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As filed with the Securities and Exchange
Commission on __________________________, 1996
Commission File No. __________________________
U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
SNB Bancshares, Inc.
--------------------
(Name of small business issuer in its charter)
Georgia 6060 58-2107916
- --------------------- ----------------------- ---------------
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
700 Walnut Street, P.O. Box 4748, Macon, Georgia 31208-4748 (912) 752-7386
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(Address and Telephone number of principal executive offices)
700 Walnut Street, P.O. Box 4748, Macon, Georgia 31208-4748
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(Address of principal place of business or intended principal place of business)
Robert C. Ham, 700 Walnut Street, P.O. Box 4748, Macon, Georgia 31208-4748 (912) 752-7386
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(Name, address and telephone number of agent for service)
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Approximate date of the proposed sale to the public: As soon as
practicable after the effective date of the Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Title of each Proposed Proposed
class of Maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered unit price fee
- ------------------------ --------------- ------------- ------------- ------------
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Common Stock
Purchase Warrants 272,560 * * *
Common Stock,
$1.00 par
value 272,560 $13.50 $3,679,560.00 $1,268.81
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*The warrants are issued to shareholders of the registrant without
consideration.
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
SNB BANCSHARES, INC.
Cross Reference Sheet
[Pursuant to Reg. Section 230.404(a)]
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Item 1. Front of Registration Statement and Facing Sheet, Cross Reference Sheet,
Outside Front Cover of Prospectus and Forepart of the Prospectus
Item 2. Inside Front and Outside Back Cover Available Information, Table of
Pages of Prospectus Contents
Item 3. Summary Information and Risk Factors Forepart of the Prospectus, Prospectus
Summary, Risk Factors, Selected
Financial Information and Pro Forma
Per Share Data
Item 4. Use of Proceeds Use of Proceeds
Item 5. Determination of Offering Price Determination of Offering Price
Item 6. Dilution Risk Factors, Selected Financial
Information and Pro Forma Per Share
Data
Item 7. Selling Security Holders Not Applicable
Item 8. Plan of Distribution Plan of Distribution
Item 9. Legal Proceedings Legal Proceedings
Item 10. Directors, Executive Officers, Directors and Executive
Promoters and Control Persons Officers
Item 11. Security Ownership of Certain Security Ownership of Certain
Beneficial Owners and Beneficial Owners and
Management Management
Item 12. Description of Securities Securities being Offered
Item 13. Interest of Named Experts Interest of Named Experts
and Counsel and Counsel
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Item 14. Disclosure of Commission Indemnification of Directors,
Position on Indemnification for Officers and Control Persons
Securities Act Liabilities
Item 15. Organization Within Last Certain Transactions
Five Years
Item 16. Description of Business Business of the Company
Item 17. Management's Discussion and Management's Discussion and
Analysis or Plan of Analysis of Financial Condition
Operation and Results of Operations
Item 18. Description of Property Description of Property
Item 19. Certain Relationships and Certain Transactions
Related Transactions
Item 20. Market for Common Equity Market for Common Equity and
and Related Stockholder and Related Stockholder Matters;
Matters Determination of Offering Price
Item 21. Executive Compensation Executive Compensation
Item 22. Financial Statements Financial Statements
Item 23. Changes in and Disagreements Not Applicable
With Accountants on Accounting
and Financial Disclosure
Item 24. Indemnification of Directors Indemnification of Directors
and Officers and Officers (Part II)
Item 25. Other Expenses of Issuance Other Expenses of Issuance
and Distribution and Distribution (Part II)
Item 26. Recent Sale of Unregistered Recent Sale of Unregistered
Securities Securities (Part II)
Item 27. Exhibits Exhibits (Part II)
Item 28. Undertakings Undertakings (Part II)
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PROSPECTUS
SNB BANCSHARES, INC.
P. O. Box 4748
700 Walnut Street
Macon, Georgia 31208-4748
(912) 752-7386
272,560 Shares of Common Stock, $1.00 Par Value,
and Warrants to Purchase the Same
SNB Bancshares, Inc. (the "Company" or "Bancshares") is hereby offering for
sale a maximum of 272,560 shares of its $1.00 par value common (the "Common
Stock") at a purchase price of $13.50 per share. The shares are offered
initially as a rights offering to shareholders of record of the Company
pursuant to warrants (the "Warrants") issued by the Company at no cost to
shareholders of record as of September , 1996 (the "Record Date") which
entitle shareholders of the Company to purchase one (1) share of the Company's
Common Stock for each five (5) shares of the Company's Common Stock owned as
of the Record Date at the subscription price of $13.50 per share for a period
of forty-five (45) days (expiring , 1996). Shares not
purchased pursuant to the exercise of those Warrants may be sold to members of
the general public who subscribe to such shares at the same price as offered
to the Company's shareholders. The Common Stock is being offered and will be
sold directly by the Company by officers and employees of the Company through
solicitation by mail, telephone and personal contact accompanied by delivery
of the Prospectus, and without the use of any dealer or underwriter. The
Warrants issued by the Company to its shareholders are non-transferable and
may only be exercised in those states in which the underlying securities of
the Company have been registered or are exempt from registration.
INVESTMENT IN THESE SECURITIES INVOLVES A SUBSTANTIAL DEGREE OF RISK. SEE
"RISK FACTORS" ON PAGES 3 THROUGH 5 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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UNDERWRITING
PRICE DISCOUNTS AND PROCEEDS
TO COMMISSIONS TO
PUBLIC PER SHARE(1) COMPANY(2)
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Common Stock, $1.00 Par Value Per
Share............................... $13.50 -0- $13.50
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Warrants............................. * * *
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Total................................ $3,679,560.00 -0- $3,679,560.00
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*The warrants are issued to shareholders of the Company without
consideration.
(1) Offers and sales of the shares of Common Stock will be made on behalf of
the Company by certain of its officers and directors who will receive no
commissions or other remuneration, either directly or indirectly, in
connection with this offering.
(2) Before deducting expenses of this offering, estimated to be $30,000.00, as
follows: legal $20,000.00; filing fees $2,000.00; accounting $5,000.00;
and printing $13,000.00.
PROSPECTUS DATED SEPTEMBER , 1996.
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission a
Registration Statement on Form SB-2 (the "Registration Statement") under the
Securities Act of 1933 with respect to the shares of Common Stock offered by
this Prospectus and the Warrants pursuant to which those shares are initially
offered. This Prospectus, which is a part of the Registration Statement, does
not contain all of the information set forth in the Registration Statement or
in the exhibits or schedules thereto. For further information with respect to
the Company and the Common Stock, reference is made to the Registration
Statement, including the exhibits and schedules thereto.
The common stock of SNB Bancshares, Inc. is registered with the Securities
and Exchange Commission pursuant to (S)12 of the Securities Exchange Act of
1934, as a result of which SNB Bancshares, Inc. is subject to the
informational requirements of the Exchange Act and files reports and other
information with the Securities and Exchange Commission. Such reports and
other information filed by SNB Bancshares, Inc. may be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024 of
the Commission's Office at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices in New York
(7 World Trade Center, Suite 1300, New York, N.Y. 10048), and in Chicago
(Citibank Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661).
Copies of such material can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. The Commission maintains a web site (http://www.sec.gov) that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission.
The securities of the Company are not listed on any national securities
exchange.
The Company furnishes annual reports to its shareholders which contain
audited financial statements certified by its independent public accountants.
The Company may distribute unaudited quarterly reports and other interim
reports to its shareholders as it deems appropriate.
The Company will provide without charge to each person who receives a
Prospectus, upon written or oral request of such person, a copy of any of the
information that is incorporated by reference in the Prospectus. Written or
oral requests for such copies should be directed to: Michael T. O'Dillon, 2918
Riverside Drive, P.O. Box 4748, Macon, Georgia 31208-4748; (912) 757-7345.
<PAGE>
TABLE OF CONTENTS
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Prospectus Summary........................................................ 1
Risk Factors.............................................................. 3
Selected Financial Information and Pro Forma Per Share Data............... 6
Use of Proceeds........................................................... 7
Determination of Offering Price........................................... 8
Plan of Distribution...................................................... 9
Legal Proceedings......................................................... 10
Directors and Executive Officers.......................................... 11
Security Ownership of Certain Beneficial Owners and Management............ 13
Securities being Offered.................................................. 17
Interest of Named Experts and Counsel..................................... 18
Indemnification of Directors, Officers and Control Persons................ 18
Certain Transactions...................................................... 19
Business of the Company................................................... 19
Management's Discussion and Analysis of Financial Condition and Results of
Operation................................................................ 26
Description of Property................................................... 48
Market for Common Equity and Related Stockholder Matters.................. 48
Executive Compensation.................................................... 49
Financial Statements...................................................... 53
SNB Bancshares, Inc.--Consolidated Financial Statements................... F-1
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<PAGE>
PROSPECTUS SUMMARY
(The information contained in the following summary is qualified in its
entirety by reference to the more detailed information and financial statements
appearing elsewhere in this Prospectus.)
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The Company........................... SNB Bancshares, Inc. is a bank holding
company organized and existing under
the laws of the State of Georgia. Its
principal offices are in Macon,
Georgia, and its primary source of
earnings is Security National Bank, a
wholly-owned subsidiary commercial
bank (the "Bank").
Securities Outstanding................ As of the date of the offering, there
were 1,362,800 shares of the Company's
Common Stock issued and outstanding.
Securities Offered.................... 272,560 shares of the $1.00 par value
of Common Stock of SNB Bancshares,
Inc.
Price of the Shares................... $13.50 per share
Plan of Distribution.................. The shares are first being offered to
existing shareholders of the Company
on a pro-rata basis pursuant to
Warrants which have been issued by the
Company without consideration. Each
such shareholder of record on the date
of the Prospectus will be entitled to
purchase pursuant to those Warrants
one (1) share of the Common Stock
offered hereunder for each five (5)
shares of the Company's Common Stock
owned by such shareholder on the date
of this Prospectus. The Warrants must
be exercised on or before November
, 1996 and will expire if not
exercised on or before that date. The
Warrants issued by the Company are
non-transferable, and may only be
exercised in those states in which the
underlying securities of the Company
are registered or are exempt from
registration. Existing shareholders
may subscribe for shares in addition
to those which they are entitled to
purchase pursuant to the Warrants, but
all such excess subscriptions are
subject to acceptance by the Board of
Directors of the Company. Excess
subscriptions will be satisfied from
shares which are the subject of any
unexercised Warrants. The underlying
shares of the unexercised Warrants may
also be offered to the public at the
same price as offered to existing
shareholders. The shares will be
offered by the Company and its
directors through the officers,
directors and employees of the Company
without the assistance of an
underwriter or dealer.
Use of Proceeds....................... The proceeds of the offering will be
used by the Company for general
corporate purposes, including
furnishing the capital required to
continue the anticipated growth of its
wholly-owned subsidiary, Security
National Bank, and to permit the
potential establishment of additional
offices of the Bank and to possibly
fund an acquisition of another
financial institution by the Company.
It is anticipated that a substantial
portion of the proceeds of the
offering will be infused as additional
capital into the Bank. However, the
Company is not committed to a specific
use of the proceeds of the offering.
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Determination of Offering Price....... There is no established public market
for the Common Stock of the Company.
The exercise price of the Warrants and
the offering price of the Common Stock
has been established by the Company
based, among other things, upon the
Company's historical and anticipated
financial performance and the
perceived demand for its shares, and
the price is not necessarily related
to the Company's asset value, net
worth, or other established indicia of
value.
The Warrants are not transferable.
Accordingly, there is no public market
for the Warrants issued by the
Company.
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2
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RISK FACTORS
An investment in the shares of Common Stock of the Company offered hereby
involves a substantial degree of risk, and a decision to invest in the Company
through the purchase of its Common Stock should be made only after a careful
consideration of the risk factors set forth herein. In particular, but without
limitation, persons considering an investment in the Company's Common Stock
should consider the following:
NO ESTABLISHED TRADING MARKET FOR THE COMPANY'S COMMON STOCK OR WARRANTS
There is no established trading market for shares of the Company's Common
Stock, and the stock of the Company is not quoted on the NASDAQ stock market
or traded on any stock exchange. Although J. C. Bradford & Co. and Robinson-
Humphrey Co., Inc. make a market for the Company's Common Stock, management
has no reason to expect that an established trading market will develop in the
shares of the Company's Common Stock in the foreseeable future.
There is no established public market for the Common Stock of the Company.
The exercise price of the Warrants and the offering price of the Common Stock
have been established by the Company based, among other things, upon the
Company's historical and anticipated financial performance and the perceived
demand for its Common Stock, and the price is not necessarily related to the
Company's asset value, net worth, or other established indicia of value. SEE
"DETERMINATION OF OFFERING PRICE". Accordingly, the market value of the Common
Stock following this offering may fall below the public offering price.
The Warrants may not be traded or transferred, and accordingly there is no
established trading market for the Warrants, nor will a public market for the
Warrants develop subsequent to their issuance. SEE GENERALLY, "DETERMINATION
OF OFFERING PRICE".
DILUTIVE EFFECT OF EXERCISE OF FOUNDERS WARRANTS
Security National Bank, the wholly-owned subsidiary of the Company, issued
to its founding directors and executive officers Warrants (the "Founders
Warrants") to purchase shares of the Common Stock of Security National Bank in
connection with its formation and organization in 1988. Upon the formation of
SNB Bancshares, Inc. as a bank holding company and the exchange of shares by
shareholders of the Bank for shares of Common Stock of the Company, the
Warrants were converted into the right to purchase shares of the Common Stock
of the Company, and the Company assumed all of the obligations of the Bank for
the Founders Warrants. As of the date of this prospectus, the founding
directors and executive officers of the Bank and their transferees, most of
whom are presently directors and executive officers of the Company, hold
Founders Warrants to purchase in the aggregate 359,760 shares of the Company's
Common Stock at a price of $4.165 per share. The exercise price is
considerably less than the offering price of the Company's Common Stock and
its book value as of June 30, 1996, and accordingly the exercise of those
options will dilute the per share book value of the Company's Common Stock.
The organizer's Warrants will expire in November, 1998 if not exercised by
that time; it is expected that all Warrants will be exercised. The dilutive
effect of the exercise of those options is set forth in the Summary Financial
Information of the Company set forth hereinafter. SEE GENERALLY, "SELECTED
FINANCIAL INFORMATION AND PRO FORMA PER SHARE DATA".
In addition, the shareholders of the Company approved in 1996 an Incentive
Stock Option Plan (the "Incentive Plan") authorizing the Company to issue
options to purchase 65,000 shares of its $1.00 par value Common Stock
(adjusted to reflect the two-for-one stock split as of June 1, 1996) to
certain executive officers and key employees of the Company and of Security
National Bank at a price deemed to be the fair market value of those shares as
of the date of the grant of the options, as determined by the Board of
Directors of the Company. Pursuant to the Incentive Plan, certain key
employees of the Company and of the Bank have been granted options to purchase
60,000 shares of the Company's Common Stock at a price of $10.75 per share,
after adjustment for the two-for-one stock split as of June 1, 1996. The
options vest and are exercisable over a period
3
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of five (5) years from the date of the grant (May 2, 1996), but must be
exercised in any event no later than ten (10) years from the date the options
were granted. It is anticipated that as of the date of the exercise of such
options by the holders of the same, the exercise price will be considerably
less than the per share book value of the shares of the Company, and will
result in a commensurate dilution of the per share book value of the Company's
shares.
RESTRICTIONS ON DIVIDENDS
The earnings of the Company consist almost entirely of dividends paid from
the Bank. The Bank is restricted by law with respect to dividends which can be
paid to the Company. Dividends may not exceed, without the prior approval of
the Comptroller of the Currency, the total of the Bank's net profits for the
year plus its retained profits for the preceding two years, less any required
transfers to surplus, or an amount greater than its net profits then on hand
less losses and bad debts.
REGULATION
Both the Company and the Bank, are subject to considerable regulation by
both federal and state governments and regulatory agencies. Regulations
promulgated by the regulatory agencies exercising regulatory control over the
Company and the Bank restrict in many respects the activities in which the
Company and the Bank can engage. Changes in those regulations can
significantly affect the operations of the Company and the Bank. Laws and
regulations promulgated by federal and state governments and agencies address,
without limitation, establishment of branch offices, the maintenance of
adequate capital by the Company and the Bank, necessary levels of reserves
against deposits, and the types and amounts of loans and investments. The
Federal Reserve Board and the Office of the Comptroller of the Currency
possess extensive powers to prevent or remedy unsafe or unsound practices by
the entities which they regulate. SEE GENERALLY, "BUSINESS OF THE COMPANY".
COMPETITION AND ECONOMIC CONDITIONS
The Company and the Bank operate in a very competitive market and compete
with other commercial banks, savings and loan associations, finance companies,
credit unions, and agricultural credit associations. A recent trend toward
deregulation of the financial services industry is likely to result in
increased financial competition from non-banking financial institutions, such
as insurance companies, securities brokerage funds, and money market mutual
funds.
In addition, the financial performance of the Company and the Bank is in
large measure dependent upon the economic conditions of the Company's market
area. An adverse change in those economic conditions could severely impair the
ability of the Bank's customers to repay extensions of credit, and therefore
have a material adverse impact on the results of operations of the Bank and
the Company. SEE GENERALLY, "BUSINESS OF THE COMPANY--MARKET AREA OF THE
COMPANY".
VOTING CONTROL
Directors and executive officers of the Company are the beneficial owners,
in the aggregate, of approximately 39.90% of the Company's outstanding Common
Stock, and if all currently exercisable warrants held by directors and
executive officers of the Company were exercised, such persons would be
beneficial owners of approximately 51.71% of the Company's outstanding stock.
Each of those directors and executive officers will be afforded an opportunity
to purchase the shares of the Company's Common Stock offered hereunder on the
same terms and conditions as are extended to other shareholders of the
Company, based on the number of shares owned as of the record date, but
excluding any shares which such directors and executive officers have a right
to purchase pursuant to unexercised warrants or the Founders Warrants. It is
not anticipated that directors and executive officers of the Company, as a
group, upon the conclusion of the offering will own beneficially less than the
percentage of the Company's outstanding Common Stock presently owned by them.
The directors and
4
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executive officers, although not parties to any voting trust or other
agreements with respect to the voting of their shares, as a group exert
considerable influence on the outcome of all matters submitted to the
Company's shareholders for approval. SEE GENERALLY, "SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT".
NET INTEREST MARGIN
The Company conducts virtually all of its operations through its wholly-
owned subsidiary, the Bank. The income of the Bank, and thus of the Company,
is primarily determined by the difference between the interest earned on the
Bank's assets and the interest paid on its deposits and liabilities. The net
interest rate margin is the difference between the average interest rate
earned by the Bank on its assets and the average interest rate paid on
deposits and liabilities. The net interest rate margin has declined in recent
years for most financial institutions, including the Bank. The net interest
rate margin was 5.60% during 1994, 5.20% during 1995, and 5.13% during the
first six months of 1996. A continued decline in the net interest rate margin
will adversely affect the profitability of the Bank and therefore of the
Company.
ADEQUACY OF ALLOWANCE FOR LOAN LOSSES; LOAN CONCENTRATION
There are certain risks inherit in making all loans, including risks with
respect to the period of time over which loans may be repaid, risks resulting
from changes in economic and industry conditions, risks inherit in dealing
with individual borrowers and, in the case of collateralized loans, risks
resulting from uncertainties as to the future value of the collateral.
The Bank maintains a reserve to protect against future loan losses. The
allowance for loan losses is established through a provision for loan losses
charged to expenses. Loans are charged against the allowance for loan losses
when management believes that the collectibility of the principal is unlikely.
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
adequacy of the loan loss reserve is evaluated periodically by management. The
allowance for potential loan losses is based upon a percentage of the
outstanding balances and for specific loans when their ultimate collectibility
is considered questionable.
The allowance for loan losses at June 30, 1996 was 1.66% of total loans
outstanding, compared to an allowance for loan losses of 1.75% as of December
31, 1995 and 1.95% as of December 31, 1994. The provision for loan losses in
1995 was less than in prior years, reflecting an improvement in the quality of
the collateral held as security on loans and the ability of debtors to service
their indebtedness. Management considers the allowance for loan losses as of
June 30, 1996 adequate to cover potential losses in the loan portfolio.
However, should the Company's allowance for loan losses prove to be
inadequate, future additions to that allowance for loan losses will result in
a decrease in the Company's net income and could result in a decrease in or
elimination of the Company's dividends.
The loan portfolio of the Company has a significant concentration in
mortgage loans. As of December 31, 1995, the Company had approximately $45
million in loans secured by real estate outstanding, of which approximately
$19 million were loans secured by family residential properties and
approximately $23.6 million were loans secured by non-residential properties.
In addition, the Company has a significant concentration of its loans secured
by hotel properties and to religious organizations. The ultimate
collectibility of the loans is largely dependent upon economic conditions in
the Middle Georgia area, and accordingly in the event of an adverse change in
the economy of that market area or in the hotel industry the Company's
allowance for loan losses could prove inadequate.
5
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SELECTED FINANCIAL INFORMATION AND PRO FORMA PER SHARE DATA
The following selected financial data is derived from the financial
statements of the Company. The data for the six months ended June 30, 1996 and
1995 (which is unaudited) and for the years ended December 31, 1995 through
1991 is derived from financial statements which reflect, in the opinion of
management, all normal recurring adjustments necessary to summarize fairly
such information for such periods. Information for the Company prior to
September 30, 1994 is for the Bank; on that date, each share of Bank Common
Stock was exchanged for one share of the Company's Common Stock. All per share
data has been revised to reflect the declaration as of March 20, 1995 of a 20%
stock dividend, and a two-for-one stock split as of June 1, 1996 effected as a
100% stock dividend. The following data should be read in conjunction with the
Company's consolidated financial statements and the related notes contained
elsewhere in this prospectus.
SELECTED FIVE-YEAR FINANCIAL DATA
(Dollars in thousands, except per share data and number of shares)
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SIX MONTH PERIOD YEARS ENDED DECEMBER 31
---------------------- -----------------------------------------------------
SIX MONTHS SIX MONTHS
ENDED ENDED
6/30/96 6/30/95 1995 1994 1993 1992 1991
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INCOME STATEMENT DATA:
Net Interest Income...... $ 2,577 $ 2,080 $ 4,311 $ 3,526 $ 2,650 $ 2,473 $ 1,957
Provision for Loan
Losses................... 107 55 109 302 378 407 816
Other Income............. 514 390 867 1,046 840 522 437
Other Expense............ 2,020 1,519 3,117 2,782 2,334 1,908 1,593
Income Taxes............. 270 255 561 436 205 181 (20)
Extraordinary Items ..... -0- -0- -0- -0- -0- 22 -0-
Cumulative Effect of
Accounting Change........ -0- -0- -0- -0- 53 -0- -0-
Net Income............... 694 641 1,391 1,052 626 521 5
PER SHARE DATA:
Earnings Per Common and
Common Equivalent Share.. $ .45 $ .47 $ 1.01 $ .81 $ .49 $ .40 $ .02
Cash Dividends Paid/s.... .11 .10 0.20 0.16 0.08 0.04 0.01
Stockholders' Equity
(Period End Book Value
Based on 1,362,800 shares
outstanding at June 30,
1996 and 1,200,000
Outstanding Shares at
December 31, 1995 and
prior)................... 7.74 6.32 7.02 5.90 5.33 4.89 4.50
RATIOS:
Return on Average Assets.. 1.24% 1.55% 1.51% 1.50% 1.03% 0.96% 0.01%
Return on Average Equity.. 14.08% 17.51% 18.16% 15.63% 10.12% 9.22% 0.09%
Dividend Payout Ratio.... 21.605 18.71% 17.26% 19.01% 15.98% 9.60% 0.00%
Average Equity to Average
Assets.................... 8.81% 8.85% 8.31% 9.65% 10.13% 10.42% 10.77%
BALANCE SHEET DATA: (at
period end)
Assets...................
Assets................... $ 121,132 $ 91,122 $ 107,566 $ 78,156 $ 66,022 $ 57,178 $ 53,080
Investment Securities.... 35.567 25,360 34,440 18,649 19,976 19,511 15,739
Loans, Net of Income..... 76,612 58,702 64,400 52,277 41,064 32,458 30,285
Allowance for Loan
Losses................... 1,274 1,090 1,128 1,020 743 862 537
Deposits................. 104,659 78,406 92,969 67,209 56,876 49,565 46,565
Stockholders' Equity..... 10,541 7,584 8,426 7,082 6,399 5,873 5,402
Shares Outstanding....... 1,362,800 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
</TABLE>
6
<PAGE>
Certain organizers of the Bank and their transferees, most of whom are
presently directors or executive officers of the Company, hold unexercised
Founders Warrants to purchase in the aggregate 359,760 shares of the Company.
SEE GENERALLY: "RISK FACTORS--DILUTIVE EFFECT OF EXERCISE OF FOUNDERS
WARRANTS". The following table reflects the effect which the exercise of the
Founders Warrants would have had on the financial performance and condition of
the Company had those Warrants been exercised as of January 1, 1991:
<TABLE>
<CAPTION>
SIX SIX
MONTHS MONTHS YEARS ENDED DECEMBER 31
ENDED ENDED -------------------------------------------------
6-30-96 6-30-95 1995 1994 1993 1992 1991
--------- --------- --------- --------- --------- --------- ---------
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Total Assets, in
thousands $ 122,590 $ 92,584 $ 108,992 $ 79,596 $ 67,491 $ 58,662 $ 54,574
--------- --------- --------- --------- --------- --------- ---------
Stockholders' Equity, in
thousands $ 12,000 $ 9,046 $ 9,852 $ 8,522 $ 7,868 $ 7,357 $ 6,896
--------- --------- --------- --------- --------- --------- ---------
Shares Outstanding
at Period End 1,722,560 1,559,760 1,559,760 1,559,760 1,559,760 1,559,760 1,559,760
========= ========= ========= ========= ========= ========= =========
PER SHARE DATA:
Earnings per Common and
Common Equivalent Share $ 0.45 $ 0.47 $ 1.01 $ 0.81 $ 0.49 $ 0.40 $ 0.02
--------- --------- --------- --------- --------- --------- ---------
Cash Dividends Paid $ 0.11 $ 0.10 $ 0.20 $ 0.16 $ 0.08 $ 0.04 $ 0.01
--------- --------- --------- --------- --------- --------- ---------
Stockholders' Equity
at Period End $ 6.97 $ 5.60 $ 6.32 $ 5.46 $ 5.04 $ 4.72 $ 4.42
========= ========= ========= ========= ========= ========= =========
</TABLE>
USE OF PROCEEDS
The Company has experienced substantial growth in the last two years. As of
December 31, 1994 the Company had assets of $78,156,000, deposits of
$67,209,000, and loans of $52,277,000, and a capital-to-assets leverage ratio
of 9.1%. As of December 31, 1995, the Company had assets of $107,566,000,
deposits of $92,969,000, loans of $64,400,000, and a capital-to-assets
leverage ratio of 7.8%, and as of June 30, 1996, the Company had assets of
$121,132,000, deposits of $104,659,000, loans of $76,803,000 and capital-to-
assets leverage ratio of 8.70%. The increase in the capital-to-assets ratio as
of June 30, 1996, is primarily attributable to the issuance of 162,800 shares
of its Common Stock (adjusted to reflect the two-for-one stock split) in the
first quarter of 1996, resulting in an additional $1,750,100 of equity
capital; otherwise, the growth of the Company during that time has resulted in
an expected decline in its capital-to-assets ratio.
The Company is presently well capitalized. Current regulatory standards
require bank holding companies to maintain a minimum risk based capital ratio
of qualifying total capital to risk weighted assets of 8.0%, with at least
4.0% of the capital consisting of Tier 1 capital, and a Tier 1 leverage ratio
of at least 4.0%. Additionally, the regulatory agencies define a well
capitalized bank as one which has a leverage ratio of at least 5%, a Tier 1
capital ratio of at least 6%, and a total risk based capital ratio of at least
10%. As of June 30, 1996, the Company's total risk based capital ratio, Tier 1
capital ratio and Tier 1 leverage ratio were all in compliance at 13.90%,
12.65% and 9.39%, respectively.
Nevertheless, the Company anticipates continued growth in its assets,
although at a somewhat lower rate, and the proceeds of this offering will
enable the Company to support that growth in assets with adequate capital.
Pending the use of the proceeds of this offering for such purposes, the
proceeds of the offering will be invested in a variety of short-term assets,
including federal funds, interest-bearing deposits in other banks, and similar
investments.
7
<PAGE>
In addition, it is the belief of management that the establishment of
additional bank offices in Bibb County, Georgia are essential to the continued
growth of the Bank, and recent changes in Georgia's branch banking laws permit
the Bank to establish branches in other counties. Management of the Company
deems it likely that the Bank will establish additional bank offices or
branches in the near future and the proceeds of the offering may be used to
support the expenditure of funds necessary to acquire or establish additional
bank facilities, including the acquisition and construction of additional
offices and the purchase of furniture and equipment used in connection
therewith.
The Company does not anticipate material changes in the allocation of the
net proceeds of the offering, but it reserves the right to alter the use of
the proceeds for all general corporate purposes which may be permitted under
applicable law.
DETERMINATION OF OFFERING PRICE
The stock of the Company is not traded in the over-the-counter market or on
any stock exchange, nor is the Company's Common Stock actively traded.
Management is frequently advised, however, of the terms upon which shares of
its Common Stock are traded. Management of the Company is aware of the trade
of 26,640 shares of its Common Stock in 1994; 4,320 shares of its Common Stock
in 1995; and 2,500 shares of the Company's Common Stock through July 31, 1996.
According to information available to the Company, its stock traded in the
following ranges:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FIRST QUARTER 1994 $6.04 $4.58
SECOND QUARTER 1994 6.56 5.83
THIRD QUARTER 1994 6.88 6.67
FOURTH QUARTER 1994 7.29 6.88
FIRST QUARTER 1995 7.56 7.06
SECOND QUARTER 1995 7.75 7.50
THIRD QUARTER 1995 9.25 8.00
FOURTH QUARTER 1995 10.50 10.00
FIRST QUARTER 1996 No Trades No Trades
SECOND QUARTER 1996 12.75 12.44
THIRD QUARTER 1996 16.00 15.50
</TABLE>
The prices reflected in the above table have been adjusted to reflect the
issuance by the Company as of March 20, 1995, of a 20% stock dividend paid to
shareholders of record of the Company, as a result of which the Company issued
an additional 100,000 shares of its Common Stock, and a two-for-one stock
split on June 1, 1996.
In January, 1996, the Company issued an additional 162,800 shares of its
Common Stock, primarily to newly elected directors and executive officers of
the Company, at a price of $10.75 per share (adjusted to reflect the
subsequent two-for-one stock split) which management believes to have
approximated the market value of such stock at the time of its issuance.
The offering price of $13.50 per share has been determined by management of
the Company based upon a number of considerations, including the Company's
historical, current and projected financial performance; the perceived demand
for the Company's Common Stock; recent bid and ask prices for the Company's
Common Stock; the prices at which shares of the Company's Common Stock have
traded in recent months; the range of prices at which shares of similarly
traded financial institutions' common stock have traded in recent months; and
the prices paid in connection with the acquisitions of similarly situated
financial institutions in recent months. The offering price does not
necessarily represent the actual value of the Common Stock, and the market
value of the Common Stock following this offering may fall below the public
offering price.
8
<PAGE>
The Warrants are issued by the Company to its shareholders of record as of
September , 1996, at no charge to the shareholders. The Warrants are not
transferable, and there is no public market for the Warrants.
PLAN OF DISTRIBUTION
The Company is offering hereby a maximum of 272,560 shares of its $1.00 par
value Common Stock at a price of $13.50 per share. Those shares are first
being offered to existing shareholders of the Company pursuant to Warrants
issued by the Company to its shareholders which entitle shareholders of record
as of September , 1996, to purchase one (1) share of the Company's Common
Stock for each five (5) shares owned by him or her as of the Record Date. The
Company had outstanding on the date of this Prospectus 1,362,800 shares of its
$1.00 par value Common Stock, and the holders of those shares will be entitled
to purchase in the aggregate 272,560 shares of the Company's Common Stock. No
fractional shares shall be issued.
Any shareholder desiring to exercise his or her Warrant to purchase shares
of the Company offered hereunder must properly complete the form of exercise
attached as Exhibit "1" to the Warrant and insure that it is received by SNB
Bancshares, Inc. on or before November , 1996. ANY WARRANT WHICH IS NOT
EXERCISED AS OF THAT DATE SHALL EXPIRE AND BE OF NO FURTHER FORCE AND EFFECT.
The exact number of shares each shareholder has a right to purchase is set
out in the Warrant which accompanies this Prospectus.
WARRANTS ISSUED TO SHAREHOLDERS OF THE COMPANY WILL EXPIRE AND BE OF NO
FURTHER FORCE AND EFFECT UNLESS EXERCISED IN ACCORDANCE WITH THE TERMS OF SUCH
WARRANTS ON OR BEFORE NOVEMBER , 1996. IN ORDER TO BE EFFECTIVELY
EXERCISED, TENDER OF THE PURCHASE PRICE AND THE FORM OF EXERCISE ATTACHED TO
THE WARRANT MUST BE DELIVERED, PERSONALLY OR BY MAIL, TO THE OFFICES OF THE
COMPANY AT 700 WALNUT STREET, P.O. BOX 4748, MACON, GEORGIA 31208-4748 ON OR
BEFORE NOVEMBER , 1996. THE WARRANTS MAY BE EXERCISED IN PART, BUT MAY NOT
BE EXERCISED TO PURCHASE FRACTIONAL SHARES. THE NUMBER OF WARRANTS THAT EACH
SUBSCRIBING SHAREHOLDER IS ENTITLED TO PURCHASE IS SET FORTH IN THE WARRANT
ISSUED AND DELIVERED TO SHAREHOLDERS OF THE COMPANY.
Any shareholder desiring to subscribe to shares in excess of those which he
or she is entitled to purchase pursuant to the Warrants may subscribe to
purchase such additional shares by so indicating on the form of warrant which
is enclosed with the Prospectus. All such subscriptions are, however, subject
to acceptance by the Company's Board of Directors in its sole discretion.
Accepted subscriptions for shares in excess of a shareholder's pro rata
portion of the shares offered hereunder will be satisfied from the shares
underlying those Warrants which are not exercised. The Company will notify
each shareholder if all or a portion of such excess subscription has been
accepted by the Board of Directors within sixty (60) days of the deadline for
exercising the Warrants. Any accepted subscription shall become a binding
contract of purchase and sale between the subscribing shareholder and the
Company; however, if the purchase price is not paid within ten (10) days of
notice of acceptance of the subscription, the Company shall have the right to
cancel the subscription.
Any shares which are not purchased pursuant to the exercise of the Warrants
will also be offered to other persons who are residents of the State of
Georgia and who are not shareholders of the Company at the same price as the
shares are offered to shareholders of the Company, after first delivering to
them a copy of the Prospectus. Such subscriptions are subject to acceptance by
the Company's Board of Directors in its sole discretion, and accepted
subscriptions for such shares will be satisfied from the underlying shares
which are the subject of unexercised Warrants. All subscriptions by persons
who are not shareholders of the Company must be for a minimum of 300 shares,
and such shares may only be purchased by persons who are bona fide residents
of the State of Georgia. Any person subscribing to purchase such shares will
be required to execute an affidavit, in form and substance satisfactory to the
Company, that the subscribing shareholder is a legal resident of the State of
Georgia. The Company will notify each person subscribing to such shares if all
or a portion of that subscription has been accepted within sixty (60) days of
receipt of the subscription; however, if the purchase price is not paid within
ten (10) days of notice of acceptance of the subscription, the Company shall
have the right to cancel the subscription.
9
<PAGE>
All subscriptions for shares which are to be satisfied from the underlying
shares of Warrants which are not exercised by shareholders of the Company will
be subject to acceptance by the Company's Board of Directors in its sole and
unfettered discretion. In order to increase the shareholder base of the
Company, it is the present, non-binding intention of the Company to first
honor subscriptions for such excess shares from those persons who are not
presently shareholders of the Company, and to allocate the remaining shares
among subscribing shareholders who are not directors or executive officers of
the Company pro rata on the basis of shares owned as of the commencement of
the offering. Any remaining shares will be subject to purchase by directors
and executive officers of the Company.
The Warrants and the shares of Common Stock of the Company to be purchased
pursuant to the exercise of those Warrants have been registered or are exempt
from registration in those states in which shareholders of the Company reside
as of the date of the Prospectus, based upon the best information available to
the Company. THE OBLIGATION OF THE COMPANY TO ISSUE SHARES PURSUANT TO THE
WARRANTS IS EXPRESSLY SUBJECT, HOWEVER, TO THE REGISTRATION OR EXEMPTION OF
THE SECURITIES WHICH MAY BE PURCHASED PURSUANT TO THE EXERCISE OF THOSE
WARRANTS IN THOSE STATES IN WHICH THE SHARES ARE TO BE ISSUED. All persons
exercising Warrants for purchase of the Common Stock of the Company or
otherwise subscribing to shares of the Common Stock of the Company which are
the subject of this offering will be required to execute, in form satisfactory
to the Company, a certificate of residency, establishing the residence of the
subscriber in a state in which the shares of the Company's Common Stock have
been registered or are exempt from registration.
The Company reserves the right to determine the legal state of a
shareholder's residence and the availability of exemptions from registration
under applicable securities laws of such states. The determination by the
Company as to those issues shall be conclusive and binding on all shareholders
of the Company and on all other persons or entities subscribing to purchase
shares of the Company's Common Stock.
