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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934
(FEE REQUIRED)
For the Fiscal Year Ended December 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934
(NO FEE REQUIRED)
For the Transition Period from ____________________ to _________________________
Commission File Number 33-80076
SNB BANCSHARES, INC.
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(Name of Small Business Issuer in its Charter)
GEORGIA 58-2107916
- ------------------------------ ------------------------------
State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization Identification No.)
700 WALNUT STREET, MACON, GEORGIA 31208
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(Address of Principal Executive Offices) (Zip Code)
Issuer's Telephone Number (912) 722-6200
Securities Registered Under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which Registered
NONE
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- -------------------------------- ------------------------------------------
Securities Registered Under Section 12(g) of the Exchange Act:
COMMON STOCK, $1.00 PAR VALUE
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(Title of Class)
- --------------------------------------------------------------------------------
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. [X] Yes [ ] No
Check if there is no disclosure of delinquent filers in response to Items 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $11,305,661 for year
ended December 31, 1996.
State the aggregate market value of the voting stock held by nonaffiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. (See definition of affiliate in Rule 12b-2 of the Exchange Act).
$24,822,780 Based on Prices as of March 24, 1997.
NOTE: If determining whether a person is an affiliate will involve an
unreasonable effort and expense, the issuer may calculate the aggregate market
value of the common equity held by nonaffiliates on the basis of reasonable
assumptions, if the assumptions are stated.
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(ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PAST FIVE YEARS)
Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. [ ] Yes [ ] No
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date.
1,654,852 shares of $1.00 par value common stock as of December 31, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe them
and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into
which the document is incorporated: (1) any annual report to security holders;
(2) any proxy or information statement; and (3) any prospectus filed pursuant
to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"). The
listed documents should be clearly described for identification purposes (e.g.,
annual report to security holders for fiscal year ended December 24, 1990).
See Attached
Transitional Small Business Disclosure Format (Check one): [ ] Yes [X] No
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DOCUMENTS INCORPORATED BY REFERENCE
LOCATION IN FORM 10-KSB INCORPORATED DOCUMENT
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PART I
<S> <C>
Item 1 - Business Pages 22 through 30 of the Company's Definitive
Proxy Statement dated April 11, 1997, in connection
with its Annual Meeting to be held April 22, 1997.
Item 3 - Legal Proceedings Page 21 of the Company's Definitive Proxy
Statement dated April 11, 1997, in connection with
its Annual Meeting to be held April 22, 1997.
PART II
Item 5 - Market for Common Equity and Related Pages 2, 31 and 32 of the Company's Definitive
Stockholder Matters Proxy Statement dated April 11, 1997, in connection
with its Annual Meeting to be held April 22, 1997.
Item 6 - Management's Discussion and Analysis or Exhibit 99 (a), Excerpt from 1996 Annual Report to
Plan of Operation Stockholders.
PART III
Item 9 - Directors, Executive Officers, Promoters Pages 5 through 13 of the Company's Definitive
and Control Persons; Compliance with Section 16(a) Proxy Statement dated April 11, 1997, in connection
of the Exchange Act. with its Annual Meeting to be held April 22, 1997.
Item 10 - Executive Compensation Pages 16 through 21 of the Company's Definitive
Proxy Statement dated April 11, 1997, in connection
with its Annual Meeting to be held April 22, 1997.
Item 11 - Security Ownership of Certain Beneficial Pages 6 through 11 of the Company's Definitive
Owners and Management Proxy Statement dated April 11, 1997, in connection
with its Annual Meeting to be held April 22, 1997.
Item 12 - Certain Relationships and Related Page 15 of the Company's Definitive Proxy
Transactions Statement dated April 11, 1997, in connection with
its Annual Meeting to be held April 22, 1997.
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PART I
Item 1
BUSINESS
Incorporated herein by reference to pages 22 through 30 of the Company's
Definitive Proxy Statement for Annual Meeting of Stockholders to be held April
22, 1997.
Item 2
PROPERTIES
The Bank currently owns three full-service operating locations and leases one
full-service location. The rented property is being leased for a term of three
years with an option to purchase at any time prior to the end of the lease term.
Facilities and locations are:
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APPROXIMATE
SQUARE FT. TYPE OF OWNED (O) OR
LOCATION PRINCIPAL USE OCCUPIED CONSTRUCTION LEASED (L)
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MAIN OFFICE: Banking Services 4,267 Brick Masonry 0
700 Walnut Street
P.O. Box 4748
Macon, Georgia 31208-4748
BRANCH OFFICE: Banking Services 6,500 Brick Masonry 0
2918 Riverside Drive
Macon, Georgia 31204
BRANCH OFFICE: Banking Services 2,225 Brick Masonry 0
4699 Log Cabin Drive
Macon, Georgia 31206
BRANCH OFFICE: Banking Services 2,541 Brick Masonry L
1897 Shurling Drive
Macon, Georgia 31211
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Management considers that its properties are well maintained.
Item 3
LEGAL PROCEEDINGS
Incorporated herein by reference to page 21 of the Company's Definitive Proxy
Statement for Annual Meeting of Stockholders to be held April 22, 1997.
Item 4
SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
1
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PART II
Item 5
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Incorporated herein by reference to pages 2, 31 and 32 of the Company's
Definitive Proxy Statement for Annual Meeting of Stockholders to be held
April 22, 1997.
Item 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Incorporated herein by reference to excerpt from the 1996 Annual Report to
Stockholders.
Item 7
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
The following consolidated financial statements of the Registrant and its
subsidiaries are included on exhibit 99(b) of this Annual Report on Form 10-KSB:
Consolidated Balance Sheets - December 31, 1996 and 1995
Consolidated Statements of Income - Years Ended December 31, 1996 and 1995
Consolidated Statements of Stockholders' Equity - Years Ended December 31,
1996 and 1995
Consolidated Statements of Cash Flows - Years Ended December 31, 1996 and
1995
Notes to Consolidated Financial Statements
Item 8
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURES
There has been no Form 8-K filed within 24 months prior to the date of the most
recent financial statements reporting a change of accountants or reporting
disagreements on any matter of accounting principle, practice, financial
statement disclosure or auditing scope or procedure.
PART III
Item 9
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE WITH
SECTION 16(a) OF THE EXCHANGE ACT
Incorporated herein by reference to pages 5 through 13 of the Company's
Definitive Proxy Statement for Annual Meeting of Stockholders to be held April
22, 1997.
2
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PART III (CONTINUED)
Item 10
EXECUTIVE COMPENSATION
Incorporated herein by reference to pages 16 through 21 of the Company's
Definitive Proxy Statement for Annual Meeting of Stockholders to be held April
22, 1997.
Item 11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Incorporated herein by reference to pages 6 through 11 of the Company's
Definitive Proxy Statement for Annual Meeting of Stockholders to be held April
22, 1997.
Item 12
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Incorporated herein by reference to page 15 of the Company's Definitive Proxy
Statement for Annual Meeting of Stockholders to be held April 22, 1997.
PART IV
Item 13
EXHIBITS AND REPORTS ON FORM 8-K
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(a) EXHIBITS INCLUDED HEREIN: PAGE
3(a) - Articles of Incorporation N/A
- Filed as Exhibit 3 to the Registrant's Registration Statement on Form SR-2 (File
No. 33-80076), Filed with the Commission on September 30, 1996 and Incorporated
Herein
3(b) - Bylaws N/A
- Filed as Exhibit 3 to the Registrant's Registration Statement on Form SR-2
(File No. 33-80076), Filed with the Commission on September 30, 1996 and
Incorporated Herein
4 - Instruments Defining the Rights of Security Holders Definitive Proxy
Statement,
Incorporated by
Reference
10 - Material Contracts
10 (a) Property Lease Attachment
10 (b) 1996 Incentive Stock Option Plan Attachment
11 - Statement of Computation of Net Income Per Share Exhibit 99(b)
19, Footnote 17
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3
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PART IV
Item 13
EXHIBITS AND REPORTS ON FORM 8-K (Continued)
(a) EXHIBITS INCLUDED HEREIN:
13 - 1996 Annual Report to Stockholders, Attachment
21 - Subsidiary Information Exhibit 99(b) 7,
Footnote 1
27 - Financial Data Schedule Attachment
99 - Additional Exhibits
99(a) - Excerpt from 1996 Annual Report to
Stockholders Incorporated by Reference Attachment
99(b) - Consolidated Financial Statements Attachment
(b) REPORTS ON FORM 8-K:
No reports on Form 8-K have been filed by the registrant during the last
quarter of the period covered by this report.
4
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Security National Bank has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized:
SNB BANCSHARES, INC.
__________________________________ ________________________________
Robert C. "Neal" Ham H. Averett Walker
Chairman of the Board of Directors President/Director/Chief
Executive Officer
Date:_____________________________ Date:___________________________
__________________________________ ________________________________
Richard A. Collinsworth Shirley O. Jackson
Executive Vice President Senior Vice-President/Secretary
Date:_____________________________ Date:___________________________
__________________________________
Michael T. O'Dillon
Senior Vice-President/Treasurer/Controller/
Chief Financial Officer
Date:_____________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:
__________________________________
Robert C. Allen, Director Date:___________________________
__________________________________
Alford C. Bridges, Director Date:___________________________
5
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__________________________________
William P. Brooks, M.D., Director Date:___________________________
__________________________________
Lee R. Greene, Jr., Director Date:___________________________
__________________________________
Benjamin W. Griffith, III, Director Date:___________________________
__________________________________
James W. Kinman, Director Date:___________________________
__________________________________
Robert T. Mullis, Director Date:___________________________
__________________________________
Ben G. Porter, Director Date:___________________________
__________________________________
Sydney J. Pyles, Director Date:___________________________
__________________________________
John F. Rogers, Jr., Director Date:___________________________
__________________________________
Charles W. Selby, Director Date:___________________________
6
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__________________________________
Frank M. Shepherd, Jr., Director Date:___________________________
__________________________________
Chris R. Sheridan, Jr., Director Date:___________________________
__________________________________
Joe E. Timberlake, III, Director Date:___________________________
__________________________________
Frank G. Wall, Jr., Director Date:___________________________
__________________________________
Richard W. White, Jr., Director Date:___________________________
7
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EXHIBIT 10(a)
[LETTERHEAD FOR THE SUMMIT GROUP APPEARS HERE]
LEASE
THIS LEASE, made as of the 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 the 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
purpose 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 users 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 casualty alone excepted.
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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, and 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 this 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 the obligation of the Landlord contained herein.
31. TIME OF ESSENCE - Time is of the 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 subleasees, 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 SECURITY NATIONAL BANK
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Landlord Tenant
By: /s/ ROBERT HAM, PRESIDENT
- ----------------------------- --------------------------------
Landlord Tenant
- -----------------------------
for: The Summit Group, Agent
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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: ROBERT HAM, PRESIDENT
- --------------------------------- --------------------------------
Landlord Tenant
Date: 4/25/95 Date: 4/24/95
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[MAP APPEARS HERE]
<PAGE>
[LETTERHEAD FOR THE SUMMIT GROUP APPEARS HERE]
PURCHASE AND SALE AGREEMENT
THIS AGREEMENT, made and entered into this 24th day of April, 1995 between F.
Tredway Shurling (hereinafter described as Seller) and Security National Bank
(hereinafter described as Purchaser):
1. WITNESSETH:
That the Seller agrees to sell and convey and the Purchaser agrees to purchase,
all the following described property, 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.
2. PURCHASE PRICE AND METHOD OF PAYMENT: The purchase price that the Purchaser
agrees to pay and Seller agrees to accept is Two hundred seventy-five thousand
and no/100 Dollars ($275,000.00), payable in full or as otherwise agreed to in
cash or certified funds, on delivery of the deed. Purchaser has paid to the
undersigned Broker $1.00, receipt of which is hereby acknowledged by Broker as
earnest money, which earnest money is to be deposited in Broker's Escrow Account
upon acceptance of this contract by all parties to same, and is to be applied as
part payment of purchase price of said property at the time the sale is
consummated. All parties to this agreement agree that Holder may, at Holder's
option, deposit the earnest money in an interest-bearing escrow/trust account
and that Holder will retain the interest earned on said deposit.
