<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1998
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
SNB BANCSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 6060 58-2107916
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION) CLASSIFICATION CODE NO.)
2918 RIVERSIDE DRIVE
P.O. BOX 4748
MACON, GEORGIA 31208
(912) 722-6200
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
H. AVERETT WALKER
SNB BANCSHARES, INC.
2918 RIVERSIDE DRIVE
P.O. BOX 4748
MACON, GEORGIA 31208
(912) 722-6200
----------------
COPY TO:
JOHN T. MCGOLDRICK, JR.
MARTIN, SNOW, GRANT & NAPIER
P.O. BOX 1606
MACON, GEORGIA 31202-1606
(912) 749-1716
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO
THE PUBLIC: As soon as practicable after this Registration Statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(1) PER SHARE OFFERING PRICE FEE(2)
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $1.00 par
value................. 846,748 shares N/A $6,057,417 $1,786.94
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The Registrant will deregister the indicated shares if the Registrant's
shareholders fail to approve the matter described above.
(2) In accordance with Rule 457(f)(2), the total registration fee has been
calculated based on the book value of the securities to be received by the
Registrant in the exchange as of the latest practicable date prior to
April , 1998, the date of filing the Registration Statement.
* As provided in the Agreement and Plan of Merger between SNB Bancshares,
Inc. and Crossroads Bancshares, Inc., the Registrant will issue as many as
846,748 shares of its common stock for all of the 291,982 shares of the
common stock of Crossroads Bancshares, Inc.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID 1 SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
[SNB BANCSHARES, INC. LETTERHEAD]
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of Shareholders (the
"Meeting") of SNB Bancshares, Inc. ("SNB"), to be held at the Macon
Centreplex, 200 Coliseum Drive, Macon, Georgia on June , 1998, at o'clock
.m., local time, notice of which is enclosed.
The proposals to be presented at the meeting are (i) the approval of an
Agreement and Plan of Merger (the "Agreement"), entered into with Crossroads
Bancshares, Inc. ("Crossroads") on January 29, 1998, as amended on February
12, 1998, pursuant to which Crossroads will merge with and into SNB (the
"Merger"); (ii) approval of an amendment to the articles of incorporation of
SNB to increase the number of shares of the Company's common stock which the
corporation is authorized to issue from 5,000,000 shares to 10,000,000 shares;
(iii) the approval of an amendment to the articles of incorporation of SNB
which will provide for a restructuring of the Board of Directors of SNB into
three classes which shall be as nearly equal in number as possible, with
staggered terms of three (3) years each; (iv) in the event of the approval of
the amendment to the articles of incorporation restructuring the Board of
Directors, the election of eight (8) persons to serve as the directors of SNB;
and (v) ratification of the appointment of McNair, McLemore, Middlebrooks &
Co. LLP as independent accountants for the year ended December 31, 1998. SNB
will also transact such other business as may properly come before the annual
meeting or any adjournments thereof.
Upon consummation of the Merger, each share of Crossroads common stock
("Crossroads Common Stock") issued and outstanding will be converted into and
exchanged for the right to receive 2.9 shares of SNB common stock ("SNB Common
Stock"), subject to adjustment if the number of shares of Crossroads Common
Stock outstanding on the effective date of the Merger is not 291,982.
I urge you to read the accompanying Proxy Statement/Prospectus, which
includes a description of the proposed Merger and also provides other specific
information concerning the additional proposals to be presented at the
Meeting.
The proposals listed above have been approved by your Board of Directors and
are recommended by the Board to you for approval. Consummation of the Merger
is subject to certain conditions, including approval of the Agreement by the
holders of both SNB Common Stock and Crossroads Common Stock, and approval of
the Merger by various regulatory agencies.
IT IS IMPORTANT TO UNDERSTAND THAT APPROVAL OF THE AGREEMENT AND OF THE TWO
PROPOSALS TO AMEND THE ARTICLES OF INCORPORATION OF SNB REQUIRE THE
AFFIRMATIVE VOTE OF TWO-THIRDS OF THE SHARES OF SNB COMMON STOCK ENTITLED TO
VOTE AT THE MEETING. CONSEQUENTLY, A FAILURE TO VOTE WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE AGREEMENT. IF YOU HAVE ANY QUESTIONS CONCERNING THE
DELIVERY OF THE ENCLOSED PROXY CARD, PLEASE CALL ME OR H. AVERETT WALKER AT
(912) 722-6200.
Accordingly, whether or not you plan to attend the Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. The proposed Merger is a significant transaction for
SNB, and your vote on this matter, as well as the other proposals to be voted
upon at the Meeting, is of great importance. ON BEHALF OF THE BOARD OF
DIRECTORS, I URGE YOU TO VOTE FOR APPROVAL OF THE PROPOSALS TO BE PRESENTED AT
THE MEETING BY MARKING THE ENCLOSED PROXY CARD "FOR" THE PROPOSALS.
Sincerely,
ROBERT C. HAM
Chairman of the Board
<PAGE>
[SNB LETTERHEAD]
SNB BANCSHARES, INC.
2918 RIVERSIDE DRIVE
MACON, GEORGIA 31204
(912) 722-6200
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE , 1998
Notice is hereby given that an Annual Meeting of Shareholders (the
"Meeting") of SNB Bancshares, Inc. ("SNB") will be held at the Macon
Centreplex, 200 Coliseum Drive, Macon, Georgia on June , 1998 at p.m.,
local time, for the following purpose:
PROPOSAL I
To consider and vote on the Agreement and Plan of Merger, dated as of
January 29, 1998, as amended on February 12, 1998 (the "Agreement"), by and
between SNB and Crossroads Bancshares, Inc. ("Crossroads") pursuant to which
SNB will acquire all of the issued and outstanding common stock of Crossroads
("Crossroads Common Stock") through the merger of Crossroads with and into SNB
(the "Merger"), and each share of Crossroads Common Stock will be converted
into shares of SNB common stock ("SNB Common Stock"), as described more fully
in the accompanying Joint Proxy Statement/Prospectus.