The Company does not have any agreement with any underwriter or other party
for a distribution of the shares offered hereby or for the Warrants and the
Company will act as principal in their offering and sale. The Company's
management will be the selling agents acting on behalf of the Company and will
conduct the offering pursuant to direct mail solicitation.
The offering is not conditioned upon the sale of all or any portion of the
shares offered hereunder. There will be no refund of any funds paid pursuant
to any subscription or pursuant to the exercise of any Warrant, even if all of
the shares offered hereunder are not sold.
LEGAL PROCEEDINGS
The Company and the Bank are involved periodically in legal proceedings
which are incidental to the business in which they are engaged. Neither the
Company nor the Bank is presently a party to any litigation which is not
routine litigation incidental to the business of the Company or the Bank. The
Company is not aware of any material legal proceedings contemplated or
threatened against the Company or the Bank.
10
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth for each director and executive officer of
the Company that person's name, age as of June 30, 1996, the year he or she
was elected a director or executive officer of the Company (or of the Bank
prior to formation of the Company); his or her business experience during the
past five (5) years; and his or her relationship to other directors or
executive officers of the Company.
NAME AGES, TERM, PRINCIPAL OCCUPATION FOR LAST FIVE
- --- YEARS AND FAMILY RELATIONSHIPS
------------------------------------------------
Robert C. Allen Age 69; Director since 1988; former Vice
President, Administration and member of Board of
Directors of Security Life Insurance Company of
Georgia from 1954 to 1985; active in handling
personal investments and real estate holdings
since his retirement in 1985.
Alford C. Bridges Age 57; Director since 1988; President and Chief
Executive Officer of Whiteway Development
Corporation, d/b/a Appling Brothers, a Middle
Georgia based grading, paving and construction
company. President of Gateway Development Center,
Inc., a real estate holding company, since 1969.
William P. Brooks, M.D. Age 52; Director since 1988; Practicing physician
since 1968; employed by South Macon Family
Physicians Clinic since 1975, where he currently
serves as President; President of Briardale
Apartments, Inc., an apartment rental complex
based in Warner Robins, Georgia.
Richard A. Collinsworth Age 46; Executive Vice President of the Company
and of Security National Bank since January,
1996; City Commercial Banking Manager for Bank
South in Macon in 1995; 24 years in banking,
including NationsBank in North Carolina and Texas
and Henderson National Bank in Huntsville,
Alabama.
Lee R. Greene, Jr. Age 75; Director since 1988; former owner of
Greene Plumbing & Heating Company, a Macon based
mechanical contracting company; retired since
1983; active in management of personal
investments and real estate holdings; Vice
President and part owner of Greene & Associates,
Inc. (mechanical contractors), and principal of
Ashburn Developers, Inc.
Benjamin W. Griffith, III Age 43; Director since 1988; President and owner
of Southern Pine Plantations, Inc., a Macon based
real estate development and marketing company,
since 1983; principal of Forestry Consultants of
Ga., Inc., Southern Timberlands, Inc., Georgia
Mine & Minerals, Inc., Southern Pine Plantations
of Georgia, Inc., and Southern Pine Plantations
of Florida, Inc.
Robert C. Ham Age 66; Director since 1988; Chairman of the
Board of Directors and Chief Executive Officer of
the Company and Security National Bank; 48 years
in banking, including 14 years as President and
Chief Executive Officer of Central Bank of
Georgia (now First Union National Bank of
Georgia)
Shirley D. Jackson Age 58; Presently Senior Vice President and
Secretary of the Company and Senior Vice
President-Loan Administration and Secretary to
the Board of Security National Bank; employed by
Central Bank of Georgia (now First Union National
Bank of Georgia) from 1973 to 1987, where she
served as Vice President with functional
responsibilities of commercial and consumer
lending; 34 years of banking experience.
11
<PAGE>
James W. Kinman Age 66; elected Director 1996; Chairman of the
Board and owner of Lowe Electric Company, a
commercial and residential electric and plumbing
supply company; former director of Bank South in
Macon.
Robert T. Mullis Age 53; Director since 1988; President and
principal owner of Melrose Holdings, Inc., a
diversified company involved in retail
merchandising, importing, wholesale distribution,
real estate and solid waste investments;
principal of Diamond Waste, Inc., RTM Industries,
Inc., Industrial Recovered Materials, Inc., and
Borago, Inc.
Michael T. O'Dillon Age 41; Senior Vice President, Treasurer and
Chief Financial Officer of the Company; Senior
Vice President and Cashier, Security National
Bank; previously employed by Central Bank of
Georgia (now First Union National Bank of
Georgia) from January, 1977 to October, 1987, as
Vice President and Corporate Secretary in charge
of operations and financial reporting.
Ben G. Porter Age 62; Director since January, 1996; Chairman
and owner of Piedmont Communications Corporation,
operator of three radio stations; Owner of RMS
Warehouse Company and Snelling Management
Services; retired from Charter Medical Company
since 1988, where he served as Senior Vice
President and President of Charter Medical
International; former director and member of the
Executive Committee of Bank South Corporation.
Sydney J. Pyles Age 67; Director since 1988; retired from Sydney
Pyles Heating & Plumbing Company, Inc., a
mechanical contracting company where he served as
President since 1964.
John F. Rogers, Jr. Age 66; Director since 1996; former proprietor of
Rogers Oil Company, which he owned until 1982;
active in maintaining private investments; Board
member of Bank South in Macon until January,
1996.
Charles W. Selby Age 67; Director since 1988; Chairman of the
Board and former President of Warren Associates,
Inc., a general contracting company.
Frank M. Shepherd Age 55; Director since 1988; President and co-
owner of Shepherd Brothers Timber Company, Inc.,
involved in the ownership, harvesting and
marketing of timber in the southeast.
Chris R. Sheridan, Jr. Age 46; Director since January, 1996; Vice
President of Chris R. Sheridan & Co., building
contractors, and a software developer with
Timberline Software Corporation; a Georgia
Registered Civil Engineer and member of the
Georgia Society of Professional Engineers;
Chairman of the Bank South, Macon Board of
Directors until January, 1996.
Joe E. Timberlake, III Age 55; Director since 1988; former President of
Timberlake Grocery Company of Macon, a wholesale
grocery company from 1976 to 1992; active in
maintaining private investments; President of the
Macon College Foundation.
H. Averett Walker Age 42; Director since January, 1996; Director,
President and Chief Operating Officer of the
Company and Security National Bank; Middle
Georgia Regional President of Bank South from
1994-1996; 10 years with NationsBank, including
Regional President in Albany/Moultrie and
President in LaGrange.
12
<PAGE>
Frank G. Wall, Jr. Age 62; Director since 1988; President since 1974
of Springhill Construction Company, Inc., a
general contracting, trucking and equipment
rental company; Principal of Springhill Services,
Inc., Santel Contractors, Inc., and Wilco Air,
Inc.
Richard W. White, Jr. Age 42; Director since 1988; President and part
owner of White Brothers Auto Supply, Inc., a
wholesale distributor of auto parts, since 1985,
and an officer since 1976.
No director of the Company is a director in any other company with a class of
securities registered pursuant to Section 12 of the Exchange Act or subject to
the requirements of Section 15(d) of such Act or any company registered as an
investment company under the Investment Company Act of 1940, as amended.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table shows all persons known to the Board of Directors of the
Company to be the beneficial owner of more than five percent (5%) of any class
of the Company's voting securities as of June 30, 1996.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF CLASS
BENEFICIAL OWNER OWNERSHIP(/1/) OUTSTANDING(/2/)
------------------- ----------------- ----------------
<S> <C> <C>
Robert T. Mullis 107,678(/3/) 7.73%
P.O. Box 6292
Macon, Ga. 31208-0000
Joe E. Timberlake, III 74,868(/4/) 5.37%
5734 Kentucky Downs Dr.
Macon, Ga. 31210
Robert C. Ham 72,000(/5/) 5.10%
4690 Oxford Circle
Macon, Ga. 31210
</TABLE>
- --------
/1/Beneficial ownership is determined in accordance with Item 403 of
Regulation S-B of the Securities and Exchange Commission, and includes all
shares which the listed individual has the right to acquire within sixty
(60) days pursuant to options or warrants. The Company has relied upon
information contained in statements filed with the Securities and Exchange
Commission under Section 13(d) or 13(g) of the Exchange Act concerning
beneficial ownership.
/2/Based on 1,362,800 shares of the Company's Common Stock issued and
outstanding, plus, for each listed person, any securities which that person
has the right to acquire within sixty (60) days pursuant to options,
warrants or other rights.
/3/Includes 24,000 unexercised Founders Warrants, 4,800 additional unexercised
warrants purchased by Mr. Mullis, 57,658 shares held directly by Mr.
Mullis, 5,760 shares held by a broker as custodian for Mr. Mullis, 4,058
shares held jointly with Michael C. Griffin, and 10,280 shares for which
Mr. Mullis has power of attorney and power to vote the shares. Mr. Mullis
disclaims beneficial ownership for the 14,338 shares held jointly with Mr.
Griffin or as to which he holds a power of attorney.
/4/Includes 31,200 unexercised Founders Warrants, 7,200 shares held by Mr.
Timberlake as trustee for revocable family trust, and 5,268 shares held by
a broker as custodian for Mr. Timberlake.
/5/Includes 48,000 unexercised Founders Warrants.
13
<PAGE>
The following table shows the number of shares of Common Stock of the
Company beneficially owned by each director and executive officer of the
Company and by directors and executive officers of the Company as a group as
of June 30, 1996:
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF CLASS
BENEFICIAL OWNER OWNERSHIP(/1/) OUTSTANDING(/2/)
------------------- ----------------- ----------------
<S> <C> <C>
Robert C. Allen 48,300(/3/) 3.46%
2956 Malvern Hill Drive
Macon, Ga. 31204
Alfred C. Bridges 40,800(/4/) 2.95%
349 Gray Highway
Macon, Ga. 31201
William P. Brooks, MD 49,200(/5/) 3.56%
4995 Wellington Drive
Macon, Ga. 31210
Richard A. Collinsworth 2,000 0.15%
159 Country Club Road
Macon, Ga. 31210
Lee R. Greene, Jr. 28,800(/6/) 2.09%
5550 Rivoli Drive
Macon, Ga. 31210
Benjamin W. Griffith, III 60,960(/7/) 4.41%
6304 Peake Road
Macon, Ga. 31210
Robert C. Ham 72,000(/8/) 5.10%
4690 Oxford Circle
Macon, Ga. 31210
Shirley D. Jackson 13,200(/9/) 0.96%
3805 Bobby Court
Macon, Ga. 31206
</TABLE>
- --------
/1/Beneficial ownership is determined in accordance with Item 403 of
Regulation S-B of the Securities and Exchange Commission, and includes all
shares which the listed individual has the right to acquire within sixty
(60) days pursuant to options or warrants. The Company has relied upon
information contained in statements filed with the Securities and Exchange
Commission under Section 13(d) or 13(g) of the Exchange Act concerning
beneficial ownership.
/2/Based on 1,362,800 shares of the Company's Common Stock issued and
outstanding, plus, for each listed person, any securities which that person
has the right to acquire within sixty (60) days pursuant to options,
warrants or other rights, except that group ownership percentages are based
on the assumption that all warrants exercisable within sixty (60) days are
exercised.
/3/Includes 24,000 unexercised Founders Warrants.
/4/Includes 20,400 unexercised Founders Warrants.
/5/Includes 20,400 unexercised Founders Warrants; 12,000 shares held by a
broker for Dr. Brooks' IRA account; and 2,400 shares held by Dr. Brooks as
custodian for minor children.
/6/Includes 14,400 unexercised Founders Warrants.
/7/Includes 18,000 unexercised Founders Warrants, and 2,100 shares held by a
broker as custodian for Mr. Griffith.
/8/Includes 48,000 unexercised Founders Warrants.
/9/Includes 12,000 unexercised Founders Warrants.
14
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF CLASS
BENEFICIAL OWNER OWNERSHIP(/1/) OUTSTANDING(/2/)
------------------- ----------------- ----------------
<S> <C> <C>
James W. Kinman 13,900(/10/) 1.02%
4978 Wellington Drive
Macon, Ga. 31210
Robert T. Mullis 107,678(/11/) 7.73%
P.O. Box 6292
Macon, Ga. 31208
Michael T. O'Dillon 13,000(/12/) 0.95%
400 Heritage Drive
Macon, Ga. 31210
Ben G. Porter 46,500 3.41%
544 Mulberry Street,
Suite 705
Macon, Ga. 31201
Sydney J. Pyles 48,000(/13/) 3.46%
525 Twelfth Street
Macon, Ga. 31201
John F. Rogers, Jr. 25,900(/14/) 1.90%
280 Country Club Road
Macon, Ga. 31210
Charles W. Selby 43,200(/15/) 3.13%
Route 1, Box 1525
Gray, Ga. 31032
Frank M. Shepherd 54,720(/16/) 3.94%
Route 1
Irwinton, Ga.
Chris R. Sheridan, Jr. 46,500(/17/) 3.41%
1064 Jackson Springs Rd.
Macon, Ga. 31211
</TABLE>
- --------
/10/ Includes 4,650 shares held by Mr. Kinman's wife.
/11/ Includes 24,000 unexercised Founders Warrants, 4,800 additional
unexercised Founders Warrants purchased by Mr. Mullis, 57,658 shares held
directly by Mr. Mullis, 5,760 shares held by a broker as custodian for Mr.
Mullis, 4,058 shares held jointly with Michael C. Griffin, and 11,280
shares for which Mr. Mullis has power of attorney and power to vote the
shares. Mr. Mullis disclaims beneficial ownership of the 14,338 shares
held jointly with Mr. Griffin or as to which he holds power of attorney.
/12/ Includes 12,000 unexercised Founders Warrants.
/13/ Includes 24,000 unexercised Founders Warrants, and 21,600 shares held by a
broker for Mr. Pyles' account and the Sydney J. Pyles Plumbing & Heating
Company Profit Sharing Plan.
/14/ Includes 14,200 shares held by a broker for Mr. Rogers' IRA account.
/15/ Includes 19,200 unexercised Founders Warrants, 1,800 shares held by Mr.
Selby's wife, Evelyn B. Selby, and 3,000 shares held by Evelyn B. Selby as
custodian for children.
/16/ Includes 27,360 unexercised Founders Warrants, 21,360 shares held jointly
with his wife, and 6,000 shares held by Shepherd Brothers Timber Company,
Inc.
/17/ Includes 2,790 shares held by Mr. Sheridan's children and 10,230 shares in
the name of Elizabeth C. Sheridan, Mr. Sheridan's spouse.
15
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND NATURE
NAME AND ADDRESS OF OF BENEFICIAL PERCENT OF CLASS
BENEFICIAL OWNER OWNERSHIP(/1/) OUTSTANDING(/2/)
------------------- ----------------- ----------------
<S> <C> <C>
Joe E. Timberlake, III 74,868(/18/) 5.37%
5734 Kentucky Downs Dr.
Macon, Ga. 31210
H. Averett Walker 18,640 1.37%
134 Gleneagles Circle
Macon, Ga 31210
Frank G. Wall, Jr. 42,000(/19/) 3.04%
Route 1, Box 2120
Irwinton, Ga. 31042
Richard W. White, Jr. 27,200(/20/) 1.98%
356 Walnut Street
Macon, Ga. 31201
All directors as a group 848,926 50.77%
(18 persons)
All directors and executive 877,126 51.71%
officers as a group (21 persons)
</TABLE>
- --------
/18/ Includes 31,200 unexercised Founders Warrants, 7,200 shares held by Mr.
Timberlake as trustee for revocable family trust, and 5,268 shares held by
a broker as custodian for Mr. Timberlake.
/19/ Includes 21,000 unexercised Founders Warrants.
/20/ Includes 12,600 unexercised Founders Warrants, and 14,600 shares held
jointly with his wife.
The Company is not aware of any arrangements which may result in a change
in control of the Company.
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SECURITIES BEING OFFERED
The securities offered by the Company are shares of its Common Stock, $1.00
par value. The Company is authorized to issue 5,000,000 shares of Common
Stock. There are presently issued and outstanding 1,362,800 shares of the
Common Stock of the Company. In addition, there are outstanding Warrants to
purchase an additional 359,760 shares of the Common Stock of the Company
issued in connection with the organization of Security National Bank, the
Company's wholly-owned subsidiary, most of which are owned by directors and
executive officers of the Company, and the Company is authorized to issue
under its 1996 Incentive Stock Option Plan stock options to certain executive
officers and key employees of the Company or of the Bank to purchase up to
65,000 shares of the Company's $1.00 par value Common Stock, of which options
to purchase 60,000 shares have been granted pursuant to that plan.
Each holder of Common Stock of the Company is entitled to one vote per
share, but possesses no preemptive rights. The Common Stock does not have
cumulative voting rights, which means that the holders of more than 50% of the
outstanding shares of Common Stock voting for the election of directors can
elect all of the directors if they choose to do so; in such event, the holders
of the remaining shares of Common Stock will not be able to elect any of the
directors. The holders of the Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors of the Company with
respect to the Common Stock out of funds legally available therefor under the
laws of the State of Georgia. SEE "RISK FACTORS". In the event of liquidation,
dissolution, or winding up of the affairs of the Company, the holders of
outstanding shares of Common Stock will be entitled to share pro rata
according to their respective interests in the Company's assets and funds
remaining after payment or provision for payment of all debts and other
liabilities of the Company. The Common Stock is not by its terms convertible
or redeemable. The articles of incorporation do not authorize the issuance of
any other class of securities.
The articles of incorporation of the Company provide that there may be no
share exchange, merger, consolidation or sale, lease, transfer, exchange or
other disposition of all or substantially all of the assets of the corporation
or any of its affiliates to another corporation, person or entity unless it is
approved by the affirmative vote of the holders of two-thirds of all classes
of stock entitled to vote in the election of directors, and further provide
that the articles of incorporation may not be amended except by the
affirmative vote of the holders of two-thirds of all classes of stock entitled
to vote in the election of directors. The articles of incorporation further
provide for the classification of its directors into five classes, which are
as nearly equal in number as possible, with the terms of each director being
five (5) years but with the terms staggered to provide for the election of
approximately one-fifth of the Company's directors at each meeting of
shareholders. These provisions in the articles of incorporation are designed
to ensure stability of leadership and to discourage hostile and indirect
attempts by persons desiring to acquire control of the Company by extending
the time required to elect a majority of the directors of the Company,
although the provisions would also tend to increase the difficulty of removing
the Board of Directors of the Company when considered appropriate by a
majority of shareholders.
The Common Stock of the Company is first being offered to shareholders of
the Company pursuant to Warrants issued to shareholders of record of the
Company as of September , 1996, which entitle each shareholder of the
Company as of that date to purchase one (1) additional share of the Company's
Common Stock for each five (5) shares of Common Stock of the Company owned as
of that date. The Warrants are issued for no consideration to the Company's
shareholders, but have been registered pursuant to the Securities Act of 1933
and have either been registered in those states in which the Company's
shareholders reside as of the Record Date or are exempt from registration in
those states, based upon the best information available to the Company. The
Warrants may not be exercised except by persons or entities who are legal
residents of the states in which the Warrants and the underlying shares have
been registered or, in the opinion of the Company, are exempt from
registration. The Warrants are not transferable, and will expire and be of no
further force and effect if not exercised in accordance with the terms and
provisions of the Warrants on or before November , 1996. The Warrants do
not entitle the holders of the Warrants to any voting rights, or to any other
rights of a shareholder of the Company, other than the right to purchase, on
the terms set forth therein, shares of the Company's Common Stock.
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<PAGE>
INTEREST OF NAMED EXPERTS AND COUNSEL
Certain financial statements included in this Prospectus have been audited
by McNair, McLemore, Middlebrooks & Co., independent certified public
accountants, to the extent and for the periods set forth in their report.
Neither McNair, McLemore, Middlebrooks & Co. nor any member of that firm owns
any of the Common Stock of the Company.
The legality of the Common Stock offered hereby will be passed upon for the
Company by Martin, Snow, Grant & Napier, Macon, Georgia. The Martin, Snow,
Grant & Napier Keogh Plan and individual members of that firm own shares of
the Company's Common Stock. However, neither McNair, McLemore, Middlebrooks &
Co. nor Martin, Snow, Grant & Napier, or any member of those firms, was hired
on a contingent basis, will receive a direct or indirect interest in the
Company, or was a promoter, underwriter, voting trustee, director, officer or
employee of the Company.
INDEMNIFICATION OF DIRECTORS,
OFFICERS AND CONTROL PERSONS
Article 8, Part 5 of the Georgia Business Corporation Code provides for
indemnification of directors and officers of corporations. Under the
provisions of O.C.G.A. (S)14-2-852, a director of the Company, to the extent
successful in the defense of any proceeding or claim to which he or she is a
party because he or she is a director of the Company, is entitled as a matter
of right to indemnification against reasonable expenses, including attorneys'
fees, incurred by him or her in connection therewith. The Company is further
authorized to indemnify any person who is made a party to a proceeding because
he or she is a director against any liability incurred including the
obligation to pay any judgment rendered against him or her if the director
acted in a manner he or she believed in good faith to be in, or not opposed
to, the best interests of the corporation and, in the case of any criminal
proceeding, he or she had no reasonable cause to believe his or her conduct
was unlawful. The authority of the Company to indemnify a director is not
applicable in connection with any proceeding brought by or in the right of the
corporation, or in connection with any other proceeding in which he or she is
adjudged liable on the basis that personal benefit was improperly received by
him. Indemnification in any action brought by or in the right of the
corporation is limited in any event to reasonable expenses incurred in
connection with the proceeding, and does not include the obligation to pay any
judgment, settlement, penalty or fine.
A determination that a director is entitled to indemnification must be made
by the board of directors by majority vote of a quorum consisting of directors
not at the time parties to the proceedings; if a quorum cannot be obtained
then by majority vote of a committee duly designated by the board of directors
(in which designation directors who are parties may participate), consisting
solely of two or more directors not at the time parties to the proceedings; by
special legal counsel; or by the shareholders of the corporation, excluding
shares owned by or voted under the control of directors who are at the time
parties to the proceeding. A director of the Company who is a party to a legal
proceeding in that capacity may apply to the court for indemnification or
advances for expenses if it determines (1) the director is entitled to
mandatory indemnification under O.C.G.A. (S)14-2-852; or (2) the director is
fairly and reasonably entitled in view of all relevant circumstances to
indemnification, even if he or she has not met the standard conduct set forth
in O.C.G.A. (S)14-2-851(a) or was adjudged liable as described in O.C.G.A.
(S)14-2-851(d), in which latter event, however, his or her indemnification is
limited to reasonable expenses incurred. If the court determines that the
director is entitled to indemnification or advance for expenses under this
part, it may also order the corporation to pay the directors reasonable
expenses to obtain court-ordered indemnification or advance for expenses. The
articles of incorporation of the Company also eliminate, as permitted by law,
the personal liability of directors of the Company for monetary damages for
breach of duty of care or other duty as a director, excepting only any
liability for misappropriation of any business opportunity of the corporation,
intentional misconduct, and other specified conduct.
An officer of the Company who is not a director is entitled to mandatory
indemnification under O.C.G.A. (S)14-2-852 and is entitled to apply for court
ordered indemnification in each case to the same extent as is a director of
the Company. The Company may also indemnify and advance expenses to an
officer, employee or agent who is not a director to the extent, consistent
with public policy, that may be provided by its articles of incorporation,
bylaws, general or specific action of its board of directors, or contract.
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<PAGE>
The Company's bylaws provide for indemnification of officers and directors
substantially similar to that provided by Article 8, Part 5 of the Georgia
Business Corporations Code. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers or
persons controlling the Company pursuant to the foregoing provisions, or
otherwise, the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the 1993 Act and is therefore unenforceable.
CERTAIN TRANSACTIONS
Security National Bank has made loans in the ordinary course of its business
to officers and directors of the Company, and also to their relatives,
spouses, and entities in which they have an interest. Each of these loans has
been made in strict compliance with state and federal statutes and rules and
regulations of the Office of the Comptroller of the Currency. As of December
31, 1995, certain executive officers and directors, and companies in which
they are an executive officer or partner or in which they have a ten percent
(10%) or more beneficial interest, were indebted to Security National Bank in
the aggregate amount of $3,254,857.00, and as of June 30, 1996 were so
indebted to the Bank in the aggregate amount of $1,854,838. Each of the loans
was made in the ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at the time for
comparable transactions with other persons, and did not involve more than the
normal risk of collectibility or present other unfavorable features.
SNB Bancshares, Inc. is a bank holding company which was formed at the
instruction of management of Security National Bank in February, 1994.
Pursuant to the terms and provisions of a Plan of Reorganization and Agreement
of Merger between the Bank, the Company and Security Interim National Bank,
shareholders of Security National Bank were issued one (1) share of Company
Common Stock in exchange for each share of bank stock owned by him or her on
September 30, 1994, the effective date of the reorganization. Directors and
executive officers of the Bank, most of whom currently serve as directors and
executive officers of the Company, received shares of the Company on the same
basis as did other shareholders of the Company, and received no additional
consideration in connection with the reorganization.
Otherwise, there were no transactions during the last two (2) years, nor are
there any other currently proposed transactions, to which either Bancshares or
the Bank was or is to be a party, in which the amount involved exceeds
$60,000.00 and in which any director, executive officer, principal stockholder
or their related interests had, or is to have, a direct or indirect material
interest.
BUSINESS OF THE COMPANY
GENERAL
The Company is a Georgia business corporation which was incorporated on
February 10, 1994. The Company was organized for the purpose of operating as a
bank-holding company under the federal Bank Holding Company Act of 1956, as
amended, and the bank holding company laws of Georgia (Georgia Laws 1976, pg.
168 et. seq.). On September 30, 1994, the Company, after obtaining the
requisite regulatory approvals, acquired 100% of the issued and outstanding
common stock of the Bank, a national bank which has engaged in a commercial
banking business in Bibb County, Georgia since November 4, 1988, through the
merger of the Bank with a bank subsidiary of the Company which was created for
the purpose of organizing the Bank into a one-bank holding company. Since that
time, the Bank has operated as a wholly-owned subsidiary of the Company. As of
June 30, 1996, the Bank had assets of $120,938,856; loans of $76,611,916;
deposits of $105,466,189; and equity capital of $9,541,098.
The Bank offers a full range of deposit products typically offered by
commercial banks, including various checking, savings, interest bearing
transaction accounts, certificates of deposit and IRA accounts. The Bank's
lending services include a wide variety of commercial, consumer, SBA, mortgage
and equity loans designed to meet customer needs. Additionally, the Bank
offers safe deposit boxes, automated teller machines, credit cards,
19
<PAGE>
wire transfers, travelers checks, money orders, night depository and other
services for the convenience of its customers. No trust services are currently
offered. The Bank has an affiliation with a full service brokerage company
which maintains an office at the Bank's Riverside Drive branch.
MARKET AREA OF THE COMPANY
The Bank, the wholly-owned subsidiary of the Company, is located and
conducts virtually all of its business in Bibb County, which had a population
in 1990 of approximately 149,967 as reported by the United States Bureau of
Census. The Bank conducts business to a lesser extent in the surrounding
counties of Jones, Monroe, Twiggs, Wilkinson and Houston. The loan portfolio
of the Company is concentrated in various commercial, real estate and consumer
loans to individuals and entities located in Middle Georgia, and the ultimate
collectibility of the loans and future growth of the Bank is largely dependent
upon economic conditions in the Middle Georgia area. The Bank's agricultural
loans are negligible. The economy of the Middle Georgia area has been
generally favorable in recent years, although population growth in Bibb County
has been relatively slow. Robins Air Force Base, located in Houston County,
recently survived national base closure mandates, and has recently expanded in
size.
COMPETITION
The banking industry in Bibb County is highly competitive. It is currently
served by eight (8) commercial banks, one (1) federal savings bank, sixteen
(16) credit unions, and various finance companies. As of December 31, 1995,
the Bank held a 4.34% market share of Bibb County deposits held in banks,
savings and loans, and credit unions.
LENDING POLICIES
The lending policies of the Company are embodied in a comprehensive
statement of lending policy adopted by the Bank, which is reviewed and
modified periodically. In general, those policies delegate to lending officers
of the Company authority to approve loans which do not exceed a specified
maximum amount, depending upon the seniority and experience of the lending
officer. Loans in excess of those specified limits, but not in excess of
$600,000.00, must be approved by the Bank's loan committee. The loan committee
is composed of members of the Board of Directors and senior officers of the
Bank, but only board members may vote on the decisions of the committee. Loans
in excess of $600,000.00 must be ratified by the Bank's full Board of
Directors.
In general, the Company authorizes loans to be made in Bibb County, but
restricts the extent to which loans can be made in its secondary service area
(defined as Jones, Twiggs, Houston, Peach, Wilkinson, Crawford, and Monroe
Counties) and outside of its defined service area. Loans in each county in the
secondary service area may not exceed 25% of the Bank's total loans, or 200-
300% of the Bank's total capital. Loans outside of Bibb County and the Bank's
secondary service area may not exceed 10% of the Bank's total loans and 80% of
its total capital. The Bank characterizes loans as desirable, acceptable,
undesirable, or prohibited largely on the basis of the nature and extent of
the collateral which secures the loans. A loan application is required on all
loans, and loan officers are required to submit a memorandum which outlines
the borrower's historical relationship with the Bank, the amount of the loan,
the purpose of the loan, the repayment schedule, collateral, financial
analysis and a statement of the loan grading. Lending officers of the Bank
actively solicit customers in the commercial, residential and consumer
sectors.
All requested loans are reviewed carefully before made, with particular
consideration to the borrower's character, repayment capacity and collateral.
Significant loans require review of documentation of the borrower's financial
history; most consumer or residential loans in excess of $10,000.00 require
personal financial statements from all borrowers, guarantors, endorsers or co-
makers, and all commercial loan applications in excess of $100,000.00 must be
supported by financial statements, the nature of which is dependent upon the
amount of credit requested. Loans secured by real estate are generally limited
to a specified percentage of the value of the
20
<PAGE>
real estate, supported by competent appraisals. The lending policy requires
that before real estate is accepted as collateral it must be personally viewed
by a representative of the Bank, and inspections are required by the lending
officer on construction and development projects before substantial draws are
made. Special procedures are in place to ensure that loans to directors and
executive officers are not made on terms more favorable than such loans are
made to other borrowers in similar circumstances.
A collateral administration department has been established by the Bank to
assist in the perfection of security interests in collateral before a loan is
consummated and to ensure proper maintenance of files. The Bank has
implemented an internal compliance program which provides for the periodic
review of samples of loans, credit files, collateral files and adverse action
notices. Loan officers are required to assign to each loan at the time it is
made a grade, the level of which depends, among other factors, upon the nature
and extent of collateral and the repayment ability of the borrower. The
lending officer is required to advise the chief executive officer of any
change in the status of the loan which would necessitate changing its grade.
All loans to customers with an aggregate indebtedness in excess of $150,000.00
are reviewed annually by the credit administration department. The quality of
the Bank's loan portfolio is reviewed semi-annually by a qualified outside
party, which includes a review of every relationship in excess of $150,000.00,
and all past due and non-accruing loans, other real estate owned, and
repossessions.
The Company seeks through its lending policy to avoid an undue concentration
of loans in any particular sector of the economy or to any one borrower.
Concentration in any enumerated sector in excess of 10% of the Bank's total
capital is subject to review by the Bank's Board of Directors, and the Board
of Directors has established specific limits designed to prevent the Bank from
becoming exposed to undue risks associated with concentrations of real estate
loans of specific types or geographic markets. Loans in excess of those
specified percentages must be approved by the loan committee and reported to
the Board of Directors. As of December 31, 1995 the Bank's loan portfolio
consisted of approximately 17.6% in commercial, financial and agricultural
loans; 4.4% in real estate construction loans; 69.5% in loans secured by real
estate mortgages; and 8.8% in individual or consumer loans.
The Company seeks generally to avoid long term, fixed-rate loans secured by
real estate, especially where such loans are not matched by liabilities of
similar maturities. Although a substantial percentage of the Bank's loan
portfolio consists of loans secured by real estate mortgages, the overwhelming
majority of those loans have maturities of less than three (3) years. Many of
the loans with maturities in excess of that time provide for periodic
adjustments of interest rates. Real estate loans are generally scheduled to
amortize within 15 years for raw land loans and for improved real estate
property loans, and 30 years for one-four family, owner occupied real estate
loans.
The Community Reinvestment Act seeks to ensure that each financial
institution meets the credit needs of the entire community served by that
institution, including low- and moderate-income neighborhoods, consistent with
the safe and sound operation of that institution. In accordance with that
statute and rules and regulations promulgated by the Board of Governors of the
Federal Reserve System, Security National Bank has established a Community
Reinvestment Act program designed to further the purposes of the Act and to
ensure compliance with it. Each program is overseen by a Community
Reinvestment Act officer, and Security National Bank has adopted written
Community Reinvestment Act statements.
REGULATION--SNB BANCSHARES, INC.
The Company is registered as a bank holding company with both the Georgia
Department of Banking and Finance as well as with the Board of Governors of
the Federal Reserve System. It is required to file annual reports and other
information regarding its business operations and those of its subsidiary with
both of those regulatory agencies and is subject to examination by both of
those agencies.
The Bank Holding Company Act requires every bank holding company to obtain
the prior approval of the Board of Governors of the Federal Reserve System (i)
before it may acquire direct or indirect ownership or control of any voting
shares of any bank if, after such acquisitions, such bank holding company will
directly or
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indirectly own or control more than 5% of the voting shares of such bank; and
(ii) before it may merge or be consolidated with another bank holding company.
This Act further requires that consummation of approved acquisitions or
mergers be delayed, generally for a period of not less than fifteen (15) days
following the date of such approval, during which time complaining parties may
obtain a review of the Board's order granting its approval by filing a
petition in the appropriate United States Court of Appeals petitioning that
the order be set aside. Since September, 1995 the Board of Governors of the
Federal Reserve System has been authorized to approve an application by a bank
holding company which is adequately capitalized and adequately managed to
acquire control of, or acquire all or substantially all the assets of, a bank
located in a state other than the home state of the bank holding company,
without regard to whether such transaction is prohibited or permitted under
state law. That legislation effectively permits bank holding companies to
acquire banks in any other state beginning September 29, 1995. Approval of the
Federal Reserve System will not be forthcoming, however, for the acquisition
of a bank in a host state by an out-of-state bank holding company if the
applicable law of the host state provides that the acquired bank be in
existence for a minimum period of time not to exceed five (5) years.
The Bank Holding Company Act prohibits (with specific exceptions) the
Company from engaging in non-banking activities or from acquiring direct or
indirect control of any company engaged in non-banking activities. The Board
of Governors by regulation or order may make exceptions for activities
determined to be so closely related to banking or managing or controlling
banks as to be a proper incident thereto. In determining whether a particular
activity is permissible, the Board of Governors is to consider whether the
performance of such an activity can reasonably be expected to produce benefits
to the public, such as a greater convenience, increased competition or gains
in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased or unfair competition, conflicts of
interest or unsound banking practices. For example, making, acquiring or
servicing loans, providing discount securities brokerage services, leasing
personal property, providing certain investment or financial advice,
performing certain data processing services, acting as agent or broker in
selling life insurance and certain other types of insurance in connection with
credit transactions and certain underwriting activities have all been
determined by regulations of the Board of Governors to be permissible
activities. The Bank Holding Company Act does not place territorial
limitations on permissible bank-related activities of bank holding companies.
However, despite prior approval, the Board of Governors does have the power to
order a holding company or its subsidiaries to terminate any activity, or
terminate its ownership or control of any subsidiary, when it has reasonable
cause to believe the continuation of such activity or such ownership or
control constitutes a serious risk to the financial safety, soundness or
stability of any bank subsidiary of that holding company. The Federal Reserve
Board considers whether the performance of such activities by an affiliate of
the holding company can reasonably be expected to produce benefits to the
public which outweigh possible adverse effects.
Under applicable federal law, the Company and its subsidiary are prohibited
from extending credit, selling or leasing property, and furnishing any service
to any customer on the condition or requirement that the customer obtain any
additional property, service or credit from the Company and its subsidiary,
refrain from obtaining any property, service or credit from any competitor of
the Company or its subsidiary, or furnish any property, service or credit to
the Company or its subsidiary. In addition, the Company is required to give
the Federal Reserve Board, unless it is considered to be "well-capitalized" by
the Board, prior written notice of any purchase or redemption of its
outstanding equity securities if the gross consideration for the purchase or
redemption, when combined with a net consideration paid for all such purchases
or redemptions during the preceding twelve (12) months, is equal to ten
percent (10%) or more of the Company's consolidated net worth. The Federal
Reserve Board may disapprove such a purchase or redemption under certain
prescribed circumstances.
The Federal Reserve Board has been vested with substantial enforcement
powers over bank-holding companies and non-banking subsidiaries in those
circumstances which represent unsafe or unsound practices or constitute
violations of law. The Federal Reserve Board, for instance, may issue cease
and desist orders to prohibit unsafe or unsound practices or practices which
constitute violations of the law. In addition, the Federal Reserve Board may
assess civil penalties against companies or individuals who violate the Bank
Holding Company Act or orders or regulations promulgated pursuant thereto in
amounts up to $1 million for each day of
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the violation; may order termination of non-banking activities of non-banking
subsidiaries or bank holding companies; and may order termination of ownership
and control of a non-banking subsidiary by a bank holding company. Certain
violations may also result in criminal penalties.