3. WARRANTY OF TITLE: Seller represents that Seller presently has good and
marketable, fee simple title to the Property, and at the time the sale is
consummated, Seller agrees to convey good and marketable, fee simple title to
the Property to Purchaser by general warranty deed.
4. TITLE EXAMINATION: Purchaser shall move promptly and in good faith after
acceptance of this Agreement to examine title to the Property and to furnish
Seller with a written statement of objections affecting the marketability of
said title. Seller shall have a reasonable time after receipt of such objections
to satisfy all valid objections, and if Seller fails to satisfy such valid
objections within a reasonable time, than at the option of the Purchaser,
evidenced by written notice to Seller, this Agreement shall be null and void,
and all Earnest Money shall be promptly returned to Purchaser or Purchaser shall
waive such objections and proceed to closing.
5. WARRANTIES: Seller represents that to the best of Seller's knowledge: (A)
there are no existing or proposed governmental orders or condemnation
proceedings affecting the Property and Seller has received no notice of any such
orders or proceedings; (B) the Property has never been used for the use,
discharge, or storage of any hazardous material or any landfill for garbage or
refuse; (C) the Property is free of any underground storage tanks, petroleum
product contamination, hazardous substance, asbestos, contaminants, oil,
radioactive or other materials, the removal of which is required, or the
maintenance of which is required, or the maintenance of which is prohibited,
penalized, or regulated by any local, state or federal agency, authority or
government unit.
6. INSPECTIONS: Commencing on the date of this Agreement, and subject to the
rights of the tenants, if any, Purchaser, Purchaser's agents, employees and
contractors, shall have the right during regular business hours, but without
interfering with operations being carried upon the Property, to enter the
Property, for the purpose of making surveys, inspections, soil tests and other
investigations of the Property, including but not limited to, the physical
condition of any improvements and mechanical and electrical systems. Purchaser
shall and does hereby agree to indemnify, defend and hold Seller and Brokers
harmless from any loss or damage suffered by Seller, Brokers or others as a
result of the exercise by Purchaser of the rights herein granted, including any
damage resulting from the negligence of Purchaser or Purchaser's agents. This
indemnity shall survive the rescission, cancellations, termination or
consummation of this Agreement.
7. CONDITION OF PROPERTY: Seller warrants that when this transaction is
consummated the improvements on the property will be in the same condition as
they are on the date of this contract, natural wear and tear excepted, and
Seller specifically assumes the risk of loss or damage to said property until
the consummation of the transaction. Should the premises be destroyed or damaged
before this contract is consummated, then, at the election of the Purchaser: (A)
the contract may be cancelled; or (B) Purchaser may consummate the contract and
receive such insurance as is paid on the claim of loss. This election is to be
exercised by the Purchaser within ten (10) days after the amount of Seller's
damage is determined and Purchaser has been notified of such amount.
8. AGENCY DISCLOSURE: Seller and Purchaser acknowledge that Broker (X) has
acted for Seller ( ) Purchaser (X), or ( ) has acted as a Transaction Broker and
not as an agent for Seller or Purchaser with respect to the transaction
contemplated herein. Seller and Purchaser acknowledge that Co-Broker ( ) has
acted for ( ) Seller ( ) Purchaser, or ( ) has acted as a Transaction Broker and
not as an agent for Seller or Purchaser, with respect to the transaction
contemplated herein.
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9. REAL ESTATE COMMISSION: In negotiating this Agreement, Broker and Co-Broker
(collectively "Brokers") have rendered a valuable service for which Brokers
shall be paid a Commission at closing by Seller equal to five percent (5%) of
the Purchase Price as follows:
100% to The Summit Group. and _____% to __________________________________.
Said Brokerage fee agreement shall vest a third party interest in this Agreement
to the above noted Real Estate Brokers and no changes or specifications to this
contract shall be made without the written approval of all three parties.
10. DEFAULT: REMEDIES: In the event the sale is not closed because of Seller's
inability, failure or refusal to perform any of Seller's obligations herein,
the Seller shall pay the full Commission to Brokers immediately, and Broker
shall return the Earnest Money to Purchaser, which shall not constitute a waiver
of any other right or remedy Purchaser may have against Seller. Purchaser agrees
that if the sale is not closed because of Purchaser's inability, failure or
refusal to perform any of Purchaser's obligations herein, Purchaser shall
forthwith pay Brokers the full Commission Immediately, provided that Brokers may
first apply up to one-half (1/2) of the Earnest Money toward payment of the
Commission and shall pay the balance thereof to Seller as liquidated damages of
Seller, if Seller claims such balance as Seller's liquidated damages in full
settlement of any claim for damages against Purchaser, whereupon Brokers shall
be released from any and all liability for return of Earnest Money to Purchaser.
In such event, Broker shall be entitled to apply one-half (1/2) of the Earnest
money against Broker's Commission, notwithstanding the fact that Seller may not
claim or be entitled to the balance of the Earnest Money as liquidated damages,
and Purchaser shall remain liable to Brokers for the balance of the full
Commission. If Seller claims one-half (1/2) of the Earnest Money as liquidated
damages, such sum shall be Seller's sole and exclusive remedy for such default
and no action for specific performance shall thereafter be available against
Purchaser.
11. MISCELLANEOUS:
All property taxes, insurance, rents and mortgage interest, if applicable, shall
be prorated as of the date of closing.
Seller shall pay the State of Georgia property transfer tax, and where
applicable, Purchaser shall pay the Georgia intangible taxes.
Consummation and closing of this contract shall be on or before August 31, 1998.
Possession of the property shall be granted at closing, unless otherwise
specified herein.
12. ENTIRE AGREEMENT: This contract contains the entire agreement between the
parties, and no representations, warranties, or promises, verbal or written,
unless contained herein, shall be binding upon any party to this contract. It is
agreed that whenever a party or parties to this contract is mentioned, it shall
include said party, its heirs, administrators, successors or assigns. Time is of
the essence of this contract. This Agreement shall be construed under the laws
of the State of Georgia.
13. SPECIAL STIPULATIONS:
The following Special Stipulation shall, if conflicting with the foregoing,
control;
See attached Special Stipulations, made a part of this contract by
reference.
AGREED AND ACKNOWLEDGED BY:
SECURITY NATIONAL BANK
/s/ F. TREDWAY SHURLING 4/25/95 By: /s/ NEAL HAM, PR 4/24/95
- ---------------------------------- ---------------------------------
Seller F. Tredway Shurling Date Purchaser Neal Ham Date
- ---------------------------------- ---------------------------------
Seller Date Purchaser Date
<PAGE>
SPECIAL STIPULATIONS
to the Purchase and Sale Agreement between
F. TREDWAY SHURLING (SELLER)
and
SECURITY NATIONAL BANK (PURCHASER)
RE: Shurington Plaza Out-Parcel, Macon, Georgia
1. Property is purchased "AS IS".
2. This contract is an option to purchase. Purchaser may exercise this option
any time during the initial term of the lease attached hereto. In the event
Purchaser does not exercise this option, Seller's sole legal remedy shall be
a claim of liquidated damages which shall not exceed the amount of earnest
money received from Purchaser.
3. Seller agrees to provide a survey of the subject property. Sale is subject
to Purchaser's and Seller's approval of said survey within ten (10) days
from the date the survey is delivered to both parties.
4. Sale is subject to Purchaser's satisfactory inspection of the property to be
completed within thirty (30) days of acceptance of this contract.
5. Seller shall grant necessary ingress/egress and parking easements from the
existing shopping center. These easements shall be approved by both parties
with the approval of the subdivision survey.
6. Sale is subject to Seller's successful negotiation of a cancellation of the
existing lease with NationsBank.
7. 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.
/s/ F. TREDWAY SHURLING /s/ NEAL HAM
- ---------------------------- --------------------------
Seller Purchaser
Date: 4/25/95 Date: 4/24/95
- ---------------------------- --------------------------
<PAGE>
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/ F. TREDWAY SHURLING /s/ NEAL HAM
- ----------------------------- ---------------------------
Landlord Tenant
Date: 5/24/95 Date: 5/24/95
- ----------------------------- ---------------------------
THE SUMMIT GROUP
By: [SIGNATURE APPEARS HERE]
- -----------------------------
<PAGE>
EXHIBIT 10(b)
SNB BANCSHARES, INC.
1996 INCENTIVE STOCK OPTION PLAN DATE OF ADOPTION
MAY 1996
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 the 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 by
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 __, 1996 and
shall continue in effect for ten (10) years thereafter until May __, 2006,
unless terminated earlier. No Option may be granted pursuant hereto after
May __, 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 by 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 a 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
5
<PAGE>
agreement with Company or Bank;
(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 or 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 _________, 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
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 5,488,508
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 4,980,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 25,882,358
<INVESTMENTS-CARRYING> 6,773,211
<INVESTMENTS-MARKET> 6,872,706
<LOANS> 86,246,752
<ALLOWANCE> (1,383,127)
<TOTAL-ASSETS> 134,085,483
<DEPOSITS> 113,031,661
<SHORT-TERM> 2,038,445
<LIABILITIES-OTHER> 1,981,625
<LONG-TERM> 2,101,300
0
0
<COMMON> 1,654,852
<OTHER-SE> 13,277,600
<TOTAL-LIABILITIES-AND-EQUITY> 134,085,483
<INTEREST-LOAN> 8,277,182
<INTEREST-INVEST> 1,814,468
<INTEREST-OTHER> 112,520
<INTEREST-TOTAL> 10,204,170
<INTEREST-DEPOSIT> 4,313,570
<INTEREST-EXPENSE> 4,607,876
<INTEREST-INCOME-NET> 5,596,294
<LOAN-LOSSES> 257,000
<SECURITIES-GAINS> 24,077
<EXPENSE-OTHER> 4,111,698
<INCOME-PRETAX> 2,329,087
<INCOME-PRE-EXTRAORDINARY> 1,642,274
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,642,274
<EPS-PRIMARY> 1.02
<EPS-DILUTED> 1.02
<YIELD-ACTUAL> 4.52
<LOANS-NON> 471,000
<LOANS-PAST> 537,000
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,127,609
<CHARGE-OFFS> (200,046)
<RECOVERIES> 198,564
<ALLOWANCE-CLOSE> 1,383,127
<ALLOWANCE-DOMESTIC> 1,383,127
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
<PAGE>
EXHIBIT 99(a)
- --------------------------------------------------------------------------------
FINANCIAL REVIEW
- --------------------------------------------------------------------------------
SUMMARY
The following discussion reviews the results of operations and assesses the
financial condition of SNB Bancshares, Inc. ("Bancshares") in Macon, Georgia.
This discussion should be read in conjunction with the preceding consolidated
financial statements and accompanying notes. These financial statements and
financial review include certain forward-looking statements that involve
inherent risks and uncertainties. A number of important factors could cause
actual results to differ materially from those in the forward-looking
statements. Those factors include fluctuations in interest rates, inflation,
government regulations, and economic conditions and competition in the
geographic business areas in which Bancshares conducts its operations.
Bancshares 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 Bancshares. 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 Bancshares. The functions of
Bancshares as the parent holding company are limited in scope, so that the
consolidated financial statements of Bancshares 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 Bancshares.
