists
of (A) 100,000,000 shares of Common Stock, $2.50 par value per share, of which
as of July 31, 1997, 41,912,989 shares were validly issued and outstanding,
fully paid and nonassessable and are not subject to preemptive rights (not
counting additional shares subject to issue pursuant to stock option and other
plans and convertible debentures), and (B) 1,000,000 shares of Preference Stock,
$2.50 par value per share, none of which are issued and outstanding. The shares
of BancGroup Common Stock to be issued in the Merger are duly authorized and,
when so issued, will be validly issued and outstanding, fully paid and
nonassessable, will have been registered under the 1933 Act, and will have been
registered or qualified under the securities laws of all jurisdictions in which
such registration or qualification is required, based upon information provided
by Acquired Corporation.
(b) The authorized capital stock of each Subsidiary of BancGroup is validly
issued and outstanding, fully paid and nonassessable, and each Subsidiary is
wholly owned, directly or indirectly, by BancGroup.
A-8
<PAGE> 126
4.3 Financial Statements; Taxes. (a) BancGroup has delivered to Acquired
Corporation copies of the following financial statements of BancGroup.
(i) Consolidated balance sheets as of December 31, 1995, December 31,
1996, and as of June 30, 1997;
(ii) Consolidated statements of operations for each of the three years
ended December 31, 1994, 1995 and 1996, and for the six months ended June
30, 1997;
(iii) Consolidated statements of cash flows for each of the three
years ended December 31, 1994, 1995 and 1996, and for the six months ended
June 30, 1997; and
(iv) Consolidated statements of changes in shareholders' equity for
the three years ended December 31, 1994, 1995 and 1996, and for the six
months ended June 30, 1997.
All such financial statements are in all material respects in accordance
with the books and records of BancGroup and have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated, all as
more particularly set forth in the notes to such statements. Each of the
consolidated balance sheets presents fairly as of its date the consolidated
financial condition of BancGroup and its Subsidiaries. Except as and to the
extent reflected or reserved against in such balance sheets (including the notes
thereto), BancGroup did not have, as of the dates of such balance sheets, any
material Liabilities or obligations (absolute or contingent) of a nature
customarily reflected in a balance sheet or the notes thereto. The statements of
consolidated income, shareholders' equity and changes in consolidated financial
position present fairly the results of operations and changes in financial
position of BancGroup and its Subsidiaries for the periods indicated. The
foregoing representations, insofar as they relate to the unaudited interim
financial statements of BancGroup for the six months ended June 30, 1997, are
subject in all cases to normal recurring year-end adjustments and the omission
of footnote disclosure.
(b) All Tax returns required to be filed by or on behalf of BancGroup have
been timely filed (or requests for extensions therefor have been timely filed
and granted and have not expired), and all returns filed are complete and
accurate in all material respects. All Taxes shown on these returns to be due
and all additional assessments received have been paid. The amounts recorded for
Taxes on the balance sheets provided under section 4.3(a) are, to the Knowledge
of BancGroup, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign or other Taxes (including any interest or
penalties) of BancGroup accrued for or applicable to the period ended on the
dates thereof, and all years and periods prior thereto and for which BancGroup
may at such dates have been liable in its own right or as transferee of the
Assets of, or as successor to, any other corporation or other party. No audit,
examination or investigation is presently being conducted or, to the Knowledge
of BancGroup, threatened by any taxing authority which is likely to result in a
material Tax Liability, no material unpaid Tax deficiencies or additional
liabilities of any sort have been proposed by any governmental representative
and no agreements for extension of time for the assessment of any material
amount of Tax have been entered into by or on behalf of BancGroup. BancGroup has
withheld from its employees (and timely paid to the appropriate governmental
entity) proper and accurate amounts for all periods in material compliance with
all Tax withholding provisions of applicable federal, state, foreign and local
Laws (including without limitation, income, social security and employment Tax
withholding for all types of compensation).
4.4 No Conflict with Other Instrument. The consummation of the
transactions contemplated by this Agreement will not result in a breach of or
constitute a Default (without regard to the giving of notice or the passage of
time) under any material Contract, indenture, mortgage, deed of trust or other
material agreement or instrument to which BancGroup or any of its Subsidiaries
is a party or by which they or their Assets may be bound; will not conflict with
any provision of the restated certificate of incorporation or bylaws of
BancGroup or the articles of incorporation or bylaws of any of its Subsidiaries;
and will not violate any provision of any Law, regulation, judgment or decree
binding on them or any of their Assets.
4.5 Absence of Material Adverse Change. Since the date of the most recent
balance sheet provided under section 4.3(a)(i) above, there have been no events,
changes or occurrences which have had or are reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on BancGroup.
A-9
<PAGE> 127
4.6 Approval of Agreement. The executive committee of the board of
directors of BancGroup has approved this Agreement and the transactions
contemplated by it and shall recommend to the board of directors of BancGroup
that such board ratify and approve this Agreement. Subject to the foregoing
sentence, this Agreement constitutes the legal, valid and binding obligation of
BancGroup, enforceable against it in accordance with its terms. Approval of this
Agreement by the shareholders of BancGroup is not required by applicable Law.
Subject to the matters referred to in section 8.2, and to the first sentence of
this Section 4.6, BancGroup has full power, authority and legal right to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. BancGroup has no Knowledge of any fact or circumstance under which
the appropriate regulatory approvals required by section 8.2 will not be granted
without the imposition of material conditions or material delays.
4.7 Tax Treatment. BancGroup has no present plan to sell or otherwise
dispose of any of the Assets of Acquired Corporation, subsequent to the Merger,
and BancGroup intends to continue the historic business of Acquired Corporation.
4.8 Title and Related Matters. BancGroup has good and marketable title to
all the properties, interests in properties and Assets, real and personal,
reflected in the most recent balance sheet referred to in section 4.3(a), or
acquired after the date of such balance sheet (except properties, interests and
Assets sold or otherwise disposed of since such date, in the ordinary course of
business), free and clear of all mortgages, Liens, pledges, charges or
encumbrances except (i) mortgages and other encumbrances referred to in the
notes of such balance sheet, (ii) liens for current Taxes not yet due and
payable and (iii) such imperfections of title and easements as do not materially
detract from or interfere with the present use of the properties subject thereto
or affected thereby, or otherwise materially impair present business operations
at such properties. To the Knowledge of BancGroup, the material structures and
equipment of BancGroup comply in all material respects with the requirements of
all applicable Laws.
4.9 Subsidiaries. Each Subsidiary of BancGroup has been duly incorporated
and is validly existing as a corporation in good standing under the Laws of the
jurisdiction of its incorporation and each Subsidiary has been duly qualified as
a foreign corporation to transact business and is in good standing under the
Laws of each other jurisdiction in which it owns or leases properties, or
conducts any business so as to require such qualification and in which the
failure to be duly qualified could have a Material Adverse Effect upon BancGroup
and its Subsidiaries considered as one enterprise; each of the banking
Subsidiaries of BancGroup has its deposits fully insured by the Federal Deposit
Insurance Corporation to the extent provided by the Federal Deposit Insurance
Act; and the businesses of the non-bank Subsidiaries of BancGroup are permitted
to subsidiaries of registered bank holding companies.
4.10 Contracts. Neither BancGroup nor any of its Subsidiaries is in
violation of its respective certificate of incorporation or bylaws or in Default
in the performance or observance of any material obligation, agreement, covenant
or condition contained in any Contract, indenture, mortgage, loan agreement,
note, lease or other instrument to which it is a party or by which it or its
property may be bound.
4.11 Litigation. Except as disclosed in or reserved for in BancGroup's
financial statements, there is no Litigation before or by any court or Agency,
domestic or foreign, now pending, or, to the Knowledge of BancGroup, threatened
against or affecting BancGroup or any of its Subsidiaries (nor is BancGroup
aware of any facts which could give rise to any such Litigation) which is
required to be disclosed in the Registration Statement (other than as disclosed
therein), or which is likely to have any Material Adverse Effect or prospective
Material Adverse Effect, or which is likely to materially and adversely affect
the properties or Assets thereof or which is likely to materially affect or
delay the consummation of the transactions contemplated by this Agreement; all
pending legal or governmental proceedings to which BancGroup or any Subsidiary
is a party or of which any of their properties is the subject which are not
described in the Registration Statement, including ordinary routine litigation
incidental to the business, are, considered in the aggregate, not material; and
neither BancGroup nor any of its Subsidiaries have any contingent obligations
which could be considered material to BancGroup and its Subsidiaries considered
as one enterprise which are not disclosed in the Registration Statement as it
may be amended or supplemented.
A-10
<PAGE> 128
4.12 Compliance. BancGroup and its Subsidiaries, in the conduct of their
businesses, are to the Knowledge of BancGroup, in material compliance with all
material federal, state or local Laws applicable to their or the conduct of
their businesses.
4.13 Registration Statement. At the time the Registration Statement
becomes effective and at the time of the Shareholders' Meeting, the Registration
Statement, including the Proxy Statement which shall constitute a part thereof,
will comply in all material respects with the requirements of the 1933 Act and
the rules and regulations thereunder, will not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the representations and warranties
in this subsection shall not apply to statements in or omissions from the Proxy
Statement made in reliance upon and in conformity with information furnished in
writing to BancGroup by Acquired Corporation or any of its representatives
expressly for use in the Proxy Statement or information included in the Proxy
Statement regarding the business of Acquired Corporation, its operations, Assets
and capital.
4.14 SEC Filings. (a) BancGroup has heretofore delivered to Acquired
Corporation copies of BancGroup's: (i) Annual Report on Form 10-K for the fiscal
year ended December 31, 1996; (ii) 1996 Annual Report to Shareholders; (iii)
Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 1997 and
June 30, 1997; and (iv) any reports on Form 8-K, filed by BancGroup with the SEC
since December 31, 1996. Since December 31, 1996, BancGroup has timely filed all
reports and registration statements and the documents required to be filed with
the SEC under the rules and regulations of the SEC and all such reports and
registration statements or other documents have complied in all material
respects, as of their respective filing dates and effective dates, as the case
may be, with all the applicable requirements of the 1933 Act and the 1934 Act.
As of the respective filing and effective dates, none of such reports or
registration statements or other documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(b) The documents incorporated by reference into the Registration
Statement, at the time they were filed with the SEC, complied in all material
respects with the requirements of the 1934 Act and Regulations thereunder and
when read together and with the other information in the Registration Statement
will not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading at the time the Registration Statement becomes effective
or at the time of the Shareholders Meeting.
4.15 Form S-4. The conditions for use of a registration statement on SEC
Form S-4 set forth in the General Instructions on Form S-4 have been or will be
satisfied with respect to BancGroup and the Registration Statement.
4.16 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by BancGroup
directly with Acquired Corporation and without the intervention of any other
person, either as a result of any act of BancGroup or otherwise in such manner
as to give rights to any valid claim against BancGroup for finders fees,
brokerage commissions or other like payments, including any claim by any Person
affiliated with any Party to this Agreement.
4.17 Government Authorization. BancGroup and its Subsidiaries have all
Permits that, to the Knowledge of BancGroup and its Subsidiaries, are or will be
legally required to enable BancGroup or any of its Subsidiaries to conduct their
businesses in all material respects as now conducted by each of them.
4.18 Absence of Regulatory Communications. Neither BancGroup nor any of
its Subsidiaries is subject to, or has received during the past three (3) years,
any written communication directed specifically to it from any Agency to which
it is subject or pursuant to which such Agency has imposed or has indicated it
may impose any material restrictions on the operations of it or the business
conducted by it or in which such Agency has raised a material question
concerning the condition, financial or otherwise, of such company.
4.19 Disclosure. No representation or warranty, or any statement or
certificate furnished or to be furnished to Acquired Corporation by BancGroup,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements contained in
this Agreement or in any such statement or certificate not misleading.
A-11
<PAGE> 129
ARTICLE 5
REPRESENTATIONS, WARRANTIES AND COVENANTS OF ACQUIRED CORPORATION
Acquired Corporation represents, warrants and covenants to and with
BancGroup, as follows:
5.1 Organization. Acquired Corporation is a Florida corporation, and the
Bank is a national banking association. Each Acquired Corporation Company is
duly organized, validly existing and in good standing under the respective Laws
of its jurisdiction of incorporation and has all requisite power and authority
to carry on its business as it is now being conducted and is qualified to do
business in every jurisdiction in which the character and location of the Assets
owned by it or the nature of the business transacted by it requires
qualification or in which the failure to qualify could, individually, or in the
aggregate, have a Material Adverse Effect.
5.2 Capital Stock. (i) As of June 30, 1997, the authorized capital stock
of Acquired Corporation consisted of 2,000,000 shares of common stock, $1.00 par
value per share, 1,212,065 shares of which were issued and outstanding. All of
such shares which are outstanding are validly issued, fully paid and
nonassessable and not subject to preemptive rights. As of June 30, 1997,
Acquired Corporation had 35,808 shares of its common stock subject to exercise
at any time pursuant to stock options under its stock option plans. Except for
the foregoing, and except for the Stock Option Agreement, Acquired Corporation
does not have any other arrangements or commitments obligating it to issue
shares of its capital stock or any securities convertible into or having the
right to purchase shares of its capital stock, including the grant or issuance
of Acquired Corporation Options.
5.3 Subsidiaries. Except as set forth on Schedule 5.3, Acquired
Corporation has no direct Subsidiaries other than the Bank, and there are no
Subsidiaries of the Bank. Acquired Corporation owns all of the issued and
outstanding capital stock of the Bank free and clear of any liens, claims or
encumbrances of any kind except for the loan described below. All of the issued
and outstanding shares of capital stock of the Subsidiaries have been validly
issued and are fully paid and non-assessable. As of June 30, 1997, there were
1,000,000 shares of the preferred stock, par value $.10 per share, and 247,500
shares of common stock, par value $5.00 per share, of the Bank authorized, with
188,310 common shares and 285,000 shares of preferred issued and outstanding and
wholly owned by Acquired Corporation. All of such shares of common stock and
preferred stock are pledged by Acquired Corporation to National Bank of
Commerce, Birmingham, Alabama, on a $6.0 million line of credit, $1.5 million of
which is currently drawn down. The Bank has no arrangements or commitments
obligating it to issue shares of its capital stock or any securities convertible
into or having the right to purchase shares of its capital stock.
5.4 Financial Statements; Taxes. (a) Acquired Corporation has delivered to
BancGroup copies of the following financial statements of Acquired Corporation:
(i) Consolidated statements of financial condition as of December 31,
1995 and 1996, and as of June 30, 1997;
(ii) Consolidated statements of income for each of the three years
ended December 31, 1994, 1995 and 1996, and for the six months ended June
30, 1997;
(iii) Consolidated statements of shareholders' equity for each of the
three years ended December 31, 1994, 1995, and 1996, and for the six months
ended June 30, 1997; and
(iv) Consolidated statements of cash flows for the three years ended
December 31, 1994, 1995 and 1996.