The Company is also subject to regulation as a bank holding company by the
State of Georgia. Georgia law requires an annual registration of all Georgia
bank holding companies with the Department of Banking and Finance. Such
registration includes information with respect to the financial condition,
operation, management and intercompany relationships of the bank holding
company and its subsidiaries and such related matters as the Department of
Banking and Finance deems necessary or appropriate to carry out the purposes
of Georgia law. Furthermore, the Department of Banking and Finance may from
time to time require reports under oath to keep itself informed as to whether
the provisions of Georgia banking laws, regulations, and orders issued
thereunder by the Department have been complied with, and may make
examinations of each bank holding company and subsidiary thereof.
In addition, Georgia law provides that, without prior approval of the
Commissioner of the Department of Banking and Finance, it is unlawful (i) for
any bank holding company to acquire direct or indirect ownership or control of
more than 5% of the voting shares of any bank; (ii) for any bank holding
company or subsidiary thereof, other than a bank, to acquire all or
substantially all of the assets of a bank; or (iii) for any bank holding
company to merge or consolidate with any other bank holding company. It is
also unlawful for any bank holding company to acquire direct or indirect
ownership or control of more than 5% of the voting shares of any bank unless
such bank has been in existence and continually operated as a bank for five
years or more prior to the date of application to the Commissioner for
approval of such acquisition, except in instances in which the Bank is
organized to facilitate the acquisition of a bank meeting the five year
requirement.
The Company and its banking subsidiary are deemed "affiliates" within the
meaning of Section 23A of the Federal Reserve Act and are subject to
restrictions contained in the Act on loan and other transactions between
affiliates. A transaction between affiliates of the Corporation may not exceed
10% of the capital stock and surplus of the banking subsidiary involved and
the total of all transactions by a banking subsidiary may not exceed 20% of
its capital stock and surplus. All extensions of credit may not exceed 20% of
its capital stock and surplus. All extensions of credit by the bank subsidiary
to affiliates of the Corporation must be secured.
REGULATION--SECURITY NATIONAL BANK
The Bank is a national banking association, organized under the laws of the
United States pursuant to the provisions of the National Bank Act. As such,
primary supervisory regulatory authority for the Bank is the Comptroller of
the Currency of the United States. The Comptroller regularly examines the Bank
and its operations. In addition, operations of the Bank are subject to state
and federal statutes applicable to national banks, including regulations of
the Board of Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation and the Comptroller of the Currency. Such statutes and
regulations relate to the required reserves, investments, loans, mergers and
consolidations, issuance of securities, payment of dividends, establishment of
branches and other aspects of their operations.
The National Bank Act contains restrictions on payment of dividends which
(i) limit the amount of dividends that may be declared by a national bank in
any calendar year without the approval of the Comptroller of the Currency to
the total of the national bank's net profits (as defined) for such year
combined with its retained profits for the preceding two (2) years, less any
required transfers to surplus; (ii) prohibit withdrawal of capital in the form
of a dividend; and (iii) prohibit the payment of a dividend in an amount
greater than its net profits then on hand less losses and bad debts. The
Comptroller of the Currency also has authority under the Financial
Institutions Supervisory Act of 1966 to prohibit a national bank from engaging
in what in his opinion constitutes an unsafe or unsound practice in conducting
its business, including the payment of a dividend.
The Bank, as the subsidiary of the Company, is subject to certain
restrictions imposed by the Federal Reserve Act, as amended, on any extensions
of credit to the bank holding company or the Bank, on investments in the stock
or other securities thereof, and on the taking of such stock or securities as
collateral for loans to any borrower.
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The Office of the Comptroller of the Currency is granted wide latitude in
enforcing sanctions against any bank which does not operate in accordance with
applicable regulations, policies, and directives. Proceedings may be brought
against any bank or any director, officer or employee of the bank that is
engaged in any unsafe and unsound practice, including the violation of
applicable laws and regulations. Civil penalties may be assessed against such
companies or individuals for violation of federal statutes, orders or
regulations in an amount not to exceed $1,000,000.00 or, in the case of a
national banking association, an amount not to exceed the lesser of
$1,000,000.00 or 1% of the total assets of that association. In addition, the
Office of the Comptroller of the Currency is empowered, upon notice and
hearing, to remove any director, officer or employee of any bank under its
jurisdiction which has violated any law or regulation, any final cease and
desist order, or any written condition or agreement to which the bank is a
party, or has engaged in any unsafe or unsound practice in connection with the
bank, or has breached a fiduciary duty to the bank. A knowing violation of any
provision of the National Bank Act may result in the forfeiture of the rights,
privileges and franchises of the Bank. In addition, the Federal Deposit
Insurance Corporation has the authority to terminate insurance of accounts
maintained with the bank, after notice and hearing, upon a finding by the FDIC
that the bank is or has engaged in unsafe and unsound practices that have not
been corrected, or is in an unsafe and unsound condition to continue
operations, or has violated any applicable law, regulation, rule or order of,
or condition imposed, by the appropriate supervisors.
The Bank is subject to restrictions on the establishment and maintenance of
branch banks by the laws of the State of Georgia. The Georgia General Assembly
recently enacted legislation which will substantially expand the ability of
commercial banks in Georgia to branch into other counties. Commercial banks in
Georgia have historically been limited in their banking operations to the
county in which their principal offices are located. However, effective July
1, 1996, banks in Georgia will be able to branch into other counties on a
limited basis, and effective July 1, 1998 banks in Georgia will be able to
branch into other counties on an unlimited basis. Recent federal legislation
also authorizes banks to merge across state lines, thereby creating interstate
branches, beginning June 1, 1997. Each state has the opportunity to "opt out"
of that legislation, thereby prohibiting interstate mergers in such states, or
to "opt in" at an earlier time, thereby allowing interstate mergers without
that state prior to June 1, 1997. Georgia law has elected to permit interstate
mergers as of June 1, 1997, subject to reciprocal legislation being enacted in
the other affected states. In addition, a bank is now able to open branches in
a state in which it does not already have banking operations, if the laws of
such state permit such de novo branching. Georgia law does not presently
permit such de novo branching from another state and a bank in another state
may only enter Georgia by acquiring a bank located in Georgia.
CAPITAL REQUIREMENTS
Both the Company and its subsidiary bank are required to maintain minimum
capital ratios. The minimum ratio of Total Capital to Total Risk-Weighted
Assets is 8%, of which at least 4% must be in the form of Tier 1 Capital
(Core). Core Capital elements include common stockholder's equity, qualifying
non-cumulative perpetual preferred stock, qualifying cumulative perpetual
preferred stock, and minority interests in the equity accounts of consolidated
subsidiaries. Tier 1 Capital is defined generally as the sum of those Core
Capital elements less good will and other tangible assets required to be
deducted in accordance with applicable regulations. Tier 2 Capital consists of
allowance for loan and lease losses (subject to applicable limitations),
perpetual preferred stock and related surplus, hybrid capital instruments,
perpetual debt, and mandatory convertible debt securities, and term
subordinated debt and intermediate-term preferred stock.
As of June 30, 1996, the Tier 1 Capital ratio of the Company, on a
consolidated basis, was 12.65%, and its total Tier 1 and Tier 2 risk-based
capital was 13.90%. Both of those measures were in excess of regulatory
minimums of 4% for Tier 1 and 8% for total risk-based capital.
In addition, the Company is required to maintain a leverage capital ratio of
not less than 4%. As of June 30, 1996, the Company's leverage capital ratio
was 9.39%.
Banking institutions which do not meet applicable capital requirements are
subject to corrective action taken by the appropriate federal banking
agencies. A financial institution which is notified by the appropriate banking
agency that it is under-capitalized, significantly under-capitalized or
critically under-capitalized must submit an
24
<PAGE>
acceptable capital restoration plan, and a financial institution is prohibited
from making capital distributions if thereafter it is under-capitalized. An
under-capitalized institution is also prohibited from increasing its average
total assets until its capital restoration plan has been accepted, and is also
generally prohibited from making acquisitions, establishing any branches or
engaging in any new line of business except in accordance with the capital
restoration plan or the approval of the appropriate agency. An under-
capitalized institution which fails to submit an acceptable capital
restoration plan or fails to implement a capital restoration plan accepted by
the appropriate agency may be required to sell additional stock, merge with
another institution, remove or replace members of management or take other
appropriate action.
Under regulations recently adopted by the Board of Governors of the Federal
Reserve system, a bank's exposure to declines in the economic value of its
capital due to changes in interest rates is one factor the agencies will
consider in evaluating a bank's capital adequacy. Additional capital may be
required if, in the judgment of the applicable regulatory agency, the bank's
capital provisions for interest rate risks are inadequate. Additional
regulations are being considered which will address in greater detail the role
of interest rate risks in assessing the adequacy of a bank's capital.
INSURANCE PREMIUMS
The deposits of the Bank are insured by the Federal Deposit Insurance
Corporation to the extent authorized by law. The Bank is assessed a premium by
the FDIC for that coverage and the FDIC has developed a risk-based system to
determine a bank's assessment rate. The risk-based system places institutions
into one of nine risk categories using a two-step process based first on
capital ratios and then on other supervisory information, and the insurance
premium for each bank depends upon the level of capitalization and other
supervisory concerns. The insurance premiums paid by the Bank increased
considerably between 1990 and 1995, as did those of other commercial banks, to
ensure that the Bank Insurance Fund which is the source of payments to
depositors of failed institutions was sufficiently capitalized. In 1995,
however, the reserve ratio of the Bank Insurance Fund achieved a designated
level, and under the new assessment schedule the assessment rates of
commercial banks such as the Bank will be reduced considerably. The deposit
insurance rate for the Bank is presently .004% of domestic deposits. However,
the FDIC is authorized to increase or decrease the assessment rates by a
maximum of five basis points without engaging in a notice-and-comment rule
making proceeding, and no assurance can be furnished that the assessment rate
of the Bank will not be increased by the five basis-point maximum in the
future, or in excess of that amount with appropriate notice by the Federal
Deposit Insurance Corporation.
EMPLOYEES
As of June 30, 1996, the Company and its subsidiary had 47 full-time
employees and 5 part-time employees.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following narrative presents management's discussion and analysis of the
Company's financial condition and results of operations as of and for the six-
month periods ended June 30, 1996 and 1995 and for the years ended December
31, 1995 and 1994. The historical financial statements of the Company are set
forth elsewhere herein. This discussion should be read in conjunction with
those financial statements and the other financial information included in
this prospectus. As the Company has no subsidiaries other than the Bank and no
activities other than those of the Bank, the following discussion refers to
the financial condition and operations of the Bank.
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO
SIX MONTHS ENDED JUNE 30, 1995
FINANCIAL CONDITION
Financial condition of a commercial bank should be examined to a large
extent in terms of trends in sources and uses of funds. The Company's primary
use of funds comes from loan demand. During the six months ended June 30,
1996, net loans made to customers increased $12,336,445 or 19.2 percent.
Investment securities increased from $34,439,849 to $35,566,924 during the
same period which represents an increase of 3.3 percent. Total assets as of
June 30, 1996 were $121,132,239 as compared to $107,566,158 as of December 31,
1995. The increase in total assets (12.6 percent) and the significant loan
growth were funded primarily through increased deposits. Deposit growth
resulted from increased media advertising and heightened community awareness
of the personal banking services provided by the Company. Demand, interest-
bearing demand and savings deposits increased by $12,880,844 for the six
months ended June 30, 1996. Time deposits decreased by $1,190,028 for the same
period.
CAPITAL RESOURCES
The significant growth of the Company for the last two years and,
particularly, the last six months has caused management to become increasingly
aware of the company's capital needs. Relevant capital balances and ratios for
the prior six quarters are as follows:
<TABLE>
<CAPTION>
QUARTERS
----------------------------------------------------------------
2ND 1996 1ST 1996 4TH 1995 3RD 1995 2ND 1995 1ST 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
(IN THOUSANDS)
Stockholders' Equity $ 10,541 $ 10,374 $ 8,426 $ 7,942 $ 7,584 $ 7,300
Stockholders'
Equity/Assets 8.70% 9.13% 7.83% 7.73% 8.32% 8.61%
Book Value Per Share $ 7.74 $ 7.61 $ 7.02 $ 6.62 $ 6.32 $ 6.08
Shares Outstanding 1,362,800 1,362,800 1,200,000 1,200,000 1,200,000 1,200,000
Cash Dividends Per Share $ .055 $ .055 $ .05 $ .05 $ .05 $ .05
</TABLE>
FINANCIAL INFORMATION
During the first quarter of 1996, 81,400 shares of additional common stock
were issued resulting in contributed capital of $1,750,100. Contributed
capital along with net income of $329,488 in the first quarter assisted in
raising book value from $7.02 per share as of December 31, 1995 to $7.61 per
share at the end of the first quarter. The equity to assets ratio at that time
was 9.13 percent. During the quarter ended June 30, 1996, net income of
$364,566 less cash dividends paid of $74,954 resulted in book value of $7.74
per share and stockholder equity to assets ratio of 8.70 percent. All share
and per share data have been adjusted to reflect a 100 percent stock split
effected in the form of a dividend on June 1, 1996 and a 20 percent stock
split effected in the form of a dividend on March 20, 1995. Management
anticipates future growth in loans and assets will be considerable and may
require additional contributed capital.
26
<PAGE>
LIQUIDITY
SNB manages its liquidity position to ensure adequate cash flow for deposit
withdrawals and credit commitments.
The percentage of net loans to deposits as of June 30, 1996 was 73.2
percent, an increase of almost 4 percentage points over the loan-deposit ratio
of 69.3 percent as of December 31, 1995. Cash and due from banks and federal
funds sold totaled $5,489,527 as of June 30, 1996 as compared with $5,632,830
as of December 31, 1995, representing a decrease of 2.5 percent. The Bank has
established relationships with its correspondent banks which will enable it to
purchase federal funds on a short-term basis when needed.
Cash provided by operations during the six months ended June 30, 1996 was
$703,209. Financing activities consisting primarily of net cash inflows from
deposits of $11,690,816 resulted in total cash inflows for the period of
$13,072,325. Cash outflows during the same period totaled $13,918,837 for
purchases of investment securities ($1,388,678) and net loans to customers of
$12,336,445. For the six- month period, cash and cash equivalents decreased
overall by $143,303.
RESULTS OF OPERATIONS
Interest Income
Interest income from loans and loan fees were $3,880,358 for the period
ended June 30, 1996, which represents an increase of $919,763 (31.1%), over
the same period for 1995. The increase is attributed to a significant
increase in the volume of loans. Interest from investment securities
totaled $926,562 for the 1996 period of which 26.4% or $244,727 represents
tax-free interest on state, county and municipal obligations. Thirty
percent of interest from investment securities in the prior six months
ended June 30, 1995 was tax-free interest.
Interest Expense
During the first six months of 1996, interest expense to the Bank
incurred on behalf of depositors totaled $2,147,607. It was considerably
higher than interest expense of the comparable 1995 period which totals
$1,474,876. The increase of $672,731 (45.6%) results from increased
interest-bearing deposits which were $87,028,963 as of June 30, 1996 versus
$65,339,565 as of June 30, 1995.
Provision for Loan Losses
The Bank provided $107,000 for loan losses for the six months ended June
30, 1996 versus $54,571 for the same period in 1995. The amount of the
provision for loan losses is the result of judgment made by management
after giving due consideration to the credit worthiness and size of the
loan portfolio. The increase in the 1996 provision for loan losses was
based primarily on growth in the loans outstanding.
Management seeks to maintain the allowance for loan losses at a level
which will be adequate under current economic conditions. However,
management's judgment is based upon a number of assumptions about future
events, which are believed to be reasonable, but which may or may not prove
valid. Thus, there can be no assurance that charge-offs in future periods
will not exceed the allowance for possible loan losses, that additional
increases in the allowance will not be required, or that any particular
level of allowance for possible loan losses will be maintained.
As of June 30, 1996, the allowance for loan losses was 1.7 percent of
outstanding loans less unearned interest. As of June 30, 1995, the
comparable level was 1.9 percent.
27
<PAGE>
Noninterest Income and Noninterest Expenses
Noninterest income consists of service charges on deposits, other service
charges, commissions and fees, security transactions and other
miscellaneous income. Noninterest income of $513,902 for the six months
ended June 30, 1996 increased by $123,492 over the comparable period of
1995. Of the total amount, 62.5 percent resulted from service charges on
deposits. Service charges on deposits increased significantly due to
increased deposit balances.
Salaries and employee benefits of $1,047,466 through the second quarter
of 1996 were higher than $737,938 for the same period in 1995. The increase
is representative of manpower requirements necessary to effectively run a
growing financial institution. Total noninterest expenses were $2,019,472
for the six months ended June 30, 1996 and $1,519,488 for the same period
in 1995.
Net Income
Net income for the first half of 1996 totaled $694,054 as compared to
$641,227 for the first half of 1995. Earnings per share were $.45 versus
$.47, a decrease of $.02 per share resulting from the issuance of 81,400
shares, which subsequently split to 162,800 shares. Return on average
assets for the six months ended June 30, 1996 was 1.24 percent representing
a decline of .31 percent from the 1.55 percent earned during the first six
months of 1995. The decline resulted, to a large extent, because deposits
grew faster than the funds could be effectively employed in earning assets.
Return on average stockholders' equity for the first quarter of 1996 was
13.84 percent as compared to 17.66 percent for the comparable period of
1995. The decline can be attributed to the contribution of $1,750,100 of
capital during the first six months of 1996.
- -------------------------------------------------------------------------------
FINANCIAL REVIEW
- -------------------------------------------------------------------------------
SUMMARY
The following discussion reviews the results of operations and assesses the
financial condition of the Company. This discussion should be read in
conjunction with the preceding consolidated financial statements and
accompanying notes.
The Company is a one bank holding company organized at the direction of
Security National Bank ("Bank") stockholders and management to hold 100% of
the common stock of Security National Bank. At a Special Meeting of the
Stockholders of the Bank on August 2, 1994, the stockholders of the Bank voted
affirmatively for a Plan of Reorganization and Agreement of Merger pursuant to
which the Bank became a wholly owned subsidiary of the Company. This
reorganization was completed effective September 30, 1994. As a result of the
reorganization, each outstanding share of $1.00 par value common stock of the
Bank was converted into one share of $1.00 par value common stock of the
Company. The functions of the Company as the parent holding company are
limited in scope, so that the consolidated financial statements of the Company
largely reflect the financial condition and operating results of its sole
banking subsidiary. The Bank is a federally chartered commercial bank which
commenced operations in Macon, Georgia on November 4, 1988. After the
September 30, 1994 reorganization detailed above, the Bank has continued its
normal operations as a subsidiary of the Company.
28
<PAGE>
The following table illustrates selected key financial data of the company for
the past five years.
TABLE 1
SELECTED FIVE YEAR FINANCIAL DATA
(Dollars in thousands, except per share data
and number of shares)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------
1995 1994 1993 1992 1991
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Interest Income $ 4,311 $ 3,526 $ 2,650 $ 2,473 $ 1,957
Provision for Loan
Losses 109 302 378 407 816
Other Income 867 1,046 840 522 437
Other Expense 3,117 2,782 2,334 1,908 1,593
Income Taxes 561 436 205 181 (20)
Extraordinary Items 0 0 0 22 0
Cumulative Effect of Ac-
counting Change 0 0 53 0 0
Net Income 1,391 1,052 626 521 5
PER SHARE DATA: (a)
Earnings Per Common and
Common Equivalent Share $ 1.01 $ 0.81 $ 0.49 $ 0.41 $ 0.02
Cash Dividends Paid 0.20 0.17 0.08 0.04 0.00
Stockholders' Equity
(Year End Book Value
Based on 1,200,000 Out-
standing Shares) 7.02 5.90 5.33 4.89 4.50
RATIOS:
Return on Average Assets 1.51% 1.50% 1.03% 0.96% 0.01%
Return on Average Equity 18.16% 15.53% 10.12% 9.22% 0.09%
Dividend Payout Ratio
(b) 17.26% 19.01% 15.98% 9.60% 0.00%
Average Equity to Aver-
age Asset 8.31% 9.65% 10.13% 10.42% 10.77%
BALANCE SHEET DATA:
(at year end)
Assets $ 107,566 $ 78,156 $ 66,022 $ 57,178 $ 53,080
Investment Securities 34,440 18,649 19,976 19,511 15,739
Loans, Net of Income 64,400 52,277 41,064 32,458 30,285
Allowance for Loan
Losses 1,128 1,020 743 862 537
Deposits 92,969 67,209 56,876 49,565 46,565
Stockholders' Equity 8,426 7,082 6,399 5,873 5,402
Shares Outstanding (a) 1,200,000 1,200,000 1,200,000 1,200,000 1,200,000
</TABLE>
- --------
(a) Share and per share data for all periods have been retroactively restated
for a 100% stock split effected in the form of a dividend on June 1, 1996,
and a 20% stock split effected in the form of a dividend on March 20, 1995.
(b) Determined by dividing dividends declared by current year net income.
Consolidated total assets of $107.6 million at December 31, 1995 were up by
$29.4 million, or 37.6%, over total assets at December 31, 1994. This growth
rate is significantly higher than the economic growth statistics for the
Company's Macon-Bibb County market area. The strong trend demonstrates the
Company's capture of a larger percentage of the local financial services market
due primarily to recent industry consolidations of larger banks in the area.
Total assets of $78.2 million at December 31, 1994 were up by $12.1 million, or
18.4%, over total consolidated assets at December 31, 1993. On average the
balance sheet grew by 31.1% during 1995, 15.0% during 1994, and 12.6% during
1993. Total earning assets averaged $86.9 million during 1995, up from $65.5
million in 1994, and yielded an average return of 9.49% on a tax equivalent
basis, compared to averages of 8.79% in 1994 and 8.36% in 1993.
29
<PAGE>
The following table presents condensed average balance sheets for the periods
indicated, and the percentages of each of these categories to total average
assets for each period.
TABLE 2
AVERAGE BALANCE SHEETS
(Amounts in 1000s)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------------------
1995 % 1994 % 1993 %
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash & Due From Banks $ 2,836 3.1% $ 2,232 3.2% $ 1,857 3.0%
Time Deposits-Other Banks 0 0.0% 47 0.1% 100 0.2%
Federal Funds Sold 3,057 3.3% 674 1.0% 975 1.6%
Taxable Investment Securi-
ties 18,245 19.8% 13,326 19.0% 16,050 26.3%
Non-Taxable Inv. Securities 7,699 8.4% 5,716 8.1% 3,683 6.0%
Market Adjustment-Securities (250) -0.3% (89) (0.1% 0 0.0%
Loans, Net of Interest 57,933 62.9% 45,751 65.1% 35,963 58.9%
Allowance for Loan Losses (1,083) -1.2% (847) -1.2% (881) -1.4%
Bank Premises & Equipment 2,193 2.4% 2,067 2.9% 1,957 3.2%
Other Real Estate 284 0.3% 364 0.5% 518 0.8%
Other Assets 1,167 1.3% 974 1.4% 844 1.4%
------- ------- ------- ------- ------- -------
TOTAL ASSETS $92,081 100.0% $70,216 100.0% $61,066 100.0%
======= ======= ======= ======= ======= =======
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits:
Non-Interest Bearing $12,734 13.83% $10,290 14.65% $ 7,272 11.91%
Interest Bearing 67,254 73.04% 50,404 71.78% 46,267 75.77%
Federal Funds Purchased 58 0.06% 345 0.49% 201 0.33%
Demand Notes-US Treasury 491 0.53% 379 0.54% 478 0.78%
Other Borrowed Money-FHLB 2871 3.12% 1299 1.85% 54 0.09%
Obligations-Capital Leases 2 0.00% 18 0.03% 108 0.18%
Other Liabilities 1032 1.12% 705 1.00% 502 0.82%
------- ------- ------- ------- ------- -------
Total Liabilities 84,442 91.70% 63,440 90.35% 54,882 89.87%
------- ------- ------- ------- ------- -------
Common Stock 600 0.65% 600 0.85% 600 0.98%
Surplus 4,500 4.89% 4,500 6.41% 4,500 7.37%
Undivided Profits 2,539 2.76% 1,676 2.39% 1,084 1.78%
------- ------- ------- ------- ------- -------
Total Stockholders' Equity 7,639 8.30% 6,776 9.65% 6,184 10.13%
------- ------- ------- ------- ------- -------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $92,081 100.00% $70,216 100.00% $61,066 100.00%
======= ======= ======= ======= ======= =======
</TABLE>
LOANS
The Bank's loan portfolio constitutes the major interest earning asset of the
Company. To analyze prospective loans, management assesses the company's
objectives for both credit quality and interest rate pricing to determine
whether to extend a loan and the appropriate rate of interest for each loan.
The loan portfolio is concentrated in various commercial, real estate and
consumer loans to individuals and entities located in middle Georgia.
Accordingly, the ultimate collectibility of the loans is largely dependent upon
economic conditions in the middle Georgia area. The local economy is generally
good, with two recent events helping to bolster the future outlook for the
area. First, a large air force base in a contiguous county has survived
national base closure mandates. This major middle Georgia employer has recently
expanded in size. Second, the 1996 Atlanta summer Olympics have generally aided
in economic stability in areas surrounding Atlanta.
Loans net of unearned income of $64.4 million and $52.3 million at December 31,
1995 and 1994 respectively, amounted to 59.9% and 66.9% of total assets, and
69.3% and 77.8% of deposits. The average yields generated
30
<PAGE>
by interest and fees from the loan portfolio amounted to 11.02% during 1995,
9.91% during 1994 and 9.66% during 1993. The Company's allowance for loan
losses at December 31, 1995 and 1994 amounted to 1.75% and 1.95%, respectively,
of outstanding net loans.
The following table presents the amount of loans outstanding by category, both
in dollars and in percentages of the total portfolio, at the end of each of the
past five years.
TABLE 3
LOANS BY TYPE
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31
-------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Commercial, Financial and Agri-
cultural $11,331 $ 9,983 $ 9,853 $ 8,987 $ 8,753
Real Estate--Construction 2,848 2,012 1,552 910 1,660
Real Estate--Mortgage
Mortgage Loans Held for Sale 0 0 0 0 0
Other Mortgage 44,737 35,975 26,290 19,444 17,210
Loans to Individuals 5,670 4,473 3,488 3,196 2,776
------- ------- ------- ------- -------
Total Loans 64,586 52,443 41,183 32,537 30,399
Unearned Income (186) (166) (118) (79) (114)
------- ------- ------- ------- -------
Total Net Loans $64,400 $52,277 $41,065 $32,458 $30,285
======= ======= ======= ======= =======
Percentage of Total Portfolio:
- ------------------------------
Commercial, Financial and Agri-
cultural 17.6% 19.1% 24.0% 27.7% 28.9%
Real Estate--Construction 4.4% 3.9% 3.8% 2.8% 5.5%
Real Estate--Mortgage
Mortgage Loans Held for Sale 0.0% 0.0% 0.0% 0.0% 0.0%
Other Mortgage 69.5% 68.7% 64.0% 59.9% 56.8%
Loans to Individuals 8.8% 8.6% 8.5% 9.9% 9.2%
------- ------- ------- ------- -------
Total Loans 100.3% 100.3% 100.3% 100.3% 100.4%
Unearned Income -0.3% -0.3% -0.3% -0.3% -0.4%
------- ------- ------- ------- -------
Total Net Loans 100.0% 100.0% 100.0% 100.0% 100.0%
======= ======= ======= ======= =======
</TABLE>
The following table provides information on the maturity distribution of
selected categories of the loan portfolio and certain interest sensitivity data
as of December 31, 1995.
TABLE 4
LOAN MATURITY DISTRIBUTION AND INTEREST SENSITIVITY
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
--------------------------------
OVER ONE
ONE YEAR OVER
YEAR THROUGH FIVE
OR LESS FIVE YEARS YEARS TOTAL
------- ---------- ----- -------
<S> <C> <C> <C> <C>
Selected loan categories:
Commercial, financial and agricultura $ 9,143 $2,038 $150 $11,331
Real estate-construction 2,352 496 0 2,848
------- ------ ---- -------
Total $11,495 $2,534 $150 $14,179
======= ====== ==== =======
Loans shown above due after one year:
Having predetermined interest rates $ 1,935
Having floating interest rates 749
-------
Total $ 2,684
=======
</TABLE>
31
<PAGE>
INVESTMENT SECURITIES
The investment securities portfolio is another major interest earning asset and
consists of debt and equity securities categorized as either available for sale
or held to maturity. These securities provide the company with a source of
liquidity and a stable source of income. The investment portfolio provides a
resource to help balance interest rate risk and credit risk related to the loan
portfolio. Investments amounted to $34.4 million, or 32.0% of total assets at
December 31, 1995, up from $18.6 million, or 23.9% of total assets at December
31, 1994.
The average 1995 tax equivalent yield on the portfolio, excluding the impact of
SFAS No. 115 market value adjustments for unrealized gains and losses on
available for sale securities as discussed below, was 6.50%, compared to 6.27%
in 1994 and 6.26% in 1993. The 1995 improvement is attributed to volume
increases in all portfolio categories, combined with slightly higher rate
repricing opportunities. During 1995, the investment securities portfolio
represented 29.8% of average earning assets and 28.2% of average total assets.
During 1994, the portfolio averaged 29.1% of earning assets and 27.1% of total
assets.
At December 31, 1995, the major portfolio components, based on amortized or
accreted cost, included 15.9% in U. S. Treasury securities, 49.4% in U. S.
agency obligations, 4.1% in mortgage backed securities, 28.7% in tax exempt
state, county and municipal bonds and 1.9% in stocks of the Federal Reserve
Bank and Federal Home Loan Bank. On December 31, 1995, the market value of the
total bond portfolio as a percentage of the book value was 100.5%, up from
98.8% a year earlier. During 1995, the bond market performance improved due to
expectations of future interest rate declines. This performance had a positive
impact on the market value of the Company's bond portfolio. As of December 31,
1995, the entire investment securities portfolio had gross unrealized gains of
$494,588 and gross unrealized losses of $327,682, for a net unrealized gain of
$166,906. As of December 31, 1994, the portfolio had a net unrealized loss of
$223,278. In accordance with SFAS No. 115, stockholders' equity included a net
unrealized gain of $24,136 and a net unrealized loss of ($168,312) recorded on
the Available for Sale portfolio as of December 31, 1995 and 1994,
respectively, net of deferred tax effects. No trading account has been
established by the Company and none is anticipated.
In December, 1995, the Company exercised an option allowed by "Special Report--
a Guide to Implementation of FASB No. 115, Accounting for Certain Investments
in Debt and Equity Securities--Questions and Answers" to make a one time
transfer of certain securities from the Held to Maturity portfolio to the
Available for Sale portfolio. This transfer was made to add additional
liquidity and flexibility to the portfolio to enable the Company to more
effectively manage its interest rate risk position. The amortized cost of the
investment securities transferred was $1.9 million.
32
<PAGE>
The following table summarizes Available for Sale and Held to Maturity
investment securities portfolios as of December 31, 1995 and 1994.
TABLE 5
INVESTMENT SECURITIES
(In Thousands)
<TABLE>
<S> <C> <C>
DECEMBER 31
---------------
<CAPTION>
1995 1994
------- -------
<S> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury $ 5,070 $ 1,939
U. S. Government Agencies
Mortgage-Backed 1,166 436
Other 15,754 8,055
State, County & Municipal 4,457 2,411
Other Investments 645 404
------- -------
$27,092 $13,245
======= =======
SECURITIES HELD TO MATURITY
U. S. Treasury $ 497 $ 0
U. S. Government Agencies
Mortgage-Backed 264 544
Other 1,000 500
State, County & Municipal 5,587 4,360
Other Investments 0 0
------- -------
$ 7,348 $ 5,404
======= =======
TOTAL INVESTMENT SECURITIES
U. S. Treasury $ 5,567 $ 1,939
U. S. Government Agencies
Mortgage-Backed 1,430 980
Other 16,754 8,555
State, County & Municipal 10,044 6,771
Other Investments 645 404
------- -------
$34,440 $18,649
======= =======
</TABLE>
The following table presents the aggregate book values of investment
securities at December 31, 1993, prior to the adoption of SFAS No. 115. Book
value is based on amortized or accreted cost.
TABLE 6
INVESTMENT SECURITIES
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1993
-----------------
<S> <C>
U.S. Treasury $ 2,026
U.S. Government Agencies:
Mortgage-Backed 1,425
Other 11,513
State, County and Municipal 4,691
Other Investments 321
-------
$19,976
=======
</TABLE>
33
<PAGE>
The following table illustrates the contractual maturities and weighted
average yields of investment securities held at December 31, 1995. Expected
maturities will differ from contractual maturities because certain issuers
have the right to call or prepay obligations with or without call or
prepayment penalties. The weighted average yields are calculated on the basis
of the amortized cost and effective yields of each security weighted for the
scheduled maturity of each security. The yield on state, county and municipal
securities is computed on a taxable equivalent basis using a statutory federal
income tax rate of 34%.
TABLE 7
MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS
(In Thousands)
<TABLE>
<CAPTION>
INVESTMENT SECURITIES INVESTMENT SECURITIES
HELD TO MATURITY AVAILABLE FOR SALE
DECEMBER 31, 1995 DECEMBER 31, 1995
----------------------- ------------------------
CARRYING AVERAGE FAIR CARRYING AVERAGE FAIR
VALUE YIELD VALUE VALUE YIELD VALUE
-------- ------- ------ -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury:
Within 1 Year $ 497 0.00% $ 496 $ 995 5.22% $ 994
1 to 5 Years 0 0.00% 0 3,988 6.51% 4,076
5 to 10 Years 0 0.00% 0 0 0.00% 0
More Than 10 Years 0 0.00% 0 0 0.00% 0
------ ---- ------ ------- ----- -------
$ 497 0.00% $ 496 $ 4,983 6.25% $ 5,070
------ ---- ------ ------- ----- -------
Mortgage-Backed Government
Agencies:
Within 1 Year $ 0 0.00% $ 0 $ 0 0.00% $ 0
1 to 5 Years 264 6.40% 265 557 7.39% 560
5 to 10 Years 0 0.00% 0 355 9.36% 372
More Than 10 Years 0 0.00% 0 221 8.72% 235
------ ---- ------ ------- ----- -------
$ 264 6.40% $ 265 $ 1,133 8.27% $ 1,167
------ ---- ------ ------- ----- -------
Other U.S. Government Agen-
cies:
Within 1 Year $ 0 0.00% $ 0 $ 1,994 4.02% $ 1,954
1 to 5 Years 1,000 5.65% 1,000 13,992 5.74% 13,800
5 to 10 Years 0 0.00% 0 0 0.00% 0
More Than 10 Years 0 0.00% 0 0 0.00% 0
------ ---- ------ ------- ----- -------
$1,000 5.65% $1,000 $15,986 5.52% $15,754
------ ---- ------ ------- ----- -------
State, County and Municipal:
Within 1 Year $ 100 9.86% $ 100 $ 476 3.52% $ 479
1 to 5 Years 2,850 8.09% 2,943 2,537 7.61% 2,596
5 to 10 Years 1,562 8.18% 1,586 1,186 10.22% 1,272
More Than 10 Years 1,075 8.01% 1,089 110 7.36% 110
------ ---- ------ ------- ----- -------
$5,587 8.13% $5,718 $ 4,309 7.87% $ 4,457
------ ---- ------ ------- ----- -------
Other Investments:
Within 1 Year $ 0 0.00% $ 0 $ 0 0.00% $ 0
1 to 5 Years 0 0.00% 0 0 0.00% 0
5 to 10 Years 0 0.00% 0 0 0.00% 0
More Than 10 Years 0 0.00% 0 644 6.52% 644
------ ---- ------ ------- ----- -------
$ 0 0.00% $ 0 $ 644 6.52% $ 644
------ ---- ------ ------- ----- -------
Total Securities:
Within 1 Year $ 597 1.65% $ 596 $ 3,465 4.30% $ 3,427
1 to 5 Years 4,114 7.39% 4,208 21,074 6.15% 21,032
5 to 10 Years 1,562 8.18% 1,586 1,541 10.02% 1,644
More Than 10 Years 1,075 8.01% 1,089 975 7.11% 989
------ ---- ------ ------- ----- -------
$7,348 7.18% $7,479 $27,055 6.17% $27,092
====== ==== ====== ======= ===== =======
</TABLE>
34
<PAGE>
As of December 31, 1995, the company had no holdings of securities of a
single issuer in which the aggregate book value and aggregate market value of
the securities exceeded ten percent of stockholders' equity, with the
exception of U. S. Treasury and U. S. Government Agencies securities.
OTHER ASSETS
The Company holds additional earning assets in overnight Federal Funds Sold.
These balances amounted to $1.8 million on both December 31, 1995 and 1994.
Balances in non-earning assets are comprised of cash and correspondent bank
balances, fixed assets, income receivable on loans and investments and other
miscellaneous assets. Management works to minimize non-earning asset balances
in order to maximize profit potential.
DEPOSITS
Deposits are the Company's primary liability and funding source. Total
deposits grew 38.3% from $67.2 million at December 31, 1994 to $93.0 million
at December 31, 1995. During 1995, 15.9% of average deposits were held in non-
interest bearing checking accounts, 22.0% were in low yield interest bearing
transaction and savings accounts, and 62.1% were in time certificates with
higher yields. Comparable average deposit mix percentages during 1994 were
16.9%, 29.4% and 53.6%, respectively. The average cost of total deposits,
including non-interest checking accounts, during 1995 was 4.39%, up from 3.28%
in 1994 and 3.66% in 1993. The increased average deposits cost in 1995 was due
in part to a shift in the mix of deposits from lower cost accounts into higher
cost certificates of deposit.