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,
------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Interest Income $5,596 $4,311 $3,526 $2,650 $2,473
Provision for
Loan Losses 257 109 302 378 407
Other Income 1,102 867 1,046 840 522
Other Expense 4,112 3,117 2,782 2,334 1,908
Income Taxes 687 561 436 205 181
Extraordinary Items 0 0 0 0 22
Cumulative Effect of
Accounting Change 0 0 0 53 0
Net Income 1,642 1,391 1,052 626 521
PER SHARE DATA:(a)
Earnings Per Common and
Common Equivalent Share $1.02 $1.01 $0.81 $0.49 $0.41
Cash Dividends Paid 0.22 0.20 0.17 0.09 0.04
</TABLE>
<PAGE>
TABLE 1 (Continued)
SELECTED FIVE YEAR FINANCIAL DATA
(Dollars in thousands, except per share data
and number of shares)
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS:
Return on Average Assets 1.40% 1.51% 1.50% 1.03% 0.96%
Return on Average Equity 14.93% 18.16% 15.53% 10.12% 9.22%
Dividend Payout Ratio (b) 19.09% 17.26% 19.01% 15.98% 9.60%
Average Equity to Average
Assets 9.37% 8.31% 9.65% 10.13% 10.42%
BALANCE SHEET DATA:
(at year end)
Assets $ 134,085 $107,566 $ 78,156 $ 66,022 $ 57,178
Investment Securities 32,656 34,440 18,649 19,976 19,511
Loans, Net of Income 86,247 64,400 52,277 41,064 32,458
Allowance for Loan Losses 1,383 1,128 1,020 743 862
Deposits 113,032 92,969 67,209 56,876 49,565
Stockholders' Equity 14,932 8,426 7,082 6,399 5,873
Shares Outstanding 1,654,852 600,000 500,000 500,000 500,000
</TABLE>
(a) Per share data for all periods has been retroactively restated for a 20%
stock split effected in the form of a dividend on March 20, 1995, and a 100%
stock split effected in the form of a dividend on June 1, 1996.
(b) Determined by dividing dividends declared by current year net income.
Consolidated total assets of $134.1 million at December 31, 1996 were up by
$26.5 million, or 24.7%, over total assets at December 31, 1995. Total assets of
$107.6 million at December 31, 1995 were up by $29.4 million, or 37.6%, over
total consolidated assets at December 31, 1994. These growth rates for the past
two years are 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. On
average the balance sheet grew by 27.5% during 1996, 31.1% during 1995, and
15.0% during 1994. 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
----------------------------------------------------------------
1996 % 1995 % 1994 %
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash & Due From Banks $ 4,084 3.5% $ 2,836 3.1% $ 2,232 3.2%
Time Deposits-Other Banks 0 0.0% 0 0.0% 47 0.1%
Federal Funds Sold 2,092 1.8% 3,057 3.3% 674 1.0%
Taxable Investment Securities 22,435 19.1% 18,245 19.8% 13,326 19.0%
Non-Taxable Inv. Securities 9,827 8.4% 7,699 8.4% 5,716 8.1%
Market Adjustment-Securities (28) -0.0% (250) -0.3% (89) -0.1%
Loans, Net of Interest 75,803 64.6% 57,933 62.9% 45,751 65.2%
Allowance for Loan Losses (1,284) -1.1% (1,083) -1.2% (847) -1.2%
Bank Premises & Equipment 2,612 2.2% 2,193 2.4% 2,067 2.9%
Other Real Estate 373 0.3% 284 0.3% 364 0.5%
Other Assets 1,454 1.2% 1,167 1.3% 974 1.4%
----------------------------------------------------------------
TOTAL ASSETS $117,368 100.0% $92,081 100.0% $70,216 100.0%
================================================================
</TABLE>
<PAGE>
TABLE 2 (Continued)
AVERAGE BALANCE SHEETS
(Amounts in 1000s)
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------------------------------------------
1996 % 1995 % 1994 %
----------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES & STOCKHOLDERS' EQUITY:
Deposits:
Non-Interest Bearing $ 16,936 14.43% $12,734 13.83% $10,290 14.65%
Interest Bearing 83,670 71.29% 67,254 73.04% 50,404 71.78%
Federal Funds Purchased 212 0.18% 58 0.06% 345 0.49%
Demand Notes-US Treasury 431 0.37% 491 0.53% 379 0.54%
Other Borrowed Money-FHLB 3,701 3.15% 2,871 3.12% 1,299 1.85%
Obligations-Capital Leases 0 0.00% 2 0.00% 18 0.03%
Other Liabilities 1,417 1.21% 1,032 1.12% 705 1.00%
----------------------------------------------------------------
Total Liabilities 106,367 90.63% 84,442 91.70% 63,440 90.35%
----------------------------------------------------------------
Common Stock 1,363 1.16% 578 0.63% 500 0.71%
Surplus 6,226 5.30% 4,500 4.89% 4,500 6.41%
Undivided Profits 3,412 2.91% 2,561 2.78% 1,776 2.53%
----------------------------------------------------------------
Total Stockholders' Equity 11,001 9.37% 7,639 8.30% 6,776 9.65%
----------------------------------------------------------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $117,368 100.00% $92,081 100.00% $70,216 100.00%
================================================================
</TABLE>
LOANS
The Bank's loan portfolio constitutes the major interest earning asset of
Bancshares. 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 $86.2 million and $64.4 million at December 31,
1996 and 1995 respectively, amounted to 64.3% and 59.9% of total assets, and
76.3% and 69.3% of deposits. The average yields generated by interest and fees
from the loan portfolio amounted to 10.92% during 1996, 11.02% during 1995 and
9.91% during 1994. Bancshares' allowance for loan losses at December 31, 1996,
1995 and 1994 amounted to 1.60%, 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.
<PAGE>
TABLE 3
LOANS BY TYPE
(In Thousands)
<TABLE>
<CAPTION>
December 31
---------------------------------------------------
1996 1995 1994 1993 1992
---------------------------------------------------
<S> <C> <C> <C> <C> <C>
Commercial, Financial
and Agricultural $15,129 $11,331 $ 9,983 $ 9,853 $ 8,987
Real Estate-Construction 2,864 2,848 2,012 1,552 910
Real Estate-Mortgage
Mortgage Loans Held for Sale 0 0 0 0 0
Other Mortgage 59,872 44,737 35,975 26,290 19,444
Loans to Individuals 8,557 5,670 4,473 3,488 3,196
---------------------------------------------------
Total Loans 86,422 64,586 52,443 41,183 32,537
Unearned Income (175) (186) (166) (118) (79)
---------------------------------------------------
Total Net Loans $86,247 $64,400 $52,277 $41,065 $32,458
===================================================
Percentage of Total Portfolio:
- ------------------------------
Commercial, Financial
and Agricultural 17.5% 17.6% 19.1% 24.0% 27.7%
Real Estate-Construction 3.3% 4.4% 3.9% 3.8% 2.8%
Real Estate-Mortgage
Mortgage Loans Held for Sale 0.0% 0.0% 0.0% 0.0% 0.0%
Other Mortgage 69.5% 69.5% 68.7% 64.0% 59.9%
Loans to Individuals 9.9% 8.8% 8.6% 8.5% 9.9%
---------------------------------------------------
Total Loans 100.2% 100.3% 100.3% 100.3% 100.3%
Unearned Income -0.2% -0.3% -0.3% -0.3% -0.3%
---------------------------------------------------
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, 1996.
TABLE 4
LOAN MATURITY DISTRIBUTION AND INTEREST SENSITIVITY
(In Thousands)
<TABLE>
<CAPTION>
December 31, 1996
-----------------------------------------
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 agricultural $12,103 $2,723 $ 303 $15,129
Real estate-construction 2,377 487 0 2,864
------------------------------------------
Total $14,480 $3,210 $ 303 $17,993
==========================================
Loans shown above due after one year:
Having predetermined interest rates $ 2,529
Having floating interest rates 984
-------
Total $ 3,513
=======
</TABLE>
<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 $32.7 million, or 24.4% of total assets at
December 31, 1996, down from $34.4 million, or 32.0% of total assets at December
31, 1995. The decrease in investment portfolio size relative to the balance
sheet reflects the deployment of a higher percentage of assets into the loan
portfolio during 1996.
The average 1996 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 6.44%, compared to 6.51%
in 1995 and 6.27% in 1994. The stability of the bond yields over this time frame
indicates a reasonably stable interest rate environment in the bond markets.
During 1996, the investment securities portfolio, excluding unrealized gains and
losses, represented 29.3% of average earning assets and 27.5% of average total
assets. During 1995, the portfolio averaged 29.8% of earning assets and 28.2% of
total assets.
At December 31, 1996, the major portfolio components, based on amortized or
accreted cost, included 12.4% in U. S. Treasury securities, 52.0% in U. S.
agency obligations, 1.4% in mortgage backed securities, 32.1% in tax exempt
state, county and municipal bonds and 2.1% in stocks of the Federal Reserve Bank
and Federal Home Loan Bank. On December 31, 1996, the market value of the total
bond portfolio as a percentage of the book value was 101.2%, up from 100.5% a
year earlier. The bond markets have experienced relatively stable years during
1996 and 1995, causing little fluctuation in the market value of the portfolio.
As of December 31, 1996, the entire investment securities portfolio had gross
unrealized gains of $309,046 and gross unrealized losses of $185,182, for a net
unrealized gain of $123,864. As of December 31, 1995, the portfolio had a net
unrealized gain of $166,906. In accordance with SFAS No. 115, stockholders'
equity included a net unrealized gains of $16,083 and $24,144 recorded on the
Available for Sale portfolio as of December 31, 1996 and 1995, respectively, net
of deferred tax effects. No trading account has been established by Bancshares
and none is anticipated.
In December, 1995, Bancshares 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 Bancshares to more effectively manage its
interest rate risk position. The amortized cost of the investment securities
transferred was $1.9 million.
The following table summarizes the Available for Sale and Held to Maturity
investment securities portfolios as of December 31, 1996, 1995 and 1994.
Available for Sale securites are shown at fair value, while Held to Maturity
securities are shown at amortized or accreted cost.
<TABLE>
<CAPTION>
TABLE 5
INVESTMENT SECURITIES
(In Thousands)
December 31
---------------------------------------
1996 1995 1994
---------------------------------------
<S> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U. S. Treasury $ 4,070 $ 5,070 $ 1,939
U. S. Government Agencies
Mortgage-Backed 414 1,166 436
Other 15,834 15,754 8,055
State, County & Municipal 4,867 4,457 2,411
Other Investments 698 645 404
---------------------------------------
$25,883 $27,092 $13,245
=======================================
</TABLE>
<PAGE>
TABLE 5 (Continued)
INVESTMENT SECURITIES
(In Thousands)
<TABLE>
<CAPTION>
December 31
------------------------------------
1996 1995 1994
------------------------------------
<S> <C> <C> <C>
SECURITIES HELD TO MATURITY
U. S. Treasury $ 0 $ 497 $ 0
U. S. Government Agencies
Mortgage-Backed 56 264 544
Other 1,000 1,000 500
State, County & Municipal 5,717 5,587 4,360
Other Investments 0 0 0
------------------------------------
$ 6,773 $ 7,348 $ 5,404
====================================
TOTAL INVESTMENT SECURITIES
U. S. Treasury $ 4,070 $ 5,567 $ 1,939
U. S. Government Agencies
Mortgage-Backed 470 1,430 980
Other 16,834 16,754 8,555
State, County & Municipal 10,584 10,044 6,771
Other Investments 698 645 404
------------------------------------
$32,656 $34,440 $18,649
====================================
</TABLE>
The following table illustrates the contractual maturities and weighted average
yields of investment securities held at December 31, 1996. 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 6
MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS
(In Thousands)
<TABLE>
<CAPTION>
Investment Securities Investment Securities
Held to Maturity Available for Sale
December 31, 1996 December 31, 1996
----------------------------------------------------------------------------
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 $ 0 0.00% $ 0 $ 1,500 6.25% $ 1,506
1 to 5 Years 0 0.00% 0 2,539 6.26% 2,564
5 to 10 Years 0 0.00% 0 0 0.00% 0
More Than 10 Years 0 0.00% 0 0 0.00% 0
----------------------------------------------------------------------------
$ 0 0.00% $ 0 $ 4,039 6.26% $ 4,070
----------------------------------------------------------------------------
Mortgage-Backed
Government Agencies:
Within 1 Year $56 6.20% $56 $ 107 6.12% $ 107
1 to 5 Years 0 0.00% 0 0 0.00% 0
5 to 10 Years 0 0.00% 0 290 8.63% 307
More Than 10 Years 0 0.00% 0 0 0.00% 0
----------------------------------------------------------------------------
$56 6.20% $56 $ 397 7.95% $ 414
----------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE 6 (Continued)
MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS
(In Thousands)
<TABLE>
<CAPTION>
Investment Securities Investment Securities
Held to Maturity Available for Sale
December 31, 1996 December 31, 1996
---------------------------------------------------------------------
Carrying Average Fair Carrying Average Fair
Value Yield Value Value Yield Value
---------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Other U.S. Government
Agencies:
Within 1 Year $ 500 5.16% $ 500 $ 2,283 5.35% $ 2,283
1 to 5 Years 500 5.25% 500 13,681 5.93% 13,551
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 5.20% $1,000 $15,964 5.85% $15,834
---------------------------------------------------------------------
State, County and Municipal:
Within 1 Year $ 440 6.84% $ 442 $ 460 7.04% $ 461
1 to 5 Years 2,710 8.30% 2,788 2,182 7.94% 2,229
5 to 10 Years 1,922 7.47% 1,938 1,713 8.75% 1,767
More Than 10 Years 645 7.60% 649 405 7.84% 409
---------------------------------------------------------------------
$5,717 7.83% $5,817 $ 4,760 8.14% $ 4,866
---------------------------------------------------------------------
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% 0 698 6.73% 698
---------------------------------------------------------------------
$ 0 0.00% $ 0 $ 698 6.73% $ 698
---------------------------------------------------------------------
Total Securities:
Within 1 Year $ 996 5.96% $ 998 $ 4,350 5.86% $ 4,357
1 to 5 Years 3,210 7.82% 3,288 18,402 6.21% 18,344
5 to 10 Years 1,922 7.47% 1,938 2,003 8.73% 2,074
More Than 10 Years 645 7.60% 649 1,103 7.14% 1,107
---------------------------------------------------------------------
$6,773 7.43% $6,873 $25,858 6.39% $25,882
=====================================================================
</TABLE>
As of December 31, 1996, 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
Bancshares holds additional earning assets in overnight Federal Funds Sold.