All of the foregoing financial statements are in all material respects in
accordance with the books and records of Acquired Corporation and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated, except for changes required by GAAP, all as more particularly
set forth in the notes to such statements. Each of such balance sheets presents
fairly as of its date the financial condition of Acquired Corporation. Except as
and to the extent reflected or reserved against in such balance sheets
(including the notes thereto), Acquired Corporation did not have, as of the date
of such balance sheets,
A-12
<PAGE> 130
any material Liabilities or obligations (absolute or contingent) of a nature
customarily reflected in a balance sheet or the notes thereto. The statements of
income, shareholders' equity and cash flows present fairly the results of
operation, changes in shareholders equity and cash flows of Acquired Corporation
for the periods indicated. The foregoing representations, insofar as they relate
to the unaudited interim financial statements of Acquired Corporation for the
six months ended June 30, 1997, are subject in all cases to normal recurring
year-end adjustments and the omission of footnote disclosure.
(b) Except as set forth on Schedule 5.4(b), all Tax returns required to be
filed by or on behalf of Acquired Corporation have been timely filed (or
requests for extensions therefor have been timely filed and granted and have not
expired), and all returns filed are complete and accurate in all material
respects. All Taxes shown on these returns to be due and all additional
assessments received have been paid. The amounts recorded for Taxes on the
balance sheets provided under section 5.4(a) are, to the Knowledge of Acquired
Corporation, sufficient in all material respects for the payment of all unpaid
federal, state, county, local, foreign and other Taxes (including any interest
or penalties) of Acquired Corporation accrued for or applicable to the period
ended on the dates thereof, and all years and periods prior thereto and for
which Acquired Corporation may at such dates have been liable in its own right
or as a transferee of the Assets of, or as successor to, any other corporation
or other party. No audit, examination or investigation is presently being
conducted or, to the Knowledge of Acquired Corporation, threatened by any taxing
authority which is likely to result in a material Tax Liability, no material
unpaid Tax deficiencies or additional liability of any sort has been proposed by
any governmental representative and no agreements for extension of time for the
assessment of any material amount of Tax have been entered into by or on behalf
of Acquired Corporation. Acquired Corporation has not executed an extension or
waiver of any statute of limitations on the assessment or collection of any Tax
due that is currently in effect.
(c) Each Acquired Corporation Company has withheld from its employees (and
timely paid to the appropriate governmental entity) proper and accurate amounts
for all periods in material compliance with all Tax withholding provisions of
applicable federal, state, foreign and local Laws (including without limitation,
income, social security and employment Tax withholding for all types of
compensation). Each Acquired Corporation Company is in compliance with, and its
records contain all information and documents (including properly completed IRS
Forms W-9) necessary to comply with, all applicable information reporting and
Tax withholding requirements under federal, state and local Tax Laws, and such
records identify with specificity all accounts subject to backup withholding
under section 3406 of the Code.
5.5 Absence of Certain Changes or Events. Except as set forth on Schedule
5.5, since the date of the most recent balance sheet provided under section
5.4(a)(i) above, no Acquired Corporation Company has
(a) issued, delivered or agreed to issue or deliver any stock, bonds
or other corporate securities (whether authorized and unissued or held in
the treasury) except shares of common stock issued upon the exercise of
existing Acquired Corporation Options and shares issued as director's
qualifying shares;
(b) borrowed or agreed to borrow any funds or incurred, or become
subject to, any Liability (absolute or contingent) except borrowings,
obligations (including purchase of federal funds) and Liabilities incurred
in the ordinary course of business and consistent with past practice;
(c) paid any material obligation or Liability (absolute or contingent)
other than current Liabilities reflected in or shown on the most recent
balance sheet referred to in section 5.4(a)(i) and current Liabilities
incurred since that date in the ordinary course of business and consistent
with past practice;
(d) declared or made, or agreed to declare or make, any payment of
dividends or distributions of any Assets of any kind whatsoever to
shareholders, or purchased or redeemed, or agreed to purchase or redeem,
directly or indirectly, or otherwise acquire, any of its outstanding
securities, except that Acquired Corporation may pay cash dividends at its
current rate and at times consistent with past practice, and provided
further that such dividend rate may be increased by $0.02 per share per
year;
(e) except in the ordinary course of business, sold or transferred, or
agreed to sell or transfer, any of its Assets, or canceled, or agreed to
cancel, any debts or claims;
A-13
<PAGE> 131
(f) except in the ordinary course of business, entered or agreed to
enter into any agreement or arrangement granting any preferential rights to
purchase any of its Assets, or requiring the consent of any party to the
transfer and assignment of any of its Assets;
(g) suffered any Losses or waived any rights of value which in either
event in the aggregate are material considering its business as a whole;
(h) except in the ordinary course of business, made or permitted any
amendment or termination of any Contract, agreement or license to which it
is a party if such amendment or termination is material considering its
business as a whole;
(i) except in accordance with normal and usual practice, made any
accrual or arrangement for or payment of bonuses or special compensation of
any kind or any severance or termination pay to any present or former
officer or employee;
(j) except in accordance with normal and usual practice, increased the
rate of compensation payable to or to become payable to any of its officers
or employees or made any material increase in any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement or other
employee benefit plan, payment or arrangement made to, for or with any of
its officers or employees;
(k) received notice or had Knowledge or reason to believe that any of
its substantial customers has terminated or intends to terminate its
relationship, which termination would have a Material Adverse Effect on its
financial condition, results of operations, business, Assets or properties;
(l) failed to operate its business in the ordinary course so as to
preserve its business intact and to preserve the goodwill of its customers
and others with whom it has business relations;
(m) entered into any other material transaction other than in the
ordinary course of business; or
(n) agreed in writing, or otherwise, to take any action described in
clauses (a) through (m) above.
Between the date hereof and the Effective Date, no Acquired Corporation
Company, without the express written approval of BancGroup, will do any of the
things listed in clauses (a) through (n) of this section 5.5 except as permitted
therein or as contemplated in this Agreement, and no Acquired Corporation
Company will enter into or amend any material Contract, other than Loans or
renewals thereof entered into in the ordinary course of business, without the
express written consent of BancGroup.
5.6 Title and Related Matters. (a) Title. Acquired Corporation has good
and marketable title to all the properties, interest in properties and Assets,
real and personal, reflected in the most recent balance sheet referred to in
section 5.4(a)(i), or acquired after the date of such balance sheet (except
properties, interests and Assets sold or otherwise disposed of since such date,
in the ordinary course of business), free and clear of all mortgages, Liens,
pledges, charges or encumbrances except (i) mortgages and other encumbrances
referred to in the notes to such balance sheet, (ii) Liens for current Taxes not
yet due and payable and (iii) such imperfections of title and easements as do
not materially detract from or interfere with the present use of the properties
subject thereto or affected thereby, or otherwise materially impair present
business operations at such properties. To the Knowledge of Acquired
Corporation, the material structures and equipment of each Acquired Corporation
Company comply in all material respects with the requirements of all applicable
Laws.
(b) Leases. Schedule 5.6(b) sets forth a list and description of all real
and personal property owned or leased by any Acquired Corporation Company,
either as lessor or lessee.
(c) Personal Property. Schedule 5.6(c) sets forth a depreciation schedule
of each Acquired Corporation Company's fixed Assets as of June 30, 1997.
(d) Computer Hardware and Software. Schedule 5.6(d) contains a description
of all agreements relating to data processing computer software and hardware now
being used in the business operations of any Acquired Corporation Company.
Acquired Corporation is not aware of any defects, irregularities or problems
with any of its computer hardware or software which renders such hardware or
software unable to satisfactorily
A-14
<PAGE> 132
perform the tasks and functions to be performed by them in the business of any
Acquired Corporation Company.
5.7 Commitments. Except as set forth in Schedule 5.7, no Acquired
Corporation Company is a party to any oral or written (i) Contracts for the
employment of any officer or employee which is not terminable on 30 days' (or
less) notice, (ii) profit sharing, bonus, deferred compensation, savings, stock
option, severance pay, pension or retirement plan, agreement or arrangement,
(iii) loan agreement, indenture or similar agreement relating to the borrowing
of money by any Acquired Corporation Company, (iv) guaranty of any obligation
for the borrowing of money or otherwise, excluding endorsements made for
collection, and guaranties made in the ordinary course of business, (v)
consulting or other similar material Contracts, (vi) collective bargaining
agreement, (vii) agreement with any present or former officer, director or
shareholder of such party, or (viii) other Contract, agreement or other
commitment which is material to the business, operations, property, prospects or
Assets or to the condition, financial or otherwise, of any Acquired Corporation
Company. Complete and accurate copies of all Contracts, plans and other items so
listed have been made or will be made available to BancGroup for inspection.
5.8 Charter and Bylaws. Schedule 5.8 contains true and correct copies of
the articles of incorporation and bylaws of each Acquired Corporation Company,
including all amendments thereto, as currently in effect. There will be no
changes in such articles of incorporation or bylaws prior to the Effective Date,
without the prior written consent of BancGroup.
5.9 Litigation. Except as disclosed on Schedule 5.9, there is no
Litigation (whether or not purportedly on behalf of Acquired Corporation)
pending or, to the Knowledge of Acquired Corporation, threatened against or
affecting any Acquired Corporation Company (nor does Acquired Corporation have
Knowledge of any facts which are likely to give rise to any such Litigation) at
law or in equity, or before or by any governmental department, commission,
board, bureau, agency or instrumentality, domestic or foreign, or before any
arbitrator of any kind, which involves the possibility of any judgment or
Liability not fully covered by insurance in excess of a reasonable deductible
amount or which may have a Material Adverse Effect on Acquired Corporation, and
no Acquired Corporation Company is in Default with respect to any judgment,
order, writ, injunction, decree, award, rule or regulation of any court,
arbitrator or governmental department, commission, board, bureau, agency or
instrumentality, which Default would have a Material Adverse Effect on Acquired
Corporation. To the Knowledge of Acquired Corporation, each Acquired Corporation
Company has complied in all material respects with all material applicable Laws
and Regulations including those imposing Taxes, of any applicable jurisdiction
and of all states, municipalities, other political subdivisions and Agencies, in
respect of the ownership of its properties and the conduct of its business,
which, if not complied with, would have a Material Adverse Effect on Acquired
Corporation.
5.10 Material Contract Defaults. Except as disclosed on Schedule 5.10, no
Acquired Corporation Company is in Default in any material respect under the
terms of any material Contract, agreement, lease or other commitment which is or
may be material to the business, operations, properties or Assets, or the
condition, financial or otherwise, of such company and, to the Knowledge of
Acquired Corporation, there is no event which, with notice or lapse of time, or
both, may be or become an event of Default under any such material Contract,
agreement, lease or other commitment in respect of which adequate steps have not
been taken to prevent such a Default from occurring.
5.11 No Conflict with Other Instrument. Except as set forth on Schedule
5.11, the consummation of the transactions contemplated by this Agreement will
not result in the breach of any term or provision of or constitute a Default
under any material Contract, indenture, mortgage, deed of trust or other
material agreement or instrument to which any Acquired Corporation Company is a
party and will not conflict with any provision of the charter or bylaws of any
Acquired Corporation Company.
5.12 Governmental Authorization. Each Acquired Corporation Company has all
Permits that, to the Knowledge of Acquired Corporation, are or will be legally
required to enable any Acquired Corporation Company to conduct its business in
all material respects as now conducted by each Acquired Corporation Company.
A-15
<PAGE> 133
5.13 Absence of Regulatory Communications. Except as provided in Schedule
5.13, no Acquired Corporation Company is subject to, nor has any Acquired
Corporation Company received during the past three years, any written
communication directed specifically to it from any Agency to which it is subject
or pursuant to which such Agency has imposed or has indicated it may impose any
material restrictions on the operations of it or the business conducted by it or
in which such Agency has raised any material question concerning the condition,
financial or otherwise, of such company.
5.14 Absence of Material Adverse Change. To the Knowledge of Acquired
Corporation, since the date of the most recent balance sheet provided under
section 5.4(a)(i), there have been no events, changes or occurrences which have
had, or are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on any Acquired Corporation Company.
5.15 Insurance. Each Acquired Corporation Company has in effect insurance
coverage and bonds with reputable insurers which, in respect to amounts, types
and risks insured, management of Acquired Corporation reasonably believes to be
adequate for the type of business conducted by such company. No Acquired
Corporation Company is liable for any material retroactive premium adjustment.
All insurance policies and bonds are valid, enforceable and in full force and
effect, and no Acquired Corporation Company has received any notice of any
material premium increase or cancellation with respect to any of its insurance
policies or bonds. Within the last three years, no Acquired Corporation Company
has been refused any insurance coverage which it has sought or applied for, and
it has no reason to believe that existing insurance coverage cannot be renewed
as and when the same shall expire, upon terms and conditions as favorable as
those presently in effect, other than possible increases in premiums that do not
result from any extraordinary loss experience. All policies of insurance
presently held or policies containing substantially equivalent coverage will be
outstanding and in full force with respect to each Acquired Corporation Company
at all times from the date hereof to the Effective Date.
5.16 Pension and Employee Benefit Plans. (a) To the Knowledge of Acquired
Corporation, all employee benefit plans of each Acquired Corporation Company
have been established in compliance with, and such plans have been operated in
material compliance with, all applicable Laws. Except as set forth in Schedule
5.16, no Acquired Corporation Company sponsors or otherwise maintains a "pension
plan" within the meaning of section 3(2) of ERISA or any other retirement plan
other than the First National Bank of Florida at Bonita Springs Profit Sharing
and 401(k) Plan that is intended to qualify under section 401 of the Code, nor
do any unfunded Liabilities exist with respect to any employee benefit plan,
past or present. To the Knowledge of Acquired Corporation, no employee benefit
plan, any trust created thereunder or any trustee or administrator thereof has
engaged in a "prohibited transaction," as defined in section 4975 of the Code,
which may have a Material Adverse Effect on the condition, financial or
otherwise, of any Acquired Corporation Company.
(b) To the Knowledge of Acquired Corporation, no amounts payable to any
employee of any Acquired Corporation Company will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code and
regulations thereunder.
5.17 Buy-Sell Agreement. To the Knowledge of Acquired Corporation, there
are no agreements among any of its shareholders granting to any person or
persons a right of first refusal in respect of the sale, transfer, or other
disposition of shares of outstanding securities by any shareholder of Acquired
Corporation, any similar agreement or any voting agreement or voting trust in
respect of any such shares.
5.18 Brokers. All negotiations relative to this Agreement and the
transactions contemplated by this Agreement have been carried on by Acquired
Corporation directly with BancGroup and without the intervention of any other
person, either as a result of any act of Acquired Corporation, or otherwise, in
such manner as to give rise to any valid claim against Acquired Corporation for
a finder's fee, brokerage commission or other like payment, including any claim
by any Person affiliated with any Party to this Agreement.