The Bank's total interest expense on deposits and borrowed funds as a
percentage of average earning assets amounted to 4.29% during 1995, up from
3.19% during 1994 and 3.50% during 1993. Even though interest rates generally
trended lower during the last half of the year 1995, repricing actions on
deposits during late 1994 and early 1995 contributed to the average increase
in the overall cost of funds.
The following table reflects average balances of deposit categories for 1995,
1994 and 1993.
TABLE 8
AVERAGE DEPOSITS
(In Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-------------------------------------------
1995 % 1994 % 1993 %
------- ----- ------- ----- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing Demand De-
posits $12,734 15.9% $10,286 16.9% $ 7,272 13.6%
Interest Bearing Demand Deposits 5,820 7.3% 5,353 8.8% 4,795 9.0%
Money Market Accounts 8,041 10.1% 8,485 14.0% 7,348 13.7%
Savings Deposits 3,733 4.7% 4,008 6.6% 3,533 6.6%
Time Deposits 0f $100,000 or
More 11,719 14.6% 7,877 13.0% 7,026 13.1%
Other Time Deposits 37,941 47.4% 24,681 40.7% 23,565 44.0%
------- ----- ------- ----- ------- -----
$79,988 100.0% $60,690 100.0% $53,539 100.0%
======= ===== ======= ===== ======= =====
</TABLE>
The table below summarizes the maturities of time deposits of $100,000 or
more as of December 31, 1995 and 1994. The Company's large denomination time
deposits are generally from customers within the local market area, therefore
providing a greater degree of stability than is typically associated with this
source of funds. The Company holds no foreign deposits.
TABLE 9
MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
(In Thousands)
As of December 31:
<TABLE>
<CAPTION>
1995 1994
------- ------
<S> <C> <C>
3 Months or Less $ 4,467 $ 800
Over 3 Months through 6 Months 1,979 2,249
Over 6 Months through 12 Months 4,098 3,672
Over 12 Months 5,307 2,454
------- ------
$15,851 $9,175
======= ======
</TABLE>
35
<PAGE>
BORROWED MONEY
Other interest bearing sources of funds at December 31, 1995 amounted to $4.7
million, up from $2.9 million at December 31, 1994. Of the 1995 balance, $3.7
million consisted of various advance agreements from the Federal Home Loan
Bank (FHLB) under the fixed rate and principal reducing credit programs. Only
$69,500 of the FHLB notes were short term borrowings due within one year.
Demand Notes to the U. S. Treasury of $0.9 million represented accumulated
federal tax deposit payments through the Treasury Department's note option
program. The cost of borrowed money components averaged 6.37% in 1995, up from
4.80% in 1994 due to the higher cost of new longer term FHLB notes.
OTHER LIABILITIES
Other liabilities of $1.5 million at December 31, 1995 and $1.0 million at
December 31, 1994 consist of interest payable on deposits, federal income
taxes payable and other accrued but unpaid expenses.
EQUITY CAPITAL
The Company's equity capital of $8.4 million at December 31, 1995 amounts to
7.8% of total assets, compared to 9.1% at December 31, 1994. On average, the
equity capital was 8.3% of assets during 1995, compared to 9.7% for 1994. The
Bank's equity capital ratios are similar. The decline in capital as a
percentage of total assets reflects the high growth rate in assets during
1995.
The Company's capital ratios continue to be higher than the minimum capital
standards required under 12 CFR Part 3 regulatory guidelines. This indicates
the ability of the Company to support additional future balance sheet growth.
LIQUIDITY
The Company, primarily through the actions of the Bank, engages in liquidity
management to insure adequate cash flow for deposit withdrawals and credit
commitments. Needs are met through loan repayments, net interest and fee
income, and the sale or maturity of existing assets. In addition, liquidity is
continuously provided through the acquisition of new deposits or the renewal
of maturing deposits. Management monitors deposit flow and evaluates alternate
pricing structures to retain and grow deposits as needed. Through various
asset / liability management strategies, a balance is maintained among goals
of liquidity, safety and earnings potential. Balances held in cash and
correspondent banks are reviewed daily to maximize the federal funds
investment position. Internal policies which are consistent with regulatory
liquidity guidelines are monitored and enforced by the Bank.
The investment portfolio provides a ready means to raise cash without loss if
liquidity needs arise. At December 31, 1995, approximately $27.1 million in
bonds, at amortized or accreted cost, were carried in the Available for Sale
portfolio, and $3.5 million of these bonds mature within a one year period.
Only marketable investment grade bonds are purchased. The Bank from time to
time invests in short term CDs at other banks, and generally maintains a net
sold position in overnight federal funds.
Management continually monitors the relationship of loans to deposits as it
relates to the Company's liquidity posture. The Bank had ratios of loans to
deposits of 69.3%, 77.8% and 72.2% at December 31, 1995, 1994 and 1993,
respectively, which were considered by management to be satisfactory levels
for liquidity purposes. The stability of the Bank's core deposit base is an
important factor in the company's liquidity position. A heavy percentage of
the Bank's deposit base is comprised of accounts of individuals and small
businesses with comprehensive banking relationships and limited volatility.
The Bank has no brokered deposits. Additionally, there are only minimal
amounts of deposits of public and governmental entities which require a pledge
of the Bank's assets. At December 31, 1995, the Bank had $15.9 million in
certificates of deposit of $100,000 or more. Although this represents 17.0% of
total deposits, the majority of these large CDs are stable deposits of local
individuals and small businesses. Management works to avoid reliance on
volatile deposits that might lead to liquidity pressures.
The Company has an unsecured line of credit and the Bank has established
borrowing lines for federal funds through correspondent banks. Borrowing
capacity also exists through the Bank's membership in the Federal Home Loan
Bank program. Management believes that the various funding sources discussed
above are adequate to meet the liquidity needs of the Bank and the Company in
the future without any material adverse impact on operating results.
36
<PAGE>
CAPITAL RESOURCES AND DIVIDENDS
The Company has always placed great emphasis on maintaining a strong capital
base. At December 31, 1995, the combination of the Company's equity capital
accounts and its allowance for loans losses amounted to $9.6 million,
resulting in an 8.8% primary capital ratio. Although down from a 10.2% primary
capital ratio at December 31, 1994 due to 1995 balance sheet growth, the
Company's equity capital position is more than sufficient to meet all
pertinent regulatory standards for minimum capital requirements.
Subsequent to December 31, 1995, the Company issued additional common stock
to new directors and executive management who joined the Company in January,
1996. The new shares of common stock were sold at current market value and
generated an additional $1.8 million in equity. The company's equity to assets
ratio at February 29, 1996 had increased to 9.6%. Outstanding stock warrants
held by the Company's organizing directors and executive officers are set to
expire in November, 1998. It is anticipated that the exercise of the warrants
at will generate an additional $1.5 million in new capital for the Company.
Regulators use a risk adjusted calculation to aid them in their
determination of capital adequacy by weighting assets based on the degree of
risk associated with on- and off-balance sheet assets. The majority of these
risk weighted assets for the Company are on-balance sheet assets in the form
of loans. A small portion of risk weighted assets are considered off-balance
sheet assets comprised of letters of credit and loan commitments. Capital is
categorized as either core (Tier 1) capital or supplementary (Tier 2) capital.
Tier 1 capital consists primarily of stockholders' equity minus any intangible
assets, while Tier 2 capital consists of the allowance for loan losses up to
certain limits, certain short term and other preferred stock and certain debt
instruments.
Current regulatory standards require bank holding companies to maintain a
minimum risk based capital ratio of qualifying total capital to risk weighted
assets of 8.0%, with at least 4.0% of the capital consisting of Tier 1
capital, and a Tier 1 leverage ratio of at least 4.0%. Additionally, the
regulatory agencies define a well capitalized bank as one which has a leverage
ratio of at least 5%, a Tier 1 capital ratio of at least 6%, and a total risk
based capital ratio of at least 10%. Bancshares' capital ratios under these
guidelines as of December 31, 1995 and 1994 are well above the levels for a
well capitalized bank as shown in the following table.
TABLE 10
CAPITAL RATIOS (A)
(In Thousands)
<TABLE>
<CAPTION>
1995 1994
------- -------
As of December 31:
<S> <C> <C>
Tier 1 Capital:
Stockholders' Equity $ 8,402 $ 7,251
Less Intangible Assets 0 0
------- -------
Total Tier 1 Capital 8,402 7,251
------- -------
Tier 2 Capital:
Eligible Portion of Allowance for
Loan Losses 895 705
Subordinated and Other Qualifying
Debt 0 0
------- -------
Total Tier 2 Capital 895 705
------- -------
Total Risk Based Capital $ 9,297 $ 7,956
======= =======
Total Net Risk Weighted Assets $71,361 $56,164
======= =======
<CAPTION>
MINIMUM
REQUIREMENT
-----------
<S> <C> <C> <C>
Total Risk Based Capital Ratio 8.0% 13.0% 14.2%
Tier 1 Capital Ratio 4.0% 11.8% 12.9%
Leverage Ratio 4.0% 8.0% 9.8%
</TABLE>
- --------
(a) Risk based capital ratios for both years presented were prepared using
risk based capital rules finalized in November,1 994, which exclude the
impact of SFAS No. 115 "Accounting for Certain Investments in Debt and
Equity Securities".
37
<PAGE>
Cash dividends of $240,000, or $.20 per common share, were declared and paid
during 1994, up from $200,000, or $.17 per common share, paid during 1994, and
$100,000, or $.08 per share, in 1993. The ratios of cash dividends paid to net
income for these years were 17.3%, 19.0% and 16.0%, respectively. No dividends
were paid in years prior to 1992. In earlier start up years, management had
chosen to retain earnings in order to build a secure capital base to support a
larger institution in the future. Management anticipates the payment of
additional cash dividends in the future based on future earnings, financial
condition, cash needs and general business conditions.
On March 20, 1995, the Company issued a 20% stock split effected in the form
of a dividend to shareholders of record on February 28, 1995, distributing one
new share of $1.00 par value common stock for every five shares held by
stockholders. After this action, 600,000 shares of Bancshares common stock
were outstanding. On June 1, 1996, a 100% stock split was issued, also
effected in the form of a dividend, resulting in 1,200,000 retroactively
adjusted shares as of December 31, 1995. Share and per share data for all
periods presented have been retroactively restated to reflect the additional
shares outstanding resulting from the stock split.
During 1995, the Bank leased and furnished a branch location at 1897 Shurling
Drive in northeast Macon and opened its fourth full service office.
Additionally, certain equipment purchases and upgrades were made for data
processing, proof and imaging technology. The additional 1995 fixed assets
were financed through the original equity base and retained earnings of the
Bank with no external borrowing.
During 1996, it is possible that additional main office and/or branch
facilities will be constructed or purchased to accomodate the company's high
rate of growth and serve all segments of its middle Georgia market. Management
is currently reviewing various options for fixed assets expansion. It is
anticipated that increases in fixed assets will be offset by a combination of
internal financing, utilization of excess cash at the parent company, and
external borrowing.
Management is aware of no current recommendations by regulatory authorities
which, if they were to be implemented, would have a material effect on the
company's liquidity, capital resources or operations.
RESULTS OF OPERATIONS FOR THE YEARS
ENDED DECEMBER 31, 1995, 1994 AND 1993
The Company's net income was $1,390,795, $1,052,239, and $625,967 for 1995,
1994 and 1993, respectively. Earnings per common and common equivalent share
amounted to $1.01 in 1995, $0.81 in 1994, and $0.49 in 1993. Share and per
share data for all periods have been retroactively restated for a 20% stock
split effected as a dividend on March 20, 1995, and a 100% stock split
effected in the form of a dividend on June 1, 1996. The Company's return on
average assets amounted to 1.51% for 1995, 1.50% for 1994, and 1.03% for 1993.
The return on average equity was 18.16%, 15.53%, and 10.12%, respectively.
NET INTEREST INCOME
Net interest income (the difference between the interest earned on assets and
the interest paid on deposits and liabilities) is the principal source of
earnings for the company. The Company's average net interest rate margin, on a
taxable equivalent basis, decreased to 5.20% during 1995, down from 5.60%
during 1994, although still strong by industry standards. The 1993 net
interest rate margin averaged 4.86%. Net interest income before tax
equivalency adjustments in 1995 amounted to $4,310,577, up 22.2% from
$3,526,568 in 1994. The net interest income of 1994 was up 33.1% from
$2,649,841 recorded in 1993. The following table presents interest income and
interest expense for the past three years. Interest income shown below has
been adjusted to reflect taxable equivalent adjustments to tax-exempt
securities income, thereby presenting interest income as if it was fully
taxable, using the Company's incremental statutory corporate federal income
tax rate of 34%.
38
<PAGE>
TABLE 11
NET INTEREST INCOME
(In Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER
31
----------------------
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
Interest Income $8,041 $5,616 $4,639
Taxable Equivalent Adjustment 210 142 107
------ ------ ------
Interest Income, Taxable Equivalent 8,251 5,758 4,746
Interest Expense 3,731 2,089 1,989
------ ------ ------
Net Interest Income, Taxable Equivalent $4,520 $3,669 $2,757
====== ====== ======
The resulting average net interest rate margins during the years 1995, 1994
and 1993 were as follows:
<CAPTION>
1995 1994 1993
------ ------ ------
<S> <C> <C> <C>
(As a % of Average
For the Years Ended December 31: Earning Assets)
Interest Income (1) 9.49% 8.79% 8.36%
Interest Expense 4.29% 3.19% 3.50%
------ ------ ------
Net Interest Rate Margin (1) 5.20% 5.60% 4.86%
====== ====== ======
</TABLE>
- --------
(1) Reflects taxable equivalent adjustments using the statutory federal income
tax rate of 34% in adjusting interest on tax exempt securities to a fully
taxable basis.
Net interest income, on a tax equivalent basis, increased by approximately
$851,000 from 1994 to 1995. Essentially all of this increase is attributed to
the strong balance sheet growth during 1995. The decline of 40 basis points in
the average 1995 net interest margin of 5.20% from the 1994 margin of 5.60% is
attributed to several factors. First, the mix of assets shifted toward lower
yielding instruments in 1995. The average loan portfolio, although exhibiting
26.6% overall growth from last year, declined as a percentage of total average
assets--62.9% in 1995 compared to 65.2% in 1994. Assets shifted into less
profitable securities and overnight federal funds. This trend continued
through year end 1995, but has reverted to stronger loan growth in the early
months of 1996.
Second, the mix of deposit growth during 1995 shifted more to costlier
certificates and away from checking, savings, and low cost transaction
accounts. In 1995, average deposits were comprised of 62.0% in certificates of
deposits (including CDs of $100,000 or more and IRA CDs), and 38.0% in
checking and lower cost deposits. The comparable 1994 percentages were 53.7%
and 46.3%. Third, repricing action on certificates of deposit during 1995,
especially in the first half of the year, significantly increased average CD
yields.
Tax equivalent net interest income increased by over $912,000 from 1993 to
1994. Approximately 85%, or $774,000, of this 1994 margin improvement over
1993 can be accounted for through strong growth trends in the balance sheet,
while 15%, or $138,000, of the increase is attributed to the rising interest
rate environment during 1994.
The improvement of 74 basis points in the average 1994 net interest rate
margin of 5.60% from the 1993 level of 4.86% occurred for several reasons. A
27.2% growth factor in the loan portfolio was the major contributor. Not only
did outstanding loans increase significantly, but the proportion of loans as a
percentage of the balance sheet grew as well, creating a more profitable
balance sheet mix. Loan yields improved by 25 basis points from 1993 to 1994.
A rising rate environment fueled this increase. We experienced five increases
in the prime rate of interest during 1994, from 6.00% to 8.50% at year end.
The other significant contributor to higher margins was the controlled cost of
deposits and other borrowings. In spite of good growth patterns, the rates
paid on most deposits trended downward on average for most of 1994 until CD
maturities and repricing pressures turned the average yields upward in mid
year 1994.
39
<PAGE>
The following table summarizes average balance sheets, interest and yield
information on a taxable equivalent basis for the years ended December 31,
1995, 1994 and 1993.
TABLE 12
AVERAGE BALANCE SHEETS, INTEREST AND YIELDS
(Tax equivalent basis, in thousands)
<TABLE>
<CAPTION>
1995 1994 1993
----------------------- ----------------------- -----------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
------- -------- ------ ------- -------- ------ ------- -------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans, net of unearned
income: (a) (b)
Taxable $57,933 6,383 11.02% $45,751 4,532 9.91% $35,963 3,473 9.66%
Tax exempt (c) 0 0 0.00 0 0 0.00 0 0 0.00
------- ----- ------- ----- ------- -----
Net Loans 57,933 6,383 11.02 45,751 4,532 9.91 35,963 3,473 9.66
------- ----- ------- ----- ------- -----
Investment securities:
(d)
Taxable 18,244 1,069 5.86 13,326 777 5.83 16,051 919 5.73
Tax Exempt (c) 7,699 619 8.04 5,716 418 7.31 3,683 316 8.58
------- ----- ------- ----- ------- -----
Total investment
securities 25,943 1,688 6.51 19,042 1,195 6.27 19,734 1,235 6.26
------- ----- ------- ----- ------- -----
Interest earning
deposits 0 0 0.00 47 4 9.23 100 9 9.15
Federal funds sold 3,057 180 5.89 674 27 4.05 975 29 2.99
------- ----- ------- ----- ------- -----
Total interest earning
assets 86,933 8,251 9.49 65,514 5,758 8.79 56,772 4,746 8.36
----- ----- ----- ----- ----- -----
Non-earning assets 5,148 4,702 4,294
------- ------- -------
Total assets $92,081 $70,216 $61,066
======= ======= =======
LIABILITIES AND
STOCKHOLDER'S EQUITY:
Interest bearing demand
deposits $5,820 135 2.32 $5,353 128 2.38 $4,795 119 2.48
Money market accounts 8,041 265 3.30 8,485 224 2.64 7,348 193 2.62
Savings deposits 3,733 96 2.56 4,009 103 2.58 3.533 98 2.77
Time deposits of
$100,000 or more 11,719 726 6.20 7,877 366 4.64 7.027 338 4.82
Other time deposits 37,941 2,291 6.04 24,681 1,171 4.74 23,564 1,213 5.15
Federal funds purchased 58 4 6.38 345 15 4.41 201 6 3.13
Demand note U.S.
Treasury 489 27 5.42 379 14 3.65 478 14 2.86
Other borrowed money--
FHLB 2,871 187 6.53 1,299 68 5.27 54 1 1.97
Capital leases &
mortgage debt 2 0 3.86 17 0 2.62 108 7 6.74
------- ----- ------- ----- ------- -----
Total interest bearing
liabilities 70,674 3,731 5.28 52,445 2,089 3.98 47,108 1,989 4.22
Non-int. bearing demand
deposits 12,734 10,286 7,272
Other liabilities 1,033 709 502
Stockholder's equity 7,640 6,776 6,184
------- ------- -------
Total liabilities and
stockholder's equity $92,081 $70,216 $61,066
======= ======= =======
Interest rate spread 4.21% 4.81% 4.14%
===== ===== =====
Net interest income 4,520 3,669 2,757
===== ===== =====
Net interest margin 5.20% 5.60% 4.86%
===== ===== =====
</TABLE>
- --------
Notes to Table of Average Balance Sheets, Interest and Yields:
(a) Interest income includes loan fees as follows (in thousands): 1995-$383,
1994-$352, and 1993-$280
(b) Average loans are shown net of unearned income. Nonaccrual loans are
included.
(c) Reflects taxable equivalent adjustments using the statutory income tax
rate of 34% in adjusting interest on tax exempt investment securities to a
fully taxable basis. The taxable equivalent adjustment included in the
table above amounts to $210 for 1995, $142 for 1994, and $107 for 1993.
(in thousands)
(d) Investment securities are stated at amortized or accreted cost.
40
<PAGE>
The following table provides a detailed analysis of the changes in interest
income and interest expense due to changes in rate and volume for the year
1995 compared to the year 1994 and the year 1994 compared to the year 1993.
TABLE 13
RATE / VOLUME ANALYSIS
(In thousands)
<TABLE>
<CAPTION>
1995 COMPARED TO 1994 COMPARED TO
1994 1993
-------------------- -------------------
CHANGE DUE TO (A) CHANGE DUE TO (A)
-------------------- -------------------
NET NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
------ ---- ------ ------ ---- ------
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Taxable loans, net $1,206 645 1,851 945 114 1,060
Tax exempt loans (b) 0 0 0 0 0 0
Taxable investment securities 287 5 292 (156) 13 (143)
Tax exempt investment securities (b) 144 57 201 174 (73) 102
Interest earning deposits (4) (0) (4) (5) (1) (5)
Federal funds sold 97 56 153 (9) 7 (2)
------ --- ----- ---- ---- -----
Total interest income 1,730 763 2,492 950 62 1,012
------ --- ----- ---- ---- -----
INTEREST PAID ON:
Interest bearing demand deposits 11 (3) 8 14 (6) 8
Money market accounts (12) 53 41 30 2 32
Savings deposits (7) (1) (8) 13 (8) 6
Time deposits of $100,000 or more 178 182 360 41 (14) 27
Other time deposits 629 491 1,120 58 (100) (42)
Federal funds purchased (13) 1 (12) 4 5 9
Demand note U.S. Treasury 4 9 13 (3) 3 0
Other borrowed money-FHLB 83 36 119 25 43 67
Capital leases & mortgage debt (0) 0 (0) (6) (1) (7)
------ --- ----- ---- ---- -----
Total interest expense 873 768 1,641 176 (76) 100
------ --- ----- ---- ---- -----
Net interest income 856 (5) 851 774 138 912
====== === ===== ==== ==== =====
</TABLE>
- --------
(a) The change in interest due to both rate and volume has been allocated to
the rate component.
(b) Reflects taxable equivalent adjustments using the statutory federal income
tax rate of 34% in adjusting interest on tax exempt investment securities
to a fully taxable basis.
INTEREST RATE RISK MANAGEMENT
The management of interest rate risk is the primary goal of the Company's
asset/liability management function. The Company attempts to achieve
consistent growth in net interest income while limiting volatility from
changes in interest rates. Management seeks to accomplish this goal by
balancing the maturity and repricing characteristics of various assets and
liabilities. The company's asset/ liability mix is sufficiently balanced so
that the effect of interest rate moves in either direction is not expected to
be significant over time.
The primary tool used by the Company to measure its interest rate sensitivity
is a cumulative gap analysis model which seeks to measure the repricing
differentials, or gap, between rate sensitive assets and liabilities over
various time horizons. Additionally, simulation modeling is used to estimate
the impact on net interest income of overall repricing at various levels of
increase or decrease in current market interest rates.
The gap analysis models are prepared quarterly by management and are reviewed
at each meeting of the company's asset/liability management committee. The
following table reflects the gap positions of the Company's consolidated
balance sheet as of December 31, 1995 at various repricing intervals. This gap
analysis indicates that the Company was moderately liability sensitive at
December 31, 1995, with a cumulative one year gap of (3.8%).
41
<PAGE>
TABLE 14
INTEREST RATE SENSITIVITY
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
---------------------------------------
OVER 3 OVER 1 YEAR
0 UP TO 3 UP TO 12 UP TO OVER 5
MONTHS MONTHS 5 YEARS YEARS
Amounts maturing or repricing: --------- -------- ----------- -------
<S> <C> <C> <C> <C>
Investment securities (a) $7,254 $ 2,165 $19,832 $ 5,152
Loans, net of unearned income 26,974 12,768 23,200 1,511
Other earning assets 1,780 0 0 0
------ ------- ------- -------
Interest sensitive assets 36,008 14,933 43,032 6,663
------ ------- ------- -------
Deposits 30,150 23,659 24,915 0
Other borrowings 934 70 3,175 495
------ ------- ------- -------
Interest sensitive liabilities 31,084 23,729 28,090 495
Interest sensitivity gap $4,924 ($8,796) $14,942 $ 6,168
====== ======= ======= =======
Cumulative interest sensitivity gap $4,924 ($3,872) $11,070 $17,238
====== ======= ======= =======
Cumulative interest sensitivity gap
as a percentage of total interest
sensitive assets 4.9% -3.8% 11.0% 17.1%
====== ======= ======= =======
Cumulative interest sensitive
assets as a percentage of
cumulative interest sensitive
liabilitie 115.8% 92.9% 113.4% 120.7%
====== ======= ======= =======
</TABLE>
- --------
(a) Excludes the effect of SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities".
PROVISION FOR LOAN LOSSES
The general nature of lending results in periodic charge offs, in spite of the
Company's continuous loan review process, credit standards, and internal
controls. The company's recent charge off history in the past two years has
been extremely good with minimal losses taken. The Company incurred net charge
offs of only $1,147 during 1995, compared to $25,417 during 1994 and $497,406
in 1993. The Company expensed $109,143 in 1995, $302,490 in 1994, and $377,790
in 1993 for loan loss provisions. The allowance for loan losses on December
31, 1995 stood at 1.75% of outstanding net loans, compared to 1.95% and 1.81%
at December 31, 1994 and 1993.
The provision for loan losses represents management's determination of the
amount necessary to be transferred to the allowance for loan losses to
maintain a level which it considers adequate in relation to the risk of future
losses inherent in the loan portfolio. It is the Bank's policy to provide for
exposure to losses principally through an ongoing loan review process. This
review process is undertaken to ascertain any probable losses which must be
charged off and to assess the risk characteristics of individually significant
loans and of the portfolio in the aggregate. This review takes into
consideration the judgments of the responsible lending officers and the Loan
Committee of the Bank Board of Directors, and also those of the regulatory
agencies that review the loans as part of their regular examination process.
During routine examinations of banks, the Office of the Comptroller of the
Currency (OCC), from time to time, may require additions to banks' provisions
for loan losses and allowances for loan losses if the regulators' credit
evaluations differ from those of management.
In addition to ongoing internal loan reviews and risk assessment, management
uses other factors to judge the adequacy of the allowance including current
economic conditions, loan loss experience, regulatory guidelines and current
levels of nonperforming loans. Management believes that the $1,127,609 balance
in the allowance for loan losses at December 31, 1995 was adequate to absorb
known risks in the loan portfolio. No assurance can be given, however, that
adverse economic conditions or other circumstances will not result in
increased losses in the company's loan portfolio.
42
<PAGE>
On January 1, 1995, the Company's adopted SFAS No. 114 "Accounting by
Creditors for Impairment of a Loan" and SFAS No. 118 "Accounting by Creditors
for Impairment of a Loan--Income Recognition and Disclosures". Prior years
have not been restated to reflect this accounting change. Impaired loans are
loans for which principal and interest are unlikely to be collected in
accordance with the original loan terms and, generally represent loans
delinquent in excess of 90 days which have been placed on nonaccrual status
and for which collateral values are less than outstanding principal and
interest. Small balance, homogeneous loans are excluded from impaired loans.
When a loan becomes impaired, management calculates the impairment based on
the present value of expected future cash flows discounted at the loan's
effective interest rate. If the loan is collateral dependent, the fair value
of the collateral is used to measure the amount of impairment. The amount of
impairment and any subsequent changes are recorded as an adjustment to the
reserve for loan losses. When management considers a loan, or a portion
thereof, as uncollectible, it is charged against the allowance for loan
losses.
The following table summarizes loans charged off, recoveries of loans
previously charged off and additions to the allowance which have been charged
to operating expense for the periods indicated. The company has no lease
financing or foreign loans.
TABLE 15
ALLOWANCE FOR LOAN LOSSES
(In Thousands)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------
1995 1994 199 1992 1991
------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at beginning of
year $1,020 $ 743 $862 $537 $370
Loans charged off during the year:
Commercial, financial and agricultur 0 13 365 115 117
Real estate-construction 0 0 0 0 25
Real estate-mortgage 0 10 163 149 330
Loans to individuals 60 54 14 52 192
------ ------ ---- ---- ----
Total loans charged off 60 77 542 316 664
------ ------ ---- ---- ----
Recoveries during the year of loans
previously charged off:
Commercial, financial and agricultur 23 11 13 26 7
Real estate-construction 0 0 0 0 0
Real estate-mortgage 18 14 8 178 3
Loans to individuals 18 27 24 30 5
Total loans recovered 59 52 45 234 15
------ ------ ---- ---- ----
Net loans charged off during the year 1 25 497 82 649
------ ------ ---- ---- ----
Additions to allowance-provision expense 109 302 378 407 816
------ ------ ---- ---- ----
Allowance for loan losses at end of year $1,128 $1,020 $743 $862 $537
====== ====== ==== ==== ====
Allowance for loan losses to year end net
loans 1.75% 1.95% 1.81% 2.66% 1.77%
====== ====== ==== ==== ====
Ratio of net loans charged off during the
year to average net loans outstanding
during the year 0.00% 0.06% 1.38% 0.26% 2.11%
====== ====== ==== ==== ====
</TABLE>
An allocation of the allowance for loan losses has been made according to
the respective amounts deemed necessary to provide for the possibility of
incurred losses within the various loan categories. The allocation is based
primarily on previous charge off experience adjusted for risk characteristic
changes among each category. Additional allowance amounts are allocated by
evaluating the loss potential of individual loans that management has
considered impaired. The allowance for loan loss allocation is based on
subjective judgment and estimates,
43
<PAGE>
and therefore is not necessarily indicative of the specific amounts or loan
categories in which charge offs may ultimately occur. The table below exhibits
these allocations for the last five years.
TABLE 16
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(In Thousands)
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
RESERVE % * RESERVE % * RESERVE % * RESERVE % * RESERVE % *
------- --- ------- --- ------- --- ------- --- ------- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of
period applicable to:
Commercial, financial
and agricultural $ 358 18% $ 323 19% $236 24% $273 28% $170 29%
Real estate-
construction 17 4 15 4 11 4 13 3 8 5
Real estate-mortgage 291 69 263 69 192 64 222 60 138 57
Loans to individuals 181 9 163 8 119 8 138 10 86 9
Unallocated 281 -- 256 -- 185 -- 216 -- 135 --
------ --- ------ --- ---- --- ---- --- ---- ---
Total allowance for
loan losses $1,128 100% $1,020 100% $743 100% $862 100% $537 100%
====== === ====== === ==== === ==== === ==== ===
</TABLE>
- --------
* Percent of loans in each category to total loans.
ASSET QUALITY
Nonperforming assets consist of nonaccrual loans, loans restructured due to
debtors' financial difficulties, and real estate acquired through foreclosure
and repossession. Nonaccrual loans are those loans on which recognition of
interest income has been discontinued. Restructured loans generally allow for
an extension of the original repayment period or a reduction or deferral of
interest or principal because of a deterioration in the financial position of
the borrower. Loans, whether secured or unsecured, are generally placed on
nonaccrual status when principal and/or interest is 90 days or more past due,
or sooner if it is known or expected that the collection of all principal and
interest is unlikely. Any loan past due 90 days or more, if not classified as
nonaccrual based on a determination of collectibility, is classified as a past
due loan.
Other real estate is initially recorded at the lower of cost or estimated
market value at the date of acquisition. A provision for estimated losses is
recorded when a subsequent decline in value occurs. Provisions for estimated
losses in the financial statements were $6,750 and $40,750 at December 31,
1995 and 1994, respectively.
Nonperforming assets at December 31, 1995 amounted to $581,077, or 0.54% of
total assets. The Company has been able to significantly reduce its percentage
of nonperforming assets to total assets over the past five years. These year-
end ratios have been 0.54% in 1995, 0.65% in 1994, 1.36% in 1993, 1.45% in
1992, and 4.76% in 1991. Management attributes the improvement to a
comprehensive and continuous loan review process, more thorough advance credit
analysis, tighter internal controls, a monthly review process by top
management to determine the adequacy of the allowance for loan losses and to
pinpoint potential problem loans, and the general economic health of the local
market area.
44
<PAGE>
TABLE 17
NONPERFORMING ASSETS
(In thousands)
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 218 $ 318 $ 498 $ 191 $1,904
Restructured loans 0 0 0 0 0
------ ------ ------ ------ ------
Nonperforming loans 218 318 498 191 1,904
90 days past due and still accruing
loans 0 0 0 5 0
------ ------ ------ ------ ------
Total $ 218 $ 318 $ 498 $ 196 $1,904
====== ====== ====== ====== ======
Nonperforming assets:
Nonperforming loans (a) $ 218 $ 318 $ 498 $ 191 $1,904
Other real estate owned 363 187 399 636 624
------ ------ ------ ------ ------
Total $ 581 $ 505 $ 897 $ 827 $2,528
====== ====== ====== ====== ======
Nonperforming assets to total loans
and other real estate 0.90% 0.96% 2.16% 2.50% 8.18%
====== ====== ====== ====== ======
Allowance for loan losses to
nonperforming loans 517.43% 320.75% 149.20% 451.31% 28.20%
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
NONACCRUAL RESTRUCTURED TOTAL
---------- ------------ -----
<S> <C> <C> <C>
Year ended December 31, 1995:
Interest at contracted rates (b) $16 $ 0 $16
Interest recorded as income 8 0 8
--- --- ---
Reduction of interest income during 1995 $ 8 $ 0 $ 8
=== === ===
</TABLE>
- --------
(a) Nonperforming loans exclude loans 90 days past due and still accruing.
(b) Interest income that would have been recorded, if the loans had been
current and in accordance with their original terms.
At December 31, 1995, there were other loans classified for regulatory purposes
as loss, doubtful, substandard, or special mention which are not included in
the table above. Management is aware of no such loans not included above which
(i) represent or result from trends or uncertainties which management
reasonably expects will materially impact future operating results, liquidity,
or capital resources, or (ii) represent material credits about which any
information causes management to have serious doubts as to the ability of such
borrowers to comply with the loan repayment terms.
NONINTEREST INCOME
Noninterest income of $866,705 in 1995 represented a 17.2% decline from
$1,046,122 recorded in 1994. Three major items caused the decline. First,
activity in the Small Business Administration (SBA) lending program declined
significantly in 1995, resulting in a $148,000 net reduction in gains and
service fee income from SBA loans. Second, mortgage origination fee income from
real estate loans not retained by the Bank fell by $43,000. Mortgage
origination activity peaked at the Bank in 1993, and has fallen in the past two
years as a result of the interest rate cycle. Third, no significant gains were
recorded during 1995 from the sale of investment securities. Securities gains
declined by $20,000 from 1994 to 1995. The reductions were partially offset by
continued increases in service charge income on deposit accounts, which grew by
$57,000 due to strong balance sheet growth.
Noninterest income in 1994 amounted to $1,046,122, up 24.5% over $840,190
recorded in 1993. Of the $206,000 increase, approximately $185,000 of increased
noninterest income was generated from the SBA lending program through gains in
the sale of SBA loans and subsequent servicing fee income. Volume related
increases in service
45
<PAGE>
charges on deposit accounts produced approximately $102,000 in additional
income. These improvements were partially offset by an $83,000 decline in
mortgage origination fees as rising interest rates slowed mortgage financing
activity.
Noninterest income of $840,190 was recorded in 1993, up 61.1% over 1992
noninterest income of $521,502. During 1993, major increases were experienced
in mortgage origination fee income on loans not retained by the Bank. The
introduction of new services also contributed significantly to noninterest
income, including brokerage services, an asset based accounts receivable
lending program, data processing services provided to a non-affiliated
financial institution, and participation in the SBA lending program. Service
charges on deposit accounts also increased due to general growth trends in
deposits.
NONINTEREST EXPENSES
Noninterest expenses in 1995 were $3,116,540, up 12.0% over 1994 noninterest
expenses of $2,781,589. Management is generally pleased that the size of the
average balance sheet grew by 31.1% while general overhead costs were held to a
lesser 12.0% increase. Salaries and benefits expense increased by $143,000, or
10.7%, due to staffing level increases made to accomodate Bank growth and the
new Shurling Drive branch office. Occupancy costs rose by $89,000, or 28.1%,
due to costs of the new branch location and increased depreciation and
maintenance on new data processing, proof and imaging equipment. All other
overhead costs were up by $102,000, or 9.1%. Major increases were in
advertising costs and stationery and supplies needed to introduce new
technologies. Higher costs were partially offset by reductions in FDIC deposit
insurance and lower outside professional fees.
Noninterest expenses of $2,781,589 were incurred in 1994, a 19.2% increase over
1993 noninterest expenses of $2,334,235. Salaries and benefits expense
increased by 21.4%, or $237,000, due mainly to 401(K) and bonus programs tied
to profitability goals attained, and normal inflationary salary increases.
Occupancy expenses were held to a 2.1%, or $7,000 increase, since no new
physical facilities were established during 1994. Other overhead expenses
increased by $204,000, or 22.3%. Most increases were volume related and
commensurate with the 18.4% growth rate in the balance sheet.
Noninterest expenses in 1993 amounted to $2,334,235, up 22.3% from $1,908,030
in 1992. Costs associated with the staffing and occupancy expense of the new
Westside branch office produced a large percentage of this increase. Salaries
and employee benefits increased by 27.2%, and occupancy costs rose by 16.6%.
All other overhead costs increased by 18.8%. Advertising and business
development expenses were increased substantially to focus on the expanded
physical coverage of the market area. Volume related costs such as supplies and
postage increased proportionately with balance sheet growth.
INCOME TAXES
Federal income tax expense in 1995 was $560,804, equating to a 28.7% effective
tax rate on pre-tax earnings. This effective rate is down slightly from 29.3%
in 1994. The principal item reducing the effective tax rate below federal
statutory tax rates of 34.0% has been the levels of tax exempt interest income
on municipal securities for all years shown.