PROPOSAL II
To amend the articles of incorporation of SNB to increase the number of
shares of the Company's common stock which the corporation is authorized to
issue from 5,000,000 shares to 10,000,000 shares.
PROPOSAL III
(a) To approve an amendment to the articles of incorporation of SNB which
will provide for a restructuring of the Board of Directors of SNB into three
classes which shall be as nearly equal in number as possible, with staggered
terms of three (3) years each; and
(b) In the event of the approval of the amendment to the articles of
incorporation restructuring the Board of Directors, to elect eight (8) persons
to serve as the directors of SNB.
PROPOSAL IV
To ratify the appointment of McNair, McLemore, Middlebrooks & Co. LLP as
independent accountants for the year ended December 31, 1998; and
Other business. To transact such other business as may properly come before
the Meeting, including adjourning the Meeting to permit, if necessary, further
solicitation of proxies.
Approval of the Agreement and of the two proposed changes to the articles of
incorporation of SNB requires the affirmative vote of two-thirds of the shares
of SNB Common Stock entitled to vote at the Meeting; the election of directors
requires the affirmative vote of a majority of the shares represented at the
Meeting; and approval of the ratification of McNair, McLemore, Middlebrooks &
Co. LLP and any other business which might come before the Meeting requires a
majority of the votes cast with respect to such matters. Only shareholders of
record at the close of business on May , 1998 are entitled to receive notice
of and to vote at the Meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS RECOMMENDS THAT HOLDERS OF SNB COMMON STOCK VOTE
"FOR" THE PROPOSALS LISTED ABOVE.
<PAGE>
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Meeting in person. The proxy may be
revoked by the person executing the proxy by filing with the Secretary of SNB
an instrument of revocation or a duly executed proxy bearing a later date or
by electing to vote in person at the Meeting.
By Order of the Board of Directors
SHIRLEY D. JACKSON
Secretary
Macon, Georgia
May , 1998
<PAGE>
[CROSSROADS LETTERHEAD]
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders (the
"Meeting") of Crossroads Bancshares, Inc. ("Crossroads") to be held at
Crossroads' main office, 1208 Washington Street, Perry, Georgia on June ,
1998, at o'clock p.m., local time, notice of which is enclosed.
At the Meeting, you will be asked to consider and vote on a proposal to
approve the Agreement and Plan of Merger entered into with SNB Bancshares,
Inc. ("SNB") on January 29, 1998, as amended on February 12, 1998 (the
"Agreement") pursuant to which Crossroads will merge with and into SNB (the
"Merger"). Upon consummation of the Merger, each share of Crossroads common
stock ("Crossroads Common Stock") issued and outstanding will be converted
into and exchanged for the right to receive 2.9 shares of SNB common stock
("SNB Common Stock"), assuming there are 291,982 shares of Crossroads Common
Stock outstanding as of the effective date of the Merger.
Crossroads Bank of Georgia will be operated as a subsidiary of SNB
subsequent to the Merger, and I will serve on the effective date of the Merger
as President of Crossroads Bank of Georgia, and the directors of Crossroads
Bank of Georgia immediately prior to the effective date of the Merger shall
continue to serve as the initial directors of Crossroads Bank of Georgia after
the Merger. Four of the existing directors of Crossroads, to be selected by
SNB, will be nominated and recommended by SNB to serve as directors of SNB
following the Merger.
Please read the enclosed Proxy Statement/Prospectus carefully and consider
thoughtfully the information set forth therein. The Agreement and the Merger
have been approved unanimously by your Board of Directors and are recommended
by the Board to you for approval. Each member of the Board of Directors has
agreed to vote all shares of Crossroads Common Stock owned by such member in
favor of the Agreement and the Merger.
IT IS IMPORTANT TO UNDERSTAND THAT APPROVAL OF THE AGREEMENT REQUIRES THE
AFFIRMATIVE VOTE OF 60 PERCENT (60%) OF THE SHARES OF CROSSROADS COMMON STOCK
ENTITLED TO VOTE AT THE MEETING. CONSEQUENTLY, A FAILURE TO VOTE WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE AGREEMENT. IF YOU HAVE ANY QUESTIONS
CONCERNING THE DELIVERY OF THE ENCLOSED PROXY CARD, PLEASE CALL ME OR CAROL A.
BRYANT AT (912) 987-0011.
Accordingly, whether or not you plan to attend the Meeting, you are urged to
complete, sign, and return promptly the enclosed proxy card. If you attend the
Meeting, you may vote in person if you wish, even if you previously have
returned your proxy card. ON BEHALF OF THE BOARD OF DIRECTORS, I URGE YOU TO
VOTE FOR APPROVAL OF THE AGREEMENT AND THE MERGER PRESENTED BY MARKING THE
ENCLOSED PROXY CARD "FOR" THE MERGER.
Sincerely,
WILLIAM D. WATSON
President
<PAGE>
[CROSSROADS LETTERHEAD]
CROSSROADS BANCSHARES, INC.