These balances amounted to $5.0 million and $1.8 million as of December 31, 1996
and 1995, respectively. 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 21.6% from $93.0 million at December 31, 1995 to $113.0 million at
December 31, 1996. During 1996, 16.8% of average deposits were held in non-
interest bearing checking accounts, 25.5% were in low yield interest bearing
transaction and savings accounts, and 57.7% were in time certificates with
higher yields. Comparable average deposit mix percentages during 1995 were
15.9%, 22.0% and 62.1%, respectively.
<PAGE>
The average cost of total deposits, including non-interest checking accounts,
during 1996 was 4.29%, up from 4.39% in 1995 and 3.28% in 1994. The slight
decrease in 1996 average deposits cost resulted from a mild shift to a more
favorable mix in non-interest and low cost deposits and declines in the rates
paid on interest checking and savings account balances.
The Bank's total interest expense on deposits and borrowed funds as a percentage
of average earning assets amounted to 4.18% during 1996, down from 4.29% during
1995 and 3.19% during 1994. The small reduction in the average cost of funds
during 1996 reflects the declining rates on interest checking and savings, along
with deposit mix improvements and a stable rate repricing environment on
maturing certificates of deposit. 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 from 1994 to 1995.
The following table reflects average balances of deposit categories for 1996,
1995 and 1994.
<TABLE>
<CAPTION>
TABLE 7
AVERAGE DEPOSITS
(In Thousands)
Years Ended December 31
--------------------------------------------------------------
1996 % 1995 % 1994 %
--------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing
Demand Deposits $ 16,936 16.8% $12,734 15.9% $10,290 17.0%
Interest Bearing Demand Deposits 8,727 8.7% 5,820 7.3% 5,353 8.8%
Money Market Accounts 13,062 13.0% 8,041 10.1% 8,485 14.0%
Savings Deposits 3,854 3.8% 3,733 4.7% 4,008 6.6%
Time Deposits of $100,000 or More 14,202 14.1% 11,719 14.7% 7,877 13.0%
Other Time Deposits 43,825 43.6% 37,941 47.4% 24,681 40.7%
--------------------------------------------------------------
$100,606 100.0% $79,988 100.0% $60,694 100.0%
==============================================================
</TABLE>
The table below summarizes the maturities of time deposits of $100,000 or more
as of December 31, 1996, 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 8
MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
(In Thousands)
As of December 31: 1996 1995 1994
------------------------------------
3 Months or Less $ 3,147 $ 4,467 $ 800
Over 3 Months through 6 Months 2,089 1,979 2,249
Over 6 Months through 12 Months 4,325 4,098 3,672
Over 12 Months 3,962 5,307 2,454
------------------------------------
$13,523 $15,851 $9,175
====================================
BORROWED MONEY
Other interest bearing sources of funds at December 31, 1996 totaled $4.1
million, down from $4.7 million at December 31, 1995. Of the 1996 balance, $3.7
million consisted of various advance agreements from the Federal Home Loan Bank
(FHLB) under the fixed and principal reducing credit programs, $1.6 million of
which matures within the next twelve months. Demand Notes to the U. S. Treasury
of $0.5 million represented accumulated federal tax deposit payments through the
Treasury Department's note option program. The cost of borrowed money components
averaged 6.77% in 1996, up from 6.37% in 1995 and 4.80% in 1994 due to the
higher cost of new longer term FHLB notes.
Other interest bearing sources of funds at December 31, 1995 amounted to $4.7
million, up from $2.9 million at December 31, 1994. The 1995 balance consisted
primarily of $3.7 million in FHLB notes, only $69,500 of which matured within
the next year, and $.9 million in Demand Notes to the U. S. Treasury.
<PAGE>
OTHER LIABILITIES
Other liabilities of $2.0 million at December 31, 1996 and $1.5 million at
December 31, 1995 consist of interest payable on deposits, federal income taxes
payable and other accrued but unpaid expenses.
LIQUIDITY
Bancshares, 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, 1996, approximately $25.9 million in
bonds, at amortized or accreted cost, were carried in the Available for Sale
portfolio, and $4.2 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 76.3%, 69.3% and 77.8% at December 31, 1996, 1995 and 1994,
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, 1996, the Bank had $13.5 million in certificates of deposit of
$100,000 or more. Although this represents 12.0% 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 parent 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 Bancshares in the
future without any material adverse impact on operating results.
CAPITAL RESOURCES AND DIVIDENDS
Bancshares has always placed great emphasis on maintaining a strong capital base
and continues to exceed all minimum capital requirements. Bancshares' equity
capital of $14.9 million at December 31, 1996 amounts to 11.1% of total assets,
compared to 7.8% at December 31, 1995 and 9.1% at December 31, 1994. On average,
the equity capital was 9.4% of assets during 1996, compared to 8.3% for 1995 and
9.7% for 1994. The significant increase in capital levels during 1996 reflects
an influx of $5.2 million in proceeds from the issuance of new stock during the
year in three different events. In September, 1996, Bancshares issued a stock
offering for the sale of 272,560 new shares of the company's common stock. The
issue, which generated $3.2 million in new capital, was fully subscribed and
successfully
<PAGE>
completed by February, 1997. At the beginning of 1996, Bancshares issued an
additional 162,800 shares of its common stock, primarily to newly elected
directors and executive officers of the company. This action produced $1.8
million in new capital. Finally, portions of outstanding stock warrants, issued
to the company's founding directors and executive officers group upon the
original formation of the Bank in 1988, were exercised in late 1996, producing
another $0.2 million in capital. Management forsees the principal uses of the
new capital to be (a) sustaining the capital adequacy of the Bank as it
continues to grow at a rapid pace, (b) expanding the Bank's presence in Macon
and Middle Georgia with more physical locations and improved delivery systems,
and (c) possible acquisition of other financial institutions.
Additional 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 remaining 310,560 warrants at $4.167 per share will
generate an additional $1.3 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, 1996 and 1995 are well above the levels for a well capitalized bank
as shown in the following table.
TABLE 9
CAPITAL RATIOS (a)
(In Thousands)
1996 1995
----------------
As of December 31:
Tier 1 Capital:
Stockholders' Equity $14,645 $ 8,402
Less Intangible Assets 0 0
-----------------
Total Tier 1 Capital 14,645 8,402
-----------------
Tier 2 Capital:
Eligible Portion of Allowance for Loan Losses 1,131 895
Subordinated and Other Qualifying Debt 0 0
-----------------
Total Tier 2 Capital 1,131 895
-----------------
Total Risk Based Capital $15,776 $9,297
=================
Total Net Risk Weighted Assets $90,258 $71,361
=================
Minimum
Requirement
-----------
Total Risk Based Capital Ratio 8.0% 17.5% 13.0%
Tier 1 Capital Ratio 4.0% 16.2% 11.8%
Leverage Ratio 4.0% 11.1% 8.0%
(a) Risk based capital ratios for both years presented were prepared using risk
based capital rules finalized in November, 1994, which exclude the impact of
SFAS No. 115 "Accounting for Certain Investments in Debt and Equity Securities".
<PAGE>
Cash dividends of $313,550, or $.22 per common share, were declared and paid
during 1996, up from $240,000, or $.20 per common share, paid during 1995, and
$200,000, or $.165 per share, in 1994. The ratios of cash dividends paid to net
income for these years were 19.1%, 17.3% and 19.0%, respectively. No dividends
were paid in years prior to 1992. Since the commencement of cash dividend
payments in 1992, the Bancshares Board of Directors has consistently declared
and paid dividends on a quarterly basis.
On March 20, 1995, Bancshares issued a 20% stock split effected in the form of a
dividend. On June 1, 1996, a 100% stock split was effected in the form of a
dividend. Per share data for all periods presented has been retroactively
restated to reflect the additional shares resulting from the stock splits.
As the Bank grows, it continues to add physical office locations to service its
existing Middle Georgia market. Bancshares is adequately capitalized to meet all
anticipated capital expenditure needs. During 1996, a remote ATM/night
depository facility was established on Forsyth Road in northwest Macon. In
October, 1996, the Bank converted its data processing software to a new advanced
system. In February, 1997, the Bank relocated its in-house data processing
facility and operational support functions to a leased operations center on
Riverside Drive near the Bank's first branch. 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 fixed assets purchased during 1996 and 1995 were financed through the
original equity base and retained earnings of the company with no external
borrowing. During 1997, additional Bibb County branch sites and executive office
space are being considered to accomodate the company's high rate of growth and
serve all segments of the local market.
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, 1996, 1995 AND 1994
Bancshares' net income was $1,642,274, $1,390,795, and $1,052,239 for 1996, 1995
and 1994, respectively. Earnings per common and common equivalent share amounted
to $1.02 in 1996, $1.01 in 1995, and $0.81 in 1994. Per share data for all
periods has been retroactively restated for a 20% stock split effected as a
dividend on March 20, 1995 and a 100% stock split effected as a dividend on June
1, 1996. The company's return on average assets amounted to 1.40% for 1996,
1.51% for 1995, and 1.50% for 1994. The return on average equity was 14.93%,
18.16%, and 15.53%, 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. Bancshares' average net interest rate margin, on a
taxable equivalent basis, has been strong by industry standards at 5.32% in
1996, 5.20% in 1995 and 5.60% in 1994. Net interest income before tax
equivalency adjustments in 1996 amounted to $5,596,294, up 29.8% from $4,310,577
in 1995. The 1995 net interest income total was up 22.2% from $3,526,568
recorded in 1994. The following table presents interest income and interest
expense for the past three years. Interest income shown in the table has been
adjusted to reflect taxable equivalent adjustments to tax-exempt securities
income, thereby presenting interest income as if it was fully taxable, using
Bancshares' incremental statutory corporate federal income tax rate of 34%.
<PAGE>
The following table summarizes average balance sheets, interest and yield
information on a taxable equivalent basis for the years ended December 31, 1996,
1995 and 1994.