Federal income tax expense of $436,372 in 1994 amounts to an effective tax rate
of 29.3% on 1994 pre-tax income. Federal income taxes for the year 1993
amounted to $205,412, for an effective tax rate of 26.4% on pre-tax earnings
for the year. Effective January 1, 1993, the company adopted SFAS No. 109
"Accounting for Income Taxes", which requires an asset and liability approach
to financial accounting and reporting for income taxes. Deferred income tax
assets and liabilities are computed annually for the differences between the
financial statement and tax bases of assets and liabilities that will result in
taxable or deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount
46
<PAGE>
expected to be realized. Income tax expense is the tax payable or refundable
for the period plus or minus the change during the period in deferred tax
assets and liabilities. The adoption of SFAS No. 109 had the effect of
increasing 1993 net income by $53,373, the cumulative effect of the accounting
change on years prior to January 1, 1993. Prior years are not restated.
INFLATION
Inflation impacts the financial condition and operating results of the Company.
However, because most of the assets of the Bank subsidiary are monetary in
nature, the effect is less significant compared to other commercial or
industrial companies with heavy investments in inventories and fixed assets.
Inflation influences the growth of total banking assets, which in turn produces
a need for an increased equity capital base to support the growing bank.
Inflation also influences interest rates and tends to raise the general level
of salaries, operating costs and purchased services. The Company has not
attempted to measure the effect of inflation on various types of income and
expense due to difficulties in quantifying the impact.
Management's awareness of inflationary effects has led to various operational
strategies to cope with its impact. The Bank engages in various asset /
liability management strategies to control interest rate sensitivity and
minimize exposure to interest rate risk. Prices for banking products and
services are continually reviewed in relation to current costs, and overhead
cost cutting is an ongoing task.
47
<PAGE>
DESCRIPTION OF PROPERTY
The Company operates out of the premises of its subsidiary, Security
National Bank, at 700 Walnut Street, Macon, Georgia. The Company owns no real
estate, and its assets consist almost exclusively of the stock of Security
National Bank. The assets of the Bank consist primarily of loans and
investment securities. However, it owns the land and building upon which are
situated the Walnut Street main office, the Riverside Drive branch and
Westside branch; and it leases a branch location on Shurling Drive in
northeast Macon. The Bank owns the drive-up facilities at all locations, a
computer system, ATM machines at each of the branches and various other
furniture, fixtures and equipment. The Bank operates an in-house data
processing facility at its Riverside Drive office.
MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The shares of Common Stock of the Company are not listed on an established
securities exchange, are not traded through an automated quotation system, and
are not actively traded. See "Determination of Offering Price" for additional
information concerning the market for the Company's Common Stock.
As of June 30, 1996, there were approximately 493 shareholders of record,
held principally by residents and legal entities in Macon, Bibb County and the
surrounding areas in Middle Georgia. The corporation is not authorized to
issue any other class of its securities.
The Warrants which have been issued by the Company to its shareholders of
record as of September , 1996 are not traded in the over-the-counter
market on any stock exchange and are non-transferable.
As of June 30, 1996 directors, executive officers and other persons (or
their transferees) who were founding directors and executive officers of
Security National Bank, the wholly-owned subsidiary of the Company, were the
holders of options to purchase 359,760 shares of the Company's Common Stock at
a price of $4.165 per share. The options are required to be exercised by
November , 1998. In addition, shareholders of the Company approved at the
annual meeting of shareholders in 1996 the Company's Incentive Stock Option
Plan, pursuant to which the Company is authorized to grant to key officers and
employees of the Company and of the Bank options to purchase 65,000 shares of
the Company's Common Stock at a price equal to the fair market value of that
stock at the time the options are granted. Certain key officers and employees
of the Company have been granted options in accordance with that plan to
purchase 60,000 shares of the Company's Common Stock at a price of $10.75 per
share. The options vest, and are exercisable, over a period of five (5) years
beginning in 1996, but must be exercised in any event within ten (10) years of
the date those options are granted.
Directors, executive officers and other persons who may be deemed
"affiliates" of the Company own as of June 30, 1996 877,126 shares of the
Company's Common Stock which may be sold pursuant to Rule 144 under the
Securities Act of 1933.
Holders of Common Stock of the Company are entitled to such dividends as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. The Company has paid quarterly cash dividends to its
shareholders since 1992. The following table sets forth the amount of each
dividend paid per share for each quarter of the Company's operations since
January 1, 1994 (figures have been adjusted to reflect the 20% stock dividend
declared by the Company as of March 20, 1995 and the two-for-one stock split
as of June 1, 1996):
<TABLE>
<CAPTION>
1996
(SIX MONTHS) 1995 1994
------------ ---- ------
<S> <C> <C> <C>
First Quarter $.055 $.05 $.0413
Second Quarter $.055 .05 .0413
Third Quarter N/A .05 .0413
Fourth Quarter N/A .05 .0413
</TABLE>
48
<PAGE>
Management is not aware of any reason that will prevent the Company from
continuing to pay future dividends on its Common Stock. However, there can be
no assurance of future payment of dividends, either in cash or in stock, as
the payment of such dividends will depend on the Bank's net earnings and
capital ratios which are more fully discussed under "Certain Risk Factors".
EXECUTIVE COMPENSATION
The following table sets forth the aggregate annual compensation for each of
the Company's chief executive officers and for each of the Company's executive
officers and subsidiary bank's executive officers whose compensation exceeded
$100,000.00 in 1995.
ANNUAL COMPENSATION
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OTHER ANNUAL ALL OTHER
POSITION YEAR SALARY(1) BONUS(2) COMPENSATION(3) COMPENSATION(4)
------------------ ---- --------- -------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Robert C. Ham 1995 $106,959 $18,922 $11,141 $3,000
Chairman of the Board
of 1994 95,725 16,521 7,632 2,400
Directors and Chief 1993 90,378 -0- 8,308 1,200
Executive Officer of
the Company and the
Bank(5)
</TABLE>
- --------
(1) Includes amounts deferred at the election of the executive officer into
the Bank's 401(K) Savings incentive and Profit Sharing Plan as follows:
1995--$9,730; 1994--$8,471; 1993--$6,006.
(2) Includes $18,922 earned during 1995 and paid in 1996; and $16,521 earned
during 1994 and paid in 1995 from the Bank's Annual Cash Incentive Bonus
Plan.
(3) Includes the Bank's discretionary and matching contributions to the
executive officer's 401(K) Savings Incentive and Profit Sharing Plan.
(4) Includes $3,000 in 1995, $2,400 in 1994 and $1,200 in 1993 in cash fees
paid to the executive officer in his capacity as a director of the Bank.
The Company pays no director fees.
(5) Prior to January, 1996, Mr. Ham also served as President of the Company
and the Bank.
Executive Officers H. Averett Walker and Richard A. Collinsworth were
elected to their positions with the Company and the Bank by the Board of
Directors in January, 1996, and therefore received no forms of salary or
benefit compensation from the Company or the Bank during calendar years prior
to 1996.
COMPENSATION PURSUANT TO PLANS
STOCK WARRANTS:
Executive officers Ham, Jackson and O'Dillon are the holders of certain
warrants issued in connection with the initial organization and stock offering
of the Bank in 1988. During organization, the Bank issued warrants to purchase
Common Stock to its organizers, interim directors and initial executive
officers. Each warrant entitled the owner to purchase one share of Common
Stock at the exercise price of $10.00 per share until the warrant expires. All
warrants issued expire ten (10) years from the date of issuance of the Bank's
charter.
Due to the formation of the Company in 1994, all outstanding warrants for
the Bank's Common Stock were automatically converted into warrants for equal
amounts of the Company's Common Stock. Due to the 20% stock split effected in
the form of a dividend on March 20, 1995, and a two-for-one stock split as of
June 1, 1996, the number of outstanding warrants for Company's Common Stock
currently stands at 359,760 shares at an exercise price of $4.165 per share
until expiration.
49
<PAGE>
After the adjustments referenced above, Robert C. Ham holds 48,000
unexercised warrants, 24,000 of which were issued to him in his capacity as an
organizer and interim director of the Bank, and 24,000 of which were issued to
him in his capacity as an initial executive officer of the Bank. The other two
initial executive officers hold a total of 24,000 unexercised warrants which
were issued to them in their capacities as initial executive officers of the
Bank.
At the annual meeting of shareholders of the Company on May 2, 1996, the
shareholders approved the adoption of an Incentive Stock Option Plan of the
Company (the "Plan"). The Plan permits the Company to grant options to
executive officers and key employees of the Company to purchase shares of the
Company's $1.00 par value Common Stock. The Plan is administered by the Board
of Directors of the Company. The Company is authorized under the Plan to issue
warrants to purchase as many as 65,000 shares of its Common Stock, and
pursuant to the provisions of that Plan, options have been issued to certain
employees of the Company to purchase 60,000 shares of the Company's Common
Stock at a price of $10.75 per share. As issued, the options may not be
exercised prior to one (1) year from the date the options were granted (May 2,
1996) and must be exercised within ten (10) years from the date the options
were granted. As of June 30, 1996 the following employees of the Company held
warrants issued pursuant to the Plan to purchase the indicated number of
shares of the Company's Common Stock: Rett Walker--15,000 shares; Richard
Collinsworth--10,000 shares; Shirley Jackson--10,000 shares; Michael
O'Dillon--10,000 shares; Mary Mundy--5,000 shares; John Truesdell--5,000
shares; Mike Bazemore--5,000 shares.
401(K) SAVINGS INCENTIVE AND PROFIT SHARING PLAN:
During 1995, executive officers Ham, Jackson and O'Dillon participated in
the Bank's 401(K) Savings Incentive and Profit Sharing Plan (the "Plan"),
which became effective as of January 1, 1990 and which was ratified by a
majority vote of the stockholders at the April 19, 1990 Annual Meeting. The
Plan combines features whereby each participant may elect to defer certain
portions of his salary into the 401(K) program and receive credit for certain
matching amounts from the Bank, and additionally to share in the accumulation
of a profit sharing pool funded by the Bank. There are currently no other
stock bonus, money purchase, thrift, pension, profit sharing or employee stock
ownership plans, qualified or unqualified, or deferred compensation
arrangements in place at the Bank. The Plan may be amended at any regular
annual meeting or at any called meeting of the stockholders by a majority vote
of the stockholders. No such amendments have been made since the Plan's
adoption.
Any employee who was employed by the Bank on January 1, 1990 was deemed
eligible to participate in the Plan at its inception. Any other employee hired
subsequent to January 1, 1990 becomes eligible for participation upon
completion of one (1) year of service and attainment of age twenty-one (21).
As of December 31, 1995, thirty-three (33) employees of the Bank were eligible
to participate and thirty-three (33) had chosen to participate in the Plan.
Directors of the Bank are not eligible to participate in the Plan in their
capacities as directors.
The annual amount of expense incurred by the Bank for contribution to the
Plan is calculated by first determining the Bank's pre-tax adjusted operating
earnings, defined as annual pre-tax operating earnings, less capital gains,
plus capital losses. The Bank's annual contribution is 10% of the pre-tax
adjusted operating earnings, not to exceed 15% of annual eligible
participating salaries, or such other maximum deductible amount as may be
determined by Code Section 404 of the Internal Revenue Code of 1986, as
amended.
The Bank's total annual expense accrual is allocated among elements of the
Plan in the following manner:
401(K) EXPENSE:
An amount is contributed by the Bank to the 401(K) plan which, when
combined with employee salary deferrals, equals one half of the 15% of
annual participating salaries in the 401(K) plan. The Bank's 401(K)
contribution is allocated each year among the participants based on the
amount of each participating employee's elected salary deferral as a
percentage of total elected salary deferrals.
50
<PAGE>
PROFIT SHARING EXPENSE:
The remaining one half of the 15% of annual participating salaries is then
contributed by the Bank to the Profit Sharing Plan. This Profit Sharing
contribution is allocated each year among the eligible employees' accounts
in the Profit Sharing Plan based on the amount of each participating
employee's salary as a percentage of eligible salaries.
CASH BONUS EXPENSE:
For any given year, if the sum of the Bank's total annual contribution to
the Plan and the amount of total employee 401(K) salary deferral
contributions equals more than 15% of eligible participating salaries, then
the amount in excess of 15% of eligible participating salaries is
distributed as a cash bonus. Each participant shares in the cash bonus on a
pro-rata basis according to the percentage of each eligible employee's
salary to total eligible salaries. Employees who are not eligible to
participate in the Plan do not participate in the cash bonus, if any.
Based upon the calculations described above relating to the Bank's operating
results for the year, expense under the Plan was $160,452 for the year ended
December 31, 1995, $120,543 in 1994 and $72,425 in 1993. These amounts are
included in Salaries and Employee Benefits expense in the Statements of
Operations. The Bank made contributions to the 401(K) and Profit Sharing Plans
amounting to $21,815 for executive officers Ham, Jackson and O'Dillon for the
Plan year 1995, $14,223 for the Plan year 1994, and $16,227 for the Plan year
1993.
ANNUAL CASH INCENTIVE PLAN:
In the March, 1994 meeting of the Bank's Board of Directors, an Annual Cash
Incentive Plan program was approved. All officers and full-time employees of
the Bank, including executive officers, participated in the Plan. Under the
Plan, goals are established based on performance factors such as earnings,
asset quality, performance against similar peer banks, and achievement of
certain other related objectives in conjunction with the Bank's five year
strategic plan and annual budget. The annual bonus for executive officers, up
to a maximum of 40% of base salary, was designed based on market comparisons
of the annual bonuses for similar positions at other companies. Individual
performance, separate from overall Bank performance, can affect bonus amounts
according to pre-established goals for each participant. Other Bank officers
participate in the Plan up to maximums of from 20% to 30% of base salaries per
scales set commensurate with position and responsibility. Full-time employees
participate in the Plan up to a maximum of 10% of base salaries based on the
attainment of several overall profitability goals and certain other
performance factors.
Total awards calculated for the year 1995 and paid to all participants in
January, 1996 amounted to $107,485. Total cash incentive expense accrued by
the Bank during 1995 was $102,000. A total of $43,313 was accrued during 1995
and paid in 1996 to executive officers Ham, Jackson and O'Dillon.
Payments of $101,956 in annual awards to Plan participants were calculated
for the year 1994 and paid to participants in January, 1995. Total cash
incentive expense accrued by the Bank for 1994 was $101,213. A total of
$38,509 was accrued during 1994 and paid in 1995 to executive officers Ham,
Jackson and O'Dillon. No such annual cash incentive bonuses were paid by the
Bank for years prior to 1994.
OTHER PLANS:
The executive officers are participants in the Bank's group insurance plans
for employees, which include medical insurance, dental insurance, life
insurance, dependent life insurance, accidental death and disability insurance
and long-term disability insurance. These group insurance plans do not
discriminate in scope, terms or operations in favor of officers of the Bank
and are available generally to all salaried employees.
51
<PAGE>
OTHER EXECUTIVE COMPENSATION:
No executive officer received during 1995 perquisites or other personal
benefits not described above which exceeded the lesser of (1) 10% of the
executive officer's disclosed total annual salary and bonus or (b) $50,000. As
of December 31, 1995, there were no other restricted stock award plans, stock
option plans, stock appreciation rights, or long term incentive plans for any
officers or employees of the Company or the Bank.
COMPENSATION OF DIRECTORS:
During 1995, each of the Bank's directors received $250.00 per month in cash
fees as compensation for service as a Bank director. During 1994, $200.00 per
month was paid in cash fees to each Bank director. During 1993, $100.00 per
month was paid in cash fees to each Bank directors. The directors are
scheduled to receive $300.00 per month in Bank director fees during 1996. The
Company pays no compensation to these individuals in their capacity as
directors of the holding company. No fees are paid for committee meetings or
special assignments.
EMPLOYMENT AGREEMENT AND CHANGE IN CONTROL ARRANGEMENT:
On January 10, 1996, the Company and the Bank entered into a letter
agreement with H. Averett Walker ("Walker"), employing Walker as President and
Chief Operating Officer of the Company and the Bank for an initial base salary
of $125,000.00 during 1996. The term of the agreement continues from and after
the date commenced until terminated in accordance with the letter agreement.
The base salary to be paid to Walker in future years is to be determined
annually by the Personnel Committee of the Bank Board of Directors. The
agreement calls for Walker's participation in the officers' annual cash
incentive bonus plan and various other fringe benefits.
Pursuant to the 1996 Incentive Stock Option Plan which was approved by
shareholders of the Company, Walker is to be granted incentive stock options
to purchase up to 15,000 shares of the Company's Common Stock at the fair
market value of such stock at the date of such grant. The options will vest at
the rate of 20% per year after such grant until fully vested five (5) years
after such grant. Upon Walker's death or total disability, the Company is
committed to pay any accrued by unpaid base salary, and all options granted as
of the date of death or total disability shall remain exercisable. If Walker's
employment is terminated "for cause" (as defined), all payments and benefits
under the letter agreement cease effective with the termination of employment,
and all unexercised options are forfeited If Company and the Bank terminate
Walker's employment without cause, he will continue to receive base salary and
insurance benefits for six (6) months, and vested options may be exercised
within thirty (30) days after the termination date.
Walker's letter agreement includes "change of control" provisions (as
defined), whereby, if a change in control occurs or is proposed within the
first six (6) years of the agreement and Walker's employment is terminated
within one (1) year of such change of control, Walker will be entitled to one
year of base salary, bonus compensation and insurance benefits, with all
options becoming immediately exercisable. The agreement includes certain one
(1) year restrictions on Walker concerning nondisclosure of proprietary
information, and covenants not to compete or solicit customers or employees of
the Company or the Bank.
There are no other compensatory plans, employment contracts or change in
control arrangements with any of the executive officers included above which
would result in any payments to said officers as a result of resignation,
retirement or any other termination of such individual's employment with the
Company or the Bank or from a change in control of Company or the Bank.
52
<PAGE>
FINANCIAL STATEMENTS
Both audited and unaudited financial statements of the Company are attached
to this Prospectus. The financial statements of the Company consist of
consolidated balance sheets for the years ended December 31, 1995 and 1994
(audited); consolidated balance sheet as of June 30, 1996 (unaudited);
statements of income for the years ended December 31, 1994 and 1995 (audited);
income statement for the six months ended June 30, 1995 and 1996 (unaudited);
statement of cash flows for the years ended December 31, 1993, 1994 and 1995
(audited); statement of cash flows for the six months ended June 30, 1995 and
1996 (unaudited); and statement of changes in stockholders' equity for the
years ended December 31, 1993, 1994 and 1995 (audited).
53
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
SNB BANCSHARES, INC. AND SUBSIDIARY (AUDITED)
Report of Independent Accountant F-2
Consolidated Balance Sheets--December 31, 1995 and 1994 F-3
Consolidated Statements of Operations for the Years Ended December 31,
1995, 1994 and 1993 F-5
Consolidated Statements of Changes in Stockholders' Equity for the Years
Ended December 31, 1995, 1994 and 1993 F-6
Consolidated Statements of Cash Flows for the Years Ended December 31,
1995, 1994 and 1993 F-7
Notes to Consolidated Financial Statements F-8
SNB BANCSHARES, INC. AND SUBSIDIARY (UNAUDITED)
Balance Sheets as of June 30, 1996 and 1995 F-23
Statements of Operations for the six months Ended June 30, 1996 and 1995 F-24
Condensed Consolidated Statements of Cash Flow for six months Ended
June 30, 1996 and 1995 F-25
</TABLE>
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
MACON, GEORGIA
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 1995 AND 1994 AND
REPORT OF INDEPENDENT ACCOUNTANTS
F-1
<PAGE>
[LOGO]
January 10, 1996
(Except for Note 25 for which the date is June 1, 1996)
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors and Stockholders
SNB Bancshares, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of SNB
BANCSHARES, INC. AND SUBSIDIARY as of December 31, 1995 and 1994 and the
related consolidated statements of operations, changes in stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1995. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of SNB
BANCSHARES, INC. AND SUBSIDIARY as of December 31, 1995 and 1994 and the
results of operations and cash flows for each of the years in the three-year
period ended December 31, 1995 in conformity with generally accepted
accounting principles.
As discussed in Notes 3 and 8 to the consolidated financial statements, SNB
BANCSHARES, INC. AND SUBSIDIARY changed its methods of accounting for
investment securities and income taxes in 1994 and 1993, respectively.
/s/ McNair, McLemore, Middlebrooks & Co.
-------------------------------------
McNAIR, McLEMORE, MIDDLEBROOKS & CO.
Macon, Georgia
F-2
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1995 1994
------------ -----------
<S> <C> <C>
CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
(NOTE 2) $ 3,852,830 $ 3,113,349
------------ -----------
FEDERAL FUNDS SOLD 1,780,000 1,830,000
------------ -----------
INVESTMENT SECURITIES (NOTE 3) 34,439,849 18,648,820
------------ -----------
LOANS (NOTES 4, 5 AND 19) 64,586,110 52,443,362
Allowance for Loan Losses (1,127,609) (1,019,613)
Unearned Interest and Fees (185,993) (166,521)
------------ -----------
63,272,508 51,257,228
------------ -----------
PREMISES AND EQUIPMENT (NOTE 6) 2,442,771 2,015,844
------------ -----------
OTHER REAL ESTATE (NET OF ALLOWANCE OF $6,750 IN
1995 AND
$40,750 IN 1994) 362,974 186,813
------------ -----------
OTHER ASSETS (NOTE 7) 1,415,226 1,104,320
------------ -----------
TOTAL ASSETS $107,566,158 $78,156,374
============ ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1995 1994
------------ -----------
DEPOSITS
<S> <C> <C>
Noninterest-Bearing $ 14,244,767 $13,083,381
Interest-Bearing (Note 9) 78,723,739 54,125,445
------------ -----------
92,968,506 67,208,826
------------ -----------
BORROWED MONEY
Demand Notes to U.S. Treasury 933,639 538,870
Other Borrowed Money (Note 10) 3,740,600 2,328,400
Obligations Under Mortgage Indebtedness (Note 11) -- 6,144
------------ -----------
4,674,239 2,873,414
------------ -----------
OTHER LIABILITIES (NOTE 12) 1,497,738 991,702
------------ -----------
COMMITMENTS AND CONTINGENCIES (NOTE 14)
STOCKHOLDERS' EQUITY
Common Stock, Par Value $1 a Share; Authorized
5,000,000 Shares, Issued 1,200,000 Shares (Notes 22
and 25) 1,200,000 1,200,000
Paid-In Capital 4,500,000 4,500,000
Retained Earnings 2,701,539 1,550,744
Net Unrealized Gain (Loss) on Securities Available
for Sale, Net of $12,438 Tax in 1995 and $86,702 Tax
Benefit in 1994 (Note 8) 24,136 (168,312)
------------ -----------
8,425,675 7,082,432
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $107,566,158 $78,156,374
============ ===========
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-4
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
INTEREST INCOME
<S> <C> <C> <C>
Loans, Including Fees $6,382,841 $4,531,846 $3,472,455
Federal Funds Sold 180,038 27,299 29,174
Deposits with Other Banks 1,284 4,959 9,151
Investment Securities
U. S. Treasury 263,889 91,641 201,109
U. S. Government Agencies 770,209 653,192 708,908
State, County and Municipal 408,548 275,596 208,604
Other Investments 34,520 31,782 9,122
---------- ---------- ----------
8,041,329 5,616,315 4,638,523
---------- ---------- ----------
INTEREST EXPENSE
Deposits 3,512,975 1,991,167 1,960,362
Federal Funds Purchased 3,693 15,233 6,310
Demand Notes Issued to the U.S. Treasury 26,538 13,844 13,668
Mortgage Indebtedness and Obligations Under
Capital Leases 60 454 7,281
Other Borrowed Money 187,486 69,049 1,061
---------- ---------- ----------
3,730,752 2,089,747 1,988,682
---------- ---------- ----------
NET INTEREST INCOME 4,310,577 3,526,568 2,649,841
Provision for Loan Losses (Note 5) 109,143 302,490 377,790
---------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN
LOSSES 4,201,434 3,224,078 2,272,051
NONINTEREST INCOME
Service Charges on Deposits 511,535 454,480 352,615
Other Service Charges, Commissions and Fees 179,468 202,995 288,198
Securities Gains 2,637 22,944 53,755
Gain on Sale of SBA Loans 46,142 212,565 35,461
Other 126,923 153,138 110,161
---------- ---------- ----------
866,705 1,046,122 840,190
---------- ---------- ----------
NONINTEREST EXPENSES
Salaries and Employee Benefits 1,488,196 1,344,760 1,108,066
Occupancy and Equipment 406,517 317,349 310,829
Other 1,221,827 1,119,480 915,340
---------- ---------- ----------
3,116,540 2,781,589 2,334,235
---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT
OF ACCOUNTING CHANGE 1,951,599 1,488,611 778,006
INCOME TAXES (NOTE 8) 560,804 436,372 205,412
---------- ---------- ----------
INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING
CHANGE 1,390,795 1,052,239 572,594
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
INCOME TAXES ON YEARS PRIOR TO 1993 (NOTE 8) -- -- 53,373
---------- ---------- ----------
NET INCOME $1,390,795 $1,052,239 $ 625,967
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN
(LOSS)
ON
SECURITIES
COMMON PAID-IN RETAINED AVAILABLE
STOCK CAPITAL EARNINGS FOR SALE TOTAL
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31,
1992 $1,200,000 $4,500,000 $ 172,538 $5,872,538
Dividends Paid (100,000) (100,000)
Net Income 625,967 625,967
---------- ---------- ---------- -------- ----------
BALANCE, DECEMBER 31,
1993 1,200,000 4,500,000 698,505 6,398,505
Net Unrealized Gain on
Securities Available
for Sale,
Net of Tax, at
January 1 $ 36,708 36,708
Net Unrealized Loss on
Securities Available
for Sale,
Net of Tax, During
1994 (205,020) (205,020)
Dividends Paid (200,000) (200,000)
Net Income 1,052,239 1,052,239
---------- ---------- ---------- -------- ----------
BALANCE, DECEMBER 31,
1994 1,200,000 4,500,000 1,550,744 (168,312) 7,082,432
Net Unrealized Gain
(Loss) on
Securities Available
for Sale,
Net of Tax, During
1995 192,448 192,448
Dividends Paid (240,000) (240,000)
Net Income 1,390,795 1,390,795
---------- ---------- ---------- -------- ----------
BALANCE, DECEMBER 31,
1995 $1,200,000 $4,500,000 $2,701,539 $ 24,136 $8,425,675
========== ========== ========== ======== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994 1993
------------ ----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Income $ 1,390,795 $ 1,052,239 $ 625,967
Adjustments to Reconcile Net Income to
Net
Cash Provided from Operating Activities
Depreciation 196, 592 148,747 162,422
Amortization and Accretion 19,759 12,915 89,680
Provision for Loan Losses 109,143 302,490 377,790
Deferred Income Taxes 14,263 (77,377) 95,556
Securities Gains (2,637) (22,944) (53,755)
Gain from Sale of SBA Loans (46,142) (212,565) (35,461)
(Gain) Loss on Sale of Other Real
Estate (5,632) (37,278) 7,192
Unrealized (Gain) Loss on Other Real
Estate (34,000) 40,750 --
Loss on Sale of Premises and Equipment 4,282 -- --
Proceeds from Sale of SBA Loans 922,840 4,251,300 709,220
Purchase of SBA Loans (876,698) (4,038,735) (673,759)
CHANGE IN
Interest Receivable (474,907) (144,538) 51,045
Prepaid Expenses 2,135 250,077 (29,493)
Interest Payable 852,485 3,833 (12,643)
Accrued Expenses and Accounts Payable (338,636) 260,390 (372,049)
Other 32,547 64,716 (111,420)
------------ ----------- ----------
1,766,189 1,854,020 830,292
------------ ----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Interest-Bearing Deposits in Other Banks -- 100,000 --
Purchase of Investment Securities
Available for Sale (14,161,045) (1,145,315) (1,268,776)
Purchase of Investment Securities Held
to Maturity (4,517,414) (467,804) --
Proceeds from Sale of Investment
Securities Available for Sale 2,454,169 1,975,199 768,070
Proceeds from Maturity of Investment
Securities
Held to Maturity 715,830 806,772 --
Loans to Customers (12,381,647) (11,494,541) (9,103,496)
Purchase of Premises and Equipment (629,401) (53,893) (505,864)
Proceeds from Disposal of Premises and
Equipment 1,600 -- --
Other Real Estate 120,695 465,260 230,243
------------ ----------- ----------
(28,397,213) (9,814,322) (9,879,823)
------------ ----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest-Bearing Customer Deposits 24,598,294 6,453,090 4,203,518
Noninterest-Bearing Customer Deposits 1,161,386 3,879,465 3,107,790
Demand Note to the U.S. Treasury 394,769 (177,018) (164,669)
Payments on Obligations Under Capital
Leases -- (40,282) (94,698)
Dividends Paid (240,000) (200,000) (100,000)
Federal Funds Purchased -- (1,185,000) 1,185,000
Note to the Federal Home Loan Bank 1,412,200 2,013,400 315,000
Mortgage Indebtedness on Other Real
Estate (6,144) (1,342) (16,350)
------------ ----------- ----------
27,320,505 10,742,313 8,435,591
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 689,481 2,782,011 (613,940)
CASH AND CASH EQUIVALENTS, BEGINNING 4,943,349 2,161,338 2,775,278
------------
CASH AND CASH EQUIVALENTS, ENDING $ 5,632,830 $ 4,943,349 $2,161,338
============ =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-7
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SNB Bancshares, Inc. was formed as a one-bank holding company on September
30, 1994. The consolidated financial statements include the accounts of SNB
Bancshares, Inc. and its wholly-owned subsidiary, Security National Bank (the
Bank) located in Macon, Georgia. All significant intercompany accounts have
been eliminated. The accounting and reporting policies of SNB Bancshares, Inc.
conform to generally accepted accounting principles and practices utilized in
the commercial banking industry. The following is a description of the more
significant of those policies.
BASIS OF PRESENTATION
In preparing the financial statements, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities as of the balance sheet date and revenues and expenses for the
period. Actual results could differ significantly from those estimates.
Material estimates that are particularly susceptible to significant change
in the near-term relate to the determination of the allowance for loan losses,
the valuation of real estate acquired in connection with foreclosures or in
satisfaction of loans and the valuation of deferred tax assets.
INVESTMENT SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 115, Accounting for Certain Investments in
Debt and Equity Securities, whereby the Bank classifies its securities as
trading, available for sale or held to maturity. Trading securities are
purchased and held for sale in the near term. Securities held to maturity are
those which the Bank has the ability and intent to hold until maturity. All
other securities not classified as trading or held to maturity are considered
available for sale.
Securities available for sale are measured at fair value with unrealized
gains and losses reported net of deferred taxes as a separate component of
stockholders' equity. Fair value represents an approximation of realizable
value as of December 31, 1995 and 1994. Realized and unrealized gains and
losses are determined using the specific identification method.
LOANS
Interest income on loans is recognized using the effective interest method
on all loans except for certain installment add-on loans. Interest on these
loans is recognized using the rule of 78's, which results in no material
difference from the use of the effective interest method.
Loans are generally reported at principal amount less unearned interest and
fees. On January 1, 1995, the Bank adopted Statement of Financial Accounting
Standards (SFAS) No. 114, Accounting by Creditors for Impairment of a Loan and
SFAS No. 118, Accounting by Creditors for Impairment of a Loan--Income
Recognition and Disclosures. Impaired loans are loans for which principal and
interest are unlikely to be collected in accordance with the original loan
terms and, generally, represent loans delinquent in excess of 90 days which
have been placed on nonaccrual status and for which collateral values are less
than outstanding principal and interest. Small balance, homogeneous loans are
excluded from impaired loans. Generally, interest payments received on
impaired loans are applied to principal. Upon receipt of all loan principal,
additional interest payments are recognized as interest income on the cash
basis.
Other nonaccrual loans are loans for which payments of principal and
interest are considered doubtful of collection under original terms but
collateral values equal or exceed outstanding principal and interest.
Security National Bank's loans consist of commercial, financial and
agricultural loans, real estate mortgage loans and consumer loans primarily to
individuals and entities located throughout middle Georgia. Accordingly, the
ultimate collectibility of the loans is largely dependent upon economic
conditions in the middle Georgia area.
F-8
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
ALLOWANCE FOR LOAN LOSSES
The allowance method is used in providing for losses on loans. Accordingly,
all loan losses decrease the allowance and all recoveries increase it. The
provision for loan losses is based on factors which, in management's judgment,
deserve current recognition in estimating possible loan losses. Such factors
considered by management include growth and composition of the loan portfolio,
economic conditions and the relationship of the allowance for loan losses to
outstanding loans.
An allowance for loan losses is maintained for all impaired loans.
Provisions are made for impaired loans upon changes in expected future cash
flows or estimated net realizable value of collateral. When determination is
made that impaired loans are wholly or partially uncollectible, the
uncollectible portion is charged off.
Management believes the allowance for possible loan losses is adequate.
While management uses available information to recognize losses on loans,
future additions to the allowance may be necessary based on changes in
economic conditions. In addition, various regulatory agencies, as an integral
part of their examination process, periodically review the Bank's allowance
for loan losses. Such agencies may require the Bank to recognize additions to
the allowance based on their judgment about information available to them at
the time of their examination.
PREMISES AND EQUIPMENT
Premises and equipment are recorded at acquisition cost net of accumulated
depreciation.
Depreciation is charged to operations over the estimated useful lives of the
assets. The estimated useful lives and methods of depreciation are as follows:
<TABLE>
<CAPTION>
DESCRIPTION LIFE IN YEARS METHOD
----------- ------------- -------------
<S> <C> <C>
Banking Premises 30 Straight-Line
Furniture and Equipment 5-25 Straight-Line
</TABLE>
Expenditures for major renewals and betterments are capitalized. Maintenance
and repairs are charged to operations as incurred. When property and equipment
are retired or sold, the cost and accumulated depreciation are removed from
the respective accounts and any gain or loss is reflected in other income or
expense.
INCOME TAXES
Income taxes are provided for the tax effects of transactions reported in
the consolidated financial statements and consist of taxes currently due plus
deferred taxes. Deferred taxes are recognized for differences between the
basis of assets and liabilities for financial statement and income tax
purposes. The differences relate primarily to depreciable assets (use of
different depreciation methods for financial statement and income tax
purposes) and allowance for loan losses (use of the allowance method for
financial statement purposes and the experience method for tax purposes). The
deferred tax assets and liabilities represent the future tax return
consequences of those differences, which will either be taxable or deductible
when the assets and liabilities are recovered or settled.
OTHER REAL ESTATE
Other real estate generally represents real estate acquired through
foreclosure and is initially recorded at the lower of cost or estimated market
value at the date of acquisition. A provision for estimated losses is recorded
when a subsequent decline in value occurs. Provisions for estimated losses
included in the 1995 financial statements total $6,750.
F-9
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCKHOLDERS' EQUITY
To be considered "well capitalized," a financial institution must generally
have a leverage ratio of at least 5 percent, a tier 1 risk-based capital ratio
of at least 6 percent and a total risk-based capital ratio of at least 10
percent. As of December 31, 1995, the Bank was in compliance with its minimum
regulatory capital requirements and is considered "well capitalized" as
defined by FDICIA.
Cash dividends payable to stockholders are limited by various bank
regulatory agencies. Standard limitations may be exceeded by specific approval
of regulatory authorities.
(2) CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS
Components of cash and balances due from depository institutions are as
follows as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Cash on Hand and Cash Items........................... $ 674,861 $ 408,106
Noninterest-Bearing Deposits with Other Banks......... 3,177,969 2,705,243
---------- ----------
$3,852,830 $3,113,349
========== ==========
</TABLE>
As of December 31, 1995, the Bank had required deposits with the Federal
Reserve of $46,572.