1208 WASHINGTON STREET
PERRY, GEORGIA 31069
(912) 987-0011
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE , 1998
Notice is hereby given that a Special Meeting of Shareholders (the
"Meeting") of Crossroads Bancshares, Inc. ("Crossroads") will be held at
Crossroads' main office, 1208 Washington Street, Perry, Georgia 31069 on June
, 1998, at p.m., local time, for the following purpose:
1. Merger. To consider and vote on the Agreement and Plan of Merger dated
January 29, 1998, as amended on February 12, 1998 (the "Agreement") by and
between SNB Bancshares, Inc. ("SNB") and Crossroads Bancshares, Inc.
("Crossroads") pursuant to which (i) SNB will acquire all of the issued and
outstanding common stock of Crossroads ("Crossroads Common Stock") through
the merger of Crossroads with and into SNB (the "Merger"), and (ii) each
share of Crossroads Common Stock will be converted into shares of SNB
common stock, as described more fully in the accompanying Joint Proxy
Statement/Prospectus.
2. Other Business. To transact such other business as may properly come
before the Meeting, including adjourning the Meeting to permit, if
necessary, further solicitation of proxies.
Approval of the Agreement requires the affirmative vote of 60 percent (60%)
of the shares of Crossroads Common Stock entitled to vote at the Meeting. Only
shareholders of record at the close of business on May , 1998, are entitled
to receive notice of and to vote at the Meeting or any adjournment or
postponement thereof.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT HOLDERS OF CROSSROADS
COMMON STOCK VOTE "FOR" THE AGREEMENT AND THE MERGER.
We urge you to sign and return the enclosed proxy as promptly as possible,
whether or not you plan to attend the Meeting in person. The proxy may be
revoked by the person executing the proxy by filing with the Secretary of
Crossroads an instrument of revocation or a duly executed proxy bearing a
later date or by electing to vote in person at the Meeting.
By Order of the Board of Directors
Carol A. Bryant
Secretary
Perry, Georgia
May , 1998
<PAGE>
JOINT PROXY STATEMENT
FOR THE ANNUAL MEETING FOR THE SPECIAL MEETING
OF SHAREHOLDERS OF SHAREHOLDERS
TO BE HELD ON JUNE , 1998 TO BE HELD ON JUNE , 1998
SNB BANCSHARES, INC. CROSSROADS BANCSHARES, INC.
2918 RIVERSIDE DRIVE 1208 WASHINGTON STREET
MACON, GEORGIA 31204 PERRY, GEORGIA 31069
(912) 722-6200 (912) 987-0011
----------------
PROSPECTUS
OF
SNB BANCSHARES, INC.
2918 RIVERSIDE DRIVE
P.O. BOX 4748
MACON, GEORGIA 31208
(912) 722-6200
FOR
AS MANY AS 846,748 SHARES OF COMMON STOCK
----------------
This Prospectus of SNB Bancshares, Inc., a bank holding company organized
and existing under the laws of the State of Georgia ("SNB"), relates to the
shares of its common stock, par value $1.00 per share ("SNB Common Stock"),
which are issuable to the shareholders of Crossroads Bancshares, Inc.
("Crossroads") upon consummation of the proposed merger (the "Merger")
described herein, pursuant to which Crossroads will merge with and into SNB
under the terms of that certain Agreement and Plan of Merger dated as of
January 29, 1998, as amended on February 12, 1998, by and between SNB and
Crossroads (the "Agreement"). A copy of the Agreement is attached to this
Joint Proxy Statement/Prospectus as Appendix A.
On the effective date of the Merger (the "Effective Date"), except as
otherwise described herein, (i) Crossroads will merge with and into SNB, and
(ii) each outstanding share of the $10.00 par value common stock of Crossroads
("Crossroads Common Stock") will be converted into the right to receive 2.9
shares of SNB Common Stock, subject to adjustment in the event the issued and
outstanding shares of Crossroads as of the effective date of the Merger do not
number 291,982. SNB will survive the Merger and the separate existence of
Crossroads will cease. Crossroads Bank of Georgia ("Crossroads Bank") will
become a wholly owned subsidiary of SNB. For a further description of the
terms of the Merger, see "The Merger."
This Prospectus also constitutes a Joint Proxy Statement of SNB and
Crossroads and is being furnished to their respective shareholders in
connection with the solicitation of proxies by their respective Boards of
Directors. The proxies solicited by the Crossroads Board of Directors will be
used at the Special Meeting of Shareholders of Crossroads (the "Crossroads
Meeting") to be held on June , 1998, including any adjournment thereof, to
consider and vote on the proposed Merger and to transact such other business
as may properly come before the Crossroads Meeting or any adjournments
thereof. The proxies solicited by the SNB Board of Directors will be used at
the Annual Meeting of Shareholders of SNB (the "SNB Meeting") to be held on
June , 1998, including any adjournment thereof, to: (i) consider and vote on
the proposed Merger; (ii) approve an amendment to the articles of
incorporation of SNB to increase the number of shares of the Company's common
stock which the corporation is authorized to issue from 5,000,000 shares to
10,000,000 shares; (iii) approve an amendment to the articles of incorporation
of SNB which will provide for a restructuring of the Board of Directors of SNB
into three classes which shall be as nearly equal in number as possible, with
staggered terms of three (3) years each.; (iv) in the event of the approval of
the amendment to the articles of incorporation restructuring the Board of
Directors, elect eight (8) persons to serve as the directors of SNB; (v)
ratify the appointment of McNair, McLemore, Middlebrooks & Co. LLP as
independent accountants for the year ended December 31, 1998; and (vi)
transact such other business as may properly come before the SNB Meeting or
any adjournments thereof. This Joint Proxy Statement/Prospectus and the
accompanying proxy cards are first being mailed to shareholders of SNB and
Crossroads on or about May , 1998.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS JOINT PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Joint Proxy Statement/Prospectus is May , 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
AVAILABLE INFORMATION...................................................... 1
SUMMARY.................................................................... 2
The Parties.............................................................. 2
Special Meeting of Crossroads Shareholders............................... 2
Annual Meeting of SNB Shareholders....................................... 3
The Merger; Exchange Ratio............................................... 3
Dissenters' Rights....................................................... 4
Reasons for the Merger................................................... 4
Effective Date........................................................... 4
Exchange of Stock Certificates........................................... 5
Regulatory Approvals and Other Conditions................................ 5
Waiver, Amendment, and Termination of the Agreement...................... 5
Directors and Executive Officers Following the Merger.................... 5
Interests of Certain Persons in the Merger............................... 6
Material Federal Income Tax Consequences of the Merger................... 6
Accounting Treatment..................................................... 6
Certain Differences in Rights of Shareholders............................ 6
Comparative Market Prices of Common Stock................................ 7
Comparative Per Share Data............................................... 8
Selected Pro Forma Financial Data........................................ 9
Additional Proposals Presented to SNB Shareholders Only.................. 10
CERTAIN CONSIDERATIONS..................................................... 11
Management of Growth..................................................... 11
Highly Competitive Business.............................................. 11
Volatility of Stock Price................................................ 11
Dependence on Senior Management.......................................... 11
Dilutive Effect of Exercise of Founders Warrants......................... 11
THE CROSSROADS MEETING..................................................... 12
General.................................................................. 12
Record Date; Vote Required............................................... 12
THE SNB MEETING............................................................ 14
General.................................................................. 14
Record Date; Vote Required............................................... 14
THE MERGER................................................................. 16