TABLE 11
AVERAGE BALANCE SHEETS, INTEREST AND YIELDS
(Tax equivalent basis in thousands)
<TABLE>
<CAPTION>
1996 1995
----------------------------------------------------------------------------
Average Yield/ Average Yield/
Balance Interest Rate Balance Interest Rate
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans, net of unearned income: (a)(b)
Taxable $ 75,806 8,277 10.92% $57,933 6,383 11.02%
Tax exempt (c) 0 0 0.00 0 0 0.00
-------------------- -------------------
Net loans 75,806 8,277 10.92 57,933 6,383 11.02
-------------------- -------------------
Investment securities: (d)
Taxable 22,434 1,302 5.81 18,244 1,069 5.86
Tax exempt (c) 9,827 778 7.89 7,699 619 8.04
-------------------- -------------------
Total investment securities 32,261 2,078 6.44 25,943 1,688 6.51
-------------------- -------------------
Interest earning deposits 0 0 0.00 0 0 0.00
Federal funds sold 2,092 112 5.37 3,057 180 5.89
-------------------- -------------------
Total interest earning assets 110,159 10,468 9.50 86,933 8,251 9.49
---------------- -------------------
Non-earning assets 7,209 5,148
--------
Total assets $117,368 $92,081
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing demand deposits $ 8,727 163 1.87 $ 5,820 135 2.32
Money market accounts 13,062 505 3.87 8,041 265 3.30
Savings deposits 3,854 86 2.24 3,733 96 2.56
Times deposits of $100,000 or more 14,202 887 6.24 11,719 726 6.20
Other time deposits 43,825 2,672 6.10 37,941 2,291 6.04
Federal funds purchased 212 13 6.13 58 4 6.38
Demand note U.S. Treasury 431 24 5.56 489 27 5.42
Other borrowed money--FHLB 3,701 257 6.95 2,871 187 6.53
Capital leases & mortgage debt 0 0 0.00 2 0 3.86
-------------------- -------------------
Total interest bearing liabilities 88,014 4,606 5.24 70,674 3,731 5.28
------------------------------ ---------------------------------
Non-int. bearing demand deposits 16,936 12,734
Other liabilities 1,417 1,033
Stockholders' equity 11,001 7,640
-------- -------
Total liabilities and stockholders' equity $117,368 $92,081
======== =======
Interest rate spread 4.27% 4.21%
===== =====
Net interest income 5,860 4,520
===== =====
Net interest margin 5.32% 5.20%
===== =====
</TABLE>
<TABLE>
<CAPTION>
1994
------------------------------------
Average Yield/
Balance Interest Rate
------------------------------------
<S> <C> <C> <C>
ASSETS:
Loans, net of unearned income: (a)(b)
Taxable $45,751 4,632 9.91%
Tax exempt (c) 0 0 0.00
-------------------
Net loans 45,751 4,532 9.91
-------------------
Investment securities: (d)
Taxable 13,326 777 5.83
Tax exempt (c) 5,716 418 7.31
-------------------
Total investment securities 19,042 1,195 6.27
-------------------
Interest earning deposits 47 4 9.23
Federal funds sold 674 27 4.05
-------------------
Total interest earning assets 65,514 5,758 8.79
----------------
Non-earning assets 4,702
-------
Total assets $70,216
=======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Interest bearing demand deposits $ 5,353 128 2.38
Money market accounts 8,485 224 2.64
Savings deposits 4,009 103 2.58
Times deposits of $100,000 or more 7,877 366 4.64
Other time deposits 24,681 1,171 4.74
Federal funds purchased 345 15 4.41
Demand note U.S. Treasury 379 14 3.65
Other borrowed money--FHLB 1,299 68 6.27
Capital leases & mortgage debt 17 0 2.62
-------------------
Total interest bearing liabilities 52,445 2,089 3.98
-----------------------------
Non-int. bearing demand deposits 10,286
Other liabilities 709
Stockholders' equity 6,776
-------
Total liabilities and stockholders' equity $70,216
=======
Interest rate spread 4.81%
=====
Net interest income 3,669
=====
Net interest margin 5.60%
=====
</TABLE>
Notes to Table of Average Balance Sheets, Interest and Yields:
- --------------------------------------------------------------
(a) Interest income includes loan fees as follows (in thousands): 1996-$585,
1995-$383, and 1994-$352.
(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 $264 for 1996, $210 for 1995, and $142 for 1994. (in thousands).
(d) Investment securities are stated at amortized or accreted cost.
<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 1996
compared to the year 1995 and the year 1995 compared to the year 1994.
TABLE 12
RATE/VOLUME ANALYSIS
(In thousands)
<TABLE>
<CAPTION>
-------------------------------------------------
1996 Compared to 1995 1995 Compared to 1994
-------------------------------------------------
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 $1,969 (75) 1,894 1,206 645 1,851
Tax exempt loans (b) 0 0 0 0 0 0
Taxable investment securities 245 (11) 234 287 5 292
Tax exempt investment securities (b) 171 (14) 157 144 57 201
Interest earning deposits 0 0 0 (4) (0) (4)
Federal funds sold (57) (11) (68) 97 56 153
--------------------------------------------------
Total interest income 2,328 (111) 2,217 1,730 763 2,492
INTEREST PAID ON:
Interest bearing demand deposits 67 (39) 28 11 (3) 8
Money market accounts 166 74 240 (12) 53 41
Savings deposits 3 (13) (10) (7) (1) (8)
Time deposits of $100,000 or more 154 7 161 178 182 360
Other time deposits 355 26 381 629 491 1,120
Federal funds purchased 9 (1) 9 (13) 1 (12)
Demand note U.S. Treasury (3) 1 (2) 4 9 13
Other borrowed money-FHLB 54 16 70 83 36 119
Capital leases & mortgage debt (0) 0 (0) (0) 0 (0)
--------------------------------------------------
Total interest expense 806 71 877 873 768 1,641
--------------------------------------------------
Net interest income 1,522 (182) 1,340 856 (5) 851
==================================================
</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 Bancshares'
asset/liability management function. Bancshares 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 on net interest
income of interest rate moves in either direction is not expected to be
significant over time.
The principal tool used by Bancshares 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 over a range of plus or minus 300
basis points.
<PAGE>
The gap analysis models are normally 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 Bancshares' consolidated
balance sheet as of December 31, 1996 and 1995 at various repricing intervals.
This gap analysis indicates that Bancshares was moderately liability sensitive
over a one year time horizon at both December 31, 1996 and 1995, with cumulative
one year gaps of (4.3%) and (3.8%), respectively. The projected deposit
repricing volumes reflect adjustments based on management's assumptions of the
expected rate sensitivity to current market rates for core deposits without
contractual maturity (i.e., interest bearing checking, savings and money market
accounts). Management believes that these adjustments allow for a more accurate
profile of Bancshares' interest rate risk position.
TABLE 13
INTEREST RATE SENSITIVITY
(in Thousands)
<TABLE>
<CAPTION>
December 31, 1996
--------------------------------------------
Over 3 Over 1 year
0 up to 3 up to 12 up to Over 5
months months 5 years years
--------------------------------------------
<S> <C> <C> <C> <C>
Amounts maturing or repricing:
- ------------------------------
Investment securities (a) $ 4,826 $ 4,354 $17,703 $ 5,747
Loans, net of unearned income 31,596 9,395 36,790 8,170
Other earning assets 4,980 0 0 0
-------------------------------------------
Interest sensitive assets 41,402 13,749 54,493 13,917
-------------------------------------------
Deposits 26,190 32,219 33,673 0
Other borrowings 468 1,571 1,648 453
-------------------------------------------
Interest sensitive liabilities 26,658 33,790 35,321 453
-------------------------------------------
Interest sensitivity gap $14,744 $(20,041) $19,172 $13,464
===========================================
Cumulative interest sensitivity gap $14,744 $ (5,297) $13,875 $27,339
===========================================
Cumulative interest sensitivity gap as a
percentage of total interest
sensitive assets 11.9% -4.3% 11.2% 22.1%
===========================================
Cumulative interest sensitive assets
as a percentage of cumulative
interest sensitive liabilities 155.3% 91.2% 114.5% 128.4%
===========================================
</TABLE>
<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
--------------------------------------------
<S> <C> <C> <C> <C>
Amounts maturing or repricing:
- ------------------------------
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 liabilities 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".
<PAGE>
PROVISION FOR LOAN LOSSES
The general nature of lending results in periodic charge offs, in spite of
Bancshares' continuous loan review process, credit standards, and internal
controls. The company's recent charge off history in the past three years has
been extremely good with minimal losses taken. Bancshares incurred net charge
offs of only $1,482 during 1996, compared to $1,147 during 1995 and $25,417 in
1994. Bancshares expensed $257,000 in 1996, $109,143 in 1995, and $302,490 in
1994 for loan loss provisions. The allowance for loan losses on December 31,
1996 stood at 1.60% of outstanding net loans, compared to 1.75% and 1.95% at
December 31, 1995 and 1994.
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 $1,383,127 balance
in the allowance for loan losses at December 31, 1996 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.
On January 1, 1995, Bancshares 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.
<PAGE>
TABLE 14
ALLOWANCE FOR LOAN LOSSES
(In Thousands)
<TABLE>
<CAPTION>
Years Ended December 31
---------------------------------------------
1995 1994 1993 1992 1991
---------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for loan losses at
beginning of year $1,128 $1,020 $ 743 $ 862 $ 537
Loans charged off during the year:
Commercial, financial and agricultural 73 0 13 365 115
Real estate-construction 0 0 0 0 0
Real estate-mortgage 53 0 10 163 149
Loans to individuals 74 60 54 14 52
---------------------------------------------
Total loans charged off 200 60 77 542 316
---------------------------------------------
Recoveries during the year of loans
previously charged off:
Commercial, financial and agricultural 124 23 11 13 26
Real estate-construction 0 0 0 0 0
Real estate-mortgage 37 18 14 8 178
Loans to individuals 37 18 27 24 30
---------------------------------------------
Total loans recovered 198 59 52 45 234
---------------------------------------------
Net loans charged off during the year 2 1 25 497 82
---------------------------------------------
Additions to allowance-provision expense 257 109 302 378 407
---------------------------------------------
Allowance for loan losses at end of year $1,383 $1,128 $1,020 $ 743 $ 862
=============================================
Allowance for loan losses to
year end net loans 1.60% 1.75% 1.95% 1.81% 2.66%
=============================================
Ratio of net loans charged off during
the year to average net loans
outstanding during the year 0.00% 0.00% 0.06% 1.38% 0.26%
=============================================
</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, 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 15
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
(In Thousands)
<TABLE>
<CAPTION>
December 31
------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------------------------------------------------
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 $ 630 18% $ 358 18% $ 323 19% $ 236 24% $273 28%
Real estate-construction 0 3 17 4 15 4 11 4 13 3
Real estate-mortgage 205 69 291 69 263 69 192 64 222 60
Loans to individuals 202 10 181 9 163 8 119 8 138 9
Unallocated 346 - 281 - 256 - 185 - 216 -
------------------------------------------------------------------------------------------
Total allowance for
loan losses $1,383 100% $1,128 100% $1,020 100% $ 743 100% $862 100%
==========================================================================================
</TABLE>
* Loan balance in each category expressed as a percentage of total year-end
loans.
<PAGE>
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 at December 31, 1996 and 1995.
Nonperforming assets at December 31, 1996 amounted to approximately $795,000, or
0.59% of total assets, up from approximately $581,000, or 0.54% of total assets
at December 31, 1995. The company's history shows significant improvement over
recent years in the level of nonperforming assets as a percentage of total
assets. These year end ratios have been 0.59% in 1996, 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 general economic health of the local market area.
TABLE 16
NONPERFORMING ASSETS
(In thousands)
<TABLE>
<CAPTION>
December 31
------------------------------------------------
1996 1995 1994 1993 1992
------------------------------------------------
<S> <C> <C> <C> <C> <C>
Nonaccrual loans $ 471 $ 218 $ 318 $ 498 $ 191
Restructured loans 0 0 0 0 0
------------------------------------------------
Nonperforming loans 471 218 318 498 191
90 days past due and
still accruing loans 537 0 0 0 5
------------------------------------------------
Total $ 1,008 $ 218 $ 318 $ 498 $ 196
================================================
Nonperforming assets:
Nonperforming loans (a) $ 471 $ 218 $ 318 $ 498 $ 191
Other real estate owned 324 363 187 399 636
------------------------------------------------
Total $ 795 $ 581 $ 505 $ 897 $ 827
================================================
Nonperforming assets
to total loans and other
real estate 0.91% 0.89% 0.96% 2.16% 2.50%
================================================
Allowance for loan losses
to nonperforming loans 293.63% 517.43% 320.75% 149.20% 451.31%
================================================
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31, 1996: Nonaccrual Restructured Total
- ----------------------------- ---------- ------------ -----
<S> <C> <C> <C>
Interest at contracted
rates (b) $72 $0 $72
Interest recorded as
income 6 0 6
--- -- ---
Reduction of interest income
during 1996 $66 $0 $66
--- -- ---
</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.