(3) INVESTMENT SECURITIES
Investment securities as of December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Treasury $ 4,982,082 $ 89,163 $ (1,565) $ 5,069,680
U.S. Government Agencies
Mortgage-Backed 1,133,012 33,406 1,166,418
Other 15,986,341 89,541 (321,832) 15,754,050
State, County and Municipal 4,309,158 151,513 (3,644) 4,457,027
Federal Reserve Stock 157,200 157,200
Federal Home Loan Bank Stock 487,200 487,200
----------- -------- --------- -----------
$27,054,993 $363,623 $(327,041) $27,091,575
=========== ======== ========= ===========
SECURITIES HELD TO MATURITY
U.S. Treasury $ 496,686 $ (641) $ 496,045
U.S. Government Agencies
Mortgaged-Backed 264,586 $ 318 264,904
Other 1,000,000 1,000,000
State, County and Municipal 5,587,002 130,647 5,717,649
----------- -------- --------- -----------
$ 7,348,274 $130,965 $ (641) $ 7,478,598
=========== ======== ========= ===========
</TABLE>
F-10
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) INVESTMENT SECURITIES (CONTINUED)
The amortized cost and fair value of investment securities as of December
31, 1995, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because issuers have the right to call or
prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
SECURITIES
---------------------------------------------
AVAILABLE FOR SALE HELD TO MATURITY
----------------------- ---------------------
AMORTIZED AMORTIZED
COST FAIR VALUE COST FAIR VALUE
----------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Due in One Year or Less $ 3,465,406 $ 3,427,138 $ 596,685 $ 596,152
Due After One Year Through Five
Years 21,074,202 21,032,136 4,113,852 4,207,876
Due After Five Years Through Ten
Years 1,540,455 1,643,186 1,562,238 1,585,931
Due After Ten Years 330,530 344,715 1,075,499 1,088,639
----------- ----------- ---------- ----------
26,410,593 26,447,175 7,348,274 7,478,598
Federal Reserve Stock 157,200 157,200
Federal Home Loan Bank Stock 487,200 487,200
----------- ----------- ---------- ----------
$27,054,993 $27,091,575 $7,348,274 $7,478,598
=========== =========== ========== ==========
</TABLE>
Investment securities as of December 31, 1994 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED
COST GAINS LOSSES FAIR VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Treasury $ 1,979,147 $ (39,928) $ 1,939,219
U.S. Government Agencies
Mortgage-Backed 436,110 $ 694 (324) 436,480
Other 8,222,234 13 (167,770) 8,054,477
State, County and Municipal 2,458,784 1,514 (49,205) 2,411,093
Federal Reserve Stock 157,200 157,200
Federal Home Loan Bank Stock 246,200 246,200
----------- -------- --------- -----------
$13,499,675 $ 2,221 $(257,227) $13,244,669
=========== ======== ========= ===========
SECURITIES HELD TO MATURITY
U.S. Government Agencies
Mortgaged-Backed $543,971 $ 6,575 $ 550,546
Other 500,000 2,969 502,969
State, County and Municipal 4,360,180 93,638 $ (71,454) 4,382,364
----------- -------- --------- -----------
$ 5,404,151 $103,182 $ (71,454) $ 5,435,879
=========== ======== ========= ===========
</TABLE>
Proceeds from sales of investments in debt securities were $3,169,999 in
1995, $2,781,971 in 1994 and $768,070 in 1993. Gross realized gains totaled
$7,117, $25,381 and $54,375 in 1995, 1994 and 1993, respectively. Gross losses
totaled $4,480, $2,437 and $620 in 1995, 1994 and 1993, respectively.
Investment securities having a carrying value approximating $1,548,000 and
$1,550,000 as of December 31, 1995 and 1994, respectively, were pledged to
secure public deposits and for other purposes.
F-11
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) LOANS
The composition of loans as of December 31 are:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Loans Secured by Real Estate
Construction and Land Development $ 2,847,546 $ 2,011,781
Secured by Farmland (Including Farm Residential and
Other Improvements) 2,018,856 1,415,725
Secured by 1-4 Family Residential Properties 19,072,385 15,986,452
Secured by Nonfarm Nonresidential Properties 23,646,239 18,573,228
Commercial and Industrial Loans (U.S. Addresses) 11,072,725 9,982,616
Acceptances of Other Banks 258,621 --
Loans to Individuals for Household, Family and Other
Personal Expenditures
Credit Cards and Related Plans 373,296 204,361
Other 5,288,710 4,255,196
All Other Loans 7,732 14,003
----------- -----------
$64,586,110 $52,443,362
=========== ===========
Loans by interest rate type are:
Fixed Rate $47,357,733 $37,517,051
Variable Rate 17,228,377 14,926,311
----------- -----------
$64,586,110 $52,443,362
=========== ===========
Impaired loans included in total loans above as of December 31,
1995 are summarized as follows:
</TABLE>
<TABLE>
<S> <C>
Total Investment in Impaired Loans $218,103
Less Allowance for Impaired Loan Losses (98,447)
--------
Net Investment $119,656
========
Average Investment $136,542
========
</TABLE>
For the year ended December 31, 1995, income recorded on the cash basis on
impaired loans totaled $7,792. Foregone interest on impaired and other
nonperforming loans approximated $8,122 in 1995, $61,800 in 1994 and $66,700 in
1993.
(5) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses are summarized below for the
years ended December 31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- --------
<S> <C> <C> <C>
BALANCE, BEGINNING $1,019,613 $ 742,540 $862,156
Provision Charged to Operating Expenses 109,143 302,490 377,790
Loans Charged Off (60,191) (77,863) (542,770)
Loan Recoveries 59,044 52,446 45,364
---------- ---------- --------
BALANCE, ENDING $1,127,609 $1,019,613 $742,540
========== ========== ========
</TABLE>
F-12
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) ALLOWANCE FOR LOAN LOSSES (CONTINUED)
The 1995 allowance for loan losses presented above includes an allowance for
impaired loan losses which was established as of January 1, 1995. Transactions
in the allowance for impaired loan losses during 1995 were as follows:
<TABLE>
<S> <C>
BALANCE, BEGINNING $67,447
Provision Charged to Operating Expenses 31,000
Loans Charged Off --
Loan Recoveries --
-------
BALANCE, ENDING $98,447
=======
</TABLE>
(6) PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Land.................................................... $ 531,411 $ 531,411
Building................................................ 1,213,677 1,151,776
Furniture, Fixtures and Equipment....................... 1,606,311 1,120,224
---------- ----------
3,351,399 2,803,411
Accumulated Depreciation................................ (908,628) (787,567)
---------- ----------
$2,442,771 $2,015,844
========== ==========
</TABLE>
Depreciation charged to operations totaled $196,592 in 1995, $148,747 in
1994 and $162,422 in 1993.
(7) OTHER ASSETS
Other assets consist of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Accrued Interest......................................... $1,092,784 $ 622,594
Deferred Income Tax Benefit.............................. 140,972 254,375
Unamortized Organization Costs........................... 30,382 38,485
Other.................................................... 151,088 188,866
---------- ----------
$1,415,226 $1,104,320
========== ==========
</TABLE>
Organization costs totaling $40,510 incurred in connection with formation of
the parent company are being amortized to operations over a period of 60
months. Related amortization expense totaled $8,103 in 1995 and $2,025 in
1994, respectively.
(8) INCOME TAXES
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, Accounting for Income Taxes, which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed
annually for differences between the financial statement and tax bases of
assets and liabilities that will result in taxable or deductible amounts in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense is the tax payable or
refundable for the period plus or minus the change during the period in
deferred tax assets and liabilities.
F-13
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) INCOME TAXES (CONTINUED)
The adoption of SFAS 109 had the effect of increasing 1993 net income by
$53,373, the cumulative effect of the accounting change on years prior to
January 1, 1993.
The net deferred taxes in the accompanying balance sheets as of December 31
include the following amounts of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Deferred Tax Asset $290,015 $256,476
Deferred Tax Liability (113,398) (76,475)
Valuation Allowance for Deferred Tax Asset (23,207) (12,328)
-------- --------
153,410 167,673
Deferred Tax Asset (Liability) on Unrealized Securities
Gains and Losses (12,438) 86,702
-------- --------
NET DEFERRED TAX ASSET $140,972 $254,375
======== ========
</TABLE>
The components of income tax expense for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994 1993
--------- -------- --------
<S> <C> <C> <C>
Current Expense $ 546,541 $513,749 $109,856
Deferred Tax Expense (Benefit) 14,263 (77,377) 95,556
--------- -------- --------
$ 560,804 $436,372 $205,412
========= ======== ========
</TABLE>
The sources of temporary differences and the resulting net deferred income
taxes for 1995, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- -------
<S> <C> <C> <C>
Provision for Loan Losses $(37,109) $(72,121) $84,003
Depreciation Expense 13,792 8,552 2,766
Accretion on Securities 26,883 (2,843) 2,842
Other 10,697 (10,965) 5,945
-------- -------- -------
NET DEFERRED TAX EXPENSE (BENEFIT) $ 14,263 $(77,377) $95,556
======== ======== =======
</TABLE>
The income tax expense of $560,804 in 1995, $436,372 in 1994 and $205,412 in
1993 is less than the income taxes computed by applying the federal statutory
rate of 34 percent to income before income taxes. The reasons for the
differences are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
FEDERAL STATUTORY INCOME TAXES $663,544 $506,128 $264,522
Tax-Exempt Interest (128,602) (91,794) (67,083)
Interest Expense Disallowance 21,153 11,500 8,148
Premiums on Officers' Life Insurance 3,169 2,771 2,373
Meal and Entertainment Disallowance 2,212 2,417 690
Other (672) 5,350 (3,238)
-------- -------- --------
ACTUAL INCOME TAXES $560,804 $436,372 $205,412
======== ======== ========
</TABLE>
F-14
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) DEPOSITS
Components of interest-bearing deposits as of December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Interest-Bearing Demand $15,257,863 $12,837,600
Savings 3,562,564 3,985,894
Time, $100,000 and Over 15,850,776 9,175,270
Other Time 44,052,536 28,126,681
----------- -----------
$78,723,739 $54,125,445
=========== ===========
</TABLE>
(10) OTHER BORROWED MONEY
Other borrowed money is comprised of the following as of December 31:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Advance agreements with the Federal Home
Loan Bank of Atlanta are payable in varying amounts
through August 7, 2005. Interest at rates ranging from
5.83 percent to 7.93 percent is payable under the
principal reducing credit program and the fixed rate
credit program. $3,740,600 $2,328,400
========== ==========
</TABLE>
Maturities of borrowed money for each of the next five years and thereafter
are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ------
<S> <C>
1996 $ 69,500
1997 1,570,500
1998 72,000
1999 598,600
2000 935,000
Thereafter 495,000
----------
$3,740,600
==========
</TABLE>
(11) OBLIGATIONS UNDER MORTGAGE INDEBTEDNESS
<TABLE>
<CAPTION>
1995 1994
---- ------
<S> <C> <C>
Mortgage Indebtedness on Other Real Estate Acquired through
Foreclosure $ -- $6,144
==== ======
</TABLE>
(12) OTHER LIABILITIES
Components of other liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1995 1994
---------- --------
<S> <C> <C>
Interest Payable $1,166,112 $313,628
Federal Income Taxes Payable 7,612 383,893
Accrued Expenses 306,237 268,593
Other 17,777 25,588
---------- --------
$1,497,738 $991,702
========== ========
</TABLE>
F-15
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(13) EMPLOYEE BENEFITS
The Bank has a 401(K) Savings Incentive and Profit Sharing Plan effective as
of January 1, 1990. All employees as of the effective date were eligible to
participate in the plan. Subsequently-employed persons become eligible after
having completed one year of service and attaining the age of 21. Employer
contributions to the plan include salary reduction deferrals elected by
employees, a discretionary matching contribution based on the salary reduction
elected by the individual employees and a discretionary amount allocated based
on compensation received by eligible participants. Expense under the plan was
$160,452 in 1995, $120,543 in 1994 and $72,425 in 1992.
(14) COMMITMENTS AND CONTINGENCIES
In the normal course of business, certain commitments and contingencies are
incurred which are not reflected in the consolidated financial statements. The
Bank had commitments under standby letters of credit to U.S. addressees
approximating $124,493 as of December 31, 1995 and $394,750 as of December 31,
1994. No losses are anticipated as a result of commitments and contingencies.
(15) NONCOMPENSATORY STOCK OPTION PLAN
In connection with the original stock offering, the Bank issued 149,900
warrants to its organizers, interim directors and initial executive officers
for the purchase of common stock. Each option entitled the owner to purchase
one share of Bank stock at the exercise price of $10 per share until the
warrant expires. Upon formation of SNB Bancshares, Inc. in a one-for-one
exchange of common stock effective September 30, 1994, the outstanding
warrants were transformed into entitlements to purchase an equivalent number
of shares of common stock of the holding company. As a result of stock splits
effected in the form of dividends, the number of outstanding warrants
increased to 359,760 with an adjusted exercise price of $4.165 per share. A
summary of option transactions follow:
<TABLE>
<CAPTION>
SHARES UNDER
OPTION
------------
<S> <C>
Granted 359,760
Canceled --
Exercised --
-------
Outstanding, December 31, 1995 359,760
=======
Eligible to be Exercised, December 31, 1995 359,760
=======
</TABLE>
(16) INTEREST INCOME AND EXPENSE
Interest income of $394,240, $269,983 and $197,303 from state, county and
municipal bonds was exempt from regular income taxes in 1995, 1994 and 1993,
respectively.
Interest on deposits includes interest expense on time certificates of
$100,000 or more totaling $726,041, $365,682 and $338,383 for the years ended
December 31, 1995, 1994 and 1993, respectively.
F-16
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(17) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the following were made during the years ended December
31:
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Interest Expense $2,878,203 $2,084,853 $1,993,954
========== ========== ==========
Income Taxes $ 553,400 $ 113,400 $ 537,561
========== ========== ==========
(18) EARNINGS PER SHARE
<CAPTION>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE
Income Before Cumulative Effect of Accounting
Change $ 1.01 $ .81 $ .45
Cumulative Effect of Accounting Change .04
---------- ---------- ----------
Net Income $ 1.01 $ .81 $ .49
========== ========== ==========
</TABLE>
All share and per share data has been restated to reflect the 20 percent
stock split effected in the form of a dividend on March 20, 1995 and the 100
percent stock split effected in the form of a dividend on June 1, 1996.
(19) RELATED PARTY TRANSACTIONS
The aggregate balance of direct and indirect loans to directors, executive
officers or principal holders of equity securities of the Bank was $2,544,857
as of December 31, 1995 and $2,700,614 as of December 31, 1994. All such loans
were made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
other persons and do not involve more than a normal risk of collectibility. A
summary of activity of related party loans is shown below:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
BALANCE, BEGINNING $2,700,614 $2,346,929
New Loans 5,221,080 6,300,685
Repayments (5,376,837) (5,947,000)
---------- ----------
BALANCE, ENDING $2,544,857 $2,700,614
========== ==========
</TABLE>
(20) NONCASH FINANCING AND INVESTMENT ACTIVITIES
Noncash financing and investment activities for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- --------
<S> <C> <C> <C>
Acquisitions of Real Estate Through Foreclosure $257,224 $256,567 $ --
======== ======== ========
</TABLE>
F-17
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(21) FINANCIAL INFORMATION OF SNB BANCSHARES, INC. (PARENT ONLY)
SNB Bancshares, Inc. (the parent company) was formed as a one-bank holding
company from Security National Bank in September 1994. The parent company's
balance sheets as of December 31, 1995 and 1994 and the related statements of
income and cash flows for the years then ended are as follows:
SNB BANCSHARES, INC. (PARENT ONLY) BALANCE SHEETS DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Cash $ 36,644 $ 17,877
Unamortized Organization Costs 30,382 38,485
Investment in Subsidiary, at Equity 8,355,112 7,024,832
Income Tax Benefit 3,537 1,238
---------- ----------
TOTAL ASSETS $8,425,675 $7,082,432
========== ==========
</TABLE>
STOCKHOLDERS' EQUITY
<TABLE>
<S> <C> <C>
STOCKHOLDERS'
EQUITY
Common Stock, Par Value $1;
5,000,000 Shares Authorized,
1,200,000 Shares Issued and
Outstanding $1,200,000 $1,200,000
Paid-In
Capital 4,500,000 4,500,000
Retained Earnings 2,701,539 1,550,744
Net Unrealized Gain (Loss) on
Securities Available for Sale,
New of Tax 24,136 (168,312)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 8,425,675 7,082,432
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $8,425,675 $7,082,432
========== ==========
</TABLE>
F-18
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(21) FINANCIAL INFORMATION OF SNB BANCSHARES, INC. (PARENT ONLY) (CONTINUED)
SNB BANCSHARES, INC. (PARENT ONLY) STATEMENTS OF INCOME FOR THE YEARS ENDED
DECEMBER 31
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
INCOME
Dividends from Subsidiary $ 265,000 $ 500,000
---------- ----------
EXPENSE
Interest -- 613
Amortization of Organization Costs 8,103 2,025
Other 10,134 1,000
---------- ----------
18,237 3,638
---------- ----------
INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED
Earnings of Subsidiary 246,763 496,362
Income Tax Benefit 6,200 1,237
---------- ----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS OF
SUBSIDIARY 252,963 497,599
Equity in Undistributed Earnings of Subsidiary 1,137,832 554,640
---------- ----------
NET INCOME $1,390,795 $1,052,239
========== ==========
</TABLE>
F-19
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(21) FINANCIAL INFORMATION OF SNB BANCSHARES, INC. (PARENT ONLY) (CONTINUED)
SNB BANCSHARES, INC. (PARENT ONLY) STATEMENTS OF CASH FLOWS FOR THE YEARS
ENDED DECEMBER 31
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $1,390,795 $1,052,239
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Amortization 8,103 2,025
Equity in Undistributed Earnings of Subsidiary (1,137,831) (554,640)
Increase in Other Asset (2,300) (1,237)
---------- ----------
258,767 498,387
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Infusion in Subsidiary -- (240,000)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid (240,000) (200,000)
Payment for Organization Costs -- (40,510)
---------- ----------
(240,000) (240,510)
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 18,767 17,877
CASH AND CASH EQUIVALENTS, BEGINNING 17,877 --
---------- ----------
CASH AND CASH EQUIVALENTS, ENDING $ 36,644 $ 17,877
========== ==========
</TABLE>
(22) COMMON STOCK SPLIT
On February 9, 1995, the board of directors approved a 20 percent stock
split to be effected on March 20, 1995 in the form of a dividend to
stockholders of record on February 28, 1995. Share, per share data and
stockholders' equity account balances for all periods presented in the
accompanying consolidated financial statements and related notes have been
restated to reflect the additional shares outstanding resulting from the stock
split.
F-20
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(23) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards (SFAS) No. 107, Disclosures
about Fair Value of Financial Instruments requires disclosure of fair value
information about financial instruments, whether or not recognized on the face
of the balance sheet, for which it is practicable to estimate that value. The
assumptions used in the estimation of the fair value of SNB Bancshares'
financial instruments are detailed below. Where quoted prices are not
available, fair values are based on estimates using discounted cash flows and
other valuation techniques. The use of discounted cash flows can be
significantly affected by the assumptions used, including the discount rate
and estimates of future cash flows. The following disclosures should not be
considered a surrogate of the liquidation value of the Company, but rather a
good-faith estimate of the increase or decrease in value of financial
instruments held by the Bank since purchase, origination or issuance.
CASH AND SHORT-TERM INVESTMENTS--For cash, due from banks and federal funds
sold, the carrying amount is a reasonable estimate of fair value.
INVESTMENT SECURITIES AVAILABLE FOR SALE--Fair values for investment
securities are based on quoted market prices.
LOANS--The fair value of fixed rate loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be
made to borrowers with similar credit ratings. For variable rate loans, the
carrying amount is a reasonable estimate of fair value.
DEPOSIT LIABILITIES--The fair value of demand deposits, savings accounts
and certain money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed maturity certificates of deposit is
estimated by discounting the future cash flows using the rates currently
offered for deposits of similar remaining maturities.
STANDBY LETTERS OF CREDIT--Because standby letters of credit are made using
variable rates, the contract value is a reasonable estimate of fair value.
The carrying amount and estimated fair values of the Company's financial
instruments as of December 31, 1995 are as follows:
<TABLE>
<CAPTION>
CARRYING AMOUNT
ESTIMATED FAIR VALUE
--------- ----------
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and Short-Term Investments $5,632 $5,632
Investment Securities Available for Sale 27,091 27,091
Investment Securities Held to Maturity 7,348 7,478
Loans 63,272 63,525
LIABILITIES
Deposits 92,968 93,645
Other Borrowed Money 3,740 3,795
UNRECOGNIZED FINANCIAL INSTRUMENTS
Standby Letters of Credit 124 124
</TABLE>
F-21
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(23) FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Fair value estimates are made at a specific point in time, based on relevant
market information and information about the financial instrument. These
estimates do not reflect any premium or discount that could result from
offering for sale at one time the entire holdings of a particular financial
instrument. Because no market exists for a significant portion of the Company's
financial instruments, fair value estimates are based on many judgments. These
estimates are subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with precision. Changes
in assumptions could significantly affect the estimates.
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. Significant assets and liabilities that are not
considered financial instruments include the mortgage banking operation,
brokerage network, deferred income taxes and premises and equipment. In
addition, the tax ramifications related to the realization of the unrealized
gains and losses can have a significant effect on fair value estimates and have
not been considered in the estimates.
(24) RECLASSIFICATIONS
Certain reclassifications have been made in the 1994 and 1993 financial
statements to conform to the 1995 presentation.
(25) SUBSEQUENT EVENT
On June 1, 1996, the board of directors approved a two-for-one stock split to
be effected in the form of a dividend. Shares, per share data, stock options
and balances of common stock and retained earnings have been restated for all
periods presented to reflect the additional shares outstanding resulting from
the stock split.
F-22
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SNB BANCSHARES, INC.
BALANCE SHEETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AS OF JUNE 30:
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
ASSETS:
Cash and Balances Due From Depository Institutions $ 5,469,527 $ 4,344,460
Federal Funds Sold 20,000 0
------------ ------------
Investment Securities 35,566,924 25,360,183
------------ ------------
Loans 76,802,803 58,887,262
Allowance for Loan Losses. (1,273,622) (1,089,659)
Unearned Interest and Fees (190,888) (185,586)
------------ ------------
75,338,293 57,612,017
------------ ------------
Premises and Equipment 2,531,653 2,230,221
------------ ------------
Other Real Estate 493,445 287,035
------------ ------------
Other Assets 1,712,397 1,287,964
------------ ------------
TOTAL ASSETS $121,132,239 $ 91,121,880
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Noninterest-Bearing $ 17,630,358 $ 13,066,842
Interest-Bearing 87,028,963 65,339,565
------------ ------------
104,659,321 78,406,407
------------ ------------
Borrowed Money:
Federal Funds Purchased 0 1,230,00
Demand Notes to the U.S. Treasury 749,256 544,160
Other Borrowed Money 3,706,300 2,322,100
------------ ------------
4,455,556 4,096,260
------------ ------------
Other Liabilities 1,476,012 1,034,767
------------ ------------
Stockholders' Equity:
Common Stock, Par Value $1 a Share; Authorized
5,000,000 Shares;
Shares Issued and Outstanding: 1,362,800 in 1996
and 1,200,000 in 1995 1,362,800 1,200,000
Paid-In Capital 6,168,700 4,500,000
Retained Earnings 3,164,277 2,071,961
Net Unrealized Gain (Loss) on Securities Available
for Sale, Net of Tax (154,427) (187,515)
------------ ------------
10,541,350 7,584,446
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $121,132,239 $ 91,121,880
============ ============
</TABLE>
Statements are unaudited and subject to certain year end adjustments.
F-23
<PAGE>
SNB BANCSHARES, INC.
STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR THE SIX MONTHS
ENDED JUNE 30:
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
INTEREST INCOME:
Loans, Including Fees $3,880,358 $2,960,595
Federal Funds Sold 57,612 65,425
Investment Securities:
U.S. Treasury 176,108 103,790
U.S. Government Agencies 481,164 318,731
State, County and Municipal. 244,727 184,929
Other Investments 24,563 13,726
---------- ----------
4,864,532 3,647,196
---------- ----------
INTEREST EXPENSE:
Deposits 2,147,607 1,474,876
Federal Funds Purchased 362 786
Demand Notes Issued to the U.S. Treasury 10,931 13,529
Other Borrowed Money 128,920 78,375
---------- ----------
2,287,820 1,567,566
---------- ----------
NET INTEREST INCOME 2,576,712 2,079,630
Provision for Loan Losses 107,000 54,571
---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 2,469,712 2,025,059
---------- ----------
NONINTEREST INCOME:
Service Charges on Deposits 321,116 239,245
Other Service Charges, Commissions and Fees 127,895 85,435
Security Transactions, Net 26,908 (122)
Other 37,983 65,852
---------- ----------
513,902 390,410
---------- ----------
NONINTEREST EXPENSES:
Salaries and Employee Benefits 1,047,466 737,938
Occupancy and Equipment 263,768 187,272
Other 708,238 594,278
---------- ----------
2,019,472 1,519,488
---------- ----------
INCOME BEFORE INCOME TAXES 964,142 895,981
Income Taxes 270,088 254,754
---------- ----------
NET INCOME $ 694,054 $ 641,227
========== ==========
</TABLE>
Statements are unaudited and subject to certain year end adjustments.
F-24
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
FOR SIX MONTHS ENDED JUNE 30
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
CASH PROVIDED BY OPERATIONS $ 703,209 $683,946
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Sale (Purchase) of Investment Securities (1,388,678) (6,762,801)
Net Loans Made to Customers (12,336,445) (6,590,645)
Purchase of Premises and Equipment (217,403) (313,132)
Cash from Sale of OREO 23,689 86,695
----------- -----------
(13,918,837) (13,579,883)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net Increase in Demand, Interest-Bearing Demand and
Savings Desposits 12,880,844 266,445
Net Increase (Decrease) in Time Certificates (1,190,028) 10,927,757
Proceeds from Issuance (Repayment) of Demand Note to
the U.S. Treasury (184,383) 5,290
Principal Payments on Capital Lease -- (6,144)
Federal Funds Purchased (Repaid) -- 1,230,000
Payment of Dividends (149,908) (120,000)
Issuance of Capital Stock 1,750,100 --
Proceeds from Issuance (Repayment) of Notes Payable
to
Federal Home Loan Bank (34,300) (6,300)
----------- -----------
13,072,325 12,297,048
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (143,303) (598,889)
CASH AND CASH EQUIVALENTS, BEGINNING 5,632,830 4,943,349
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 5,489,527 $ 4,344,460
=========== ===========
</TABLE>
F-25
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. Indemnification of Directors and Officers
-----------------------------------------
Article 8, Part 5 of the Georgia Business Corporation Code provides
for indemnification of directors and officers of corporations. Under the
provisions of O.C.G.A. (S)14-2-852, a director of the Company, to the
extent successful in the defense of any proceeding or claim to which the
director is a party because he or she is a director of the Company, is
entitled as a matter of right to indemnification against reasonable
expense, including attorneys' fees, incurred by him in connection
therewith. Company is further authorized to indemnify any person who is
made a director to a proceeding because he or she is a director against any
liability incurred if that person acted in a manner he or she believed in
good faith to be in, or not opposed to, the best interest of the
corporation and, in the case of any criminal proceeding, he or she had no
reasonable cause to believe his or her conduct was unlawful. The authority
of the Company to indemnify a director is not applicable in connection with
any proceeding brought by or in the right of the corporation in which the
director was adjudged liable to the corporation, or in connection with any
other proceeding in which he or she is adjudged liable on the basis that
personal benefit was improperly received by him. Indemnification in any
action brought by or in the right of the corporation is limited in any
event to reasonable expenses incurred in connection with the proceeding,
and does not include the obligation to pay any judgment, settlement,
penalty or fine.
A determination that a director is entitled to indemnification must be
made by the Board of Directors by majority vote of a quorum consisting of
directors not at the time parties to the proceedings; if a quorum cannot be
obtained then by majority vote of a committee duly designated by the Board
of Directors (in which designation directors who are parties may
participate), consisting solely of two or more directors not at the time
parties to the proceedings; by special legal counsel; or by the
shareholders of the corporation, excluding shares owned by or voted under
the control of directors who are at the time parties to the proceeding. A
director of a corporation who is a party to a legal proceeding may apply to
the court for indemnification or advances for expenses. The court may
order indemnification or advances for expenses if it determines (1) the
director is entitled to mandatory indemnification; or (2) the director is
fairly and reasonably entitled to indemnification, even if he or she has
not met the standard conduct set forth in O.C.G.A. (S)14-2-851(a) or was
adjudged liable as described in O.C.G.A. (S)14-2-851(b), in which latter
event, however, his or her indemnification is limited to reasonable
expenses incurred. If the court determines that the director is entitled
to indemnification or advance for expenses under this part, it may also
order the corporation to pay the director's reasonable expenses to obtain
court indemnification or advance for expenses. The articles of
incorporation of the Company also eliminate, as permitted by law, the
personal liability of directors of the Company from monetary damages for
breach of duty of care or other duty as a director, excepting only any
<PAGE>
liability for misappropriation of any business opportunity of the
corporation, intentional misconduct, and other specified conduct.
An officer of the Company who is not a director is entitled to
mandatory indemnification and is entitled to apply for court ordered
indemnification in each case to the same extent as is a director of the
Company. Company may also indemnify and advance expenses to an officer,
employee or agent who is not a director to the extent, consistent with
public policy, that may be provided by its articles of incorporation,
bylaws, general or specific action of its Board of Directors, or contract.
Company bylaws provide for indemnification of officers and directors
substantially similar to that provided by Article 8, Part 5 of the Georgia
Business Corporations Code. Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Act and therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
ITEM 25. Other Expenses of Issuance and Distribution
-------------------------------------------
The registrant anticipates the following expenses in connection with
the offering:
<TABLE>
<S> <C>
Registration Fee $ 1,268.81
Printing Costs $13,000.00
Legal Fees $20,000.00
Accounting Fees $ 5,000.00
Blue Sky Filing Fees $ 1,000.00
</TABLE>
ITEM 26. Recent Sale of Unregistered Securities
--------------------------------------
The registrant issued the following unregistered securities within the
preceding three (3) years:
(a) On or about January 12, 1996, SNB Bancshares, Inc. issued 162,800
shares of its $1.00 par value Common Stock (adjusted to reflect a
two-for-one stock split declared by the Company on June 1, 1996);
<PAGE>
(b) There were no underwriters involved in the issuance. The
securities were issued to the following persons in the amounts
indicated (all numbers have been adjusted to reflect the two-for-
one stock split declared on June 1, 1996):
<TABLE>
<CAPTION>
<S> <C> <C>
Ben G. Porter 46,500 Shares
Chris R. Sheridan, Jr. 46,500 Shares
John F. Rogers, Jr. (or an IRA
for his sole benefit) 25,900 Shares
Mary L. Kinman 4,650 Shares
James W. Kinman 9,310 Shares
H. Averett Walker 18,640 Shares
Richard Collinsworth 2,000 Shares
Martin, Snow, Grant & Napier
Pension Plan 9,300 Shares
</TABLE>
(c) The shares were each sold at a price of $10.75 per share
(adjusted to reflect the two-for-one stock split), or
$1,750,100.00 in the aggregate.
(d) The issuance of the shares in question were exempt from the
registration provisions of the Securities Act of 1933 pursuant to
Section 3(11), in that the securities were issued only to persons
who were residents of the State of Georgia, and Section 4(2), in
that the transaction did not involve a public offering. A notice
of sale on Form D was filed with the Securities and Exchange
Commission on January 17, 1996.
ITEM 27. Exhibits
--------
The following exhibits are filed as a part of this Registration
Statement:
3. Articles of Incorporation and By-laws of Registrant -incorporated
by reference to the Registration Statement filed by SNB
Bancshares, Inc. on Form S-4, Commission File No. 33-80076.
4. Form of Warrant.
5. Opinion of Martin, Snow, Grant & Napier regarding legality of
shares to be issued.
10. Material contracts.
(a) Employment Agreement with H. Averett Walker
(b) Lease of Shurling Drive property
(c) 1996 Incentive Stock Option Plan
(d) Form of Director Warrants issued in connection with
formation of Security National Bank
<PAGE>
21. A list of subsidiaries of the Company.
23. Written consents (a) the written consent of Martin, Snow, Grant &
Napier is included in Exhibit 5. (b) Written consent of McNair,
McLemore, Middlebrooks & Co.
ITEM 28. Undertakings. The undersigned Registrant hereby under-takes as
------------
follows:
(1) The undersigned Registrant will file, during any period in which
it offers or sells securities, a post-effective amendment to this
Registration Statement to:
(i) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) reflect in the prospectus any facts or events which, individually
or together, represent a fundamental change in the information in the
Registration Statement; and
(iii) include any additional or changed material information on the
plan of distribution.
(2) For determining liability under the Securities Act treat each
post-effective amendment as a new Registration Statement of the securities
offered, and the offering of the securities at that time to be the initial
bona fide offering.
(3) File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
(4) The Registrant, for determining any liability under the Securities
Act, will treat the information omitted from the form of prospectus filed
as part of this registration in reliance upon Rule 430A and contained in a
form of prospectus filed by the small business issuer under Rule 424(b)(1),
or (4) or 497(h) under the Securities Act as part of this Registration
Statement as of the time the Commission declared it effective.
(5) The Registrant will, for determining any liability under the
Securities Act, treat each post-effective amendment that contains a form of
prospectus as a new registration statement for the securities offered in
the registration statement, and that offering of the securities at that
time as the initial bona fide offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, SNB
Bancshares, Inc. certifies that it has reasonable grounds to believe that
it meets all of the requirements of filing on Form SB-2 and authorized this
Registration Statement to be signed on its behalf by the undersigned, in
the City of Macon, State of Georgia, on August 26, 1996.
SNB BANCSHARES, INC.
BY: /s/ Robert C. Ham
________________________________
ROBERT C. HAM, Chief Executive
Officer and Chairman of the Board
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert C. Ham and H. Averett Walker,
jointly and severally, his attorneys-in-fact, with power of substitution
for him in any and all capacities, to sign any amendment to this
Registration Statement, and to file the same, with Exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and affirming all that said attorneys-in-fact,
or his substitute or substitutes, may do or cause to be done by virtue
hereof.
In accordance with the requirements of the Securities Act of 1933,
this Registration Statement has been signed by the following persons in the
capacities indicated on the 26th day of August, 1996.
/s/ Robert C. Ham
___________________________________
ROBERT C. HAM, Chief Executive
Officer and Chairman of the Board
of Directors
/s/ Averett Walker
___________________________________
H. AVERETT WALKER, President, Chief
Operating Officer and Director
/s/ Michael T. O'Dillon
___________________________________
MICHAEL T. O'DILLON, Senior Vice
President, Treasurer and Chief
Financial Officer (principal
accounting officer)
/s/ Robert C. Allen
___________________________________
Robert C. Allen, Director
/s/ Alford C. Bridges
___________________________________
Alford C. Bridges, Director
/s/ William P. Brooks
___________________________________
William P. Brooks, M.D., Director
/s/ Lee R. Greene, Jr.
___________________________________
Lee R. Greene, Jr., Director
/s/ Benjamin W. Griffith, III
___________________________________
Benjamin W. Griffith, III, Director
/s/ James W. Kinman
___________________________________
James W. Kinman, Director
___________________________________
Robert T. Mullis, Director
/s/ Ben G. Porter
___________________________________
Ben G. Porter, Director
/s/ Sydney J. Pyles
___________________________________
Sydney J. Pyles, Director
___________________________________
John F. Rogers, Jr., Director
/s/ Charles W. Selby
___________________________________
Charles W. Selby, Director
____________________________________
Frank M. Shepherd, Director
/s/ Chris R. Sheridan, Jr.
_____________________________________
Chris R. Sheridan, Jr., Director
/s/ Joe E. Timberlake, III
_____________________________________
Joe E. Timberlake, III, Director
/s/ Frank G. Wall, Jr.
_____________________________________
Frank G. Wall, Jr., Director
/s/ Richard W. White, Jr.
_____________________________________
Richard W. White, Jr., Director
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page
------- ----
<S> <C> <C>
3. Articles of Incorporation and By-laws of Registrant -
incorporated by reference to the Registration Statement
filed by SNB Bancshares, Inc. on Form S-4, Commission File
No. 33-80076 ................................................
4. Form of Warrant .............................................
5. Opinion of Martin, Snow, Grant & Napier regarding
legality of shares to be issued .............................
10. Material contracts ..........................................
(a) Employment Agreement with H. Averett Walker
(b) Lease of Shurling Drive Property
(c) 1996 Incentive Stock Option Plan
(d) Form of Director Warrants issued in connection with
formation of Security National Bank
21. A list of subsidiaries of the Company .......................
23. Written consents
(a) The written consent of Martin, Snow, Grant & Napier
is included in Exhibit 5
(b) Written consent of McNair, McLemore, Middlebrooks & Co.
</TABLE>
<PAGE>
EXHIBIT 4
WARRANT NO. ________ RIGHT TO PURCHASE _________ SHARES
SNB BANCSHARES, INC., A GEORGIA CORPORATION
COMMON STOCK PURCHASE WARRANT
Registered Owner: _______________________________________
THIS WARRANT AND THE SHARES OF SNB BANCSHARES, INC. COMMON STOCK WHICH
MAY BE PURCHASED PURSUANT TO ITS EXERCISE HAVE BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION, BUT HAVE BEEN REGISTERED ONLY IN
SELECTED STATES IN THE UNITED STATES. ACCORDINGLY, THIS WARRANT MAY BE
EXERCISED ONLY BY A REGISTERED OWNER WHO, IN THE OPINION OF SNB BANCSHARES,
INC., IS A RESIDENT OF A STATE IN WHICH THE WARRANTS AND THE UNDERLYING
SHARES HAVE BEEN REGISTERED OR ARE EXEMPT FROM REGISTRATION.
SNB Bancshares, Inc., a Georgia corporation ("Bancshares"), at no
charge and for no consideration, grants the following rights to the
Registered Owner of this Warrant:
(a) ISSUE. Upon Tender (as defined in Paragraph (e) hereof), Bancshares
------
shall issue to the Registered Owner hereof the number of shares
specified herein of fully paid and nonassessable shares of Bancshares'
$1.00 par value Common Stock. This Warrant is not transferable and
may only be exercised by the Registered Owner.
(b) NUMBER OF SHARES. The number of shares of Common Stock of Bancshares
-----------------
that the Registered Owner of this Warrant is entitled to receive upon
exercise of this Warrant is shown above, and represents the right to
purchase one (1) share of Bancshares' Common Stock for every five (5)
shares of Bancshares' Common Stock owned of record by the Registered
Owner as of September ____, 1996. The right to purchase any
fractional share of .5 or more has been rounded up, and the right to
purchase any fractional share of less than .5 has been rounded down.