General.................................................................. 16
Background of and Reasons for the Merger................................. 16
Crossroads' Reasons for the Merger....................................... 17
SNB's Reasons for the Merger............................................. 17
Fairness Opinions........................................................ 18
Effective Date of the Merger............................................. 18
Distribution of Stock Certificates after the Merger...................... 18
Conditions to Consummation of the Merger................................. 19
Regulatory Approvals..................................................... 20
Rights of Dissenting Shareholders........................................ 20
Waiver, Amendment, and Termination of The Agreement...................... 21
Conduct of Business Pending the Merger................................... 22
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Directors and Executive Officers Following the Merger................... 22
Interests of Certain Persons in the Merger.............................. 23
Material Federal Income Tax Consequences of the Merger.................. 23
Accounting Treatment.................................................... 24
Expenses and Fees....................................................... 25
Resales of SNB Common Stock............................................. 25
Description of SNB Common Stock......................................... 25
Certain Differences in Rights of Shareholders........................... 25
General................................................................. 25
Authorized Capital Stock................................................ 26
Removal of Directors.................................................... 26
Vote Required for Shareholder Approval.................................. 26
Action by Shareholders Without a Meeting................................ 26
Number of Directors..................................................... 27
COMPARATIVE MARKET PRICES AND DIVIDENDS................................... 28
SNB Market Prices....................................................... 28
Crossroads Market Prices................................................ 28
Recent Prices........................................................... 28
Dividends............................................................... 28
Shareholders of Record.................................................. 29
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION.............. 30
General................................................................. 30
BUSINESS OF SNB........................................................... 35
General................................................................. 35
The Bank................................................................ 35
History................................................................. 35
Business................................................................ 35
Banking Premises........................................................ 35
Market Area............................................................. 36
Competition............................................................. 36
Employees............................................................... 36
SELECTED FINANCIAL DATA................................................... 37
MANAGEMENT OF SNB......................................................... 38
Director Nominees....................................................... 38
Other Current Directors of SNB.......................................... 39
Executive Officers...................................................... 41
Biographies of Director Nominees, Directors and Executive Officers of
SNB.................................................................... 42
Committees of The Board of Directors and Attendance..................... 44
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................ 46
SECURITY OWNERSHIP OF SNB................................................. 47
EXECUTIVE COMPENSATION FOR SNB............................................ 48
STOCK OPTION GRANT AND EXERCISE TABLES.................................... 49
EMPLOYMENT CONTRACT AND CHANGE IN CONTROL ARRANGEMENT..................... 50
COMPENSATION PURSUANT TO PLANS............................................ 51
Stock Warrants.......................................................... 51
Incentive Stock Options................................................. 51
401(K) Savings Incentive and Profit Sharing Plan........................ 51
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Annual Cash Incentive Plan.............................................. 52
Other Plans............................................................. 53
Other Executive Compensation............................................ 53
COMPENSATION OF DIRECTORS................................................. 54
PENDING LEGAL PROCEEDINGS................................................. 54
SNB BANCSHARES, INC.--MANAGEMENT'S DISCUSSION AND ANALYSIS................ 55
BUSINESS OF CROSSROADS.................................................... 77
General................................................................. 77
Deposits................................................................ 77
Lending Activities...................................................... 77
Investment Activities................................................... 78
Asset/Liability Management.............................................. 78
Employees............................................................... 78
Properties.............................................................. 78
Litigation.............................................................. 78
MANAGEMENT AND SECURITY OWNERSHIP OF CROSSROADS........................... 79
Management.............................................................. 79
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS............... 81
SELECTED HISTORICAL FINANCIAL DATA OF CROSSROADS.......................... 83
CERTAIN REGULATORY CONSIDERATIONS......................................... 98
General................................................................. 98
Payment of Dividends.................................................... 99
Capital Adequacy........................................................ 100
Support of Subsidiary Institutions...................................... 101
Prompt Corrective Action................................................ 101
FDIC Insurance Assessments.............................................. 102
Safety and Soundness Standards.......................................... 103
10-KSB ANNUAL REPORT...................................................... 104
EXPERTS................................. ................................. 104
OPINIONS.................................................................. 104
ADDITIONAL PROPOSALS FOR SNB SHAREHOLDERS................................. 105
SHAREHOLDER PROPOSALS FOR 1999............................................ 107
OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING.................... 107
INDEX TO FINANCIAL STATEMENTS
SNB BANCSHARES, INC. FINANCIAL STATEMENTS................................. F-1
CROSSROADS FINANCIAL STATEMENTS........................................... F-23
APPENDIX A: AGREEMENT AND PLAN OF REORGANIZATION, AS AMENDED.............. A-1
APPENDIX B: ARTICLE 13 OF THE GEORGIA BUSINESS CORPORATION CODE........... B-1
</TABLE>
iii
<PAGE>
AVAILABLE INFORMATION
SNB is subject to the reporting requirements of the Securities Exchange Act
of 1934, as amended (the "Exchange Act") and, in accordance therewith, files
reports, proxy statements, and other information with the Securities and
Exchange Commission (the "SEC"). Copies of such reports, proxy statements, and
other information can be obtained, at prescribed rates, from the SEC by
addressing written requests for such copies to the Public Reference Section at
the SEC at 450 Fifth Street, N.W., Room 1024, Judiciary Plaza, Washington,
D.C. 20549. In addition, such reports, proxy statements, and other information
can be inspected at the public reference facilities referred to above and at
the regional offices of the SEC at its New York Regional Office at 7 World
Trade Center, Suite 1300, New York, New York 10048 and at its Chicago Regional
Office, Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2551. The SEC maintains a Web site that contains reports, proxy
and information statements and other information regarding SNB. The address of
such Web site is http://www.sec.gov.