<PAGE>
At December 31, 1996, 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 in 1996 totaled $1,101,491, up 27.1% from $866,705 in 1995.
Over 80% of the increase, or $189,000, is attributed to growth related increases
in service charges on deposit accounts, which rose by 36.9% over the previous
year. Other increases were realized in mortgage origination fee income, up
$25,000, fees related to more ATM locations, up $26,000, and an increase in
gains from sales in the securities portfolio, up $21,000. The improvements were
partially offset by a loss of data processing servicing 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 1994 and 1995 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 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 EXPENSES
Noninterest expenses were $4,111,698 for the year 1996, up 31.9% from $3,116,540
in 1995. Almost 66% of the increase is attributed to higher costs of salaries
and benefits. The Bank has increased staff significantly during 1996 to carry
out executive management succession plans, to staff an infrastructure for the
growing organization, and to staff the growing number of physical locations.
Salaries and benefits increased by $656,000, or 44.1%. Occupancy costs rose by
$168,000, or 41.4%, due to a full year of expenses for operating the Bank's four
full service offices. All other overhead expenses increased by $171,000, or
14.0%, due principally to volume and growth related increases. Overhead
pressures were partially alleviated by reductions in the cost of FDIC deposit
insurance premiums and lower internal data processing costs.
Noninterest expenses in 1995 were $3,116,540, up 12.0% over 1994 noninterest
expenses of $2,781,589. 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
<PAGE>
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.
INCOME TAXES
Federal and state income tax expense in 1996 amounted to $686,813, or an
effective rate of 29.5%, on the year's pre-tax earnings. Federal income tax
expense in 1995 was $560,804, equating to a 28.7% effective tax rate. This
effective rate is down slightly from 29.3%, or $436,372, in 1994. The principal
item reducing the effective tax rate below federal statutory tax rates of 34.0%
has been the level of tax exempt interest income on municipal securities for all
years shown. See Note 8 to Bancshares' consolidated financial statements for a
detailed analysis of income taxes.
INFLATION
Inflation impacts the financial condition and operating results of Bancshares.
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. Bancshares 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.
<PAGE>
EXHIBIT 99(b)
McNair, McLemore, Middlebrooks & Co., LLP
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION
RALPH S. McLEMORE, SR., C.P.A. (1963-1977) 389 MULBERRY STREET
SIDNEY B. McNAIR, C.P.A. (1954-1992) POST OFFICE BOX ONE
MACON, GEORGIA 31202
SIDNEY E. MIDDLEBROOKS, C.P.A., P.C. (912) 746-6277
RAY C. PEARSON, C.P.A. FAX (912) 741-8353
J. RANDOLPH NICHOLS, C.P.A.
WILLIAM H. EPPS, JR., C.P.A. 1117 MORNINGSIDE DRIVE
RAYMOND A. PIPPIN, JR., C.P.A. POST OFFICE BOX 1287
JERRY A. WOLFE, C.P.A. PERRY, GA 31069
W. E. BARFIELD, JR., C.P.A. (912) 987-0947
HOWARD S. HOLLEMAN, C.P.A. FAX (912) 987-0526
F. GAY McMICHAEL, C.P.A.
RICHARD A. WHITTEN, JR., C.P.A.
ELIZABETH WARE HARDIN, C.P.A.
CAROLINE E. GRIFFIN, C.P.A.
RONNIE K. GILBERT, C.P.A.
January 24, 1997
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, 1996 and 1995 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, 1996.
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, 1996 and 1995 and the results of operations
and cash flows for each of the years in the three-year period ended December 31,
1996 in conformity with generally accepted accounting principles.
/s/ McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
---------------------------------------------
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
1
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1996 1995
-------------- -------------
<S> <C> <C>
CASH AND BALANCES DUE FROM DEPOSITORY INSTITUTIONS $ 5,488,508 $ 3,852,830
-------------- -------------
FEDERAL FUNDS SOLD 4,980,000 1,780,000
-------------- -------------
INVESTMENT SECURITIES 32,655,569 34,439,849
-------------- -------------
LOANS 86,421,730 64,586,110
Allowance for Loan Losses (1,383,127 (1,127,609)
Unearned Interest and Fees (174,978 (185,993)
-------------- -------------
84,863,625 63,272,508
-------------- -------------
PREMISES AND EQUIPMENT 2,533,931 2,442,771
-------------- -------------
OTHER REAL ESTATE (NET OF ALLOWANCE OF $6,750 IN
1996 AND 1995) 323,966 362,974
-------------- -------------
OTHER ASSETS 3,239,884 1,415,226
-------------- -------------
TOTAL ASSETS $134,085,483 $107,566,158
============== =============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
1996 1995
-------------- -------------
DEPOSITS
<S> <C> <C>
Noninterest-Bearing $ 20,950,094 $ 14,244,767
Interest-Bearing 92,081,567 78,723,739
-------------- -------------
113,031,66 92,968,506
-------------- -------------
BORROWED MONEY
Demand Notes to U.S. Treasury 467,945 933,639
Other Borrowed Money 3,671,800 3,740,600
-------------- -------------
4,139,745 4,674,239
-------------- -------------
OTHER LIABILITIES 1,981,625 1,497,738
-------------- -------------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common Stock, Par Value $1 a Share; Authorized
5,000,000 Shares, Issued and Outstanding 1,654,852
and 600,000 Shares, Respectively 1,654,852 600,000
Paid-In Capital 9,312,662 4,500,000
Retained Earnings 3,948,855 3,301,531
Net Unrealized Gain on Securities Available for Sale,
Net of Tax of $8,286 in 1996 and $12,438 in 1995 16,083 24,144
-------------- -------------
14,932,452 8,425,675
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $134,085,483 $107,566,158
============== =============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
3
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1996 1995 1994
--------------- ---------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans, Including Fees $ 8,277,182 $6,382,841 $4,531,846
Federal Funds Sold 112,358 180,038 27,299
Deposits with Other Banks 162 1,284 4,959
Investment Securities
U. S. Treasury 309,433 263,889 91,641
U. S. Government Agencies 947,789 770,209 653,192
State, County and Municipal 512,013 408,548 275,596
Other Investments 45,233 34,520 31,782
--------------- ---------- ----------
10,204,170 8,041,329 5,616,315
--------------- ---------- ----------
INTEREST EXPENSE
Deposits 4,313,570 3,512,975 1,991,167
Federal Funds Purchased 12,995 3,693 15,233
Demand Notes Issued to the U.S. Treasury 23,970 26,538 13,844
Mortgage Indebtedness and Obligations Under Capital Leases - 60 454
Other Borrowed Money 257,341 187,486 69,049
--------------- ---------- ----------
4,607,876 3,730,752 2,089,747
--------------- ---------- ----------
NET INTEREST INCOME 5,596,294 4,310,577 3,526,568
Provision for Loan Losses 257,000 109,143 302,490
--------------- ---------- ----------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,339,294 4,201,434 3,224,078
--------------- ---------- ----------
NONINTEREST INCOME
Service Charges on Deposits 700,074 511,535 454,480
Other Service Charges, Commissions and Fees 262,211 179,468 202,995
Securities Gains 24,077 2,637 22,944
Gain from Sale of SBA Loans 50,000 46,142 212,565
Other 65,129 126,923 153,138
--------------- ---------- ----------
1,101,491 866,705 1,046,122
--------------- ---------- ----------
NONINTEREST EXPENSES
Salaries and Employee Benefits 2,143,932 1,488,196 1,344,760
Occupancy and Equipment 574,982 406,517 317,349
Other 1,392,784 1,221,827 1,119,480
--------------- ---------- ----------
4,111,698 3,116,540 2,781,589
--------------- ---------- ----------
INCOME BEFORE INCOME TAXES 2,329,087 1,951,599 1,488,611
INCOME TAXES 686,813 560,804 436,372
--------------- ---------- ----------
NET INCOME $ 1,642,274 $1,390,795 $1,052,239
=============== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS)
ON SECURITIES
COMMON PAID-IN RETAINED AVAILABLE
SHARES STOCK CAPITAL EARNINGS FOR SALE TOTAL
----------- -------------- ---------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1993 500,000 $ 500,000 $4,500,000 $1,398,505 6,398,505
Net Unrealized Gain on Securities Available for
Sale, $ 36,716
Net of Tax, at January 1
Net Unrealized Loss on Securities Available for
Sale, (205,020)
Net of Tax, During 1994
Cash Dividends (200,000) (200,000)
Net Income 1,052,231 1,052,231
----------- -------------- ---------- ----------- ------------- ----------
BALANCE, DECEMBER 31, 1994 500,000 500,000 4,500,000 2,250,736 (168,304) 7,082,432
20% Stock Split Effected as Dividend 100,000 100,000 (100,000)
Net Unrealized Gain on Securities Available for
Sale, 192,448
Net of Tax, During 1995
Cash Dividends (240,000) (240,000)
Net Income 1,390,795 1,390,795
----------- -------------- ---------- ----------- ------------- ----------
BALANCE, DECEMBER 31, 1995 600,000 600,000 4,500,000 3,301,531 24,144 8,425,675
Issuance of Common Stock 81,400 81,400 1,668,700 1,750,100
100% Stock Split Effected as Dividend 681,400 681,400 (681,400)
Issuance of Common Stock 242,852 242,852 2,988,160 3,231,012
Stock Warrants Exercised 49,200 49,200 155,802 205,002
Net Unrealized Loss on Securities Available for
Sale, (8,061)
Net of Tax, During 1996
Cash Dividends (313,550) (313,550)
Net Income 1,642,274 1,642,274
----------- -------------- ---------- ----------- ------------- ----------
BALANCE, DECEMBER 31, 1996 1,654,852 $1,654,852 $9,312,662 $3,948,855 $ 16,083 14,932,452
=========== ============== ========== =========== ============= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE>
<TABLE>
<CAPTION>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
1996 1995 1994
--------------- ------------- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 1,642,274 $ 1,390,795 $ 1,052,239
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities
Depreciation 237,354 196, 592 148,747
Amortization and Accretion 109,578 19,759 12,915
Provision for Loan Losses 257,000 109,143 302,490
Deferred Income Taxes (84,456) 14,263 (77,377)
Securities Gains (24,077) (2,637) (22,944)
Gain from Sale of SBA Loans (50,000) (46,142) (212,565)
(Gain) Loss on Sale of Other Real Estate - (5,632) (37,278)
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 982,096 922,840 4,251,300
Investment in SBA Loans (932,096) (876,698) (4,038,735)
CHANGE IN
Interest Receivable (69,380) (474,907) (144,538)
Prepaid Expenses (90,945) 2,135 250,077
Interest Payable 73,973 852,485 3,833
Accrued Expenses and Accounts Payable 112,996 (338,636) 260,390
Other (1,021,465) 32,547 64,716
--------------- ------------- ------------
1,142,852 1,766,189 1,854,020
--------------- ------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Interest-Bearing Deposits in Other Banks - - 100,000
Purchase of Investment Securities Available for Sale (9,177,429) (14,161,045) (1,145,315)
Purchase of Investment Securities Held to Maturity (1,261,907) (4,517,414) (467,804)
Proceeds from Disposition of Investment Securities
Available for Sale 10,374,775 2,454,169 1,975,199
Held to Maturity 1,806,630 715,830 806,772
Loans to Customers (22,048,648) (12,381,647) (11,494,541)
Purchase of Software (190,477) - -
Purchase of Premises and Equipment (450,883) (629,401) (53,893)
Proceeds from Disposal of Premises and Equipment - 1,600 -
Other Real Estate 239,539 120,695 465,260
--------------- ------------- ------------
(20,708,400) (28,397,213) (9,814,322)
--------------- ------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest-Bearing Customer Deposits 13,357,828 24,598,294 6,453,090
Noninterest-Bearing Customer Deposits 6,705,328 1,161,386 3,879,465
Demand Note to the U.S. Treasury (465,694) 394,769 (177,018)
Payments on Obligations Under Capital Leases - - (40,282)
Issuance of Common Stock 5,186,114 - -
Dividends Paid (313,550) (240,000) (200,000)
Federal Funds Purchased - - (1,185,000)
Note to the Federal Home Loan Bank - 1,425,000 2,025,000
Repayments on Notes to Federal Home Loan Bank (68,800) (12,800) (11,600)
Mortgage Indebtedness on Other Real Estate - (6,144) (1,342)
--------------- ------------- ------------
24,401,226 27,320,505 10,742,313
--------------- ------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,835,678 689,481 2,782,011
CASH AND CASH EQUIVALENTS, BEGINNING 5,632,830 4,943,349 2,161,338
--------------- ------------- ------------
CASH AND CASH EQUIVALENTS, ENDING $ 10,468,508 $ 5,632,830 $ 4,943,349
=============== ============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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, 1996 and 1995. 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.