5.19 Approval of Agreements. The board of directors of Acquired
Corporation has approved this Agreement and the transactions contemplated by
this Agreement and has authorized the execution and
A-16
<PAGE> 134
delivery by Acquired Corporation of this Agreement. Subject to the matters
referred to in section 8.2, Acquired Corporation has full power, authority and
legal right to enter into this Agreement, and, upon appropriate vote of the
shareholders of Acquired Corporation in accordance with this Agreement, Acquired
Corporation shall have full power, authority and legal right to consummate the
transactions contemplated by this Agreement.
5.20 Disclosure. No representation or warranty, nor any statement or
certificate furnished or to be furnished to BancGroup by Acquired Corporation,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements contained in
this Agreement or in any such statement or certificate not misleading.
5.21 Registration Statement. At the time the Registration Statement
becomes effective and at the time of the Shareholders Meeting, the Registration
Statement, including the Proxy Statement which shall constitute part thereof,
will not contain an untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties in this section shall only apply to
statements in or omissions from the Proxy Statement relating to descriptions of
the business of Acquired Corporation, its Assets, properties, operations, and
capital stock or to information furnished in writing by Acquired Corporation or
its representatives expressly for inclusion in the Proxy Statement.
5.22 Loans; Adequacy of Allowance for Loan Losses. All reserves for loan
losses shown on the most recent financial statements furnished by Acquired
Corporation have been calculated in accordance with prudent and customary
banking practices and are adequate in all material respects to reflect the risk
inherent in the loans of Acquired Corporation. Acquired Corporation has no
Knowledge of any fact which is likely to require a future material increase in
the provision for loan losses or a material decrease in the loan loss reserve
reflected in such financial statements. Each loan reflected as an Asset on the
financial statements of Acquired Corporation is the legal, valid and binding
obligation of the obligor of each loan, enforceable in accordance with its terms
subject to the effect of bankruptcy, insolvency, reorganization, moratorium, or
other similar laws relating to creditors' rights generally and to general
equitable principles and complies with the requirements of all Laws to which
Acquired Corporation and its Subsidiaries are subject. Acquired Corporation does
not have in its portfolio any loan exceeding its legal lending limit, and except
as disclosed on Schedule 5.22(A), Acquired Corporation has no known significant
delinquent, substandard, doubtful, loss, nonperforming or problem loans.
Schedule 5.22(B) sets forth a list of all loans made by any Acquired Corporation
Company for which any shares of Acquired Corporation common stock serve as
collateral. All certificates representing such shares that serve as collateral
have been submitted to, and are currently held by the Bank, in its collateral
vault, with proper indorsements or transfer powers.
5.23 Environmental Matters. Except as provided in Schedule 5.23, to the
Knowledge of Acquired Corporation, each Acquired Corporation Company is in
material compliance with all Laws and other governmental requirements relating
to the generation, management, handling, transportation, treatment, disposal,
storage, delivery, discharge, release or emission of any waste, pollution, or
toxic, hazardous or other substance (the "Environmental Laws"), and Acquired
Corporation has no Knowledge that any Acquired Corporation Company has not
complied with all regulations and requirements promulgated by the Occupational
Safety and Health Administration that are applicable to any Acquired Corporation
Company. To the Knowledge of Acquired Corporation, there is no Litigation
pending or threatened with respect to any violation or alleged violation of the
Environmental Laws. To the Knowledge of Acquired Corporation, with respect to
Assets of any Acquired Corporation Company, including any Loan Property, (i)
there has been no spillage, leakage, contamination or release of any substances
for which the appropriate remedial action has not been completed; (ii) no owned
or leased property is contaminated with or contains any hazardous substance or
waste; and (iii) there are no underground storage tanks on any premises owned or
leased by any Acquired Corporation Company. Acquired Corporation has no
Knowledge of any facts which might suggest that any Acquired Corporation Company
has engaged in any management practice with respect to any of its past or
existing borrowers which could reasonably be expected to subject any Acquired
Corporation Company to any Liability, either directly or indirectly, under the
principles of law as set forth in United States v. Fleet Factors Corp., 901 F.2d
1550 (11th Cir. 1990) or any similar principles. Moreover, to the Knowledge of
Acquired
A-17
<PAGE> 135
Corporation, no Acquired Corporation Company has extended credit, either on a
secured or unsecured basis, to any person or other entity engaged in any
activities which would require or requires such person or entity to obtain any
Permits which are required under any Environmental Law which has not been
obtained.
5.24 Transfer of Shares. Acquired Corporation has no Knowledge of any plan
or intention on the part of Acquired Corporation's shareholders to sell or
otherwise dispose of any of the BancGroup Common Stock to be received by them in
the Merger that would reduce such shareholders' ownership to a number of shares
having, in the aggregate, a fair market value of less than fifty (50%) percent
of the total fair market value of Acquired Corporation common stock outstanding
immediately before the Merger.
5.25 Collective Bargaining. There are no labor contracts, collective
bargaining agreements, letters of undertakings or other arrangements, formal or
informal, between any Acquired Corporation Company and any union or labor
organization covering any Acquired Corporation Company's employees and none of
said employees are represented by any union or labor organization.
5.26 Labor Disputes. To the Knowledge of Acquired Corporation, each
Acquired Corporation Company is in material compliance with all federal and
state laws respecting employment and employment practices, terms and conditions
of employment, wages and hours. No Acquired Corporation Company is or has been
engaged in any unfair labor practice, and, to the Knowledge of Acquired
Corporation, no unfair labor practice complaint against any Acquired Corporation
Company is pending before the National Labor Relations Board. Relations between
management of each Acquired Corporation Company and the employees are amicable
and there have not been, nor to the Knowledge of Acquired Corporation, are there
presently, any attempts to organize employees, nor to the Knowledge of Acquired
Corporation, are there plans for any such attempts.
5.27 Derivative Contracts. No Acquired Corporation Company is a party to
or has agreed to enter into a swap, forward, future, option, cap, floor or
collar financial contract, or any other interest rate or foreign currency
protection contract or derivative security not included in Acquired
Corporation's financial statements delivered under section 5.4 hereof which is a
financial derivative contract (including various combinations thereof).
ARTICLE 6
ADDITIONAL COVENANTS
6.1 Additional Covenants of BancGroup. BancGroup covenants to and with
Acquired Corporation as follows:
(a) Registration Statement and Other Filings. BancGroup shall prepare
and file with the SEC the Registration Statement on Form S-4 (or such other
form as may be appropriate) and all amendments and supplements thereto, in
form reasonably satisfactory to Acquired Corporation and its counsel, with
respect to the Common Stock to be issued pursuant to this Agreement.
BancGroup shall use reasonable good faith efforts to prepare all necessary
filings with any Agencies which may be necessary for approval to consummate
the transactions contemplated by this Agreement. Copies of all such filings
shall be furnished in advance to Acquired Corporation and its counsel.
(b) Blue Sky Permits. BancGroup shall use its best efforts to obtain,
prior to the effective date of the Registration Statement, all necessary
state securities Law or "blue sky" Permits and approvals required to carry
out the transactions contemplated by this Agreement.
(c) Financial Statements. BancGroup shall furnish to Acquired
Corporation:
(i) As soon as practicable and in any event within forty-five (45)
days after the end of each quarterly period (other than the last
quarterly period) in each fiscal year, consolidated statements of
operations of BancGroup for such period and for the period beginning at
the commencement of the fiscal year and ending at the end of such
quarterly period, and a consolidated statement of financial condition of
BancGroup as of the end of such quarterly period, setting forth in each
case in
A-18
<PAGE> 136
comparative form figures for the corresponding periods ending in the
preceding fiscal year, subject to changes resulting from year-end
adjustments;
(ii) Promptly upon receipt thereof, copies of all audit reports
submitted to BancGroup by independent auditors in connection with each
annual, interim or special audit of the books of BancGroup made by such
accountants;
(iii) As soon as practicable, copies of all such financial
statements and reports as it shall send to its shareholders and of such
regular and periodic reports as BancGroup may file with the SEC or any
other Agency; and
(iv) With reasonable promptness, such additional financial data as
Acquired Corporation may reasonably request.
(d) No Control of Acquired Corporation by BancGroup. Notwithstanding
any other provision hereof, until the Effective Date, the authority to
establish and implement the business policies of Acquired Corporation shall
continue to reside solely in Acquired Corporation's officers and board of
directors.
(e) Listing. Prior to the Effective Date, BancGroup shall use its
reasonable efforts to list the shares of BancGroup Common Stock to be
issued in the Merger on the NYSE or other quotations system on which such
shares are primarily traded.
(f) Employee Benefit Matters. On the Effective Date, all employees of
any Acquired Corporation Company shall, at BancGroup's option, either
become employees of the Resulting Corporation or its Subsidiaries or be
entitled to severance benefits in accordance with Colonial Bank's severance
policy as of the date of this Agreement. All employees of any Acquired
Corporation Company who become employees of the Resulting Corporation or
its Subsidiaries on the Effective Date shall be entitled, to the extent
permitted by applicable Law, to participate in all benefit plans of
Colonial Bank to the same extent as Colonial Bank employees, except as
stated otherwise in this section. Employees of any Acquired Corporation
Company who become employees of the Resulting Corporation or its
Subsidiaries on the Effective Date shall be allowed to participate as of
the Effective Date in the medical and dental benefits plan of Colonial Bank
as new employees of Colonial Bank, and the time of employment of such
employees who are employed at least 30 hours per week with any Acquired
Corporation Company as of the Effective Date shall be counted as employment
under such dental and medical plans of Colonial Bank for purposes of
calculating any 30 day waiting period and pre-existing condition
limitations. To the extent permitted by applicable Law, the period of
service with the appropriate Acquired Corporation Company of all employees
who become employees of the Resulting Corporation or its Subsidiaries on
the Effective Date shall be recognized only for vesting and eligibility
purposes under Colonial Bank's benefit plans. In addition, if the Effective
Date falls within an annual period of coverage under any group health plan
of the Resulting Corporation and its Subsidiaries, each such Acquired
Corporation Company employee shall be given credit for covered expenses
paid by that employee under comparable employee benefit plans of the
Acquired Corporation Company during the applicable coverage period through
the Effective Date towards satisfaction of any annual deductible limitation
and out-of-pocket maximum that may apply under that group health plan of
the Resulting Corporation and its Subsidiaries.
6.2 Additional Covenants of Acquired Corporation. Acquired Corporation
covenants to and with BancGroup as follows:
(a) Operations. (i) Acquired Corporation will conduct its business
and the business of each Acquired Corporation Company in a proper and
prudent manner and will use its best efforts to maintain its relationships
with its depositors, customers and employees. No Acquired Corporation
Company will engage in any material transaction outside the ordinary course
of business or make any material change in its accounting policies or
methods of operation, nor will Acquired Corporation permit the occurrence
of any change or event which would render any of the representations and
warranties in Article 5 hereof untrue in any material respect at and as of
the Effective Date with the same effect as though such representations and
warranties had been made at and as of such Effective Date. Acquired
Corporation
A-19
<PAGE> 137
shall contact any person who may be required to execute an undertaking
under Section 10.5 hereof to request such undertaking and shall take all
such reasonable steps as are necessary to obtain such undertaking. Acquired
Corporation will take no action that would prevent or impede the Merger
from qualifying (i) for pooling of interests accounting treatment or (ii)
as a tax-free reorganization within the meaning of Section 368 of the Code.
(ii) If requested by BancGroup, Acquired Corporation shall use its
best efforts to cause all officers and directors that own any stock of
Acquired Corporation and all other shareholders of Acquired Corporation
who own more than five percent (5%) of Acquired Corporation Stock, to
execute an acknowledgment that such person has no present plan,
intention, or binding commitment to sell or otherwise dispose of the
BancGroup Common Stock to be received by them in the Merger that would
reduce such shareholders' ownership to a number of shares having, in the
aggregate, a fair market value of less than fifty (50%) percent of the
total fair market value of Acquired Corporation common stock outstanding
immediately before the Merger within twelve (12) months after the
Effective Date.
(b) Shareholders Meeting; Best Efforts. Acquired Corporation will
cooperate with BancGroup in the preparation of the Registration Statement
and any regulatory filings and will cause the Shareholders Meeting to be
held for the purpose of approving the Merger as soon as practicable after
the effective date of the Registration Statement, and will use its best
efforts to bring about the transactions contemplated by this Agreement,
including shareholder approval of this Agreement, as soon as practicable
unless this Agreement is terminated as provided herein.
(c) Prohibited Negotiations. Except with respect to this Agreement
and the transactions contemplated hereby, no Acquired Corporation Company
nor any affiliate thereof nor any investment banker, attorney, accountant,
or other representative (collectively, "Representatives") retained by an
Acquired Corporation Company shall directly or indirectly solicit any
Acquisition Proposal by any Person. Except to the extent necessary to
comply with the fiduciary duties of Acquired Corporation's Board of
Directors as advised in writing by counsel to such Board of Directors, no
Acquired Corporation Company or any Representative thereof shall furnish
any non-public information that it is not legally obligated to furnish,
negotiate with respect to, or enter into any Contract with respect to, any
Acquisition Proposal, and each Acquired Corporation Company shall direct
and use its reasonable efforts to cause all of its Representatives not to
engage in any of the foregoing, but Acquired Corporation may communicate
information about such an Acquisition Proposal to its shareholders if and
to the extent that it is required to do so in order to comply with its
legal obligations as advised in writing by counsel to such Board of
Directors. Acquired Corporation shall promptly notify BancGroup orally and
in writing in the event that any Acquired Corporation Company receives any
inquiry or proposal relating to any such Acquisition Proposal. Acquired
Corporation shall immediately cease and cause to be terminated any existing
activities, discussions, or negotiations with any Persons other than
BancGroup conducted heretofore with respect to any of the foregoing.
Acquired Corporation shall enter unto the Stock Option Agreement with
BancGroup dated as of the date of this Agreement.
(d) Director Recommendation. The members of the Board of Directors of
Acquired Corporation agree to support publicly the Merger.
(e) Shareholder Voting. Acquired Corporation shall on the date of
execution of this Agreement obtain and submit to BancGroup an agreement
from its directors substantially in the form set forth in Exhibit A.
(f) Financial Statements and Monthly Status Reports. Acquired
Corporation shall furnish to BancGroup:
(i) As soon as practicable and in any event within 45 days after
the end of each quarterly period (other than the last quarterly period)
in each fiscal year, consolidated statements of operations of Acquired
Corporation for such period and for the period beginning at the
commencement of the fiscal year and ending at the end of such quarterly
period, and a consolidated statement
A-20
<PAGE> 138
of financial condition of Acquired Corporation as of the end of such
quarterly period, setting forth in each case in comparative form figures
for the corresponding periods ending in the preceding fiscal year,
subject to changes resulting from year-end adjustments;
(ii) Promptly upon receipt thereof, copies of all audit reports
submitted to Acquired Corporation by independent auditors in connection
with each annual, interim or special audit of the books of Acquired
Corporation made by such accountants;
(iii) As soon a practicable, copies of all such financial
statements and reports as it shall send to its shareholders and of such
regular and periodic reports as Acquired Corporation may file with the
SEC or any other Agency;
(iv) With reasonable promptness, such additional financial data as
BancGroup may reasonably request; and
(v) Within 10 calendar days after the end of each month (or, if the
financial statements referred to in clause (d) are not then available,
as soon as possible thereafter) commencing with the next calendar month
following the date of this Agreement and ending at the Effective Date, a
written description of (a) any non-compliance with the terms of this
Agreement, together with its then current estimate of the out-of-pocket
costs and expenses incurred or reasonably accruable in connection with
the transactions contemplated by this Agreement; (b) the status, as of
the date of the report, of all existing or threatened litigation against
any Acquired Corporation Company; (c) copies of minutes of any meeting
of the board of directors of any Acquired Corporation Company and any
committee thereof occurring in the month for which such report is made,
including all documents presented to the directors at such meetings; and
(d) monthly financial statements, including a balance sheet and income
statement.