This Joint Proxy Statement/Prospectus constitutes part of the Registration
Statement on Form S-4 of SNB (including any exhibits and amendments thereto,
the "Registration Statement") filed with the SEC under the Securities Act of
1933, as amended (the "Securities Act"), relating to the securities offered
hereby. This Joint Proxy Statement/Prospectus does not include all of the
information in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. For further
information about SNB and Crossroads and the securities offered hereby,
reference is made to the Registration Statement. The Registration Statement
may be inspected and copied, at prescribed rates, at the SEC's public
reference facilities at the addresses set forth above. SNB Common Stock is
traded on The Nasdaq Stock Market. Reports, proxy statements, and other
information concerning SNB are also filed at the office of The Nasdaq Stock
Market, Nasdaq Regulatory Filings, 1735 K Street, NW, Washington, D.C. 20006-
1500.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE INCLUDED IN THIS JOINT PROXY STATEMENT/
PROSPECTUS, AND IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY SNB OR CROSSROADS. THIS JOINT
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH
AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL
UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF SNB OR CROSSROADS SINCE THE DATE HEREOF OR THAT THE INFORMATION
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
All information included in this Joint Proxy Statement/Prospectus with
respect to SNB was supplied by SNB, and all information included herein with
respect to Crossroads was supplied by Crossroads.
1
<PAGE>
SUMMARY
The following is a summary of certain information relating to the Crossroads
Meeting, the SNB Meeting, the Merger, and the shares of SNB Common Stock to be
issued upon consummation thereof. This summary does not purport to be complete
and is qualified in its entirety by reference to the more detailed information
appearing elsewhere or incorporated by reference in this Joint Proxy
Statement/Prospectus. Shareholders are urged to read carefully the entire Joint
Proxy Statement/Prospectus, including the Appendices. As used in this Joint
Proxy Statement/Prospectus, the terms "SNB" and "Crossroads" refer to those
entities, respectively, and, where the context requires, to those entities and
their respective subsidiaries.
THE PARTIES
SNB. SNB is a bank holding company headquartered in Macon, Georgia, which
operates as its wholly owned subsidiary, Security National Bank (the "Bank").
As of December 31, 1997, SNB had total consolidated assets of approximately
$142.9 million, total consolidated deposits of approximately $121.9 million and
total consolidated shareholders' equity of approximately $16.8 million. Through
its subsidiary, SNB offers a broad range of banking and banking-related
services.
SNB was incorporated in 1994 under the laws of the State of Georgia and is
registered as a bank holding company with the Federal Reserve Board (the
"Federal Reserve") and the Georgia Department of Banking and Finance (the
"Georgia Department") under the federal Bank Holding Company Act of 1956, as
amended (the "BHCA") and the Georgia Bank Holding Company Act (the "Georgia
BHCA"). SNB's principal executive offices are located at 2918 Riverside Drive,
Macon, Georgia 31204, and its telephone number at such address is (912) 722-
6200.
Crossroads. Crossroads is a bank holding company headquartered in Perry,
Georgia. Crossroads operates through its subsidiary, Crossroads Bank of
Georgia. As of December 31, 1997, Crossroads had total consolidated assets of
approximately $73.6 million, total consolidated deposits of approximately $66.9
million and total consolidated shareholders' equity of approximately $5.9
million.
Crossroads was incorporated in 1991 under the laws of the State of Georgia
and is a registered bank holding company under the BHCA and the Georgia BHCA.
Crossroads' principal executive offices are located at 1208 Washington Street,
Perry, Georgia 31069, and its telephone number at such address is (912) 987-
0011.
SPECIAL MEETING OF CROSSROADS SHAREHOLDERS
The Crossroads Meeting will be held at o'clock p.m., local time, on June
, 1998, at Crossroads' main office, 1208 Washington Street, Perry, Georgia
31069, for the purpose of considering and voting on approval of the Agreement
and transacting such other business as may properly come before the meeting or
any adjournments thereof. See "The Crossroads Meeting." Only holders of record
of Crossroads Common Stock at the close of business on May , 1998 (the
"Crossroads Record Date"), will be entitled to vote at the Crossroads Meeting.