Bancshares shall at all times reserve and hold available sufficient
shares of its Common Stock to satisfy all purchase rights represented
by this Warrant. Bancshares covenants and agrees that all shares of
its Common Stock that may be issued upon exercise of the Warrant
shall, upon issuance, be duly and validly issued, fully paid and
nonassessable, and free from all taxes, liens and charges with respect
to the purchase and issuance of the shares.
(c) EXERCISE PRICE. The price at which shares of stock may be purchased
---------------
upon exercise of this Warrant is $13.50 per share (the "Exercise
Price").
(d) EXERCISE. This Warrant may only be exercised on or after September
---------
___, 1996, and on or before a date that is forty-five (45) days after
that date ("Exercise"). If not exercised during this period, this
Warrant and all rights granted under this Warrant shall expire and
lapse.
<PAGE>
(e) TENDER. The exercise of this Warrant must be accomplished by: 1)
-------
actual delivery of the Exercise Price; 2) actual delivery of an
exercise form attached to this Warrant as Exhibit "1", properly
executed by the Registered Owner of this Warrant; and 3) surrender of
this Warrant to Bancshares ("Tender"). Tender may only be
accomplished by delivery, personally or by mail, to the offices of
Bancshares at 700 Walnut Street, P.O. Box 4748, Macon, Georgia 31208-
4748. Documents sent by mail shall be deemed to be delivered when
postmarked.
(f) RECOGNITION OF REGISTERED OWNER. Prior to due presentment for
--------------------------------
registration of this Warrant, Bancshares may deem and treat the
Registered Owner or Owners of this Warrant as its absolute owner or
owners for all purposes, as the person or persons exclusively entitled
to receive notices concerning this Warrant, and as the person or
persons otherwise entitled to exercise rights under this Warrant.
This Warrant and all rights under it are not transferable by the
Registered Owner and may only be exercised by the Registered Owner.
(g) RIGHTS ACQUIRED HEREUNDER. This Warrant does not entitle the record
--------------------------
owner of this Warrant to any voting rights, to any other rights of a
stockholder of Bancshares, or to any other rights whatsoever, except
for the rights that are expressed as rights and set forth in this
Warrant. No dividends are or shall be payable, or shall accrue, on or
with respect to this Warrant or any interest represented by this
Warrant or on the shares purchasable upon exercise hereof until or
unless, and except to the extent that, this Warrant is properly
exercised.
(h) NO PARTIAL EXERCISE OF WARRANT. This Warrant may be exercised in
-------------------------------
whole or in part, provided that it may not be exercised to purchase
fractional shares. Any partial exercise will be noted on the face of
the Warrant and the Warrant returned to the Registered Owner.
(i) REGISTRATION OF SHARES AND WARRANTS. The Warrants issued by
------------------------------------
Bancshares, and the shares of Common Stock which may be purchased
pursuant to the exercise of the Warrants, have been registered with
the Securities and Exchange Commission pursuant to the Securities Act
of 1933. The issuance and delivery of the Warrants is accompanied by
a prospectus which constitutes a portion of the registration statement
filed with the Securities and Exchange Commission. The Warrants and
shares which may be purchased pursuant to the exercise of the Warrants
have been registered, or are exempt from registration, in those states
in which shareholders of the Company resided as of September ____,
1996 based on the best information available to Bancshares, and the
Warrants may be exercised only by, and the underlying shares may be
issued only to, persons who are residents of such states. Any person
or entity seeking to exercise the Warrant will be required to execute
in connection therewith, in form satisfactory to the Company, a
certificate establishing that the person or entity exercising the
Warrant is deemed a resident of a state in which the Common Shares
<PAGE>
of the Company have been registered or are exempt from registration.
The Company's determination as to the state of residence of any person
seeking to exercise the Warrant or the availability of an exemption
from registration of such Warrant or the underlying securities of the
Company will be conclusive and binding on all persons attempting to
exercise the Warrant or to purchase the underlying shares of the
Company.
IN WITNESS WHEREOF, the corporation has signed this Warrant by its
duly authorized officer, this ______ day of September, 1996.
SNB BANCSHARES, INC. (SEAL)
BY:_______________________________
ROBERT C. HAM, Chief Executive
Officer and Chairman of the
Board
<PAGE>
EXERCISE FORM
EXHIBIT "A"
(To be completed and executed by the Registered Owner of the Warrant
to which this exhibit is attached to Tender and to purchase the stock
pursuant to the Warrant.)
SNB BANCSHARES, INC.
700 Walnut Street
P.O. Box 4748
Macon, Georgia 31208-4748
The undersigned hereby: (1) Irrevocably subscribes for and offers to
purchase ________________ shares of Common Stock of SNB Bancshares, Inc.
which is the subject of the Warrant to which this exhibit is attached; (2)
encloses payment of $____________ for these shares at a price of $13.50 per
share; and (3) requests that a certificate for the shares be issued in the
name of the undersigned and delivered to the undersigned at the address
specified below.
The undersigned does further represent that as of this date he or she
is a bona fide resident, or in the case of a corporation, partnership,
trust, estate or other entity is deemed a resident, of the State of
_______________.
In addition to those shares which the undersigned is entitled to
purchase and for which a check for the purchase price is enclosed, the
undersigned hereby subscribes for ____________ additional shares of the
Common Stock of SNB Bancshares, Inc. at a price of $13.50 per share. The
undersigned understands that this subscription may or may not be accepted
for such excess amount, or that it may be accepted in whole or in part. In
the event of notification that the excess subscription has been accepted,
the undersigned will promptly forward to Bancshares a check for the amount
of such excess subscription accepted by the Board of Directors of
Bancshares, and if that check is not received within seven (7) days of that
notice the undersigned acknowledges that Bancshares may cancel the
subscription.
This ______ day of _______________, 1996.
_____________________________________
(Please sign exactly as your name
appears on the Warrant)
____________________________________
____________________________________
(Address of Warrant holder)
____________________________________
(Social Security Number or Tax
Identification Number)
<PAGE>
EXHIBIT 5
[LETTERHEAD OF MARTIN, SNOW, GRANT & NAPIER APPEARS HERE]
August 27, 1996
Board of Directors
of SNB Bancshares, Inc.
700 Walnut Street
P.O. Box 4748
Macon, Georgia 31208-4748
Re: Registration Statement on SEC Form SB-2
Relating to the Issuance of 272,560 Shares
of the $1.00 Par Value Common Stock of
SNB Bancshares, Inc.
_______________________________________________
Gentlemen:
This opinion is rendered in connection with the SEC Form SB-2
Registration Statement which is being filed by SNB Bancshares, Inc. with
the Securities and Exchange Commission under the Securities Act of 1933,
as amended, with respect to the proposed issuance of a maximum of
272,560 shares of SNB Bancshares, Inc. common stock. We are of the
opinion that a maximum of 272,560 shares of $1.00 par value common stock
of SNB Bancshares, Inc., when issued in connection with the offering,
will be validly issued, fully paid and non-assessable, and that no
personal liability for the liabilities of SNB Bancshares, Inc. attaches
to the ownership of its $1.00 par value common stock under the laws of
the State of Georgia.
CONSENT
-------
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the
caption "Interest of Named Experts and Counsel" in the prospectus of SNB
Bancshares, Inc. included in the Registration Statement.
Yours very truly,
JOHN T. McGOLDRICK, JR.
<PAGE>
EXHIBIT 10(a)
[LETTERHEAD OF SECURITY NATIONAL BANK]
January 10, 1996
Mr. Harvie Averett Walker
134 Gleneagles Circle
Macon, Georgia 31210
Dear Rett:
This letter will set forth the terms of the agreement regarding your
employment with SNB Bancshares, Inc. (the "Company") and Security National Bank
(the "Bank").
1. EMPLOYMENT AND DUTIES.
---------------------
(a) Subject to the terms and conditions set forth in this letter agreement,
the Company and the Bank shall employ you as President and Chief Operating
Officer of the Company and the Bank. I will continue to serve the Company and
the Bank as Chief Executive Officer of the Company and the Bank until December
31, 1996, at which time it is expected that the Boards of Directors of the
Company and the Bank will designate you as Chief Executive Officer of the
Company and the Bank. I will remain as Chairman of the Boards of Directors of
the Company and the Bank at least until December 31, 1999, and will during such
time continue to serve on all committees of the Company and the Bank (subject to
the pleasure of the Boards of Directors of the Company and the Bank in
accordance with that certain resolution of the Boards of Directors of the
Company and the Bank adopted October 12, 1995). At all times during the term of
your employment with the Company and the Bank (the "Term"), you shall use your
best efforts, skills, knowledge and specialized training to perform the duties
and exercise the powers of and functions incident to your position as President
and Chief Operating Officer of the Company and the Bank, or which from time to
time may be assigned to or vested in you by the Chief Executive Officer or the
Boards of Directors of the Company and the Bank, in an efficient and competent
manner. At all times during the Term, you shall devote the whole of your time,
attention and ability to your duties hereunder, to the exclusion of all other
business activities; you shall comply with all reasonable requests, instructions
and regulations made by the Chief Executive Officer or the Boards of Directors;
and you shall give to the Company and the Bank such explanations, information
and assistance as the Chief Executive Officer or the Boards of Directors may
reasonably require.
<PAGE>
(b) You represent and warrant to the Company and the Bank that you are not
subject to any contractual commitments, either oral or written, relating to your
employment with any prior or current employer, which restrict in any way your
right to leave such employment at will; you are not and have never been a party
to any agreement, oral or written, which restricted in any way your right to
compete with any prior or current employer in any manner whatsoever; and you are
not aware of any matter or event which could restrict in any way your right to
compete with any current or prior employer in any manner whatsoever.
2. EMPLOYMENT TERM. The Term shall commence on January 11, 1996, and
---------------
shall continue from and after that date until terminated in accordance with this
letter agreement.
3. COMPENSATION.
------------
(a) Subject to the terms of this Agreement, as base compensation for the
services to be performed by you for the Bank and the Company during the term,
the Bank shall initially pay you a base salary of $125,000.00 per annum (the
"Base Salary"), which Base Salary shall be payable to you in no less frequently
than monthly installments, in arrears. The Personnel Committee of the Bank will
review your Base Salary annually and will at such time consider adjusting such
Base Salary, taking into account your performance, the operating results of the
Bank, and other performance issues. Subject adjustments shall be approved by
the Board of Directors of the Bank. Your Base Salary and all other compensation
hereunder shall be subject to all withholdings required by applicable laws or
regulations.
(b) In addition to the Base Salary, during the Term you shall be entitled
to participate in all cash incentive executive bonus plans that may from time to
time be adopted by the Board of Directors of the Bank for the benefit of all
officers of the Bank.
(c) Subject to shareholder approval, the Company currently intends to adopt
an incentive stock option plan pursuant to which the Company will issue
incentive stock options (as that term is defined in Section 422 of the Internal
Revenue Code) to you (the "Plan"). The Plan and/or your option Agreement
related thereto will describe in more detail your rights and obligations
thereunder, and shall contain all of the following terms. After one full
continuous year of employment by the Company and the Bank, the Company will
grant to you incentive stock options to purchase up to 7,500 shares of the
Company's common stock at the fair market value of such stock on the date of
such grant (the "Options"). These Options will vest at the rate of twenty
percent (20%) per
<PAGE>
year after such grant, until fully vested five (5) years after such grant. If,
prior to your exercise of all of the Options, your employment with the Bank or
the Company is terminated by the Bank or the Company or you pursuant to Section
5(d) hereof, all Options that are not vested at such time will be forfeited, and
you shall be required, within thirty (30) days after the date of termination of
your employment, to exercise all Options which shall have vested as of the date
of termination, or such vested Options shall also be forfeited. Furthermore,
if, prior to your exercise of all of the Options, your employment with the Bank
or the Company is terminated by the Bank or the Company pursuant to Section 5(c)
hereof, then upon such termination, all such Options owned by you on the date of
such termination which are not vested, shall be forfeited, and you shall be
required to exercise all Options within thirty (30) days after the date of
termination of your employment or such vested Options shall be forfeited. If,
prior to your exercise of all of the Options, your employment with the Bank or
the Company is terminated pursuant to Sections 5(a) or 5(b) hereof, or pursuant
to Section 5(e)(1) hereof, all Options shall be immediately exercisable and you
or your personal representative must exercise such Options within the later of
thirty (30) days after termination or thirty (30) days after the date of
qualification of the personal representative. Additionally, if and to the
extent any Options are not forfeited as a result of the termination of your
employment with the Company or the Bank, and after such termination you breach
any of the provisions of Sections 6 or 7 hereof, then all such Options that have
not been exercised as of the date of such breach shall be immediately forfeited.
All such Options must be exercised no later than ten years after the date of
grant. All such Options shall be nontransferable by you.
4. OTHER BENEFITS. During the Term, you shall be entitled to such fringe
--------------
benefits as may be recommended by the Personnel Committee of the Bank from time
to time, including the following and will be subject to approval by the Board of
Directors of the Bank.
(a) You shall be entitled to paid vacations and paid sick leave in
accordance with the Bank's practices with respect to vacations and sick leaves
established by the Bank for the benefit of its officers generally.
(b) Subject to your ability to qualify for coverage, you shall be
provided,such major medical, life, workers' compensation, disability and other
insurance coverage benefits as the Bank may from time to time make available for
the benefit of its officers generally.
<PAGE>
(c) You shall be entitled to the use of an automobile, the model and style
of which must be approved by the Personnel Committee of the Bank and the Board
of Directors of the Bank. You shall be entitled to be reimbursed for all
operating expenses of such automobile incurred by you in connection with your
services to the Bank and the Company under this letter agreement. You
acknowledge and agree that all expenses related to the personal use of the
automobile shall, if paid by the Bank in the discretion of the Personnel
Committee, be reported by the Bank as compensation to you.
(d) Subject to generally applicable participation limitations, you shall be
entitled to participate in those deferred compensation, retirement and/or
employee welfare benefit plans adopted or sponsored by the Bank from time to
time and made available to its officers generally.
(e) You shall be entitled to receive reimbursement for club dues and other
reasonable expenses incurred by you in the ordinary course of the business of
the Company or the Bank related to your membership in the Idle Hour Club, the
Macon City Club and the Macon Rotary Club.
(f) You shall be entitled to reimbursement by the Bank for all other
actual, reasonable and direct expenses incurred by you in the performance of
your duties hereunder, provided that such expenses are properly characterized as
being business expenses that are properly tax deductible for the Bank, and
further provided that such expenses were incurred only in accordance with the
policies and procedures established by the Bank from time to time. You agree to
provide the Bank with written documentation of such expenses in a form complying
with the records required of the Bank by the Internal Revenue Service and the
State of Georgia for tax deductibility purposes, and reimbursement for each
item's approved expenses shall be made within a reasonable time after receipt by
the Bank of the written documentation thereof.
5. TERMINATION.
-----------
(a) Death. In the event of your death during the Term, your employment by
-----
the Company and the Bank shall be deemed to terminate on the date on which your
death occurs, and all payments and benefits to you under this letter agreement
shall then cease, except (1) for all accrued but unpaid Base Salary through the
date of deemed termination, and (2) that, pursuant to Section 3(c) above, all
Options as of the date of deemed termination shall remain exercisable.
<PAGE>
(b) Disability. In the event that you become physically or mentally
----------
"Totally Disabled" during the Term, your employment by the Bank and the Company
shall be deemed to terminate on the date of such total disability, and all
payments and benefits to you under this letter agreement shall then cease,
except (1) for all accrued but unpaid Base Salary through the date of deemed
termination, and (2) that, pursuant to Section 3(c) above, all Options as of the
date of deemed termination shall remain exercisable. As used in this letter
agreement, the term "Totally Disabled" refers to a condition resulting from
injury or illness to you while you are an employee of the Bank or the Company
which prevents you from performing your services hereunder for a period of
ninety (90) consecutive days, and total disability shall be deemed to have
occurred on the first date following such ninety (90) day period.
(c) Termination for Cause. Your employment by the Bank and the Company may
---------------------
be terminated by the Bank and the Company for "Cause." For purposes of this
letter agreement, "Cause" shall mean:
(1) Conduct by you in the performance of your duties hereunder that amounts
to insubordination, fraud, dishonesty, misappropriation of Company or Bank
assets or misconduct;
(2) Failure by you to perform your duties hereunder diligently, competently
and in the manner and to the extent required under this letter agreement, or
breach by you of any covenant, promise, representation or warranty of this
letter agreement or of any fiduciary or other obligation owned by you to the
Bank or the Company, including without limitation the obligation to refrain from
engaging in the activities prohibited by Sections 6 and 7 of this letter
agreement;
(3) The commission by you of a felony or any crime involving moral
turpitude;
(4) Your failure or refusal to follow established lawful policies of the
Bank or the Company.
In any such event, the Bank and the Company may terminate your employment
immediately by written notice, and in the event of such termination under this
Section 5(c), all payments and benefits to you under this letter agreement shall
cease effective with the termination of employment, and all unexercised Options
shall thereupon be forfeited.
<PAGE>
(d) Termination Without Cause. Your employment by the Rank and the Company
-------------------------
may be terminated by you for any reason on not less than thirty (30) days prior
written notice to the Bank and the Company. In the event of termination by you
under this Section 5(d), all payments and benefits to you under this letter
agreement shall then cease, except for all accrued but unpaid Base Salary
through the date of termination. Your employment by the Bank and the Company
may be terminated by the Bank and the Company for any reason immediately upon
written notice to you. In the event of termination by the Bank and the Company
under this Section 5(d), all payments and benefits to you under this letter
agreement shall then cease, except (1) you shall be entitled to exercise all of
your then vested Options within 30 days after the date of termination, and (2)
you shall be entitled to receive, for a period of six (6) months following the
date of termination, your then current Base Salary, and those health insurance,
life insurance and other insurance benefits then enjoyed by you and other
officers of the Bank, as if your employment had not been terminated until the
end of such six (6) month period. Notwithstanding the above, if during such six
(6) month period you obtain employment elsewhere and comparable coverage is
provided by your new employer, you shall no longer be entitled to receive any
such insurance benefits.
(e) Change in Control.
-----------------
(1) Notwithstanding any other provision of this letter agreement to the
contrary, if a "Change in Control" occurs at any time during the first six (6)
years of the Term, and, within (1) year after such Change in Control, your
employment is either terminated by the Bank and the Company pursuant to Section
5(d), or is terminated by you pursuant to Section 5(d) due solely to an
"Involuntary Termination," then, notwithstanding any provision in this letter
agreement to the contrary, upon such termination of employment, all payments and
benefits to you under this letter agreement shall cease, except for the
following:
(a) The Bank shall continue to pay you your then current Base Salary for a
period of twelve (12) months after the effective date of your termination, as if
your employment had not been terminated; provided however, that upon your
written request, the aggregate "Present Value" of such payments shall be paid to
you by the Bank in a single lump sum payment not later than thirty (30) days
after the termination of your employment. For purposes of this letter
agreement, your "then current Base Salary" shall be the highest rate of Base
Salary that you received during the six (6) month period prior to your
termination.
<PAGE>
(b) You shall receive bonus payments from the company and the Bank for 12
months following the month in which your employment is terminated in an amount
for each such month equal to one-twelfth of the average of the bonuses paid to
you for the two calendar years immediately preceding the year in which such
termination occurs. Any bonus amounts that you had previously earned from the
Company or the Bank but which may not yet have been paid as of the date of
termination shall not be affected by this provision. The bonus amounts
determined herein shall be paid in a single lump sum payment, to be paid not
later than 30 days after termination of employment; provided, further, that the
-------- -------
amount of such lump sum payment shall be determined by taking the bonus payments
(as of the payment date) to be made and discounting them to their Present Value.
(c) All health insurance, life insurance and other insurance benefits
provided to you by the Bank or the Company as of the date of termination shall
be continued at the same level and in the same manner as if your employment had
not terminated (subject to customary changes in such coverages such as if you
retire or reach the age of 65), for a period of twelve (12) months from the date
of such termination. Any additional insurance coverage you had and were paying
for at termination, including dependent coverage, will also be continued for
such period at the same level and on the same terms as provided to you
immediately prior to your termination, to the extent permitted by the applicable
policies or contracts. All premiums and other costs you were paying for such
coverages at the time of termination shall be paid by you by separate check
payable to the Company or the Bank each month in advance. If the terms of any
benefit plan referred to in this subparagraph do not permit continued
participation by you, then the Company or the Bank will attempt to arrange for
other coverage providing substantially similar benefits, and the party who
previously paid the premiums with respect to such unavailable coverage will pay
the premiums with respect to any replacement coverage. Notwithstanding anything
in this subparagraph to the contrary, if during the twelve (12) month period
following such termination you obtain employment elsewhere and comparable
coverage is provided by your new employer, or die, all such benefits shall
immediately cease upon such employment or death.
(d) As provided in Section 3(c) above, all Options at the date of
termination shall be immediately exercisable.
(2) Notwithstanding any other provisions of this Section 5(e) to the
contrary, if at any time during the first six (6) years of the Term (a) there is
a public announcement by the Company of a proposal for a transaction that, if
consummated, would constitute
<PAGE>
a Change in Control, or the Board of Directors of the Company receives and
decides to explore an expression of interest with respect to a transaction that,
if consummated, would constitute a Change in Control (either transaction being
referred to herein as a "Proposed Transaction"); and (b) your employment is
thereafter terminated by the Company and the Bank pursuant to Section 5(d) and
prior to the consummation of the Proposed Transaction; and (c) the Proposed
Transaction is consummated within one (1) year after the date of termination of
your employment, and, in any event, at any time prior to January 11, 2002, then
you shall be entitled to benefits under Section 5(e)(1) as if a Change in
Control occurred during the first six (6) years of the Term and you were
terminated within one (1) year after such Change in Control by the Company
pursuant to Section 5(d).
(3) For purposes of this letter agreement: (a) "Present Value" shall be
determined by the methods set forth in Section 280G(d)(4) of the Internal
Revenue Code, as such is in effect on the date hereof; (b) "Involuntary
Termination" shall mean termination of your employment by you following a Change
in Control which in your judgment, is due to (1) a change of your
responsibilities, position (including status, office, title, reporting
relationships or working conditions), authority or duties (including changes
resulting from the assignment to you of any duties inconsistent with your
positions, duties or responsibilities as in effect immediately prior to the
Change in Control); or (2) a reduction in your compensation or benefits, or (3)
your forced relocation outside the Macon metropolitan area or significant
increase in your travel requirements. Involuntary Termination does not include
retirement (including early retirement) within the meaning of any retirement
plan, or your death or disability; and (c) "Change in Control" shall mean
either: (1) the acquisition, directly or indirectly, by any "person" (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended) within any twelve (12) month period of securities of the Company
representing any aggregate of thirty percent (30%) or more of the combined
voting power of the Company's then outstanding securities; (2) during any period
of two (2) consecutive years, individuals who at the beginning of such period
constitute the Board of Directors of the Company, cease for any reason to
constitute at least a majority thereof, unless each new director was nominated
by the directors then still in office who were directors at the beginning of the
period; (3) consummation of a merger, consolidation or other business
combination of the Company with any other "person" (as such term is used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended) or
affiliate thereof, other than a merger, consolidation or business combination
which would result in the outstanding common stock of
<PAGE>
the Company immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into common stock of the surviving
entity or a parent or affiliate thereof) at least sixty percent (60%) of the
common stock of the Company or such surviving entity or parent or affiliate
thereof outstanding immediately after such merger, consolidation or business
combination; (4) consummation of a plan of complete liquidation of the Company
or (5) the sale or disposition by the Company of all or substantially all the
assets of the Company to an unaffiliated third party.
6. PROPRIETARY INFORMATION.
-----------------------
(a) Nondisclosure. You acknowledge that, in performing your duties
-------------
hereunder, you will be making use of, acquiring and adding to, the Bank's and
the Company's confidential and proprietary information, which is of a special
and unique nature and value, which is not public information or is not generally
known or available to the Bank's and the Company's competitors, and which
relates to such matters as, but not limited to, the Bank's and the Company's
methods of operation, internal structure, software programs, equipment and
techniques, existing and contemplated facilities, products and services,
methods, ideas, procedures, manuals, confidential studies and reports, financial
information and practices, plans, pricing, selling techniques, sales and
marketing programs and methods, names, addresses and telephone numbers of
customers, credit and financial data of the Bank and the Company and their
customers, particular business requirements of the Bank's and the Company's
customers, special methods and processes involved in selling the Bank's and the
Company's products and services, and any other information related to the Bank's
and the Company's customers that could be used as competitive advantage by the
Bank's and the Company's competitors if revealed or disclosed to such
competitors, and all "trade secrets" of the Bank and the Company, as that term
is defined in O.C.G.A. 10-I-761, all of which shall be deemed to be
"Confidential Information." You agree that, during the Term, and (1) with
respect to all Confidential Information consisting of "trade secrets," for so
long as such Confidential Information continues to constitute "trade secrets"
(or for a period of one (1) year after the Term, whichever is longer); and (2)
with respect to all Confidential Information not constituting "trade secrets",
for a period of one (1) year after the Term, you shall not, directly or
indirectly, use, divulge or disclose to any person or entity, other than those
employed by the Bank and the Company and authorized to receive such information,
any of such Confidential Information which is obtained by you as a result of
your employment by the Bank and the Company, but shall hold all of the same
confidential and
<PAGE>
inviolate and shall not use such Confidential Information against the best
interests of the Bank and the Company. If you become legally compelled (by
deposition, interrogatory, request for production of documents, subpoena, civil
investigative demand or similar process) to disclose any of the Confidential
Information, you shall provide the Bank and the Company with prompt prior
written notice of such requirement so that the Bank and the Company may seek a
protective order or other appropriate remedy. You will cooperate fully with the
Bank's and the Company's efforts to obtain any such order or other relief. In
the event that such protective order or other remedy is not obtained, you will
furnish only that portion of the Confidential Information which you are advised
by written opinion of counsel is legally required.
(b) Return of Records. All customer and employee files, contracts and
-----------------
agreements, financial books, records, instruments and documents, customer lists,
memoranda, data, reports, software, rolodexes, telephone and address books,
letters, research, card decks, listings, and any other instruments, records or
documents relating or pertaining to the customers of the Bank and the Company,
the duties performed hereunder by you, or the business of the Bank and the
Company (collectively, the "Records") shall at all times be and remain the
property of the Bank and the Company. Upon termination of your employment under
this letter agreement for any reason whatsoever, you shall return to the Bank
and the Company all records, and you shall neither make nor retain any copies of
any of such Records after such termination.
7. PROTECTIVE COVENANTS. You acknowledge that your specialized skills,
--------------------
abilities and contacts are important to the success of the Bank and the Company,
and agree that you shall faithfully and strictly adhere to the following
covenants:
(a) Noncompete. During the Term and for a period of one (1) year
----------
thereafter, you will not, anywhere within a fifty (50) mile radius of 700 Walnut
Street, Macon, Georgia 31201 (the "Territory"), compete directly as a
"Competitor," or be employed as a consultant, officer, director, executive or
employee by any "Competitor," in a capacity that would result in you performing
activities that are substantially similar to the services described herein and
performed for the Bank and the Company by you hereunder. As used in this Section
7(a), the term "Competitor" shall mean any person, business or entity who or
which engages directly or indirectly in the Territory in the commercial banking
business. You represent that during the Term you will perform your services to
the Bank and the Company under this letter agreement throughout the Territory.
<PAGE>
(b) Nonsolicitation of Customers. During the Term and for a period of one
----------------------------
(1) year thereafter, you will not, on your own behalf or on behalf of any
person, firm; partnership, association, corporation or business organization,
entity or enterprise, solicit, contact, call upon, communicate with or attempt
to communicate with any customer or prospect of the Bank or the Company, or any
representative of any customer or prospect of the Bank or the Company, with a
view to the sale or provision of any product or service competitive or
potentially competitive with any product or service sold or provided or under
development by the Bank or the Company during the last two (2) years of your
employment with the Bank or the Company; provided that the restrictions set
forth in this Section 7(b) shall apply only to customers or prospects of the
Bank or the Company, or representatives of customers or prospects of the Bank or
the Company, with which you had contact during the last two (2) years of the
Term.
(c) Nonsolicitation of Employees. During the Term and for a period of one
----------------------------
(1) year thereafter, you will not directly or indirectly solicit or encourage
any employee of the Bank or the Company to leave such employment, or directly or
indirectly employ in any capacity any (Pounds)former employee of the Bank or the
Company, unless such former employee shall have ceased to be so employed by the
Bank or the Company for a period of at least one (1) year.
(d) Construction; Remedies. You agree that the covenants and agreements
----------------------
contained in Sections 6 and 7 of this Agreement are of the essence of this
letter Agreement, and that each of such covenants is reasonable and necessary to
protect and preserve the interests and business of the Bank and the Company. You
further agree that each of such covenants is separate, distinct and severable,
not only from the other of such covenants, but also from the remaining
provisions of this letter agreement; that the unenforceability of any such
covenants or agreements shall not affect the validity or enforceability of any
other such covenants or agreements or any other provision or provisions this
Agreement; and that, in the event any court of competent jurisdiction or
arbitrator determines, rules or holds that any such provision, covenant or
agreement hereof is overly broad or against the public policy of the state, then
said court or arbitrator is specifically authorized to reform and narrow said
provision, covenant or agreement to the extent necessary to make said reformed
and narrowed provisions, covenant or agreement valid and enforceable. You agree
that any breach of the provisions of Section 6 or 7 of this letter agreement is
likely to result in irreparable injury to the Bank and the Company, that the
remedy at law alone will be an inadequate remedy for such breach, and that in
addition to any
<PAGE>
other remedy it may have, the Bank or the Company shall be entitled to enforce
the specific performance of this letter agreement by you and to seek both
temporary and permanent injunctive relief (to the extent permitted by law)
without the necessity of proving actual damages.
(e) Section 6 and this Section 7 shall not apply upon termination of your
employment by the Bank and the Company under Section 5(d) or in the event of a
Change in Control.
We are very excited about you joining the Security Team. If the terms of
this letter agreement correctly reflect your understanding relating to your
employment, please indicate your acceptance below.
Yours very truly,
/s/ Robert C. Ham
___________________________________
Robert C. Ham, as Chairman
and Chief Executive Officer of
SNB Bancshares, Inc. and
Security National Bank
Agreed and Accepted this ______ day of January, 1996.
/s/ Harvie Averett Walker
-----------------------------------
Harvie Averett Walker
<PAGE>
EXHIBIT 10(b)
[LETTERHEAD OF THE SUMMIT GROUP APPEARS HERE]
LEASE
THIS LEASE, made as of this 24th day of April, 1995, by and between F. Tredway
---- ----- -- ----------
Shurling, first party, (hereinafter called "Landlord"), and Security National
- -------- -----------------
Bank, second party, (hereinafter called "Tenant"), and Summit Commercial
- ----
Services, Inc., d/b/a The Summit Group, third party, (hereinafter called
"Agent");
WITNESSETH:
1. PREMISES - The Landlord, for and in consideration of the rents, covenants,
agreements and stipulations hereinafter mentioned, provided for and contained,
to be paid, kept and performed by the Tenant, has leased and rented, and by
these presents leases and rents, unto the said Tenant, and said Tenant hereby
leases and takes upon the terms and conditions which hereinafter appear, the
following described property (hereinafter called "Premises"), to wit:
All that tract or parcel of land lying and being in Bibb County, Georgia,
consisting of approximately .5 acre of land with a 2,541 square foot
building to be taken from a larger tract described in Deed Book 2383, Page
278, of the Bibb County tax records. Property further described and
outlined in red on the attached plat, made a part of this contract by
reference;
and being known as Shurlington Plaza Out-Parcel, Macon, Georgia.
---------------------------------------------
2. TERM - The Tenant shall have and hold the Premises for a term of three (3)
years beginning on the 1st day of September, 1995, and ending on the 31st day
--- --------- -- ----
of August, 1998, at midnight, unless sooner terminated as hereinafter provided.
------ --
3. RENTAL - Tenant agrees to pay to Landlord, by payments to The Summit Group,
Agent of Landlord, an annual rent in the amount of $30,000.00, paid in equal
---------
monthly installments of $2,500.00. Said monthly rent shall be paid at the
--------
designated office of the Agent, in advance and promptly on the first day of each
and every month, during the initial lease term and any renewals thereof. Any
rental payment received after the tenth (10th) day of any month shall include a
five (5%) percent late fee.
4. AGENT'S COMMISSION - Agent has rendered Landlord and Tenant a valuable
service by assisting in the creation of the Landlord-Tenant relationship
hereunder. For this reason, Agent is made a party to this Lease and is given a
special lien on the interest of the Landlord and the Tenant in the Premises in
order to enable Agent to enforce its commission rights against the Premises as
well as against the other parties hereto as herein provided and as otherwise
provided by law or equity. The commission to be paid in conjunction with the
creation of the aforesaid Landlord-Tenant relationship by this Lease has been
negotiated between Landlord and Agent, and Landlord hereby agrees to pay Agent,
as compensation for Agent's services in procuring this Lease and creating the
aforesaid Landlord-Tenant relationship as follows:
Five percent (5%) of the monthly rental until expiration or purchase option
- --------------------------------------------------------------------------------
is exercised, whichever occurs first.
- --------------------------------------------------------------------------------
5. PURCHASE OF PROPERTY - In the event that Tenant acquires title to the
Premises or any part thereof, at any time during the term of this Lease, any
renewals thereof, or within six months after this expiration of the term hereof
or any extensions, then Landlord shall pay Agent a sales commission on the sale
of the Premises in the amount equal to five (5%) percent of the gross sales
price of the property. In the event that the property is sold to any other
party, then the agents commission rights contained in this agreement shall not
be relieved, and the purchaser shall assume all commission obligations incurred
by the Landlord in connection with this agreement.
6. UTILITY BILLS - Tenant shall pay all utility bills, including, but not
limited to water, sewer, gas, electricity, fuel, light, and heat bills, for the
Premises, and Tenant shall pay all charges for garbage collection services or
other sanitary services rendered to the Premises or used by tenant in connection
therewith. If Tenant fails to pay any of said utility bills or charges for
garbage collection or other sanitary services, Landlord may pay same, and such
payment shall be added to, and become part of, the next rental payment due under
this Lease.
7. USE OF PREMISES - Premises shall be used for banking facility purposes and
----------------
no other. Premises shall not be used for any illegal purposes, nor in any
manner to create any nuisance or trespass on the premises, nor in any manner to
increase the rate of insurance on the premises.
8. ABANDONMENT OF THE PREMISES - Tenant agrees not to abandon or vacate the
Premises during the period of this Lease and agrees to use the Premises for the
purposes herein leased until the expiration hereof.
9. REPAIRS BY LANDLORD - Landlord agrees to keep in good repair the roof,
foundations, and exterior walls of the Premises (exclusive of all glass and all
exterior doors), and underground utility and sewer pipes outside the exterior
walls of the building, except repairs rendered necessary by the negligence of
Tenant, its agents, employees or invitees. Landlord gives to Tenant exclusive
control of the Premises and shall be under no obligation to inspect said
Premises. Tenant shall promptly report in writing to Landlord any defective
condition known to it which Landlord is required to repair.
10. REPAIRS BY TENANT - Tenant accepts the Premises in their present condition
and as suited for the uses intended by Tenant. Tenant shall, throughout the
initial term of this Lease and any extension or renewal thereof, at its expense,
maintain in good order and repair the Premises, including the building, heating
and air conditioning equipment (including but not limited to replacement of
parts, compressors, air handling units and heating units), and other
improvements located thereon, except those repairs expressly required to be made
by Landlord hereunder. Tenant further agrees to care for the grounds around the
building, including the mowing of grass, parking lot maintenance, care of shrubs
and general landscaping. Tenant agrees to return the Premises to Landlord at
the expiration, or prior to termination, of this Lease in as good condition and
repair as when first received, natural wear and tear, damage by storm, fire,
lightning, earthquake or other casually alone excepted.
<PAGE>
LEASE
26. RIGHTS CUMULATIVE - All rights, powers and privileges conferred hereunder
upon parties hereto shall be cumulative and not restrictive of those given by
law.
27. SERVICE OF NOTICE - Tenant hereby appoints as his agent to receive service
of all dispossessory or distraint proceedings and notices hereunder, an all
notices required under this Lease, the person in charge of the Premises at the
time, or occupying the Premises; and if no person is in charge of, or occupying
the Premises, then such service or notice may be made by attaching the same on
the main entrance to the Premises. A copy of all notices under this Lease shall
also be sent to Tenant's last known address, if different from the Premises.
28. WAIVER OF RIGHTS - No failure of Landlord to exercise any power given
Landlord hereunder, or to insist upon strict compliance by Tenant of his
obligations hereunder, and no custom or practice of the parties at variance with
the terms hereof shall constitute a waiver of Landlord's right to demand exact
compliance with the terms hereof.
29. OWNERSHIP - The owner of the Premises is the Landlord in this agreement, and
the person authorized to manage the Premises is The Summit Group, as agent of
the Landlord. Service of process and demands and notices as to the Landlord
shall be made to The Summit Group whose address is 2245 Vineville Avenue, Macon,
Georgia 31204, who is authorized to acknowledge the receipt of same on behalf of
the Landlord.
30. AGENT'S SERVICES - Agent is hereby a third party to this Lease solely for
the purpose of enforcing his rights of commissions for services rendered, and it
is agreed by all parties hereto that Agent is acting solely in the capacity as
agent for Landlord, to whom Tenant must look to regarding all covenants,
agreements and warranties herein contained, and that Agent shall not be liable
for this obligations of the Landlord contained herein.