(g) Fiduciary Duties. Prior to the Effective Date, (i) no director or
officer (each an "Executive") of any Acquired Corporation Company shall,
directly or indirectly, own, manage, operate, join, control, be employed by
or participate in the ownership, proposed ownership, management, operation
or control of or be connected in any manner with, any business, corporation
or partnership which is competitive to the business of any Acquired
Corporation Company, (ii) all Executives, at all times, shall satisfy their
fiduciary duties to Acquired Corporation and its Subsidiaries, and (iii)
such Executives shall not (except as required in the course of his or her
employment with any Acquired Corporation Company) communicate or divulge
to, or use for the benefit of himself or herself or any other person, firm,
association or corporation, without the express written consent of Acquired
Corporation, any confidential information which is possessed, owned or used
by or licensed by or to any Acquired Corporation Company or confidential
information belonging to third parties which any Acquired Corporation
Company shall be under obligation to keep secret or which may be
communicated to, acquired by or learned of by the Executive in the course
of or as a result of his or her employment with any Acquired Corporation
Company.
(h) Certain Practices. (a) Beginning with the date of this Agreement,
(i) Acquired Corporation shall consult with BancGroup and advise BancGroup
in advance of all of the Bank's loan requests over $250,000 that are not
single family residential loan requests or of any other loan request
outside the normal course of business, (ii) Acquired Corporation shall
furnish to BancGroup promptly upon their availability copies of all minutes
of loan committee meetings of the Bank for meetings occurring after the
date of this Agreement, and (iii) Acquired Corporation will consult with
BancGroup to coordinate various business issues on a basis mutually
satisfactory to Acquired Corporation and BancGroup. To accomplish the
foregoing, Acquired Corporation shall make available to BancGroup office
space for one representative of BancGroup to utilize from time to time
during the term of this Agreement. BancGroup shall reimburse Acquired
Corporation for all expenses reasonably associated with such space. Such
representative shall respond on behalf of BancGroup to matters arising
under clauses (i) and (iii) of the first sentence of this section and shall
be available to attend board or loan committee meetings of the Bank when
appropriate. Acquired Corporation and the Bank shall not be required to
undertake any of such activities, however, except as such activities may be
in compliance with existing Law and Regulations.
A-21
<PAGE> 139
(b) Schedule 6.2(h)(b) sets forth a list of all loans of any Acquired
Corporation Company to any Person affiliated directly or indirectly with
any Acquired Corporation Company, or any officer or employee of any
Acquired Corporation Company, showing the identity of the borrower,
identifying the collateral, and summarizing the material terms thereof.
Between the date of this Agreement and the Effective Date, no Acquired
Corporation Company shall alter the terms of any loan shown on Schedule
6.2(h)(b) (or any update to such schedule), or release, exchange or modify
the collateral for such loans, without prior notice to and consultation
with BancGroup. Schedule 6.2(h)(b) shall be updated by Acquired Corporation
on a monthly basis.
(i) Release or Alteration of Collateral. Between the date of this
Agreement and the Effective Date, no Acquired Corporation Company will
release any collateral for the loans listed on Schedule 5.22(B), or
alter the terms of such loans or exchange or modify the collateral for
such loans, except as may be required by Law, without prior notice to
and consultation with BancGroup. Between the date of this Agreement and
the Effective Date, Acquired Corporation shall collect all stock powers
or indorsements relating to, and undertake all other actions necessary
to perfect the security interest in, the collateral that is shown on
Schedule 5.22 (B).
(j) Investment Portfolio. Schedule 6.2(j) sets forth a list of all
investments of any Acquired Corporation Company. Between the date of
this Agreement and the Effective Date, Acquired Corporation will not
make purchases for its investment portfolio without the prior written
consent of BancGroup, except that such consent shall not be required for
purchases of U.S. Treasuries, Agency Notes and Bonds, investment grade
corporate notes with due dates of less than three years and Fed Funds.
ARTICLE 7
MUTUAL COVENANTS AND AGREEMENTS
7.1 Best Efforts; Cooperation. Subject to the terms and conditions herein
provided, BancGroup and Acquired Corporation each agrees to use its best efforts
promptly to take, or cause to be taken, all actions and do, or cause to be done,
all things necessary, proper or advisable under applicable Laws or otherwise,
including, without limitation, promptly making required deliveries of
shareholder lists and stock transfer reports and attempting to obtain all
necessary Consents and waivers and regulatory approvals, including the holding
of any regular or special board meetings, to consummate and make effective, as
soon as practicable, the transactions contemplated by this Agreement. The
officers of each Party to this Agreement shall fully cooperate with officers and
employees, accountants, counsel and other representatives of the other Parties
not only in fulfilling the duties hereunder of the Party of which they are
officers but also in assisting, directly or through direction of employees and
other persons under their supervision or control, such as stock transfer agents
for the Party, the other Parties requiring information which is reasonably
available from such Party.
7.2 Press Release. Each Party hereto agrees that, unless approved by the
other Parties in advance, such Party will not make any public announcement,
issue any press release or other publicity or confirm any statements by any
person not a party to this Agreement concerning the transactions contemplated
hereby. Notwithstanding the foregoing, each Party hereto reserves the right to
make any disclosure if such Party, in its reasonable discretion, deems such
disclosure required by Law. In that event, such Party shall provide to the other
Party the text of such disclosure sufficiently in advance to enable the other
Party to have a reasonable opportunity to comment thereon.
7.3 Mutual Disclosure. Each Party hereto agrees to promptly furnish to
each other Party hereto its public disclosures and filings not precluded from
disclosure by Law including but not limited to call reports, Form 8-K, Form 10-Q
and Form 10-K filings, Y-3 applications, reports on Form Y-6, quarterly or
special reports to shareholders, Tax returns, Form S-8 registration statements
and similar documents.
7.4 Access to Properties and Records. Each Party hereto shall afford the
officers and authorized representatives of the other Party full access to the
Assets, books and records of such Party in order that such other Parties may
have full opportunity to make such investigation as they shall desire of the
affairs of such
A-22
<PAGE> 140
Party and shall furnish to such Parties such additional financial and operating
data and other information as to its businesses and Assets as shall be from time
to time reasonably requested. All such information that may be obtained by any
such Party will be held in confidence by such party, will not be disclosed by
such Party or any of its representatives except in accordance with this
Agreement, and will not be used by such Party for any purpose other than the
accomplishment of the Merger as provided herein.
7.5 Notice of Adverse Changes. Each Party agrees to give written notice
promptly to the other Party upon becoming aware of the occurrence or impending
occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) would cause or constitute a
material breach of any of its representations, warranties, or covenants
contained herein, and to use its reasonable efforts to prevent or promptly to
remedy the same.
7.6. Second Due Diligence. Approximately 30 days prior to the Effective
Date, the estimate of which BancGroup shall provide to Acquired Corporation in
writing, BancGroup shall be permitted to conduct a second due diligence
investigation of all Acquired Corporation Companies. The subject matter of such
investigation shall be limited to matters arising or occurring since the
completion of BancGroup's due diligence investigation conducted prior to the
execution of this Agreement. BancGroup shall conduct such second due diligence
in accordance with its standard loan review procedures, sampling and statistical
methods. BancGroup shall notify Acquired Corporation in writing regarding any
item that would cause BancGroup to terminate this Agreement under section
13.2(e), no later than 14 days prior to the scheduled Effective Date.
ARTICLE 8
CONDITIONS TO OBLIGATIONS OF ALL PARTIES
The obligations of BancGroup and Acquired Corporation to cause the
transactions contemplated by this Agreement to be consummated shall be subject
to the satisfaction, in the sole discretion of the Party relying upon such
conditions, on or before the Effective Date of all the following conditions,
except as such Parties may waive such conditions in writing:
8.1 Approval by Shareholders. At the Shareholders Meeting, this Agreement
and the matters contemplated by this Agreement shall have been duly approved by
the vote of the holders of not less than the requisite number of the issued and
outstanding voting securities of Acquired Corporation as is required by
applicable Law and Acquired Corporation's articles of incorporation and bylaws.
8.2 Regulatory Authority Approval. Orders, Consents and approvals, in form
and substance reasonably satisfactory to BancGroup and Acquired Corporation,
shall have been entered by the Board of Governors of the Federal Reserve System
and other appropriate bank regulatory Agencies (i) granting the authority
necessary for the consummation of the transactions contemplated by this
Agreement, including the merger of the Bank with Colonial Bank as structured
pursuant to section 2.8 hereof and (ii) satisfying all other requirements
prescribed by Law. No Order, Consent or approval so obtained which is necessary
to consummate the transactions as contemplated hereby shall be conditioned or
restricted in a manner which in the reasonable good faith judgment of the Board
of Directors of BancGroup would so materially adversely impact the economic
benefits of the transaction as contemplated by this Agreement so as to render
inadvisable the consummation of the Merger.
8.3 Litigation. There shall be no pending or threatened Litigation in any
court or any pending or threatened proceeding by any governmental commission,
board or Agency, with a view to seeking or in which it is sought to restrain or
prohibit consummation of the transactions contemplated by this Agreement or in
which it is sought to obtain divestiture, rescission or damages in connection
with the transactions contemplated by this Agreement and no investigation by any
Agency shall be pending or threatened which might result in any such suit,
action or other proceeding.
8.4 Registration Statement. The Registration Statement shall be effective
under the 1933 Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect; no proceedings for
A-23
<PAGE> 141
such purpose, or under the proxy rules of the SEC or any bank regulatory
authority pursuant to the 1934 Act, with respect to the transactions
contemplated hereby, shall be pending before or threatened by the SEC or any
bank regulatory authority; and all approvals or authorizations for the offer of
BancGroup Common Stock shall have been received or obtained pursuant to any
applicable state securities Laws, and no stop order or proceeding with respect
to the transactions contemplated hereby shall be pending or threatened under any
such state Law.
8.5 Tax Opinion. An opinion of Coopers & Lybrand L.L.P., shall have been
received in form and substance reasonably satisfactory to the Acquired
Corporation and BancGroup to the effect that (i) the Merger will constitute a
"reorganization" within the meaning of section 368 of the Code; (ii) no gain or
loss will be recognized by BancGroup or Acquired Corporation; (iii) no gain or
loss will be recognized by the shareholders of Acquired Corporation who receive
shares of BancGroup Common Stock except to the extent of any taxable "boot"
received by such persons from BancGroup, and except to the extent of any
dividends received from Acquired Corporation prior to the Effective Date; (iv)
the basis of the BancGroup Common Stock received in the Merger will be equal to
the sum of the basis of the shares of Acquired Corporation common stock
exchanged in the Merger and the amount of gain, if any, which was recognized by
the exchanging Acquired Corporation shareholder, including any portion treated
as a dividend, less the value of taxable boot, if any, received by such
shareholder in the Merger; (v) the holding period of the BancGroup Common Stock
will include the holding period of the shares of Acquired Corporation common
stock exchanged therefor if such shares of Acquired Corporation common stock
were capital assets in the hands of the exchanging Acquired Corporation
shareholder; and (vi) cash received by an Acquired Corporation shareholder in
lieu of a fractional share interest of BancGroup Common Stock will be treated as
having been received as a distribution in full payment in exchange for the
fractional share interest of BancGroup Common Stock which he or she would
otherwise be entitled to receive and will qualify as capital gain or loss
(assuming the Acquired Corporation common stock was a capital asset in his or
her hands as of the Effective Date).
ARTICLE 9
CONDITIONS TO OBLIGATIONS OF ACQUIRED CORPORATION
The obligations of Acquired Corporation to cause the transactions
contemplated by this Agreement to be consummated shall be subject to the
satisfaction on or before the Effective Date of all the following conditions
except as Acquired Corporation may waive such conditions in writing:
9.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of Acquired Corporation, all representations
and warranties of BancGroup contained in this Agreement shall be true in all
material respects on and as of the Effective Date as if such representations and
warranties were made on and as of such Effective Date, and BancGroup shall have
performed in all material respects all agreements and covenants required by this
Agreement to be performed by it on or prior to the Effective Date.
9.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 4.3(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition or affairs of BancGroup
which in their total effect constitute a Material Adverse Effect, nor shall
there have been any material changes in the Laws governing the business of
BancGroup which would impair the rights of Acquired Corporation or its
shareholders pursuant to this Agreement.
9.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, Acquired Corporation shall have received a certificate
from the President or a Vice President and from the Secretary or Assistant
Secretary of BancGroup dated as of the Closing certifying that:
(a) the Board of Directors of BancGroup has duly adopted resolutions
approving the substantive terms of this Agreement and authorizing the
consummation of the transactions contemplated by this Agreement and such
resolutions have not been amended or modified and remain in full force and
effect;
A-24
<PAGE> 142
(b) each person executing this Agreement on behalf of BancGroup is an
officer of BancGroup holding the office or offices specified therein and
the signature of each person set forth on such certificate is his or her
genuine signature;
(c) the certificate of incorporation and bylaws of BancGroup
referenced in section 4.4 hereof remain in full force and effect;
(d) such persons have no knowledge of a basis for any material claim,
in any court or before any Agency or arbitration or otherwise against, by
or affecting BancGroup or the business, prospects, condition (financial or
otherwise), or Assets of BancGroup which would prevent the performance of
this Agreement or the transactions contemplated by this Agreement or
declare the same unlawful or cause the rescission thereof;
(e) to such persons' knowledge, the Proxy Statement delivered to
Acquired Corporation's shareholders, or any amendments or revisions thereto
so delivered, as of the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made (it being understood that such persons need not express a
statement as to information concerning or provided by Acquired Corporation
for inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 9 insofar as they relate
to BancGroup have been satisfied.
9.4 Opinion of Counsel. Acquired Corporation shall have received an
opinion of Miller, Hamilton, Snider & Odom, L.L.C., counsel to BancGroup, dated
as of the Closing, substantially in the form set forth in Exhibit B hereto.
9.5 NYSE Listing. The shares of BancGroup Common Stock to be issued under
this Agreement shall have been approved for listing on the NYSE.
9.6 Other Matters. There shall have been furnished to such counsel for
Acquired Corporation certified copies of such corporate records of BancGroup and
copies of such other documents as such counsel may reasonably have requested for
such purpose.