7
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS (CONTINUED)
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.
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.
8
<PAGE>
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
(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>
1996 1995
--------------- -----------
<S> <C> <C>
Cash on Hand and Cash Items $1,136,379 $ 674,861
Noninterest-Bearing Deposits with Other Banks 4,352,129 3,177,969
-------------- ------------
$5,488,508 $ 3,852,830
============== ============
</TABLE>
As of December 31, 1996, the Bank had required deposits with the Federal Reserve
of $3,000.
9
<PAGE>
(3) INVESTMENT SECURITIES
Investment securities as of December 31, 1996 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
-------------- ---------- ------------- ------------
<S> <C> <C> <C> <C>
SECURITIES AVAILABLE FOR SALE
U.S. Treasury $ 4,038,805 $ 31,228 $ 4,070,033
U.S. Government Agencies
Mortgage Backed 397,156 16,701 413,857
Other 15,964,313 48,605 $ (179,278) 15,833,640
State, County and Municipal 4,759,315 109,184 (2,071) 4,866,428
Federal Reserve Stock 181,200 181,200
Federal Home Loan Bank Stock 517,200 517,200
-------------- ---------- ------------- ------------
$25,857,989 $205,718 $ (181,349) $25,882,358
============== ========== ============= ============
</TABLE>
SECURITIES HELD TO MATURITY
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
U.S. Government Agencies
Mortgaged Backed $ 56,351 $ (30) $ 56,321
Other 1,000,000 $ 45 1,000,045
State, County and Municipal 5,716,860 103,283 (3,803) 5,816,340
-------------- ---------- ------------- ------------
$ 6,773,211 $103,328 $ (3,833) $ 6,872,706
============== ========== ============= ============
</TABLE>
The amortized cost and fair value of investment securities as of December 31,
1996, 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 FAIR AMORTIZED FAIR
COST VALUE COST VALUE
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Due in One Year or Less $ 4,242,379 $ 4,249,784 $ 940,000 $ 941,533
Due After One Year Through Five Years 18,402,389 18,344,543 3,209,490 3,287,578
Due After Five Years Through Ten Years 1,712,679 1,767,120 1,922,477 1,938,396
Due After Ten Years 404,986 408,654 644,893 648,877
------------- ------------- ------------- --------------
24,762,433 24,770,101 6,716,860 6,816,384
Mortgage Backed Securities 397,156 413,857 56,351 56,322
Federal Reserve Stock 181,200 181,200
Federal Home Loan Bank Stock 517,200 517,200
-------------- -------------- ------------- --------------
$ 25,857,989 $ 25,882,358 $ 6,773,211 $ 6,872,706
============== ============== ============= ==============
</TABLE>
10
<PAGE>
(3) INVESTMENT SECURITIES (CONTINUED)
Investment securities as of December 31, 1995 are summarized as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES 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
Mortgage 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>
Proceeds from sales of investments in debt securities were $8,306,405 in 1996,
$3,169,999 in 1995 and $2,781,971 in 1994. Gross realized gains totaled
$37,612, $7,117 and $25,381 in 1996, 1995 and 1994, respectively. Gross losses
totaled $13,535, $4,480 and $2,437 in 1996, 1995 and 1994, respectively.
Investment securities having a carrying value approximating $4,551,000 and
$1,548,000 as of December 31, 1996 and 1995, respectively, were pledged to
secure public deposits and for other purposes.
11
<PAGE>
(4) LOANS
The composition of loans as of December 31 are:
<TABLE>
<CAPTION>
1996 1995
------------- -----------
<S> <C> <C>
Loans Secured by Real Estate
Construction and Land Development $ 2,864,293 $ 2,847,546
Secured by Farmland (Including Farm Residential and
Other Improvements) 2,337,764 2,018,856
Secured by 1-4 Family Residential Properties 25,555,495 19,072,385
Secured by Multifamily (5 or More) Residential Properties 17,530
Secured by Nonfarm Nonresidential Properties 31,961,212 23,646,239
Commercial and Industrial Loans (U.S. Addressees) 15,129,141 11,331,346
Loans to Individuals for Household, Family and Other
Personal Expenditures
Credit Cards and Related Plans 427,437 373,296
Other 8,128,858 5,288,710
All Other Loans - 7,732
------------- -----------
$86,421,730 $64,586,110
============= ===========
Loans by interest rate type are:
Fixed Rate $65,083,381 $47,357,733
Variable Rate 21,338,349 17,228,377
------------- -----------
$86,421,730 $64,586,110
============= ===========
</TABLE>
Impaired loans included in total loans above as of December 31 are summarized as
follows:
<TABLE>
<CAPTION>
1996 1995
----------- ---------
<S> <C> <C>
Total Investment in Impaired Loans $485,744 $218,103
Less Allowance for Impaired Loan Losses 119,809 98,447
----------- ---------
Net Investment $365,935 $119,656
=========== =========
Average Investment $425,840 $136,542
=========== =========
</TABLE>
For the year ended December 31, 1996, no income was recorded on the cash basis
on impaired loans. Foregone interest on impaired and other nonperforming loans
approximated $66,000 in 1996, $8,122 in 1995 and $61,800 in 1994.
12
<PAGE>
(5) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses are summarized below for the years
ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------- ----------- ----------
<S> <C> <C> <C>
BALANCE, BEGINNING $1,127,609 $1,019,613 $ 742,540
Provision Charged to Operating Expenses 257,000 109,143 302,490
Loans Charged Off (200,046) (60,191) (77,863)
Loan Recoveries 198,564 59,044 52,446
------------- ----------- ----------
BALANCE, ENDING $1,383,127 $1,127,609 $1,019,613
============= =========== ==========
</TABLE>
The 1996 and 1995 allowance for loan losses presented above include an allowance
for impaired loan losses which was established as of January 1, 1995.
Transactions in the allowance for impaired loan losses during 1996 and 1995 were
as follows:
<TABLE>
<CAPTION>
1996 1995
------------ --------
<S> <C> <C>
BALANCE, BEGINNING $ 98,447 $67,447
Provision Charged to Operating Expenses 98,890 31,000
Loans Charged Off (77,528) -
Loan Recoveries - -
------------ --------
BALANCE, ENDING $119,809 $98,447
============ ========
</TABLE>
(6) PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
-------------- ----------
<S> <C> <C>
Land $ 531,411 $ 531,411
Building 1,226,457 1,213,677
Furniture, Fixtures and Equipment 1,829,521 1,606,311
-------------- ----------
3,587,389 3,351,399
Accumulated Depreciation (1,053,458) (908,628)
-------------- ----------
$ 2,533,931 $2,442,771
============== ==========
</TABLE>
Depreciation charged to operations totaled $237,354 in 1996, $196,592 in 1995
and $148,747 in 1994.
13
<PAGE>
(7) OTHER ASSETS
Other assets consist of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Accrued Interest Receivable $1,162,165 $1,092,784
Net Deferred Tax Asset 229,581 140,972
Unamortized Organization Costs 22,280 30,382
Demand Deposit Application in Process 1,227,707 -
Unamortized Software Costs 265,445 -
Other 332,706 151,088
------------ ----------
$3,239,884 $1,415,226
============ ==========
</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 1996 and 1995 and $2,025 in 1994.
(8) INCOME TAXES
The Company reports income taxes under 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.
The components of income tax expense for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
----------- --------- ---------
<S> <C> <C> <C>
Current Federal Expense $576,357 $546,541 $513,749
Deferred Federal Expense (Benefit) 84,456 14,263 (77,377)
----------- --------- ---------
660,813 560,804 436,372
Current State Tax Expense 26,000 - -
----------- --------- ---------
$686,813 $560,804 $436,372
=========== ========= =========
</TABLE>
14
<PAGE>
(8) INCOME TAXES (CONTINUED)
Federal income tax expense of $660,813 in 1996, $560,804 in 1995 and $436,372 in
1994 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>
1996 1995 1994
------------ ---------- ---------
<S> <C> <C> <C>
FEDERAL STATUTORY INCOME TAXES $ 791,889 $ 663,544 $506,128
Tax-Exempt Interest (160,347) (128,602) (91,794)
Interest Expense Disallowance 24,469 21,153 11,500
Premiums on Officers' Life Insurance 2,621 3,169 2,771
Meal and Entertainment Disallowance 3,603 2,212 2,417
Other (1,422) (672) 5,350
------------ ---------- ---------
ACTUAL INCOME TAXES $ 660,813 $ 560,804 $436,372
============ ========== =========
</TABLE>
The components of the net deferred tax asset included in other assets in the
accompanying balance sheets as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ---------
DEFERRED TAX ASSETS
<S> <C> <C>
Allowance for Loan Losses $ 321,598 $ 234,218
Georgia Occupation and License Tax Credit 53,581 52,639
Other Real Estate Owned Valuation Allowance 2,295 2,295
Valuation Allowance for Deferred Tax Assets (23,286) (23,207)
------------ ---------
354,188 265,945
------------ ---------
DEFERRED TAX LIABILITIES
Premises and Equipment (99,852) (76,978)
Securities Accretion (16,470) (35,557)
------------ ---------
(116,322) (112,535)
------------ ---------
237,866 153,410
DEFERRED TAX LIABILITY ON UNREALIZED SECURITIES GAINS (8,285) (12,438)
------------ ---------
NET DEFERRED TAX ASSET $ 229,581 $ 140,972
============ =========
</TABLE>
15
<PAGE>
(9) DEPOSITS
Components of interest-bearing deposits as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------- -----------
<S> <C> <C>
Interest-Bearing Demand $25,062,789 $15,257,863
Savings 4,153,442 3,562,564
Time, $100,000 and Over 13,522,903 15,850,776
Other Time 49,342,433 44,052,536
------------- -----------
$92,081,567 $78,723,739
============= ===========
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit, each with a
minimum denomination of $100,000, was approximately $12,048,000 and $10,544,000
on December 31, 1996 and 1995, respectively.
As of December 31, 1996, the scheduled maturities of certificates of deposit are
as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
------------------- -------------
<S> <C>
1997 $43,808,150
1998 7,583,290
1999 1,770,194
2000 9,349,326
2001 and Thereafter 354,376
-------------
$62,865,336
=============
</TABLE>
(10) OTHER BORROWED MONEY
Other borrowed money is comprised of the following as of December 31:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Advance agreements with the Federal Home Loan Bank of
Atlanta payable in varying amounts through August 7, 2005.
Interest at rates ranging from 5.83 percent to 7.93 percent payable
under the principal reducing credit program and the fixed rate
credit program. $3,671,800 $3,740,600
============ ==========
</TABLE>
16
<PAGE>
(10) OTHER BORROWED MONEY (CONTINUED)
Maturities of borrowed money for each of the next five years and thereafter are
as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---------- ----------
<S> <C>
1997 $1,570,500
1998 72,000
1999 598,600
2000 955,500
2001 22,700
Thereafter 452,500
----------
$3,671,800
==========
</TABLE>
(11) OTHER LIABILITIES
Components of other liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------------ ----------
<S> <C> <C>
Interest Payable $1,240,085 $1,166,112
Federal Income Taxes Payable 23,706 7,612
State Income Taxes Payable 26,000 -
Accrued Expenses 388,177 306,237
Other 303,657 17,777
------------ ----------
$1,981,625 $1,497,738
============ ==========
</TABLE>
(12) 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
$167,890 in 1996, $160,452 in 1995 and $120,543 in 1994.