31. TIME OF ESSENCE - Time is of essence of this Lease.
32. DEFINITIONS - "Landlord" as used in this Lease shall include first party,
his heirs, representatives, assigns and successors in title to the Premises.
"Tenant" shall include second party, his heirs and representatives, and if this
Lease shall be validly assigned or sublet, shall include also Tenant's assignees
or sublessees, as to the Premises covered by such assignment or sublease.
"Agent" shall include third party, his successors, assigns, heirs and
representatives. "Landlord," "Tenant," and "Agent" include male and female,
singular and plural, corporation, partnership or individual, as may fit the
particular parties.
33. SPECIAL STIPULATIONS - Special stipulations, if any, which by their
reference and attachment to this lease hereof shall become a part of the
agreement, and should they conflict with any of the foregoing provisions, the
special stipulations shall control. (Attached)
This Lease contains the entire agreement of the parties hereto and no
representations, inducements, promises or agreements, either verbal or written,
between the parties, not embodied herein, shall be of any force or effect.
IN WITNESS WHEREOF, the parties herein have hereunto set their hands and
seals, the day and year above noted.
/s/ Tredway Shurling /s/ Security National Bank
- --------------------------- --------------------------
Landlord Tenant
By: /s/ Robert Ham, Pres.
- --------------------------- -------------------------
Landlord Tenant
- ----------------------------
for: The Summit Group, Agent
<PAGE>
SPECIAL STIPULATIONS
to the Lease Agreement between
F. Tredway Shurling (Landlord)
and
Security National Bank (Tenant)
RE: Shurlington Plaza Out-Parcel, Macon, Georgia
1. Tenant accepts premises "AS IS", except for the HVAC system which Landlord
agrees to warrant for ninety (90) days.
2. Lease is subject to Tenant's satisfactory inspection of the premises within
thirty (30) days of acceptance of this contract.
3. Tenant shall pay all expenses on the property, including property taxes and
insurance (fire/hazard and liability).
4. Tenant shall have the right to remodel the interior and exterior of the
building along with re-landscaping the grounds.
5. Tenant shall have the right to erect a pole sign where the existing
NationsBank sign is located or elsewhere on the leased premises.
6. Landlord shall grant Tenant the necessary ingress/egress and parking
easements from the existing shopping center.
7. Landlord grants Tenant permission to negotiate with NationsBank for any
personal property or removable fixtures currently located within the
demised premises.
8. Lease is subject to Landlord successfully negotiating a cancellation of the
existing lease with NationsBank.
9. Landlord grants Tenant immediate access to the premises for the purpose of
planning and estimating proposed renovations.
10. It is understood by both parties that the vault door belongs to
NationsBank. Should the vault door remain after NationsBank vacates, it
shall become part of the demised premises.
11. This agreement shall include an option to purchase the leased premises for
$275,000 at any time during the lease term. Said option is attached and
made a part of this contract by reference.
SECURITY NATIONAL BANK
/s/ Tredway Shurling By: /s/ Robert Ham, Pres.
- --------------------------- -----------------------
Landlord Tenant
Date: 4/25/95 Date: 4/24/95
---------------------- ----------------------
<PAGE>
ADDENDUM
to the Lease Agreement between
F. Tredway Shurling (Landlord)
and
Security National Bank (Tenant)
In reference to the contract dated April 24, 1995, between the above referenced
parties, on the property described as Shurlington Plaza Out-Parcel, Macon,
Georgia;
The contract is amended as follows:
1. Tenant has completed the inspection outlined in Special Stipulation #2
and found everything to be satisfactory.
2. This lease shall be subject to approval from all governmental
authorities governing the use of the premises as a bank branch for
Security National Bank.
All other terms and conditions of the contract remain binding on the undersigned
parties.
/s/ Tredway Shurling /s/ Robert Ham
- -------------------------- ----------------------------
Landlord Tenant
Date: 5/24/95 Date: 5/24/95
--------------------- -----------------------
THE SUMMIT GROUP
By: /s/ ??????????????????
- --------------------------
<PAGE>
EXHIBIT 10(c)
SNB BANCSHARES, INC.
1996 INCENTIVE STOCK OPTION PLAN
1. Purpose.
-------
(a) This 1996 Incentive Stock Option Plan (the "Plan") document is intended
to implement and govern the Incentive Stock Option Plan of SNB Bancshares, Inc.,
a Georgia corporation ("Company"), and its subsidiary corporation, Security
National Bank ("Bank"). It provides for the granting of options that are
intended to qualify as incentive stock options ("Incentive Stock Options")
within the meaning of Section 422(b) of the Internal Revenue Code of 1986, as
amended (the "Code").
(b) The purpose of this Plan is to further the interests of the Company by
assisting the Bank in retaining and developing strong management and inducing
individuals to become and remain employees of the Bank. The Plan is intended to
accomplish this purpose by allowing the Company to grant options ("Options") to
purchase shares of the Company's $1.00 par value common stock ("Common Stock").
For purposes of the Plan, "Parent Corporation" and "Subsidiary Corporation"
shall mean corporations as defined in Sections 424(e) and 424(f), respectively,
of the Code.
2. Administration.
--------------
(a) The Plan shall be administered by the Board of Directors (the "Board")
or by a committee ("Committee") appointed by the Board and consisting of not
less than two Board members. (For purposes of this plan document, the term
"Board" shall mean the Committee to the extent that the Board's powers have been
delegated to the Committee.)
(b) The Board shall have sole authority in its absolute discretion to (i)
determine which officers or other key employees of the Bank shall receive
Options ("Optionees"), and (ii) subject to the express provisions of this Plan,
to determine the time when Options shall be granted, the terms and conditions of
Options other than those terms and conditions fixed under this Plan, and the
number of shares which may be issued upon exercise of the Options. The Board
shall adopt by resolution such rules and regulations as may be required to carry
out the purposes of the Plan and shall have authority to do everything necessary
or appropriate to administer the Plan. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees.
Administration of the Plan with respect to members of the Committee shall not be
delegated, but shall at all times remain vested in the Board. The Board may from
time to time remove members from, or add members to, the Committee and vacancies
on the Committee shall be filled by the Board. Furthermore, the Board at any
time by resolution may abolish the Committee and revest in the Board the
administration of the Plan.
<PAGE>
(c) With respect to Options granted to an employee who is also a member of
the Board, the Board shall take action by a vote sufficient without counting the
vote of such member of the Board, although such member of the Board may be
counted in determining the presence of a quorum at a meeting of the Board which
authorizes the granting of Options to such member of the Board.
(d) The Committee, if appointed pursuant to this Section 2, shall report to
the Board the name of employees granted Options, the number of shares covered by
each Option and the terms and conditions of each such Option.
3. Eligibility. Persons who shall be eligible to receive Options under the
-----------
Plan shall be officers and other key employees of the Bank who render those
types of services which contribute materially to the success of the Bank. The
determination as to whether an officer or other key employee is eligible to
receive Options hereunder shall be made by the Board in its sole discretion, and
the decision of the Board shall be binding and final.
4. Number of Shares. The maximum aggregate number of shares which may be
----------------
optioned and sold under the Plan is 32,500 shares of authorized but unissued or
treasury shares of Common Stock of the Company. In the event that Options
granted under the Plan shall terminate or expire without being exercised, in
whole or in part, the shares subject to such unexercised Options shall again
become available for the granting of an Option under this Plan.
5. Option Price. The option price ("Option Price") for shares of Common
------------
Stock to be issued under the Plan shall be equal to or greater than the fair
market value of such shares on the date on which the Option covering such shares
is granted, except that if on the date on which such Option is granted the
Optionee is a Restricted Shareholder (as defined hereinafter), then such Option
Price shall be equal to or greater than one hundred ten percent (110%) of the
fair market value of the shares on the date such Option is granted. For the
purposes of the Plan, a "Restricted Shareholder" is an individual who, at the
time an Option is granted under the Plan, owns stock possessing more than ten
percent (10%) of the total combined vesting power of all classes of stock of the
Bank, with stock ownership to be determined in light of the attribution rules
set forth in Section 424(d) of the Code. The fair market value of shares of
Common Stock for all purposes of the Plan shall be determined by the Board in
its sole discretion, exercised in good faith.
6. Term of the Plan. The Plan shall be effective as of May 23, 1996 and
----------------
shall continue in effect for ten (10) years thereafter until May 23, 2006,
unless terminated earlier. No Option may be granted pursuant hereto after May
23, 2006.
2
<PAGE>
7. Exercise of Options. Subject to the limitations set forth herein and/or
-------------------
in any applicable Stock Option Agreement entered into hereunder, Options granted
under the Plan shall be exercisable in accordance with the following rules:
(a) General. Subject to the other provisions of this Section 7, Options
-------
shall vest and become exercisable at such times and in such installments as the
Board shall provide in each individual Stock Option Agreement. Notwithstanding
the foregoing, the Board may in its sole discretion, accelerate the time at
which an Option or installment thereof may be exercised.
(b) Termination of Options. All installments of an Option shall expire
----------------------
and terminate on such date as the Board shall determine, but in no event later
than ten (10) years (five (5) years in the case of a Restricted Shareholder)
from the date such Option was granted ("Option Termination Date"). Unless
provided otherwise in this Section 7 or in the Stock Option Agreement pursuant
to which an Option is granted, an Option shall vest and may be exercised as
provided in such Stock Option Agreement and at any time thereafter until, and
including, the day before the Option Termination Date.
(c) Change in Control.
-----------------
(i) In the event that the employment of an Optionee with the Company or
Bank is terminated, voluntarily or involuntarily, by reason of a Change in
Control (as defined hereinafter), any Options granted pursuant hereto which have
not vested as of the date of such Optionee's termination of employment by reason
of a Change in Control shall become vested and exercisable on the Optionee's
date of termination. All vested and exercisable Options granted pursuant hereto
to such Optionee shall be exercisable until the earlier of the Option
Termination Date or the date thirty (30) days after the date of such Optionee's
date of termination. Provided, however, if such Optionee should breach any
covenant regarding proprietary information or other protective covenants of an
employment agreement with the Company or Bank following termination, then any
Option granted pursuant hereto but not exercised as of the date of such breach
shall be immediately forfeited. As used herein, a "Change in Control" shall
mean either: (1) the acquisition, directly or indirectly, by any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended) within any twelve (12) month period of securities of the
Company or Bank representing any aggregate of thirty percent (30%) or more of
the combined voting power of the Parent Corporation's or Subsidiary
Corporation's then outstanding securities; (2) during any period of two (2)
consecutive years, individuals who at the beginning of such period constitute
the Board of Directors of the Company or Bank, cease for any reason to
constitute a majority thereof, unless each new director was nominated by the
directors then still in office who
3
<PAGE>
were directors at the beginning of the period; (3) consummation of a merger,
consolidation or other business combination of the Company or Bank with any
other "person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended) or affiliate thereof, other than a
merger, consolidation or business combination which would result in the
outstanding common stock of the Company or Bank immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into common stock of the surviving entity or a parent or affiliate thereof) at
least sixty percent (60%) of the common stock of the Company or Bank, or such
surviving entity or parent or affiliate thereof outstanding immediately after
such merger, consolidation or business combination; (4) consummation of a plan
of complete liquidation or the Company or Bank; or (5) the sale or disposition
by the Company or Bank of all or substantially all the assets of the Company or
Bank to an unaffiliated third party.
(ii) Upon the consummation of any Change in Control specified in
Section 7(c)(i) above, the Plan and any unexercised Options issued hereunder (or
any unexercised portion thereof) shall terminate and cease to be effective,
unless provision is made in connection with such transaction for assumption of
Options previously granted or the substitution for such Options of new options
covering the securities of a successor corporation or an affiliate thereof, with
appropriate adjustments as to the number and kind of securities and prices. Any
change or adjustment made pursuant to the terms of this Section 7(c)(ii) shall
be made in such a manner so as not to constitute a "modification" as defined in
Section 424(h) of the Code and so as not to cause any Incentive Stock Option
issued under the Plan to fail to continue to qualify as an Incentive Stock
Option as defined in Section 422(b) of the Code.
(d) Death or Disability of Optionee While Employed.
----------------------------------------------
(i) In the event that the employment of an Optionee with the Company or
Bank is terminated by reason of such Optionee's death, any Options granted
pursuant hereto which have not vested as of the date of such Optionee's death
shall become vested and exercisable on the date of Optionee's death. All vested
and exercisable Options granted pursuant hereto to such Optionee shall be
exercisable until the earlier of the Option Termination Date or the date thirty
(30) days after the date of qualification of such Optionee's personal
representative. Any such vested Option of a deceased Optionee may be exercised
prior to their expiration only by a person or persons to whom such Optionee's
Option rights pass by will or by the laws of descent and distribution.
Provided, however, if such Optionee should breach any covenant regarding
proprietary information or other protective covenants of an employment agreement
with the Company or Bank following termination, then any Option granted pursuant
hereto but not
4
<PAGE>
exercised as of the date of such breach shall be immediately forfeited.
(ii) In the event that the employment of an Optionee with the Company
or Bank is terminated by reason of such Optionee becoming Totally Disabled (as
defined hereinafter), any Options granted pursuant hereto which have not vested
as of the date of such Optionee's termination of employment by reason of
becoming Totally Disabled shall become vested and exercisable on the date of
Optionee becoming Totally Disabled. All vested and exercisable Options granted
pursuant hereto to such Optionee shall be exercisable until the earlier of the
Option Termination Date or the date thirty (30) days after the date of such
Optionee becoming Totally Disabled. As used herein, "Totally Disabled" refers
to a condition resulting from injury or illness to an Optionee while such
Optionee is an employee of the Company or Bank which prevents such Optionee from
performing his or her services pursuant to any employment agreement for a period
of ninety (90) consecutive days. Provided, however, if such Optionee should
breach any covenant regarding proprietary information or other protective
covenants of an employment agreement with the Company or Bank following
termination, then any Option granted pursuant hereto but not exercised as of the
date of such breach shall be immediately forfeited.
(e) Termination of Employment Other Than by Change in Control or by Death
---------------------------------------------------------------------
or Disability.
-------------
(i) In the event that the employment of an Optionee with the Company
or Bank is terminated for Cause (as defined hereinafter), all Options granted
pursuant hereto which have not vested as of such Optionee's date of termination
shall expire and become unexercisable on the earlier of the Option Termination
Date or the Optionee's date of termination. All vested and exercisable options
as of such Optionee's date of termination shall expire on the earlier of the
Option Termination Date or the date thirty (30) days after such Optionee's date
of termination. As used herein, "Cause" shall mean:
(1) conduct by an Optionee in the performance of his or her duties
that amounts to insubordination, fraud, dishonesty, misappropriation of Company
or Bank assets or misconduct;
(2) failure by an Optionee to perform his or her duties diligently,
competently and in a manner and to the extent required under any employment
agreement with the Company or Bank, or breach by an Optionee of any covenant,
promise, representation or warranty of any employment agreement with the Company
or Bank or of any fiduciary or other obligation owed by an Optionee to the
Company or Bank, including without limitation the obligation to refrain from
engaging in activities prohibited by any employment agreement with Company
or Bank;
5
<PAGE>
(3) the commission by an Optionee of a felony or any crime
involving moral turpitude;
(4) failure of an Optionee to follow established lawful policies
of the Company or Bank.
Provided, however, if such Optionee should breach any covenant regarding
proprietary information or other protective covenants of an employment agreement
with the Company or Bank following termination, then any Option granted pursuant
hereto but not exercised as of the date of such breach shall be immediately
forfeited.
(ii) In the event that the employment of an Optionee with the Company
or Bank is terminated by the Company or Bank or by Optionee for any reason other
than for Cause or upon Optionee's death or becoming Totally Disabled, all
Options granted pursuant hereto which have not vested as of such Optionee's date
of termination shall expire and become unexercisable on the earlier of the
Option Termination Date or the Optionee's date of termination. All vested and
exercisable options as of such Optionee's date of termination shall expire on
the earlier of the Option Termination Date or the date thirty (30) days after
such Optionee's date of termination. A leave of absence approved in writing by
the Board shall not be deemed a termination of employment for purposes of this
Section 7(e)(ii), but no Option may be exercised during any such leave of
absence. Provided, however, if such Optionee should breach any covenant
regarding proprietary information or other protective covenants of an employment
agreement with the Company or Bank following termination, then any Option
granted pursuant hereto but not exercised as of the date of such breach shall be
immediately forfeited.
(f) Payment. The entire Option Price shall be paid in cash at the time
-------
the Option is exercised.
(g) Miscellaneous.
-------------
(i) An Option may be exercised in accordance with this Section 7 as to
all vested Options from time to time during the applicable option period, except
that an Option shall not be exercisable with respect to fractions of a share.
(ii) As a condition to the exercise of an Option, the Board may in its
sole discretion, require the Optionee to pay in cash, in addition to the
purchase price of the shares covered by the Option, an amount equal to any
federal, state and local taxes that may be required to be withheld in connection
with the exercise of such Option.
6
<PAGE>
8. Shareholder Approval. The Options granted under the Plan are effective
--------------------
immediately upon adoption of the Plan by the Board, but the exercise of any
Option granted is conditioned on approval of the Plan by stockholders of the
Company as required by applicable law and/or the Company's Certificate of
Incorporation and Bylaws within twelve months after approval of the Plan by the
Board. No Option granted pursuant hereto shall be exercisable (or otherwise
vest any rights thereunder in the Optionees) unless and until the Plan has been
so approved.
9. Limit on Amount of Exercisable Options. The aggregate fair market value
--------------------------------------
(determined as of the date the Option is granted) of the shares of Common Stock
with respect to which Incentive Stock Options are exercisable for the first time
by such individual during any calendar year under all incentive stock option
plans of the Company shall not exceed one hundred thousand dollars
($100,000.00).
10. Stock Option Agreement. The terms and conditions of Options granted under
----------------------
the Plan shall be evidenced by a Stock Option Agreement executed by the Company
or Bank and the person to whom the Option is granted. Each Stock Option
Agreement shall incorporate the Plan by reference and shall include such
provisions as are determined to be necessary or appropriate by the Board.
11. Stock Restriction Agreement. As a condition to the granting of any Option
---------------------------
hereunder and the subsequent exercise of any such Option, the Board may require
the Optionee to enter into a stock restriction agreement with the Company for
the purpose of limiting the sale or other transfer of ownership of Common Stock
acquired by the Optionee.
12. Amendment or Termination of the Plan.
------------------------------------
(a) The Board may amend, suspend and/or terminate the Plan at any time;
provided, however, that except as provided in Section 15 below, the Board shall
not amend the Plan in the following respects without shareholder approval:
(i) To increase the maximum number of shares subject to the Plan;
(ii) To change the designation or class of persons eligible to receive
Options under the Plan;
(iii) To extend the term of the Plan or the maximum Option exercise
period; or
(iv) To decrease the minimum price at which shares may be optioned
under the Plan.
(b) Furthermore, the Plan may not, without the approval of
7
<PAGE>
the shareholders, be amended in any manner that would cause Incentive Stock
Options issued hereunder to fail to qualify as Incentive Stock Options as
defined in Section 422(b) of the Code. Notwithstanding the foregoing, no
amendment, suspension or termination of the Plan shall adversely affect Options
granted on or prior to the date thereof, as evidenced by the execution of a
Stock Option Agreement by both the Company and the Optionee, without the consent
of such Optionee.
13. Options Not Transferable. Options granted under this Plan may not be sold,
------------------------
pledged, hypothecated, assigned, encumbered, gifted or otherwise transferred or
alienated in any manner, either voluntarily or involuntarily by operation of
law, other than by will or the laws of descent and distribution, and may be
exercised during the lifetime of an Optionee only by such Optionee or, if such
Optionee shall become legally Incompetent or disabled, by such Optionee's
guardian or legal representative.
14. Restrictions on Issuance of Shares.
----------------------------------
(a) Subject to the limitations set forth herein, the Company shall have the
following registration, qualification and stock exchange approval obligations:
(i) In the event that the Company shall deem it necessary to register
the Plan and/or the shares of Common Stock and/or the Options under the
Securities Act of 1933 or other applicable statutes any shares of Common Stock
with respect to which an Option shall have been exercised, or to qualify any
such shares for exemption from such registration requirements, then the Company
shall take such action at its own expense before delivery of such shares; and/or
(ii) In the event the shares of stock of the Company shall be listed
on any national stock exchange at the time of the exercise of an Option under
the Plan, then the Company shall make prompt application for such stock
exchange's approval of the listing of such shares on such stock exchange, at the
sole expense of the Company.
(b) In no event shall the Company be obligated to agree to any conditions
which it deems unacceptable as a prerequisite to obtaining such registration,
qualification and/or stock exchange approval. The inability of the Company to
obtain from any regulatory agency and/or stock exchange the authorization deemed
by the Company's counsel to be necessary to the lawful issuance and sale of any
shares of its stock hereunder shall relieve the Company of any liability in
respect of the non-issuance or sale of such stock as to which such requisite
authorization shall not have been obtained.
(c) The exercise of Options granted under the Plan shall be
8
<PAGE>
conditioned upon the Company obtaining any required regulatory permit
authorizing the Company to issue such Options.
15. Adjustments Upon Changes In Capitalization. If the outstanding shares of
------------------------------------------
Common Stock of the Company are increased, decreased, changed into or exchanged
for a different number or kind of shares of the Company through reorganization,
recapitalization, reclassification, stock dividend, stock split or reverse stock
split, upon proper authorization of the Board an appropriate adjustment shall be
made in the number or kind of shares, and the per-share option price thereof,
which may be issued in the aggregate and to individual Optionees under the Plan
upon exercise of Options granted under the Plan; provided, however, that no such
adjustment need be made if, upon the advice of counsel, the Board determines
that such adjustment may result in the receipt of federally taxable income to
holders of Options granted pursuant hereto or the holders of Common Stock or
other classes of the Company's securities.
16. Representations and Warranties. As a condition to the granting and the
------------------------------
exercise of any portion of an Option, the Company may require the person
receiving or exercising such Option to make any representation and/or warranty
to the Company as may, in the judgment of counsel to the Company, be required
under any applicable law or regulation, including but not limited to a
representation and warranty that the Option and/or shares are being acquired
only for investment and without any present intention to sell or distribute such
shares if, in the opinion of counsel for the Company, such a representation is
required under the Securities Act of 1933 or any other applicable law,
regulation or rule of any governmental agency.
17. No Enlargement of Employee Rights. The Plan is purely voluntary on the
---------------------------------
part of the Company, and while the Company hopes to continue it indefinitely,
the continuance of the Plan shall not be deemed to constitute a contract between
the Company or the Bank and any employee, or to be consideration for or a
condition of the employment of any employee. Nothing contained in the Plan
shall be deemed to give any employee the right to be retained in the employ of
the Company or to interfere with the right of the Company to discharge or retire
any employee thereof at any time. No employee shall have the right to or
interest in options authorized hereunder prior to the grant of such an Option to
such employee, and upon such grant he shall have only such rights and interests
as are expressly provided herein, subject, however, to all applicable provisions
of the Company's Certificate of Incorporation and Bylaws, as the same may be
amended from time to time.
18. Privileges of Stock Ownership. No person entitled to exercise any Option
-----------------------------
granted under the Plan shall have any of the rights or privileges of a
stockholder of the Company in respect of any shares of Common Stock issuable
upon exercise of such Option until a
9
<PAGE>
certificate representing such shares shall have been issued. No adjustments
shall be made for dividends or other rights for which the record date is prior
to the date of issuance of such certificate, except as provided in Section 15.
19. Legends on Options and Stock Certificates. Each Stock Option Agreement and
-----------------------------------------
each certificate representing shares of Common Stock acquired upon exercise of
an Option shall be endorsed with all legends, if any, required by applicable
securities laws to be placed on the Stock Option Agreement and/or certificate.
20. Availability of Plan. A copy of the Plan shall be delivered to the
--------------------
Secretary of the Company and shall be shown by the Secretary to any eligible
person making reasonable inquiry concerning the Plan.
21. Applicable Law. The Plan shall be governed by and construed in accordance
--------------
with the laws of the State of Georgia.
22. Miscellaneous.
-------------
(a) The Plan shall be binding upon the successors and assigns of the
Company.
(b) Whenever used herein, nouns in the singular shall include the plural,
and the masculine pronoun shall include the feminine gender.
(c) Headings of articles and sections hereof are inserted for convenience
and reference; they constitute no part of the Plan.
IN WITNESS WHEREOF, pursuant to the due authorization and adoption of the
Plan by the Board on May 23, 1996, the Company has caused the Plan to be duly
executed by its duly authorized officers this __________ day of __________,
1996.
SNB BANCSHARES, INC.
BY:
------------------------------
President
ATTEST:
------------------------------
Secretary
10
<PAGE>
Exhibit 10(d)
SECURITY NATIONAL BANK OF MACON
STOCK WARRANT AGREEMENT
Warrants to purchase Five Thousand (5,000) shares of common stock of
Security National Bank of Macon (the common stock of Security National Bank of
Macon is hereinafter referred to as the "Shares"), a National Banking
Association (the "Bank"), are hereby granted to Michael T. O'Dillon at the
price determined as herein provided, subject to the following terms and
conditions:
1. Exercise Price. The exercise price per share of common stock of the
--------------
Bank subject to the warrants granted in this agreement (the
"Warrants") shall be an amount equal to the initial offering price of $10.00
per share (the "Exercise Price").
2. Exercise of Warrant. The Warrants may be exercised in whole or in part
-------------------
at any time from the date hereof through the Expiration Date (defined below),
subject to the following conditions:
(a) Expiration of Warrant Term. The Warrants shall expire on the date
--------------------------
which is ten years from the date of the issuance of the bank's charter (the
"Expiration Date"). Upon the expiration of the term hereof, this agreement
shall thereafter be null and void, and stock of the Bank reserved for
issuance with respect to all unexercised Warrants shall no longer be restricted.
<PAGE>
(b) Method of Exercise. The Warrants shall be exercisable by written
------------------
notice delivered to the Secretary of the Bank which shall:
(i) State the owner's election to exercise the Warrants, the number
of shares with respect to which it is being exercised, the person in whose name
the stock certificate for such shares is to be registered, his address and
Social Security Number (or if more than one, the names, addresses and Social
Security Numbers of such person);
(ii) Contain such representations and agreements as to the holder's
investment intent with respect to such shares as may be required by the Bank's
counsel;
(iii) Be signed by the person or persons entitled to exercise the
Warrants and, if the Warrants are being exercised by any person or persons other
than the original holder hereof, be accompanied by proof satisfactory to counsel
for the Bank of the right of such person or persons to exercise the Warrants;
and
(iv) Be in writing and be accompanied by this Stock Warrant
Agreement.
(c) Payment. Payment of the purchase price of any shares with respect
to which the Warrants are being exercised shall be by certified or bank
cashier's check, or by personal check drawn on funds on deposit with Security
National Bank of Macon .
<PAGE>
(d) Registration. The certificate or certificates for shares of common
------------
stock as to which the Warrants shall be exercised shall be registered in the
name of the person or persons exercising the Warrants.
(e) Partial Exercise. In the event of a partial exercise of the Warrants,
----------------
the Bank shall either issue a new agreement for the balance of the stock subject
to this Stock Warrant Agreement after such partial exercise, or it shall
conspicuously note hereon the date and number of shares granted pursuant to such
exercise and the number of shares thereafter covered by this Stock Warrant
Agreement.
(f) Restrictions on Exercise. The Warrants may not be exercised if the
------------------------
issuance of the shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulation. To the
extent that exercise would result in ownership of ten percent or more of the
outstanding common stock of the Bank by the holder of the Warrants, the Warrants
may then only be exercised with the approval of a majority of the Board of
Directors of the Bank (including common stock owned by the holder's spouse and
minor children). As a condition to the exercise of the Warrants, the Bank may
require the person exercising this warrant to make any representation and
warranty required by the Board of Directors of the Bank and to pay all costs
incurred by the Bank to comply with
<PAGE>
any applicable law or regulation. Additionally, the Bank may require the persons
exercising this Warrant to aid and assist the Bank in complying with State and
Federal Laws and Regulations and to assume and indemnify the Bank for any and
all duties, liabilities and responsibilities arising out of the proposed
exercise.
3. Transferability of Warrant. The Warrants are freely transferable. The
--------------------------
terms of the Warrants shall be binding upon the executors, administrators,
heirs, successors and assigns of the grantee hereof.
4. Merger; Dilution. In the event that the number of outstanding Shares
----------------
shall be changed into or exchanged for a different number of shares or class of
stock of the Bank, or if the stock of another corporation shall be issued in
exchange for the Shares, by reason of a merger, consolidation, recapitalization,
reclassification, stock split, stock dividend or otherwise, then the total
number of Shares subject to the Warrants or the price payable for shares under
the Warrants shall be adjusted in accordance with the provisions of Appendix A
which is attached hereto and made a part hereof.
5. Stock Warrant Plan. The Warrants granted under this Stock Warrant
------------------
Agreement were authorized by the shareholders of the Bank at the organization
meeting of shareholders held on October 13, 1988, authorizing the granting of
Warrants through the ratification of the Articles of Association. These have
been
<PAGE>
granted in consideration of Warrant per share purchase by the organizers and
interim directors. The issuance of Warrants to the organizers and directors was
fully disclosed in the Offering Circular of Security National Bank of Macon
(In Organization), the effective date of which was June 1, 1988.
SECURITY NATIONAL BANK OF MACON
-------------------------------
(Corporate Seal)
By: ___________________________
Chairman
ATTEST: _______________________________
Secretary
<PAGE>
APPENDIX ""A''
Adjustment of Exercise Price and Number of Shares Purchasable or Number of
Warrants. The Exercise Price, the number of Shares purchasable upon the
exercise of each Warrant and the number of Warrants outstanding are subject to
adjustment from time to time as set forth in this Appendix.
(a) In case the Bank shall at any time after the date of this Agreement (i)
declare a dividend of the Shares in shares of its capital stock, (ii) subdivide
the outstanding Shares, (iii) combine the outstanding Shares into a smaller
number of shares, or (iv) issue any shares of its capital stock by
reclassification of the Share (including any such reclassification in connection
with a consolidation or merger in which the Bank is the continuing corporation),
the Exercise Price, and the number and kind of Shares receivable upon exercise,
in effect at the time of the record date for such dividend or of the effective
date of such subdivision, combination or reclassification shall be
proportionately adjusted so that the holder of any Warrant exercised after such
time shall be entitled to receive the aggregate number and kind of Shares which,
if such Warrant had been exercised immediately prior to such time, he would have
owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) In case the Bank shall issue rights or warrants to all holders of
Shares entitling them (for a period expiring within 45 days after the record
date for the determination of shareholders entitled to receive such rights or
warrants) to subscribe for or purchase Shares (or securities convertible into
Shares) at a price per Share (or having a conversion price per Share, if a
security convertible into Shares) less than the current market price per Share
(as defined in subsection (d)) of this Appendix) on such record date, the
Exercise Price shall be adjusted by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Shares outstanding on such record date plus the number of
Shares which the aggregate offering price of the total
<PAGE>
number of Shares so to be offered (or the aggregate initial conversion price of
the convertible securities so being offered) would purchase at such current
market price and the denominator of which shall be the number of Shares
outstanding on such record date plus the number of additional Shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). Such adjustment shall become
effective at the close of business on such record date; however, to the extent
that Shares (or securities convertible into Shares) are not delivered after the
expiration of such rights or warrants, the Exercise Price shall be readjusted
(but only with respect to Warrants exercised after such expiration) to the
Exercise Price which would then be in effect had the adjustments made upon the
issuance of such rights or warrants been made upon the basis of delivery of only
the number of Shares (or securities convertible into Shares) actually issued. In
case any subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Bank. Shares owned by
or held for the account of the Bank or any majority-owned subsidiary shall not
be deemed outstanding for the purpose of any such computation.
(c) In case the Bank shall distribute to all holders of Shares (including
any such distribution made in connection with a consolidation or merger in
which the Bank is the continuing corporation) evidences of its indebtedness or
assets (other than cash dividends or distributions and dividends payable in
Shares) or subscription rights or warrants (excluding those referred to in
subsection (b) of this Appendix), the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to the record date
of the determination of shareholders entitled to receive such distribution by a
fraction, the numerator of which shall be the market price per Share (as defined
in subsection (d) of this Appendix) on such record date, less the fair market
value (as determined by the Board of Directors of the Bank, whose determination
shall be conclusive) of the portion of the evidences of indebtedness or assets
so to be distributed or for such subscription rights or warrants applicable to
one Share, and the denominator of which shall be such current market price per
Share.
<PAGE>
(d) For the purposes of any computation under this Appendix, the current
market price of such Shares shall be as determined by the Board of Directors of
the Bank as of the date indicated.
(e) No adjustment in the Exercise Price shall be required if the amount of
such adjustment shall be less than twenty-five cents per Share; provided,
however, that any adjustments which by reason of this subsection (e) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this Appendix shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
(f) In any case in which this Appendix shall require that an adjustment in
the Exercise Price be made effective as of a record date for a specified event,
the Bank may elect to defer until the occurrence of such event issuing to the
holder of any Warrant exercised after such record date the Shares, if any,
issuable upon exercise over and above the Shares, if any, issuable upon such
exercise on the basis of the Exercise Price in effect prior to such adjustment;
provided, however, that the Bank shall deliver to such holder a due bill or
other appropriate instrument evidencing such holder's right to receive such
additional Shares upon the occurrence of the event requiring such adjustment.
(g) Unless the Bank shall have exercised its election as provided in
subsection (h) of this Appendix, upon each adjustment of the Exercise Price as a
result of the calculations made in subsections (a), (b), or (c) of this
Appendix, each Warrant outstanding prior to the making of the adjustment in
the Exercise Price shall thereafter evidence the right to purchase, at the
adjusted Exercise Price, that number of Shares (calculated to the nearest
hundredth) obtained by: (A) multiplying the number of Shares purchasable upon
exercise of a Warrant prior to adjustment of the number of Shares, by the
Exercise Price in effect prior to adjustment of the Exercise Price; and (B)
dividing the product so obtained by the Exercise Price in effect after such
adjustment of the Exercise Price.
(h) The Bank may elect on or after the date of any adjustments of the
Exercise Price to adjust the number of Warrants, in
<PAGE>
substitution for any adjustment in the number of Shares purchasable upon the
exercise of a Warrant as provided in subsection (g) of this Appendix. Each of
the Warrants outstanding after such adjustment of the number of Warrants shall
be exercisable for one Share. Each Warrant held of record prior to such
adjustment of the number of Warrants shall become that number of Warrants
(calculated to the nearest hundredth) obtained by dividing the Exercise Price
in effect prior to adjustment of the Exercise Price by the Exercise Price in
effect after adjustment of the Exercise Price. The Bank shall notify the
holders of Warrants of its election to adjust the number of Warrants
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Exercise Price is adjusted or any day thereafter, but shall be at least 10
days later than the date of the notice. Upon each adjustment of the number of
Warrants pursuant to this subsection (h) the Bank shall, as promptly as
practicable, cause to be distributed to holders of record of Warrants on such
record date, Warrant agreements evidencing the additional Warrants to which
such holders shall be entitled as a result of such adjustment, or, at the
option of the Bank, shall cause to be distributed to such holders of record in
substitution and replacement for the Warrant agreements held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Bank, new Warrant agreements evidencing all the Warrants to which such holders
shall be entitled after such adjustment.
(i) In case of any capital reorganization of the Bank, or of any
reclassification of the Shares (other than a reclassification of the Shares
referred to in subsection (a) of this Appendix), or in case of the consolidation
of the Bank or the merger of the Bank with any other corporation or the sale of
the properties and assets of the Bank as, or substantially as, an entirety to
any other corporation, each Warrant shall after such capital reorganization,
reclassification of Shares, consolidation, merger or sale be exercisable, upon
the terms and conditions specified in this Agreement, for the number of
shares of stock or other securities, assets or cash to which a holder of the
number of Shares purchasable (at the time of such capital reorganization,
reclassification of Shares, consolidation, merger or sale) upon exercise of
such Warrant would have been entitled upon such capital reorganization,
reclassification of Shares,
<PAGE>
consolidation, merger or sale; and in any such case, if necessary, the
provisions set forth in this Appendix with respect to the rights and interests
thereafter of the holders of the Warrants shall be appropriately adjusted so as
to be applicable, as nearly as may reasonably be, to any shares of stock or
other securities, assets or cash thereafter deliverable on the exercise of
the Warrants. The subdivision or combination of Shares at any time outstanding
into a greater or lesser number of Shares shall not be deemed to be a
reclassification of the Shares for the purposes of this paragraph. The Bank
shall not effect any such consolidation, merger or sale, unless prior to or
simultaneously with the consummation thereof the successor corporation (if other
than the Bank) resulting from such consolidation or merger or the corporation
purchasing such assets or other appropriate corporation or entity shall assume
the obligation to deliver the holder of each Warrant such shares of stock,
securities, assets or cash as, in accordance with the foregoing provisions, such
holders may be entitled to purchase and the other obligations under this Warrant
Agreement.
<PAGE>
EXHIBIT 15
CONSENT OF McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
We hereby consent to the use in this Registration Statement on Form SB-2 of our
report dated January 10, 1996, relating to the consolidated financial statements
of SNB Bancshares, Inc. and Subsidiary, and to the reference to our Firm under
the caption "Experts" in the Prospectus.
/s/ McNair, McLemore, Middlebrooks & Co., LLP
---------------------------------------------
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
Macon, Georgia
August 15, 1996
<PAGE>
EXHIBIT 21
The following is the only subsidiary of SNB Bancshares, Inc.
1. Security National Bank