Approval of the Agreement and the Merger requires the affirmative vote of 60
per cent (60%) of the shares of Crossroads Common Stock entitled to vote at the
Crossroads Meeting. As of the Crossroads Record Date, there were 291,982 shares
of Crossroads Common Stock outstanding and entitled to be voted.
2
<PAGE>
The directors and executive officers of Crossroads beneficially owned, as of
the Crossroads Record Date, 92,968 shares (or approximately 31.84% of the
outstanding shares) of Crossroads Common Stock. Each member of the Board of
Directors of Crossroads has delivered to SNB irrevocable proxies appointing SNB
to act as their attorney in fact for the purpose of voting all shares of
Crossroads Common Stock owned by them at the special meeting of the
shareholders of Crossroads. SNB intends to vote those shares in favor of the
Agreement and the Merger.
As of the Crossroads Record Date, the directors and executive officers of SNB
did not beneficially own any shares of Crossroads Common Stock. As of that
date, neither Crossroads nor SNB held any shares of Crossroads Common Stock in
a fiduciary capacity for others. See "The Crossroads Meeting."
ANNUAL MEETING OF SNB SHAREHOLDERS
The SNB Meeting will be held at o'clock p.m., local time, on June , 1998,
at the Macon Centreplex, 200 Coliseum Drive, Macon, Georgia 31201, to vote on
(i) approval of the Agreement and the Merger; (ii) approval of an amendment to
the articles of incorporation of SNB to increase the number of shares of the
Company's common stock which the corporation is authorized to issue from
5,000,000 shares to 10,000,000 shares; (iii) approval of an amendment to the
articles of incorporation of SNB which will provide for a restructuring of the
Board of Directors of SNB into three classes which shall be as nearly equal in
number as possible, with staggered terms of three (3) years each; (iv) in the
event of the approval of the amendment to the articles of incorporation
restructuring the Board of Directors, the election of eight (8) persons to
serve as the directors of SNB; (v) ratification of the appointment of McNair,
McLemore, Middlebrooks & Co. LLP as independent accountants for the year ended
December 31, 1998; and (vi) the transaction of such other business as may
properly come before the annual meeting or any adjournments thereof. See "The
SNB Meeting."
Only holders of record of SNB Common Stock at the close of business on May ,
1998 (the "SNB Record Date") will be entitled to vote at the SNB Meeting. The
affirmative vote of two-thirds of the shares of SNB Common Stock outstanding
and entitled to vote at the SNB Meeting will be required to approve the
Agreement and the two proposed amendments to the articles of incorporation of
SNB. The election of a director requires the affirmative vote of a majority of
the shares represented at the SNB Meeting. Approval of any other matter will
require the affirmative vote of a majority of the shares cast on the matter. As
of March 27, 1998, there were 2,297,331 shares of SNB Common Stock outstanding
and entitled to vote.
The directors and executive officers of SNB beneficially owned, as of March
27, 1998, approximately 1,021,007 shares (or approximately 44.44% of the
outstanding shares) of SNB Common Stock.
As of the SNB Record Date, the directors and executive officers of Crossroads
did not beneficially own any shares of SNB Common Stock. As of that date,
neither SNB nor Crossroads held any shares of SNB Common Stock in a fiduciary
capacity for others. See "The SNB Meeting."
THE MERGER; EXCHANGE RATIO
Proposal No. 1 is approval of the Agreement and Plan of Merger dated
January 29, 1998 between SNB and Crossroads. The Agreement provides for the
combination of Crossroads with SNB pursuant to the merger of Crossroads with
and into SNB. On the effective date of the Merger, each share of Crossroads
Common Stock then issued and outstanding will be converted into the right to
receive that number of shares of SNB Common Stock (plus cash in lieu of
fractional shares) equal to (i) 846,748 divided by (ii) the aggregate number of
outstanding Crossroads shares (the "Exchange Ratio"); provided, however, if the
number of shares of Crossroads outstanding as of the date of the Merger is
291,982 shares the Exchange Ratio shall be 2.9. SNB will pay cash in lieu of
any fractional shares (computed to the nearest cent) in an amount equal to such
fraction multiplied by $18.00.
3
<PAGE>
DISSENTERS' RIGHTS
Holders of Crossroads Common Stock who dissent from the Merger are entitled
to the rights and remedies of dissenting shareholders set forth in Article 13
of the Georgia Business Corporation Code (the "Georgia Code"), subject to
compliance with the procedures set forth herein. A dissenting shareholder is
entitled to receive cash in an amount equal to the "fair value" of such
holder's shares. A copy of Article 13 of the Georgia Code is set forth in
Appendix B to this Joint Proxy Statement/Prospectus and a summary thereof is
included under "The Merger--Rights of Dissenting Shareholders." To perfect
dissenters' rights a shareholder must comply with Article 13 of the Georgia
Code, which requires, among other things, that a shareholder give Crossroads
notice of such holder's intent to dissent from approval of the Agreement prior
to the vote of the shareholders at the Crossroads Meeting and that such
shareholder not vote his or her shares in favor of the Agreement. Any
shareholder who returns a signed proxy but fails to provide instructions as to
the manner in which such holder's shares are to be voted will be deemed to have
voted in favor of the Agreement and thus will not be entitled to assert
dissenters' rights.