17
<PAGE>
(13) 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 $201,800 as of December 31, 1996 and $124,500 as of December 31,
1995. Unfulfilled loan commitments as of December 31, 1996 and 1995
approximated $13,215,000 and $9,606,000, respectively. No losses are
anticipated as a result of commitments and contingencies.
The Bank is committed to purchase equipment approximating $610,000 during 1997.
(14) 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 warrant entitled the owner to purchase one share
of Bank stock at the exercise price of $10 per share until the warrant expired.
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 $4.167 per share.
During 1996, the board of directors of SNB Bancshares, Inc. adopted the 1996
incentive stock option plan which granted key officers the right to purchase
shares of common stock at the price of $10.75, representing the market value of
the stock at the date of the option grant. Option holders may exercise in
accordance with a vesting schedule beginning with 20 percent the first year and
increasing 20 percent for each year thereafter such that 100 percent of granted
options may be exercised by the end of the fifth year. Unexercised options
expire at the end of the tenth year.
A summary of warrant and option transactions follows:
<TABLE>
<CAPTION>
SHARES UNDER
---------------------------
ORIGINAL INCENTIVE STOCK
WARRANTS OPTIONS
----------- --------------
<S> <C> <C>
Granted 359,760 50,000
Canceled - -
Exercised 49,200 -
----------- --------------
Outstanding, December 31, 1996 310,560 50,000
=========== ==============
Eligible to be Exercised, December 31, 1996 310,560 -
=========== ==============
</TABLE>
18
<PAGE>
(15) INTEREST INCOME AND EXPENSE
Interest income of $471,608, $394,240 and $269,983 from state, county and
municipal bonds was exempt from regular income taxes in 1996, 1995 and 1994,
respectively.
Interest on deposits includes interest expense on time certificates of $100,000
or more totaling $886,601, $726,041 and $365,682 for the years ended December
31, 1996, 1995 and 1994, respectively.
(16) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the following were made during the years ended December 31:
<TABLE>
<CAPTION>
1996 1995 1994
------------ ---------- ----------
<S> <C> <C> <C>
Interest Expense $4,533,903 $2,878,203 $2,084,853
============ ========== ==========
Income Taxes $ 721,000 $ 553,400 $ 113,400
============ ========== ==========
Noncash investing activities for the years ended December 31 are as follows:
Acquisitions of Real Estate Through
Foreclosure $ 200,531 $ 257,224 $ 256,567
============ ========== ==========
(17) EARNINGS PER SHARE
1996 1995 1994
------------- --------- ----------
Earnings Per Common and Common Equivalent Share $1.02 $1.01 $.81
============= ========= ==========
Weighted Average Shares Outstanding 1,617,717 1,384,268 1,323,448
============= ========= ==========
</TABLE>
Earnings per common share and common equivalent share was computed by dividing
adjusted net income by the weighted average number of shares of common stock and
common stock equivalents outstanding during the year. The number of common
shares was increased by the number of shares issuable upon the exercise of
warrants and stock options when the market price of the common stock exceeded
the exercise price of the warrants or options. The increase in the number of
common shares was reduced by the number of common shares that are assumed to
have been purchased with the proceeds from the exercise of the warrants or
options.
19
<PAGE>
(17) EARNINGS PER SHARE (CONTINUED)
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation
(Statement 123). Statement 123 establishes a "fair value" based method of
accounting for stock-based compensation plans and encourages all entities to
adopt that method of accounting for all of their employee stock compensation
plans. However, it also allows an entity to continue to measure compensation
cost for those plans using the intrinsic value based method of accounting
prescribed by APB Opinion No. 25, Accounting for Stock Issued to Employees
(Opinion 25). Entities electing to remain with the accounting in Opinion 25
must make proforma disclosures of net income and earnings per share, as if the
fair value based method of accounting defined in Statement 123 had been applied.
Under the fair value based method, compensation cost is measured at the grant
date based on the value of the award and is recognized over the service period,
which is usually the vesting period. Under the intrinsic value based method,
compensation cost is the excess, if any, of the quoted market price of the stock
at grant date or other measurement date over the amount an employee must pay to
acquire the stock. This statement also applies to transactions in which an
entity issues its equity instruments to acquire goods or
services from nonemployees. SNB Bancshares, Inc. has decided to continue to
follow Opinion 25 in accounting for its stock-based compensation awards. The
effect of Statement 123 on net income and earnings per share is immaterial.
All share and per share data have been restated to reflect the 100 percent stock
split effected in the form of a dividend on June 1, 1996 and the 20 percent
stock split effected in the form of a dividend on March 20, 1995.
(18) 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 $2,227,189 as
of December 31, 1996 and $2,544,857 as of December 31, 1995. 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>
1996 1995
------------ -----------
<S> <C> <C>
BALANCE, BEGINNING $ 2,544,857 $ 2,700,614
New Loans 1,840,377 5,221,080
Repayments (2,158,044) (5,376,837)
------------ -----------
BALANCE, ENDING $ 2,227,190 $ 2,544,857
============ ===========
</TABLE>
20
<PAGE>
(19) 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, 1996 and 1995 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
<TABLE>
<CAPTION>
ASSETS
1996 1995
------------- -----------
<S> <C> <C>
Cash $ 4,388,241 $ 36,644
Accounts Receivable - Other 31,118
Unamortized Organization Costs 22,280 30,382
Investment in Subsidiary, at Equity 10,514,772 8,355,112
Income Tax Benefit 9,626 3,537
------------- -----------
TOTAL ASSETS $14,966,037 $8,425,675
============= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
State Income Tax Payable $ 24,000 $ -
Other 9,585 -
------------- -----------
33,585 -
------------- -----------
STOCKHOLDERS' EQUITY
Common Stock, Par Value $1 a Share; Authorized
5,000,000 Shares, Issued and Outstanding 1,654,852
and 600,000 Shares, Respectively 1,654,852 600,000
Paid-In Capital 9,312,662 4,500,000
Retained Earnings 3,948,855 3,301,531
Net Unrealized Gain on Securities Available for
Sale, Net of Tax 16,083 24,144
------------- -----------
TOTAL STOCKHOLDERS' EQUITY 14,932,452 8,425,675
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $14,966,037 $8,425,675
============= ===========
</TABLE>
21
<PAGE>
(19) 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>
1996 1995
------------- -----------
<S> <C> <C>
INCOME
Dividends from Subsidiary $ 313,550 $ 265,000
------------- -----------
EXPENSE
Amortization of Organization Costs 8,103 8,103
Other 50,984 10,134
------------- -----------
59,087 18,237
------------- -----------
INCOME BEFORE TAXES AND EQUITY IN UNDISTRIBUTED
EARNINGS OF SUBSIDIARY 254,463 246,763
Income Tax Benefit 20,091 6,200
------------- -----------
INCOME BEFORE EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARY 274,554 252,963
Equity in Undistributed Earnings of Subsidiary 1,367,720 1,137,832
------------- -----------
NET INCOME $ 1,642,274 $1,390,795
============= ===========
</TABLE>
22
<PAGE>
(19) 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>
1996 1995
-------------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Net Income $ 1,642,274 $ 1,390,795
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Amortization 8,103 8,103
Equity in Undistributed Earnings of Subsidiary (1,367,720) (1,137,832)
Increase in Other (3,624) (2,299)
-------------- -----------
279,033 258,767
-------------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital Infusion in Subsidiary (800,000) -
-------------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends Paid (313,550) (240,000)
Issuance of Common Stock 5,186,114 -
-------------- -----------
4,872,564 (240,000)
-------------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 4,351,597 18,767
CASH AND CASH EQUIVALENTS, BEGINNING 36,644 17,877
-------------- -----------
CASH AND CASH EQUIVALENTS, ENDING $ 4,388,241 $ 36,644
============== ===========
</TABLE>
(20) STOCK SPLITS EFFECTED AS DIVIDENDS
On May 23, 1996, the board of directors approved a two-for-one stock split to be
effected in the form of a dividend on June 1, 1996. On March 20, 1995, a 20
percent stock split was effected as a dividend. All share and per share data
including stock options and warrants have been adjusted to reflect the
additional shares outstanding resulting from the stock splits.
23
<PAGE>
(21) 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, 1996 are as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- -----------------------
CARRYING ESTIMATED Carrying Estimated
AMOUNT FAIR VALUE Amount Fair Value
---------------------- -----------------------
(in Thousands)
ASSETS
<S> <C> <C> <C> <C>
Cash and Short-Term Investments $ 10,468 $ 10,468 $ 5,632 $ 5,632
Investment Securities Available for Sale 25,882 25,882 27,091 27,091
Investment Securities Held to Maturity 6,773 6,873 7,348 7,478
Loans 84,864 85,460 63,272 63,525
LIABILITIES
Deposits 113,032 113,971 92,968 93,645
Borrowed Money 4,140 4,195 4,674 4,729
UNRECOGNIZED FINANCIAL INSTRUMENTS
Standby Letters of Credit 202 202 124 124
Unfulfilled Loan Commitments 13,215 13,215 9,606 9,606
</TABLE>
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<PAGE>
(21) 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.
(22) REGULATORY CAPITAL MATTERS
The amount of dividends payable to the parent company from the subsidiary bank
is limited by various banking regulatory agencies. Upon approval by regulatory
authorities, the bank may pay cash dividends to the parent company in excess of
regulatory limitations.
The Company is subject to various regulatory capital requirements administered
by the federal banking agencies. Failure to meet minimum capital requirements
can initiate certain mandatory and, possibly additional discretionary, actions
by regulators that, if undertaken, could have a direct material effect on the
Company's financial statements. Under capital adequacy guidelines and the
regulatory framework for prompt corrective action, the Company must meet
specific capital guidelines that involve quantitative measures of the Company's
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The Company's capital amounts and
classification are also subject to qualitative judgments by the regulators about
components, risk weightings and other factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Company to maintain minimum amounts and ratios of total and Tier I
capital to risk-weighted assets, and of Tier I capital to average assets. The
amounts and ratios as defined in regulations are presented hereafter.
Management believes, as of December 31, 1996, the Company meets all capital
adequacy requirements to which it is subject and is classified as well
capitalized under the regulatory framework for prompt corrective action. In
the opinion of management, there are no conditions or events since prior
notification of capital adequacy from the regulators that have changed the
institution's category.
25
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(22) REGULATORY CAPITAL MATTERS (CONTINUED)
<TABLE>
<CAPTION>
TO BE WELL
CAPITALIZED UNDER
FOR CAPITAL PROMPT CORRECTIVE
ACTUAL ADEQUACY PURPOSES ACTION PROVISIONS
--------------------- -------------------- -------------------
AMOUNT RATIO AMOUNT RATIO AMOUNT RATIO
---------------------- -------------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
AS OF DECEMBER 31, 1996
Total Capital
to Risk-Weighted Assets $15,776,000 17.48% $7,220,000 8.00% $9,025,000 10.00%
Tier I Capital
to Risk-Weighted Assets 14,645,000 16.23 3,609,000 4.00 5,414,000 6.00
Tier I Capital
to Average Assets 14,645,000 10.85 5,399,000 4.00 6,749,000 5.00
AS OF DECEMBER 31, 1995
Total Capital
to Risk-Weighted Assets 9,297,000 13.03 5,708,000 8.00 7,135,000 10.00
Tier I Capital
to Risk-Weighted Assets 8,402,000 11.77 2,855,000 4.00 4,283,000 6.00
Tier I Capital
to Average Assets 8,402,000 8.01 4,196,000 4.00 5,245,000 5.00
</TABLE>
(23) RECLASSIFICATIONS
Certain reclassifications have been made in the 1995 and 1994 financial
statements to conform to the 1996 presentation.
26