9.7 Material Events. There shall have been no determination by the board
of directors of Acquired Corporation that the transactions contemplated by this
Agreement have become impractical because of any state of war, declaration of a
banking moratorium in the United States or a general suspension of trading on
the NYSE or any other exchange on which BancGroup Common Stock may be traded.
ARTICLE 10
CONDITIONS TO OBLIGATIONS OF BANCGROUP
The obligations of BancGroup to cause the transactions contemplated by this
Agreement to be consummated shall be subject to the satisfaction on or before
the Effective Date of all of the following conditions except as BancGroup may
waive such conditions in writing:
10.1 Representations, Warranties and Covenants. Notwithstanding any
investigation made by or on behalf of BancGroup, all representations and
warranties of Acquired Corporation contained in this Agreement shall be true in
all material respects on and as of the Effective Date as if such representations
and warranties were made on and as of the Effective Date, and Acquired
Corporation shall have performed in all material respects all agreements and
covenants required by this Agreement to be performed by it on or prior to the
Effective Date.
10.2 Adverse Changes. There shall have been no changes after the date of
the most recent balance sheet provided under section 5.4(a)(i) hereof in the
results of operations (as compared with the corresponding period of the prior
fiscal year), Assets, Liabilities, financial condition, or affairs of Acquired
Corporation which constitute a Material Adverse Effect, nor shall there have
been any material changes in the Laws
A-25
<PAGE> 143
governing the business of Acquired Corporation which would impair BancGroup's
rights pursuant to this Agreement.
10.3 Closing Certificate. In addition to any other deliveries required to
be delivered hereunder, BancGroup shall have received a certificate from
Acquired Corporation executed by the President or Vice President and from the
Secretary or Assistant Secretary of Acquired Corporation dated as of the Closing
certifying that:
(a) the Board of Directors of Acquired Corporation has duly adopted
resolutions approving the substantive terms of this Agreement and
authorizing the consummation of the transactions contemplated by this
Agreement and such resolutions have not been amended or modified and remain
in full force and effect;
(b) the shareholders of Acquired Corporation have duly adopted
resolutions approving the substantive terms of the Merger and the
transactions contemplated thereby and such resolutions have not been
amended or modified and remain in full force and effect;
(c) each person executing this Agreement on behalf of Acquired
Corporation is an officer of Acquired Corporation holding the office or
offices specified therein and the signature of each person set forth on
such certificate is his or her genuine signature;
(d) the articles of incorporation and bylaws of Acquired Corporation
and the Bank referenced in section 5.8 hereof remain in full force and
effect and have not been amended or modified since the date hereof;
(e) to such persons' knowledge, the Proxy Statement delivered to
Acquired Corporation's shareholders, or any amendments or revisions thereto
so delivered, as of the date thereof, did not contain or incorporate by
reference any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances under which
they were made (it being understood that such persons need only express a
statement as to information concerning or provided by Acquired Corporation
for inclusion in such Proxy Statement); and
(f) the conditions set forth in this Article 10 insofar as they relate
to Acquired Corporation have been satisfied.
10.4 Opinion of Counsel. BancGroup shall have received an opinion of
Schifino & Fleischer, P.A., counsel to Acquired Corporation, dated as of the
Closing, substantially as set forth in Exhibit C hereto.
10.5 Controlling Shareholders. Each shareholder of Acquired Corporation
who may be an "affiliate" of Acquired Corporation, within the meaning of Rule
145 of the general rules and regulations under the 1933 Act shall have executed
and delivered an agreement satisfactory to BancGroup to the effect that such
person shall not make a "distribution" (within the meaning of Rule 145) of the
Common Stock which he receives upon the Effective Date and that such Common
Stock will be held subject to all applicable provisions of the 1933 Act and the
rules and regulations of the SEC thereunder, and that such person will not sell
or otherwise reduce risk relative to any shares of BancGroup Common Stock
received in the Merger until financial results concerning at least 30 days of
post-Merger combined operations have been published by BancGroup within the
meaning of Section 201.01 of the SEC's Codification of Financial Reporting
Policies. Acquired Corporation recognizes and acknowledges that BancGroup Common
Stock issued to such persons may bear a legend evidencing the agreement
described above.
10.6 Other Matters. There shall have been furnished to counsel for
BancGroup certified copies of such corporate records of Acquired Corporation and
copies of such other documents as such counsel may reasonably have requested for
such purpose.
10.7 Dissenters. The number of shares as to which shareholders of Acquired
Corporation have exercised dissenters rights of appraisal under section 3.6 does
not exceed 10 percent of the outstanding shares of common stock of Acquired
Corporation.
A-26
<PAGE> 144
10.8 Material Events. There shall have been no determination by the board
of directors of BancGroup that the transactions contemplated by this Agreement
have become impractical because of any state of war, declaration of a banking
moratorium in the United States or general suspension of trading on the NYSE or
any exchange on which BancGroup Common Stock may be traded.
10.9 Employment Agreement. An employment agreement, in form and substance
reasonably satisfactory to BancGroup, shall have been executed between BancGroup
and Richard Garner.
10.10 Pooling of Interest. BancGroup shall have received the written
opinion of Coopers & Lybrand, L.L.P., that the Merger will qualify for the
pooling of interests method of accounting under generally accepted accounting
principles.
ARTICLE 11
TERMINATION OF REPRESENTATIONS AND WARRANTIES
All representations and warranties provided in Articles 4 and 5 of this
Agreement or in any closing certificate pursuant to Articles 9 and 10 shall
terminate and be extinguished at and shall not survive the Effective Date. All
covenants, agreements and undertakings required by this Agreement to be
performed by any Party hereto following the Effective Date shall survive such
Effective Date and be binding upon such Party. If the Merger is not consummated,
all representations, warranties, obligations, covenants, or agreements hereunder
or in any certificate delivered hereunder relating to the transaction which is
not consummated shall be deemed to be terminated or extinguished, except that
the last sentences of Sections 7.4 and 6.2(c), and sections 7.2, 13.3, Article
11, Article 12, Article 15 and any applicable definitions of Article 14, shall
survive. Items disclosed in the Exhibits and Schedules attached hereto are
incorporated into this Agreement and form a part of the representations,
warranties, covenants or agreements to which they relate.
ARTICLE 12
NOTICES
All notices, requests, demands and other communications under this
Agreement shall be in writing and shall be deemed to have been duly given at the
time given or mailed, first class postage prepaid:
(a) If to Acquired Corporation to David Crockett, 20 Circuit Avenue,
Wellfleet, Massachusetts 02667, facsimile 508-349-1396, with copies to
William J. Schifino, Esq., Schifino & Fleischer, P.A., One Tampa City
Center, Suite 2700, 201 North Franklin Street, Tampa, Florida 33602,
facsimile (813) 223-3070, or as may otherwise be specified by Acquired
Corporation in writing to BancGroup.
(b) If to BancGroup, to W. Flake Oakley, IV, One Commerce Street,
Suite 803, Montgomery, Alabama, 36104, facsimile (334) 240-5019, with a
copy to Michael D. Waters, Miller, Hamilton, Snider & Odom, L.L.C., One
Commerce Street, Suite 802, Montgomery, Alabama 36104, facsimile (334) 265-
4533, or as may otherwise be specified in writing by BancGroup to Acquired
Corporation.
ARTICLE 13
AMENDMENT OR TERMINATION
13.1 Amendment. This Agreement may be amended by the mutual consent of
BancGroup and Acquired Corporation before or after approval of the transactions
contemplated herein by the shareholders of Acquired Corporation.
13.2 Termination. This Agreement may be terminated at any time prior to or
on the Effective Date whether before or after action thereon by the shareholders
of Acquired Corporation, as follows:
(a) by the mutual consent of the respective boards of directors of
Acquired Corporation and BancGroup;
A-27
<PAGE> 145
(b) by the board of directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach and which breach would provide the non-breaching Party
the ability to refuse to consummate the Merger under the standard set forth
in section 10.1 of this Agreement in the case of BancGroup and section 9.1
of this Agreement in the case of Acquired Corporation;
(c) by the board of directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching Party
of such breach, or if any of the conditions to the obligations of such
Party contained in this Agreement in Article 9 as to Acquired Corporation
or Article 10 as to BancGroup shall not have been satisfied in full;
(d) by the board of directors of either BancGroup or Acquired
Corporation if all transactions contemplated by this Agreement shall not
have been consummated on or prior to February 28, 1998 (but if all Federal
Regulatory approvals (including the Form S-4 having been declared effective
by the SEC) have not been granted prior to December 31, 1997, then the
February 28, 1998 deadline shall be extended to April 30, 1998), if the
failure to consummate the transactions provided for in this Agreement on or
before such date is not caused by any breach of this Agreement by the Party
electing to terminate pursuant to this section 13.2(d); or
(e) by the board of directors of BancGroup if, in the sole judgement
of BancGroup, as a result of the second due diligence undertaken by
BancGroup in accordance with section 7.6 hereof, BancGroup has determined
that a Material Adverse Effect on Acquired Corporation or the Bank has
occurred.
13.3 Damages. In the event a Party terminates this Agreement pursuant to
Section 13.2 because of a breach of this Agreement by the other Party, the Party
in breach shall be liable to the terminating Party for damages, including
out-of-pocket expenses and reasonable attorney's fees. In other cases of
termination, and subject to Section 6.2, the expenses incurred shall be borne as
set forth in section 15.1 hereof.
ARTICLE 14
DEFINITIONS
(a) The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement:
Acquired Corporation....... South Florida Banking Corp., a Florida corporation.
Acquired Corporation
Company.................. Shall mean Acquired Corporation, the Bank, any
Subsidiary of Acquired Corporation or the Bank, or
any entity acquired as a Subsidiary of Acquired
Corporation or the Bank in the future and owned by
Acquired Corporation or the Bank at the Effective
Date.
Acquired Corporation
Options.................. Options respecting the issuance of a maximum of
35,308 shares of Acquired Corporation common stock
pursuant to Acquired Corporation's stock option
plans.
Acquired Corporation
Stock.................... Shares of common stock, par value $1.00 per share,
of Acquired Corporation.
Acquisition Proposal....... Shall mean, with respect to a Party, any tender
offer or exchange offer or any proposal for a
merger, acquisition of all of the stock or assets
of, or
A-28
<PAGE> 146
other business combination involving such Party or
any of its Subsidiaries or the acquisition of a
substantial equity interest in, or a substantial
portion of the assets of, such Party or any of its
Subsidiaries.
Agencies................... Shall mean, collectively, the Federal Trade
Commission, the United States Department of
Justice, the Board of the Governors of the Federal
Reserve System, the Federal Deposit Insurance
Corporation, the Office of Thrift Supervision, all
state regulatory agencies having jurisdiction over
the Parties and their respective Subsidiaries, HUD,
the VA, the FHA, the GNMA, the FNMA, the FHLMC, the
NYSE, and the SEC.
Agreement.................. Shall mean this Agreement and Plan of Merger and
the Exhibits and Schedules delivered pursuant
hereto and incorporated herein by reference.
Assets..................... Of a Person shall mean all of the assets,
properties, businesses and rights of such Person of
every kind, nature, character and description,
whether real, personal or mixed, tangible or
intangible, accrued or contingent, or otherwise
relating to or utilized in such Person's business,
directly or indirectly, in whole or in part,
whether or not carried on the books and records of
such Person, and whether or not owned in the name
of such Person or any Affiliate of such Person and
wherever located.
BancGroup.................. The Colonial BancGroup, Inc., a Delaware
corporation with its principal offices in
Montgomery, Alabama.
Bank....................... First National Bank of Florida at Bonita Springs, a
national banking association.
Closing.................... The submission of the certificates of officers,
legal opinions and other actions required to be
taken in order to consummate the Merger in
accordance with this Agreement.
Code....................... The Internal Revenue Code of 1986, as amended.
Common Stock............... BancGroup's Common Stock authorized and defined in
the restated certificate of incorporation of
BancGroup, as amended.
Consent.................... Any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any
Person pursuant to any Contract, Law, Order, or
Permit.
Contract................... Any written or oral agreement, arrangement,
authorization, commitment, contract, indenture,
instrument, lease, obligation, plan, practice,
restriction, understanding or undertaking of any
kind or character, or other document to which any
Person is a party or that is binding on any Person
or its capital stock, Assets or business.
Default.................... Shall mean (i) any breach or violation of or
default under any Contract, Order or Permit, (ii)
any occurrence of any event that with the passage
of time or the giving of notice or both would
constitute a breach or violation of or default
under any Contract, Order or Permit, or (iii) any
occurrence of any event that with or without the
passage of time or the giving of notice would give
rise to a right to terminate or revoke, change the
current terms of, or renegotiate, or to accelerate,
increase, or impose any Liability under, any
Contract, Order or Permit.
DGCL....................... The Delaware General Corporation Law.
A-29
<PAGE> 147
Effective Date............. Means the date and time at which the Merger becomes
effective as defined in section 2.7 hereof.
Environmental Laws......... Means the laws, regulations and governmental
requirements referred to in section 5.23 hereof.
ERISA...................... The Employee Retirement Income Security Act of
1974, as amended.
Exchange Ratio............. Shall mean 1.5746, unless certain loans reflected
on Schedule 3.1(a)(ii) have been repaid in
accordance with Section 3.1(a)(ii), in which case
the Exchange Ratio shall be 1.5908 for all purposes
under this Agreement.
Exhibits................... A through C, inclusive, shall mean the Exhibits so
marked, copies of which are attached to this
Agreement. Such Exhibits are hereby incorporated by
reference herein and made a part hereof, and may be
referred to in this Agreement and any other related
instrument or document without being attached
hereto.
FBCA....................... The Florida Business Corporation Act
GAAP....................... Means generally accepted accounting principles
applicable to banks and bank holding companies.
Knowledge.................. Means the actual knowledge of the Chairman,
President, Chief Financial Officer, Chief
Accounting Officer, Chief Credit Officer, General
Counsel or any Senior or Executive Vice President
of BancGroup, in the case of knowledge of
BancGroup, or of Acquired Corporation and the Bank,
in the case of knowledge of Acquired Corporation.
Law........................ Any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable
to a Person or its Assets, Liabilities or business,
including those promulgated, interpreted or
enforced by any Agency.
Liability.................. Any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost
or expense (including costs of investigation,
collection and defense), deficiency, guaranty or
endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts
presented for collection or deposit in the ordinary
course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated,
matured or unmatured, or otherwise.
Lien....................... Any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation,
infringement, lien, mortgage, pledge, reservation,
restriction, security interest, title retention or
other security arrangement, or any adverse right or
interest, charge, or claim of any nature whatsoever
of, on, or with respect to any property or property
interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository
institution Subsidiaries of a Party, pledges to
secure deposits and other Liens incurred in the
ordinary course of the banking business, and (iii)
Liens in the form of easements and restrictive
covenants on real property which do not materially
adversely affect the use of such property by the
current owner thereof.
Litigation................. Any action, arbitration, complaint, criminal
prosecution, governmental or other examination or
investigation, hearing, inquiry, administrative or
other proceeding relating to or affecting a Party,
its business, its Assets
A-30
<PAGE> 148
(including Contracts related to it), or the
transactions contemplated by this Agreement.