REASONS FOR THE MERGER
Crossroads' Board of Directors has unanimously approved the Merger and the
Agreement and has determined that the Merger is fair to, and in the best
interests of, Crossroads and its shareholders. ACCORDINGLY, CROSSROADS' BOARD
UNANIMOUSLY RECOMMENDS THAT CROSSROADS' SHAREHOLDERS VOTE FOR APPROVAL OF THE
AGREEMENT. DIRECTORS AND EXECUTIVE OFFICERS OF CROSSROADS HAVE EXECUTED
IRREVOCABLE PROXIES WHICH AUTHORIZE SNB TO VOTE THE SHARES OWNED BY SUCH
PERSONS IN FAVOR OF THE AGREEMENT. In approving the Merger, Crossroads
directors considered SNB's financial condition; various alternatives to the
Merger, including the merits of other acquisition proposals; the consideration
to be received by Crossroads shareholders; the anticipated synergies and
enhanced resources and lending capabilities that would result from the Merger;
the competitive and regulatory environments for financial institutions and
commercial lending businesses generally; the income tax aspects of the Merger
as a tax-free exchange; the current lack of marketability of the Crossroads
Common Stock, contrasted with the ability of Crossroads' shareholders to
exchange their Crossroads Common Stock for SNB Common Stock in connection with
the Merger and thereafter have the ability to trade such securities on The
Nasdaq Stock Market; and the likelihood that the Merger would be approved by
applicable regulatory authorities. See "The Merger--Background of and Reasons
for the Merger."
The SNB Board of Directors has unanimously approved the Agreement and has
determined that the Merger is in the best interests of SNB and its
shareholders. ACCORDINGLY, SNB'S BOARD UNANIMOUSLY RECOMMENDS THAT SNB'S
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT. (PROPOSAL I). In approving the
Merger, SNB's directors considered Crossroads' financial condition, operations
and market area; SNB's overall strategic focus; the financial terms and income
tax consequences of the Merger; and the management philosophy of Crossroads and
its compatibility with that of SNB. See "The Merger--Background of and Reasons
for the Merger."
EFFECTIVE DATE
Subject to the conditions to the obligations of the parties to effect the
Merger, the effective date (the "Effective Date") will occur on the date and at
the time specified in Articles of Merger (the "Articles of Merger") filed by
SNB with the Georgia Secretary of State. If no effective date or time is
specified, the Merger will become effective upon the filing of the Articles of
Merger. Unless otherwise agreed upon by SNB and Crossroads, and subject to the
conditions to the obligations of the parties to effect the Merger, the parties
will use their reasonable efforts to cause the Effective Date to occur on the
last business day of the month in which the last of the following events
occurs: (i) the effective date (including the expiration of any applicable
waiting period) of the last federal or state regulatory approval required for
the Merger or; (ii) the date on which the
4
<PAGE>
Agreement is approved by the requisite vote of SNB and Crossroads shareholders.
The parties expect that all conditions to consummation of the Merger will be
satisfied so that the Merger can be consummated in the third quarter of 1998,
although there can be no assurance as to whether or when the Merger will occur.
See "The Merger--Effective Date of the Merger," "--Conditions to Consummation
of the Merger," and "--Waiver, Amendment, and Termination of the Agreement."
EXCHANGE OF STOCK CERTIFICATES
Promptly after the Effective Date, SNB or an exchange agent selected by it
(the "Exchange Agent") will send to the former shareholders of Crossroads a
letter of transmittal, together with instructions for the exchange of such
shareholders' certificates representing shares of Crossroads Common Stock for
certificates representing shares of SNB Common Stock. Former shareholders of
Crossroads will not be entitled to receive dividends or other distributions on
their shares of SNB Common Stock until SNB has received their Crossroads stock
certificates. CROSSROADS SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK
CERTIFICATES UNTIL THEY RECEIVE THE FORM LETTER OF TRANSMITTAL AND
INSTRUCTIONS. See "The Merger--Distribution of Stock Certificates After the
Merger."
REGULATORY APPROVALS AND OTHER CONDITIONS
The Merger is subject to approval by the Federal Reserve and the Georgia
Department. Applications for the requisite approvals have been filed with these
agencies, each of which has yet to issue its approval of the Merger. There can
be no assurance that the approvals of these agencies will be given or as to the
timing or conditions of such approvals.
Consummation of the Merger is subject to various other conditions, including
receipt of the required approval of the SNB and Crossroads shareholders,
receipt of an opinion of counsel as to the tax-free nature of certain aspects
of the Merger, and certain other customary conditions. See "The Merger--
Conditions to Consummation of the Merger."
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
The Agreement may be terminated, and the Merger abandoned, at any time prior
to the Effective Date by mutual action of the Boards of Directors of both
Crossroads and SNB, or by action of the Board of Directors of either company
under certain circumstances, including if the Merger is not consummated by
September 30, 1998, unless the failure to consummate by such time is due to a
breach of the Agreement by the party seeking to terminate. If for any reason
the Merger is not consummated, SNB will continue to operate as a bank holding
company under its present management and Crossroads will continue to operate as
a bank holding company under its present management. See "The Merger--Waiver,
Amendment, and Termination of the Agreement."
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
The Agreement provides that SNB will be the Surviving Corporation after the
Merger (the "Surviving Corporation") and that the directors of the Surviving
Corporation after the Merger will consist of the directors of SNB immediately
prior to the Effective Date of the Merger, but that SNB will nominate and
recommend election of four of the existing directors of Crossroads as directors
of SNB. The executive officers of SNB immediately prior to the Merger will
continue to serve as officers of SNB after the Effective Date of the Merger in
accordance with the bylaws of SNB. Crossroads Bank will operate as a separately
chartered banking subsidiary of SNB as of the Effective Date and until such
time as SNB in its business judgment deems a change in such status warranted.