Loan Property.............. Any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or
Subsidiary holds a security interest, and, where
required by the context, includes the owner or
operator of such property, but only with respect to
such property.
Loss....................... Any and all direct or indirect payments,
obligations, recoveries, deficiencies, fines,
penalties, interest, assessments, losses,
diminution in the value of Assets, damages,
punitive, exemplary or consequential damages
(including, but not limited to, lost income and
profits and interruptions of business),
liabilities, costs, expenses (including without
limitation, reasonable attorneys' fees and
expenses, and consultant's fees and other costs of
defense or investigation), and interest on any
amount payable to a third party as a result of the
foregoing.
material................... For purposes of this Agreement shall be determined
in light of the facts and circumstances of the
matter in question; provided that any specific
monetary amount stated in this Agreement shall
determine materiality in that instance.
Material Adverse Effect.... On a Party shall mean an event, change or
occurrence which has a material adverse impact on
(i) the financial position, Assets, business, or
results of operations of such Party and its
Subsidiaries, taken as a whole, or (ii) the ability
of such Party to perform its obligations under this
Agreement or to consummate the Merger or the other
transactions contemplated by this Agreement,
provided that "material adverse impact" shall not
be deemed to include the impact of (x) changes in
banking and similar laws of general applicability
or interpretations thereof by courts or
governmental authorities, (y) changes in generally
accepted accounting principles or regulatory
accounting principles generally applicable to banks
and their holding companies, and (z) the Merger and
compliance with the provisions of this Agreement on
the operating performance of the Parties.
Merger..................... The merger of Acquired Corporation with BancGroup
as contemplated in this Agreement.
Merger Consideration....... The distribution of BancGroup Common Stock for each
share of Acquired Corporation Stock as provided in
section 3.1(a) hereof.
NYSE....................... The New York Stock Exchange.
Order...................... Any administrative decision or award, decree,
injunction, judgment, order, quasi-judicial
decision or award, ruling, or writ of any federal,
state, local or foreign or other court, arbitrator,
mediator, tribunal, administrative agency or
Agency.
Party...................... Shall mean Acquired Corporation or BancGroup, and
"Parties" shall mean both Acquired Corporation and
BancGroup.
Permit..................... Any federal, state, local, and foreign governmental
approval, authorization, certificate, easement,
filing, franchise, license, notice, permit, or
right to which any Person is a party or that is or
may be binding upon or inure to the benefit of any
Person or its securities, Assets or business.
A-31
<PAGE> 149
Person..................... A natural person or any legal, commercial or
governmental entity, such as, but not limited to, a
corporation, general partnership, joint venture,
limited partnership, limited liability company,
trust, business association, group acting in
concert, or any person acting in a representative
capacity.
Proxy Statement............ The proxy statement used by Acquired Corporation to
solicit the approval of its shareholders of the
transactions contemplated by this Agreement, which
shall include the prospectus of BancGroup relating
to the issuance of the BancGroup Common Stock to
the shareholders of Acquired Corporation.
Registration Statement..... The registration statement on Form S-4, or such
other appropriate form, to be filed with the SEC by
BancGroup, and which has been agreed to by Acquired
Corporation, to register the shares of BancGroup
Common Stock offered to shareholders of the Bank
pursuant to his Agreement, including the Proxy
Statement.
Resulting Corporation...... BancGroup, as the surviving corporation resulting
from the Merger.
SEC........................ United States Securities and Exchange Commission.
Stock Option Agreement..... The agreement dated as of the date hereof between
BancGroup and Acquired Corporation granting to
BancGroup the right to acquire up to 19.9% of
Acquired Corporation common stock.
Shareholders Meeting....... The special meeting of shareholders of Acquired
Corporation called to approve the transactions
contemplated by this Agreement.
Subsidiaries............... Shall mean all those corporations, banks,
associations, or other entities of which the entity
in question owns or controls 5% or more of the
outstanding equity securities either directly or
through an unbroken chain of entities as to each of
which 5% or more of the outstanding equity
securities is owned directly or indirectly by its
parent; provided, however, there shall not be
included any such entity acquired through
foreclosure or any such entity the equity
securities of which are owned or controlled in a
fiduciary capacity.
Tax or Taxes............... Means any federal, state, county, local, foreign,
and other taxes, assessments, charges, fares, and
impositions, including interest and penalties
thereon or with respect thereto.
1933 Act................... The Securities Act of 1933, as amended.
1934 Act................... The Securities Exchange Act of 1934, as amended.
ARTICLE 15
MISCELLANEOUS
15.1 Expenses. Each Party hereto shall bear its own legal, auditing,
trustee, investment banking, regulatory and other expenses in connection with
this Agreement and the transactions contemplated hereby.
15.2 Benefit. This Agreement shall inure to the benefit of and be binding
upon Acquired Corporation and BancGroup, and their respective successors. This
Agreement shall not be assignable by any Party without the prior written consent
of the other Party.
15.3 Governing Law. This Agreement shall be governed by, and construed in
accordance with the Laws of the State of Alabama without regard to any conflict
of Laws.
A-32
<PAGE> 150
15.4 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to constitute an original. Each such counterpart shall
become effective when one counterpart has been signed by each Party thereto.
15.5 Headings. The headings of the various articles and sections of this
Agreement are for convenience of reference only and shall not be deemed a part
of this Agreement or considered in construing the provisions thereof.
15.6 Severability. Any term or provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining terms and provisions thereof or affecting the
validity or enforceability of such provision in any other jurisdiction, and if
any term or provision of this Agreement is held by any court of competent
jurisdiction to be void, voidable, invalid or unenforceable in any given
circumstance or situation, then all other terms and provisions, being severable,
shall remain in full force and effect in such circumstance or situation and the
term or provision shall remain valid and in effect in any other circumstances or
situation.
15.7 Construction. Use of the masculine pronoun herein shall be deemed to
refer to the feminine and neuter genders and the use of singular references
shall be deemed to include the plural and vice versa, as appropriate. No
inference in favor of or against any Party shall be drawn from the fact that
such Party or such Party's counsel has drafted any portion of this Agreement.
15.8 Return of Information. In the event of termination of this Agreement
prior to the Effective Date, each Party shall return to the other, without
retaining copies thereof, all confidential or non-public documents, work papers
and other materials obtained from the other Party in connection with the
transactions contemplated in this Agreement and shall keep such information
confidential, not disclose such information to any other person or entity, and
not use such information in connection with its business.
15.9 Equitable Remedies. The parties hereto agree that, in the event of a
breach of this Agreement by either Party, the other Party may be without an
adequate remedy at law owing to the unique nature of the contemplated
transactions. In recognition thereof, in addition to (and not in lieu of) any
remedies at law that may be available to the non-breaching Party, the
non-breaching Party shall be entitled to obtain equitable relief, including the
remedies of specific performance and injunction, in the event of a breach of
this Agreement by the other Party, and no attempt on the part of the
non-breaching Party to obtain such equitable relief shall be deemed to
constitute an election of remedies by the non-breaching Party that would
preclude the non-breaching Party from obtaining any remedies at law to which it
would otherwise be entitled.
15.10 Attorneys' Fees. If any Party hereto shall bring an action at law or
in equity to enforce its rights under this Agreement (including an action based
upon a misrepresentation or the breach of any warranty, covenant, agreement or
obligation contained herein), the prevailing Party in such action shall be
entitled to recover from the other Party its costs and expenses incurred in
connection with such action (including fees, disbursements and expenses of
attorneys and costs of investigation).
15.11 No Waiver. No failure, delay or omission of or by any Party in
exercising any right, power or remedy upon any breach or Default of any other
Party shall impair any such rights, powers or remedies of the Party not in
breach or Default, nor shall it be construed to be a wavier of any such right,
power or remedy, or an acquiescence in any similar breach or Default; nor shall
any waiver of any single breach or Default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character on the part of any Party of any
provisions of this Agreement must be in writing and be executed by the Parties
to this Agreement and shall be effective only to the extent specifically set
forth in such writing.
15.12 Remedies Cumulative. All remedies provided in this Agreement, by law
or otherwise, shall be cumulative and not alternative.
15.13 Entire Contract. This Agreement and the documents and instruments
referred to herein constitute the entire contract between the parties to this
Agreement and supersede all other understandings with respect to the subject
matter of this Agreement.
A-33
<PAGE> 151
IN WITNESS WHEREOF, Acquired Corporation and BancGroup have caused this
Agreement to be signed by their respective duly authorized officers as of the
date first above written.
<TABLE>
<S> <C>
ATTEST: SOUTH FLORIDA BANKING CORP.
BY: /s/ Josephine Hogue BY: /s/ John N. Elder
----------------------------------------------- -----------------------------------------------
ITS: Secretary ITS: Executive Vice President & C.F.O.
----------------------------------------------- -----------------------------------------------
(CORPORATE SEAL)
ATTEST: THE COLONIAL BANCGROUP, INC.
BY: /s/ Donna R. Piel BY: /s/ W. Flake Oakley, IV
----------------------------------------------- -----------------------------------------------
ITS: Assistant Secretary ITS: Chief Financial Officer
----------------------------------------------- -----------------------------------------------
(CORPORATE SEAL)
</TABLE>
A-34
<PAGE> 152
APPENDIX B
607.1301 DISSENTER'S RIGHTS; DEFINITIONS. -- The following definitions
apply to sec.sec. 607.1302 and 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a dissenting
shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value," with respect to a dissenter's shares, means the
value of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would
be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on
which the corporation received written consents without a meeting from the
requisite number of shareholders in order to authorize the action, or, in
the case of a merger pursuant to sec. 607.1104, the day prior to the date
on which a copy of the plan of merger was mailed to each shareholder of
record of the subsidiary corporation.
607.1302 RIGHT OF SHAREHOLDERS TO DISSENT. -- (1) Any shareholder has the
right to dissent from, and obtain payment of the fair value of his shares in the
event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under sec. 607.1104, and the shareholders would have been
entitled to vote on action taken, except for the applicability of
607.1104;
(b) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange pursuant to sec. 607.1202, including a sale in dissolution but not
including a sale pursuant to court order or a sale of cash pursuant to a
plan by which all or substantially all of the net proceeds of the sale will
be distributed to the shareholders within 1 year after the date of sale;
(c) As provided in sec. 607.0902(11), the approval of a control-share
acquisition;
(d) Consummation of a plan of share exchange to which the corporation
is a party as the corporation the shares of which will be acquired, if the
shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the shareholder
is entitled to vote on the amendment and if such amendment would adversely
affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to any of
his shares;
2. Altering or abolishing the voting rights pertaining to any of
his shares, except as such rights may be affected by the voting rights
of new shares then being authorized of any existing or new class or
series of shares;
3. Effecting an exchange, cancellation, or reclassification of any
of his shares, when such exchange, cancellation, or reclassification
would alter or abolish his voting rights or alter his percentage or
equity in the corporation, or effecting a reduction or cancellation of
accrued dividends or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his redeemable
shares, altering or abolishing any provision relating to any sinking
fund for the redemption or purchase of any of his shares, or making any
of his shares subject to redemption when they are not otherwise
redeemable;
5. Making noncumulative, in whole or in part, dividends of any of
his preferred shares which had theretofore been cumulative;
B-1
<PAGE> 153
6. Reducing the stated dividend preference to any of his preferred
shares; or
7. Reducing any stated preferential amount payable on any of his
preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in
paragraph (1)(e) has the right to dissent only as to those of his shares
which are adversely affected by the amendment.
(3) A Shareholder may dissent as to less than all the shares
registered in his name. In that event, his rights shall be determined as
if the shares as to which he has dissented and his other shares were
registered in the names of different shareholders.
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share
exchange or a proposed sale or exchange of property, to the holders of
shares of any class or series which, on the record date fixed to
determine the shareholders entitled to vote at the meeting of
shareholders at which such action is to be acted upon or to consent to
any such action without a meeting, were either registered on a national
securities exchange or designated as a national market system security
on a interdealer quotation system by the National Association of
Securities Dealers, Inc., or held of record by not fewer than 2,000
shareholders.
(5) A shareholder entitled to dissent and obtain payment for his
shares under this section may not challenge the corporate action
creating his entitlement unless the action is unlawful or fraudulent
with respect to the shareholder or the corporation.
607.1320 PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS. -- (1)(a) If a
proposed corporate section creating dissenters' rights under sec. 607.1320 is
submitted to a vote at a shareholders' meeting, the meeting notice shall state
that shareholders are or may be entitled to assert dissenters' rights and be
accompanied by a copy of sec.sec. 607.1301, 607.1302, and 607.1320. A
shareholder who wishers to assert dissenter's rights shall:
1. Deliver to the corporation before the vote is taken written notice
of his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy or
vote against the proposed action does not constitute such a notice of
intent to demand payment.
(b) If proposed corporate action creating dissenters' rights under
sec. 607.1302 is effectuated by written consent without a meeting, the
corporation shall deliver a copy of sec.sec. 607.1301, 607,1302, and 607.1320 to
each shareholder simultaneously with any request for his written consent or, if
such a request is not made, within 10 days after the date the corporation
received written consents without a meeting from the requisite number of
shareholders necessary to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder who
elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares. Any
shareholder failing to file such election to dissent within the period set forth
shall be bound by the terms of the proposed corporate action. Any shareholder
filing an election to dissent shall deposit his certificates for certificated
shares with the corporation simultaneously with the filing of the election to
dissent. The corporation may restrict the transfer of uncertificated shares from
the date the shareholder's election to dissent is filed with the corporation.
B-2
<PAGE> 154
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless the
corporation consents thereto. However, the right of such shareholder to be paid
the fair value of his shares shall cease, and he shall be reinstated to have all
right of such shareholder to be paid the fair value of his shares shall cease,
and he shall be reinstated to have all his rights as a shareholder as of the
filing of his notice of election, including any intervening preemptive rights
and the right to payment of any intervening dividend or other distribution or,
if any such rights have expired or any such dividend or distribution other than
in cash has been completed, in lieu thereof, at the election of the corporation,
the fair value thereof in cash as determined by the board as of the time of such
expiration or completion, but without prejudice otherwise to any corporate
proceeding that may have been taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such shareholder is
not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which shareholders
may file their notices of election to dissent, or within 10 days after such
corporate action is effected, whichever is later (but in no case later than 90
days from the shareholders' authorization date), the corporation shall make a
written offer to each dissenting shareholder who has made demand as provided in
this section to pay an amount the corporation estimates to be the fair value for
such shares. If the corporate action has not been consummated before the
expiration of the 90-day period after the shareholders' authorization date, the
offer may be made conditional upon the consummation of such action. Such notice
and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more
than 12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the 12-month
period ended on the date of such balance sheet or, if the corporation was
not in existence throughout such 12-month period, for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period specific
therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholders
(whether or not residents of this state), other than shareholders who have
agreed with the corporation as to the value of their shares, shall be made
parties to the proceeding as an action against their shares. The corporation
shall serve a copy of the initial pleading in such proceeding upon each
dissenting shareholder who is a resident of
B-3
<PAGE> 155
this state in the manner provided by law for the service of a summons and
complaint and upon each nonresident dissenting shareholder either by registered
or certified mail and publication or in such other manner as is permitted by
law. The jurisdiction of the court is plenary and exclusive. All shareholders
who are proper parties to the proceeding are entitled to judgment against the
corporation for the amount of the fair value of their shares. The court may, if
it so elects, appoint one or more persons as appraisers to receive evidence and
recommend a decision on the question of fair value. The appraisers shall have
such power and authority as is specified in the order of their appointment or an
amendment thereof. The corporation shall pay each dissenting shareholder the
amount found to be due him within 10 days after final determination of the
proceedings. Upon payment of the judgment, the dissenting shareholder shall
cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair rate
of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined by
the court and shall be assessed against the corporation, but all or any part of
such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that action of such shareholders in failing to accept such
offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this action, may be held and disposed of by such corporation as
authorized but unissued shares of the corporation, except that, in the case of a
merger, they may be held and disposed of as the plan of merger otherwise
provides. The shares of the surviving corporation into which the shares of such
dissenting shareholders would have been converted had they assented to the
merger shall have the status of authorized but unissued shares of the surviving
corporation.
B-4
<PAGE> 156
APPENDIX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 4, 1997 (the "Agreement"), by
and between South Florida Banking Corp., a Florida corporation ("Issuer"), and
The Colonial BancGroup, Inc., a Delaware corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger dated as of September 4, 1997 (the "Merger Agreement"), providing for,
among other things, the merger of Issuer with and into Grantee, with Grantee as
the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Merger
Agreement, Grantee has required that Issuer agree, and Issuer has agreed, to
grant Grantee the Option (as defined below);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth herein and in
the Merger Agreement, and intending to be legally bound hereby, Issuer and
Grantee agree as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Merger
Agreement.
2. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase from time to time up to 230,292 shares (as adjusted
as set forth herein) (the "Option Shares"), of Common Stock, par value
$1.00 per share ("Issuer Common Stock"), of Issuer at a purchase price per
Option Share (the "Purchase Price") equal to $38.00; provided, however,
that in no event shall the number of shares for which this option is
exercisable exceed 19% of the outstanding shares of Issuer Common Stock.
3. Exercise of Option
(a) Provided that (i) Grantee shall not be in material breach of
the agreements or covenants contained in this Agreement or the Merger
Agreement, and (ii) no preliminary or permanent injunction or other
order against the delivery of shares covered by the Option issued by any
court of competent jurisdiction in the United States shall be in effect,
Grantee may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as
defined below); provided that the Option shall terminate and be of no
further force or effect upon the earliest to occur of (A) the Effective
Date, or (B) termination of the Merger Agreement in accordance with the
terms thereof prior to the occurrence of a Purchase Event or a
Preliminary Purchase Event, (C) termination of the Merger Agreement in
accordance with the terms thereof after the occurrence of a Purchase
Event or a Preliminary Purchase Event (other than a termination of the
Merger Agreement by Grantee due to a material breach by Issuer in
accordance with Section 13.2(b) of the Merger Agreement or a termination
due to the failure to fulfill conditions set forth in Sections 8.1,
10.1, 10.3, 10.4, 10.6, 10.7, 10.9 or 10.10 of the Merger Agreement), or
(D) twelve months after termination of the Merger Agreement following
the occurrence of a Purchase Event or a Preliminary Purchase Event,
provided that the termination of the Merger Agreement was due to one of
the reasons listed in the parenthetical of Clause (C) above; and
provided further, that any purchase of shares upon exercise of the
Option shall be subject to compliance with applicable law including,
without limitation, the Bank Holding Company Act of 1956, as amended
(the "BHC Act"). The rights set forth in Section 8 shall terminate when
the right to exercise the Option terminates (other than as a result of a
complete exercise of the Option) as set forth herein.
(b) As used herein, a "Purchase Event" means any of the following
events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed, or publicly announced an
intention to authorize, recommend, or propose, or
C-1
<PAGE> 157
shall have entered into any agreement with any person (other than
Grantee or any subsidiary of Grantee) to effect an Acquisition
Transaction (as defined below). As used herein, the term Acquisition
Transaction shall mean (A) a merger, consolidation, or other business
combination involving Issuer, (B) the disposition, by sale, lease,
exchange, or otherwise, of assets of Issuer or any of its
subsidiaries representing in either case all or substantially all of
the consolidated assets of Issuer, or (C) the issuance, sale, or
other disposition of (including by way of merger, consolidation,
share exchange, or any similar transaction) securities representing
25% or more of the voting power of Issuer; or
(ii) any person (other than Grantee or any subsidiary of
Grantee) shall have acquired beneficial ownership (as such term is
defined in Rule 13d-3 promulgated under the Securities Exchange Act
of 1934 (the "1934 Act")) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the 1934
Act) shall have been formed which beneficially owns or has the right
to acquire beneficial ownership of, 25% or more of the then
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
1934 Act), or shall have filed a registration statement under the
1933 Act with respect to, a tender offer or exchange offer to
purchase any shares of Issuer Common Stock such that, upon
consummation of such offer, such person would own or control 25% or
more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" or an "Exchange
Offer," respectively); or
(ii) (1) the holders of Issuer Common Stock shall not have
approved the Merger Agreement at the meeting of such stockholders
held for the purpose of voting on the Merger Agreement, (2) such
meeting shall not have been held or shall have been canceled prior to
termination of the Merger Agreement (unless caused by the failure to
obtain Agency approvals), (3) the Issuer's Board of Directors or any
person representing such Board shall have commenced negotiations with
any person other than Grantee regarding an Acquisition Transaction,
or (4) Issuer's Board of Directors shall have withdrawn or modified
in a manner adverse to Grantee the recommendation of Issuer's Board
of Directors with respect to the Merger Agreement, in each case after
it shall have been publicly announced (or otherwise disclosed to the
Issuer prior to such public announcement) that any person (other than
Grantee or any subsidiary of Grantee) shall have (A) made, or
disclosed to Issuer an intention to make, a proposal to engage in an
Acquisition Transaction, (B) commenced a Tender Offer or filed a
registration statement under the 1933 Act with respect to an Exchange
Offer, or (C) filed an application (or given a notice), whether in
draft or final form, under the BHC Act, the Bank Merger Act, or the
Change in Bank Control Act of 1978, or other appropriate banking
agency, for approval to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in Sections
3(a)(9) and 13(d)(3) of the 1934 Act.
(d) In the event Grantee wishes to exercise the Option, it shall
send to Issuer a written notice (the date of which being herein referred
to as the "Notice Date") specifying (i) the total number of Option
Shares it intends to purchase pursuant to such exercise and (ii) a place
and date not earlier than three business days nor later than 15 business
days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). If prior notification to or approval of
the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board") or any other regulatory authority is required in
connection with such purchase, Issuer shall cooperate with Grantee in
the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately
following such regulatory approvals (and any mandatory waiting periods).
C-2
<PAGE> 158
4. Payment and Delivery of Certificates
(a) On each Closing Date, Grantee shall (i) pay to Issuer, in
immediately available funds by wire transfer to a bank account
designated by Issuer, an amount equal to the Purchase Price multiplied
by the number of Option Shares to be purchased on such Closing Date, and
(ii) present and surrender this Agreement to the Issuer at the address
of the Issuer specified in Section 11(f) hereof.
(b) At each Closing, simultaneously with the delivery of
immediately available funds and surrender of this Agreement as provided
in Section 4(a), (i) Issuer shall deliver to Grantee (A) a certificate
or certificates representing the Option Shares to be purchased at such
Closing, which Option Shares shall be free and clear of all liens,
claims, charges, and encumbrances of any kind whatsoever and subject to
no pre-emptive rights, and (B) if the Option is exercised in part only,
an executed new agreement with the same terms as this Agreement
evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Grantee shall deliver to
Issuer a letter agreeing that Grantee shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable
federal and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable
law, certificates for the Option Shares delivered at each Closing shall
be endorsed with a restrictive legend which shall read substantially as
follows:
THE STOCK REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE LAW AND THE
TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT
DATED AS OF SEPTEMBER 4, 1997. A COPY OF SUCH AGREEMENT WILL BE
PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY THE
ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that: (i) the reference to restrictions arising
under the 1933 Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the United States Securities and
Exchange Commission ("SEC"), or an opinion of counsel in form and substance
reasonably satisfactory to Issuer and its counsel, to the effect that such
legend is not required for purposes of the 1933 Act; and (ii) the reference to
restrictions pursuant to this Agreement in the above legend shall be removed by
delivery of a substitute certificate without such reference if the Option Shares
evidenced by such certificate containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Issuer has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals referred to herein, to
consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer. This Agreement has been duly executed and
delivered by Issuer.
(b) Issuer has taken all necessary corporate and other action to
authorize and reserve and to permit it to issue (and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon
the exercise of the Option terminates, will have reserved for issuance),
upon exercise of the Option, the number of shares of Issuer Common Stock
necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which may
be issued pursuant to Section 7 upon exercise of the Option. The shares
of Issuer Common Stock to be issued
C-3
<PAGE> 159
upon due exercise of the Option, including all additional shares of
Issuer Common Stock or other securities which may be issuable pursuant
to Section 7, upon issuance pursuant hereto, shall be duly and validly
issued, fully paid and nonassessable, and shall be delivered free and
clear of all liens, claims, charges, and encumbrances of any kind or
nature whatsoever, including any statutory preemptive rights of any
stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to
enter into this Agreement and, subject to any approvals or consents
referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has
been duly executed and delivered by Grantee.
(b) This Option is not being, and any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered
or exempt from registration under the 1933 Act.
7. Adjustment upon Changes in Capitalization, etc.
(a) In the event of a change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares, or similar transaction, the type and number of
shares or securities subject to the Option, and the Purchase Price
therefor, shall be adjusted appropriately, subject to the limitation set
forth in Section 2 hereof, and proper provision shall be made in the
agreements governing such transaction so that Grantee shall receive,
upon exercise of the Option, the number and class of shares or other
securities or property that Grantee would have received in respect of
Issuer Common stock if the Option had been exercised immediately prior
to such event, or the record date therefor, as applicable. If any
additional shares of Issuer Common Stock are issued after the date of
this Agreement (other than pursuant to an event described in the first
sentence of this Section 7(a) or a sale of the Issuer Common Stock for
cash at its fair market value), the number of shares of Issuer Common
Stock subject to the Option shall be adjusted so that, after such
issuance, the shares of Issuer Common Stock subject to the Option,
together with any shares of Issuer Common Stock previously issued
pursuant hereto, equal 19% of the number of shares of Issuer Common
Stock then issued and outstanding.
(b) In the event that Issuer shall enter into an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of
its subsidiaries, and shall not be the continuing or surviving
corporation of such consolidation or merger; (ii) to permit any person,
other than Grantee or one of its subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then-outstanding shares of Issuer
Common Stock shall be changed into or exchanged for stock or other
securities of the Issuer or any other person or cash or any other
property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of
the outstanding shares and share equivalents of the merged company; or
(iii) to sell or otherwise transfer all or substantially all of its
assets to any person, other than Grantee or one of its subsidiaries,
then, and in each such case, the agreement governing such transaction
shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions
set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Grantee, of either (x) the
Acquiring Corporation (as defined below), (y) any person that controls
the Acquiring Corporation, or (z) in the case of a merger described in
clause (ii), the Issuer (in each case, such person being referred to as
the "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as
C-4
<PAGE> 160
similar as possible and in no event less advantageous to Grantee. The
Substitute Option Issuer shall also enter into an agreement with the
then-holder or holders of the Substitute Option in substantially the
same form as this Agreement, which shall be applicable to the Substitute
Option.
(d) The Substitute Option shall be exercisable for such number of
shares of the Substitute Common Stock (as hereinafter defined) as is
equal to the Assigned Value (as hereinafter defined) multiplied by the
number of shares of the Issuer Common Stock for which the Option was
theretofore exercisable, divided by the Average Price (as hereinafter
defined). The exercise price of the Substitute Option per share of the
Substitute Common Stock (the "Substitute Purchase Price") shall then be
equal to the Purchase Price multiplied by a fraction in which the
numerator is the number of shares of the Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number
of shares for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (x) the continuing or
surviving corporation of a consolidation or merger with the Issuer
(if other than the Issuer), (y) the Issuer in a merger in which the
Issuer is the continuing or surviving person, and (z) the transferee
of all or substantially all of the Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock
issued by the Substitute Option Issuer upon exercise of the
Substitute Option.
(iii) "Assigned Value" shall mean the highest of (x) the price
per share of the Issuer Common Stock at which a Tender Offer or
Exchange Offer therefor has been made by any person after the date
hereof (other than Grantee), (y) the price per share of the Issuer
Common Stock to be paid by any person (other than the Grantee)
pursuant to an agreement with the Issuer, or (z) the highest closing
sales price per share of Issuer Common Stock quoted on the National
Association of Securities Dealers Automated Quotation National Market
System ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on the
NASDAQ/NMS, the highest bid price per share on any day as quoted on
the principal trading market or securities exchange on which such
shares are traded as reported by a recognized source chosen by
Grantee or, if there is no such information available, the value of
such shares as determined by a nationally recognized investment
banking firm selected by Grantee) within the six-month period
immediately preceding the Agreement; provided, however, that in the
event of a sale of all or substantially all of the Issuers' assets,
the Assigned Value shall be the sum of the price paid in such sale
for such assets and the current market value of the remaining assets
of the Issuer as determined by a nationally recognized investment
banking firm selected by Grantee (or by a majority in interest of the
Grantees if there shall be more than one Grantee (a "Grantee
Majority")), divided by the number of shares of the Issuer Common
Stock outstanding at the time of such sale.
(iv) "Average Price" shall mean the average closing price of a
share of the Substitute Common Stock for the one year immediately
preceding the consolidation, merger or sale in question, but in no
event-higher than the closing price of the shares of the Substitute
Common Stock on the day preceding such consolidation, merger, or
sale, provided that if Issuer is the issuer of the Substitute Option,
the Average Price shall be computed with respect to a share of common
stock issued by the Issuer, the person merging into the Issuer or by
any company which controls or is controlled by such merger person, as
Grantee may elect, and provided further that if there is no such
trading information available, the price of such shares shall be
determined by a nationally recognized investment banking firm
selected by Grantee.
(f) In no event pursuant to any of the foregoing paragraphs shall
the Substitute Option be exercisable for more than 19% of the aggregate
of the shares of the Substitute Common Stock outstanding prior to
exercise of the Substitute Option. In the event that the Substitute
Option would be exercisable for more than 19% of the aggregate of the
shares of Substitute Common Stock but for
C-5
<PAGE> 161
this clause (f), the Substitute Option Issuer shall make a cash payment
to Grantee equal to the excess of (i) the value of the Substitute Option
without giving effect to the limitation in this clause (f) over (ii) the
value of the Substitute Option after giving effect to the limitation in
this clause (f). This difference in value shall be determined by a
nationally recognized investment banking firm selected by Grantee (or a
Grantee Majority).
(g) Issuer shall not enter into any transaction described in
subsection (b) of this Section 7 unless the Acquiring Corporation and
any person that controls the Acquiring Corporation assumes in writing
all the obligations of Issuer hereunder and takes all other actions that
may be necessary so that the provisions of this Section 7 are given full
force and effect (including, without limitation, any action that may be
necessary so that the shares of Substitute Common Stock are in no way
distinguishable from or have lesser economic value than other shares of
common stock issued by the Substitute Option Issuer) (other than any
diminution in value resulting from the fact that the shares of
Substitute Common Stock are restricted securities as defined in Rule 144
under the 1933 Act or any successor provision).
(h) The provisions of Sections 8, 9, and 10 shall apply, with
appropriate adjustments, to any securities for which the Option becomes
exercisable pursuant to this Section 7 and, as applicable, references in
such sections to "Issuer," "Option," "Purchase Price," and "Issuer
Common Stock" shall be deemed to be references to "Substitute Option
Issuer," "Substitute Option," "Substitute Purchase Price," and
"Substitute Common Stock," respectively.
8. Repurchase at the Option of Grantee
(a) Subject to the last sentence of Section 3(a), at the request of
Grantee at any time commencing upon the first occurrence of a Repurchase
Event (as defined in Section 8(d)) and ending 30 days immediately
thereafter, Issuer shall, to the extent permitted by applicable law,
repurchase from Grantee the Option and all shares of Issuer Common Stock
purchased by Grantee pursuant hereto with respect to which Grantee then
has beneficial ownership. The date on which Grantee exercises its right
under this Section 8 is referred to as the "Request Date". Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Grantee for any shares
of Issuer Common Stock acquired pursuant to the Option with respect
to which Grantee then has beneficial ownership;
(ii) The excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase
Price (subject to adjustment pursuant to Section 7), multiplied by
the number of shares of Issuer Common Stock with respect to which the
Option has not been exercised; and
(iii) the excess, if any, of the Applicable Price over the
Purchase Price (subject to adjustment pursuant to Section 7) paid
(or, in the case of Option Shares with respect to which the Option
has been exercised but the Closing Date has not occurred, payable) by
Grantee for each share of Issuer Common Stock with respect to which
the Option has been exercised and with respect to which Grantee then
has beneficial ownership, multiplied by the number of such shares.
(b) If Grantee exercises its right under this Section 8, Issuer
shall, to the extent permitted by applicable law, within 10 business
days after the Request Date, pay the Section 8 Repurchase Consideration
to Grantee in immediately available funds, and contemporaneously with
such payment Grantee shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased
thereunder with respect to which Grantee then has beneficial ownership,
and Grantee shall warrant that it has sole record and beneficial
ownership of such shares and that the same are then free and clear of
all liens, claims, charges, and encumbrances of any kind whatsoever.
Notwithstanding the foregoing, to the extent that prior notification to
or approval of the Board of Governors of the Federal Reserve System or
other regulatory authority is required in
C-6
<PAGE> 162
connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Grantee shall have the ongoing option to
revoke its request for repurchase pursuant to this Section 8, in whole
or in part, or to require that Issuer deliver from time to time that
portion of the Section 8 Repurchase Consideration that it is not then so
prohibited from paying and promptly file the required notice or
application for approval and expeditiously process the same (and each
party shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If the Board of
Governors of the Federal Reserve System or any other regulatory
authority disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such
fact to Grantee. If the Board of Governors of the Federal Reserve System
or other agency prohibits the repurchase in part but not in whole, then
Grantee shall have the right (i) to revoke the repurchase request, or
(ii) to the extent permitted by the Board of Governors of the Federal
Reserve System or other agency, determine whether the repurchase should
apply to the Option and/or Option Shares and to what extent to each, and
Grantee shall thereupon have the right to exercise the Option as to the
number of Options Shares for which the Option was exercisable at the
Request Date less the sum of the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii)
and the number of shares covered by the portion of the Option (if any)
that has been repurchased. Grantee shall notify Issuer of its
determination under the preceding sentence within five (5) days of
receipt of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of the
Grantee's rights under this Section 8 shall terminate on the date of
termination of this Option pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means
the highest of (i) the highest price per share of Issuer Common Stock
paid for any such share by the person or groups described in Section
8(d)(i); (ii) the price per share of Issuer Common Stock received by
holders of Issuer Common Stock in connection with any merger or other
business combination transaction described in Section 7(b)(i), 7(b)(ii)
or 7(b)(iii); or (iii) the highest closing sales per share of Issuer
Common Stock quoted on the NASDAQ/NMS (or if Issuer Common Stock is not
quoted on the market or securities exchange on which such shares are
traded as reported by a recognized source chosen by Grantee and
reasonably acceptable to Issuer) during the 60 business days preceding
the Request Date; provided, however, that in the event of a sale of less
than all of Issuer's assets, the Applicable Price shall be the sum of
the price paid in such sale for such assets and the current market value
of the remaining assets of Issuer as determined by a nationally
recognized investment banking firm selected by Grantee, divided by the
number of shares of the Issuer Common Stock outstanding at the time of
such sale. If the consideration to be offered, paid or received pursuant
to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith
by an independent nationally recognized investment banking firm selected
by Grantee and reasonably acceptable to Issuer, which determination
shall be conclusive for all purposes of the Agreement.
(d) As used herein, "Repurchase Event" shall occur if (i) any
person (other than Grantee or any subsidiary of Grantee) shall have
acquired beneficial ownership of (as such term is defined in Rule 13d-3
promulgated under the 1934 Act), or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the 1934
Act) shall have been formed which beneficially owns or has the right the
acquire beneficial ownership of, 50% or more of the then outstanding
shares of Issuer Common Stock, or (ii) any of the transactions described
in Section 7(b)(i), 7(b)(ii), or 7(b)(iii) shall be consummated.
(e) In connection with the application of the provisions of this
Section 8, Grantee acknowledges that Issuer's ability to fund the
Section 8 Repurchase Consideration in accordance with the provisions of
this Section 8 may be dependant upon the ability of Issuer to obtain the
prior approval of the Board of Governors of the Federal Reserve System
and applicable provisions of Florida law and that, unless there has been
an agreement of the type described in Section 7(b), Issuer's obligations
under this Section 8 do not impose on the Issuer an obligation to
otherwise finance the
C-7
<PAGE> 163
payment of the Section 8 Repurchase Consideration through the incurrence
of indebtedness or the issuance of capital instruments or securities by
Issuer in either case sufficient in amount to satisfy the payment of the
Section 8 Repurchase Consideration. Accordingly, Issuer shall not be
deemed to be in breach of this Section 8 if, after making its best
efforts to obtain regulatory authorization for a capital distribution
required to pay the Section 8 Repurchase Consideration, it is unable to
do so.
9. Quotation: Listing. If the Issuer Common Stock or any other
securities to be acquired upon exercise of the Option are then authorized
for quotation or trading or listing on the NASDAQ/NMS or any securities
exchange, Issuer, upon the request of Grantee, will promptly file an
application, if required, to authorize for quotation or trading or listing
shares of Issuer Common Stock or other securities to be acquired upon
exercise of the Option on the NASDAQ/NMS or such other securities exchange
and will use its best efforts to obtain approval, if required, of such
quotation or listing as soon as practicable.
10. Division of Option. This Agreement (and the Option granted
hereby) are exchangeable, without expense, at the Option of the Grantee,
upon presentation and surrender of this Agreement at the principal office
of Issuer for other Agreements providing for Options of different
denominations entitling the holder thereof to purchase in the aggregate the
same number of shares of Issuer Common Stock purchasable hereunder. The
terms "Agreement" and "Option" as used herein include any other Agreements
and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction, or mutilation of this
Agreement, and (in the case of loss, theft, or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of
like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of the Issuer,
whether or not the Agreement so lost, stolen, destroyed or mutilated shall
at any time be enforceable by anyone.
11. Miscellaneous
(a) Expenses. Each of the parties hereto shall bear and pay all
costs and expenses incurred by it or on its behalf in connection with
the transactions contemplated hereunder, including fees and expenses of
its own financial consultants, investment bankers, accountants and
counsel.
(b) Waiver and Amendments. Any provision of this Agreement may be
waived at any time in writing by the party that is entitled to the
benefits of such provision. This Agreement may not be modified, amended,
altered, or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(c) Entire Agreement: No Third-Party Beneficiary:
Severability. This Agreement, together with the Merger Agreement and
the other documents and instruments referred to herein and therein,
between Grantee and Issuer (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and
oral, between the parties with respect to the subject matter hereof and
(b) is not intended to confer upon any person other than the parties
hereto (other than any transferee of the Option Shares or any permitted
transferee of this Agreement pursuant to Section 11(h)) any rights or
remedies hereunder. If any terms, provision, covenant, or restriction of
this Agreement is held by a court of competent jurisdiction or a federal
or state regulatory agency to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants, and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired, or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Grantee to
Acquire, or does not require Issuer to repurchase, the full number of
shares of Issuer Common Stock as provided in Sections 3 and 8 (as
adjusted pursuant to Section 7), it is the express intention of Issuer
to allow Grantee to Acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible without any amendment or
modification hereof.
(d) Governing Law. This Agreement shall be governed and construed
in accordance with the laws of the State of Alabama without regard to
any applicable conflicts of law rules.
C-8
<PAGE> 164
(e) Descriptive Headings. The description headings contained
herein are for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally,
telecopied (with confirmation), or mailed by registered or certified
mail (return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by
like notice):
<TABLE>
<S> <C>
If to Issuer to: South Florida Banking Corp.
20 Circuit Avenue
Wellfleet, Massachusetts 02667
Telecopy Number: (508) 349-1396
Attention: David Crockett
Chairman
with a copy to: Schifino & Fleischer, P.A.
One Tampa City Center, Suite 2700
201 North Franklin Street
Tampa, Florida 33602
Telecopy Number: (813) 223-3070
Attention: William J. Schifino, Esq.
If to Grantee to: The Colonial BancGroup, Inc.
P.O. Box 1108
Montgomery, Alabama 36101
Telecopy Number (334) 240-5069
Attention: W. Flake Oakley, IV
Chief Financial Officer
with a copy to: Miller, Hamilton, Snider & Odom, L.L.C.
Suite 802
One Commerce Street
Montgomery, Alabama 36104
Telecopy Number (334) 265-4533
Attention: Hugh C. Nickson, III, Esq.
</TABLE>
(g) Counterparts. This Agreement and all amendments hereto may be
executed in two counterparts, each of which shall be considered one and
the same agreement and shall become effective when both counterparts
have been signed, it being understood that both parties need not sign
the same counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests, or obligations hereunder or under the Option shall be
assigned by any of the parties hereto (whether by operation of law or
otherwise) without the prior written consent of the other party, except
that Grantee may assign this Agreement to a wholly owned subsidiary of
Grantee. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties
and their respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option
by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be
reasonably necessary in order to consummate the transactions provided
for by such exercise.
(j) Specific Performance. The parties hereto agree that this
Agreement may be enforced by either party through specific performance,
injunctive relief, and other equitable relief. Both parties further
agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such equitable relief and that
this provision is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.
C-9
<PAGE> 165
IN WITNESS WHEREOF, Issuer and Grantee have caused this agreement to be
signed by their respective officers thereunto duly authorized, all as of the day
and year first written above.
<TABLE>
<S> <C>
ATTEST: SOUTH FLORIDA BANKING CORP.
By: /s/ JOSEPHINE HOGUE By: /s/ JOHN N. ELDER
-------------------------------------------------- ---------------------------------------------------
Josephine Hogue John N. Elder
Secretary Executive Vice President & C.F.O.
[CORPORATE SEAL]
ATTEST: THE COLONIAL BANCGROUP, INC.
By: /s/ DONNA R. PIEL By: /s/ W. FLAKE OAKLEY, IV
-------------------------------------------------- ---------------------------------------------------
Donna R. Piel W. Flake Oakley, IV
Assistant Secretary Chief Financial Officer
[CORPORATE SEAL]
</TABLE>
C-10
<PAGE> 166
SOUTH FLORIDA BANKING CORP.
Special Meeting of Shareholders, February 9, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned holder of shares of common stock of South Florida Banking
Corp. ("South Florida"), a Florida corporation, does hereby appoint David F.
Crockett, Jr. and Matthew W. Wood, and each of them, as due and lawful
attorneys-in-fact (each of whom shall have full power of substitution), to
represent and vote as designated below all of the shares of South Florida common
stock that the undersigned held of record at 5:00 p.m., Eastern Standard Time,
on December 19, 1997, at the Special Meeting of Shareholders of South Florida,
to be held at 27975 Old 41 Road, Bonita Springs, Florida on February 9, 1998 at
4:00 p.m. or any adjournment thereof, on the following matters, and on such
other business as may properly come before the meeting:
<TABLE>
<S> <S>
1. APPROVAL OF ACQUISITION PROPOSAL
Proposal to approve and adopt the Agreement and Plan of
Merger dated as of September 4, 1997, by and among The
Colonial BancGroup, Inc., and South Florida, as described in
the accompanying Proxy Statement/Prospectus dated December
29, 1997.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
In their discretion, on such other business as may properly
2. come before the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN,
THIS PROXY WILL BE VOTED FOR THE APPROVAL OF THE ACQUISITION
PROPOSAL.
(Please Sign and Date on Reverse Side)
</TABLE>
(Continued from other side)
PLEASE SIGN AND RETURN PROMPTLY.
PLEASE ENTER THE NUMBER OF SHARES OF SOUTH FLORIDA COMMON STOCK YOU OWN:
- ---------------
(Please sign, date, and return this proxy form exactly as your name or names
appear below whether or not you plan to attend the meeting.)
<TABLE>
<S> <C> <C> <C>
[ ] I PLAN TO ATTEND THE SPECIAL MEETING. [ ] I DO NOT PLAN TO ATTEND THE SPECIAL MEETING.
</TABLE>
Date: 1998
----------------------
--------------------------------
Signature(s):
--------------------------------
--------------------------------
Title or Authority (if
applicable)
PLEASE SIGN YOUR NAME HERE
EXACTLY AS IT APPEARS HEREON.
JOINT OWNERS SHOULD EACH SIGN.
WHEN SIGNING AS AN ATTORNEY,
EXECUTOR, ADMINISTRATOR,
TRUSTEE, GUARDIAN, CORPORATE
OFFICER OR OTHER SIMILAR
CAPACITY, SO INDICATE. IF THE
OWNER IS A CORPORATION, AN
AUTHORIZED OFFICER SHOULD SIGN
FOR THE CORPORATION AND STATE
HIS TITLE. THIS PROXY SHALL BE
DEEMED VALID FOR ALL SHARES HELD
IN ALL CAPACITIES THAT THEY ARE
HELD BY THE SIGNATORY.