The directors and officers of Crossroads Bank immediately prior to the
Effective Date of the Merger shall serve as the initial directors and officers
of Crossroads Bank from and after the Effective Date of the Merger in
accordance with the bylaws of Crossroads.
5
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain executive officers and directors of Crossroads have interests in the
Merger in addition to their interests as Crossroads shareholders generally.
Those interests relate to, among other things, provisions in the Agreement
regarding indemnification and eligibility for certain SNB employee benefits.
SNB has agreed that William D. Watson, who presently serves as President of
Crossroads Bank, will serve initially as President of Crossroads Bank
subsequent to the Effective Date of the Merger and that Carol A. Bryant, Ronald
K. Bell, Ronald J. Baggett, and Ray M. Durham will be maintained with the
resulting organization in a role similar to that now occupied by them with
Crossroads Bank. The Agreement does not provide for, nor do the parties
contemplate, written employment agreements with those persons, all of whom will
serve as employees at will. See "The Merger--Interests of Certain Persons in
the Merger."
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
Crossroads has received an opinion of Martin, Snow, Grant & Napier, LLP,
counsel to SNB, to the effect that, among other things: (i) the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); (ii) the exchange
in the Merger of Crossroads Common Stock for SNB Common Stock will not give
rise to gain or loss to Crossroads shareholders except for the recognition of
gain as required by Section 302 of the Code with respect to cash received by
Crossroads shareholders in lieu of fractional shares of SNB stock as a result
of the Merger; (iii) neither SNB nor Crossroads will recognize income, gain or
loss as a consequence of the Merger; (iv) the aggregate tax basis of SNB Common
Stock received by Crossroads shareholders pursuant to the Merger will be the
same as the tax basis of the shares of Crossroads Common Stock exchanged
therefor, decreased by any portion of such tax basis allocated to fractional
shares of SNB Common Stock that are treated as redeemed by SNB; (v) Crossroads
shareholders will have the same holding period in the shares of SNB Common
Stock received pursuant to the Merger as the holding period of the shares of
Crossroads Common Stock exchanged therefor. See "The Merger--Material Federal
Income Tax Consequences of the Merger."
DUE TO THE INDIVIDUAL NATURE OF THE INCOME TAX CONSEQUENCES OF THE MERGER,
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE
SPECIFIC EFFECT OF THE MERGER ON THEM UNDER FEDERAL, STATE, LOCAL, AND FOREIGN
TAX LAWS.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Crossroads will be carried forward and
recorded on the financial statements of SNB at their previously recorded
amounts. In order for the Merger to qualify for pooling-of-interests accounting
treatment, substantially all (90% or more) of the outstanding Crossroads Common
Stock must be exchanged for SNB Common Stock. There are certain other criteria
that must be satisfied in order for the Merger to qualify as a pooling of
interests, some of which criteria cannot be satisfied until after the Effective
Date.
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
On the Effective Date, Crossroads shareholders, whose rights are governed by
the Georgia Code and by Crossroads' Articles of Incorporation and Bylaws, will
automatically become SNB shareholders, and their rights as SNB shareholders
will be determined by the Georgia Code and by SNB's Articles of Incorporation
and Bylaws. Upon consummation of the Merger, the rights of SNB shareholders
will differ from the rights of Crossroads shareholders in certain respects. See
"The Merger--Certain Differences in Rights of Shareholders" and "The Merger--
Description of SNB Common Stock."
6
<PAGE>
COMPARATIVE MARKET PRICES OF COMMON STOCK
SNB Common Stock is currently traded on The Nasdaq Stock Market under the
symbol "SNBJ." Prior to December 1, 1997, SNB Common Stock was not traded on
The Nasdaq Stock Market or on any stock exchange, although certain brokerage
firms made a market for its common stock. Crossroads Common Stock is not traded
on an established market. The following table sets forth the last sale price of
SNB Common Stock on January 20, 1998, the date of the last sale reported by The
Nasdaq Stock Market prior to January 29, 1998 (the date of public announcement
of the proposed Merger) and the sale price of Crossroads Common Stock on August
22, 1997, the date of the last known arms-length sale of Crossroads Common
Stock prior to January 29, 1998. It also provides the last sales price of SNB
Common Stock on May , 1998, the date of the last sale reported by The Nasdaq
Stock Market prior to the mailing of this Joint Proxy Statement/Prospectus and
the sale price of Crossroads Common Stock on August 22, 1997, the date of the
most recent known arms-length sale of Crossroads Common Stock prior to the
mailing of this Joint Proxy Statement/Prospectus.
SNB COMMON STOCK CROSSROADS COMMON STOCK
$18.00 at January 20, $18.00 at August 22, 1997 (prior to announcement)
1998 (prior to $18.00 at August 22, 1997
announcement) $ at
May , 1998
7
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data relating to
net income, cash dividends, and book value on (i) a historical basis for SNB
and Crossroads, (ii) a pro forma combined basis per share of SNB Common Stock,
giving effect to the Merger, and (iii) an equivalent pro forma basis per share
of Crossroads Common Stock, giving effect to the Merger. The data also
retroactively reflects the effect of SNB's 20% stock split in the form of a
dividend on March 20, 1995; its 100% stock split effected as a dividend on June
1, 1996; and its 25% stock split in the form of a dividend declared on
September 25, 1997. The SNB and Crossroads pro forma combined information gives
effect to the Merger on a pooling-of-interests accounting basis and assumes the
Exchange Ratio of 2.9 shares of SNB Common Stock for each share of Crossroads
Common Stock. See "The Merger--Accounting Treatment." The unaudited pro forma
data is presented for informational purposes only and is not necessarily
indicative of the results of operations or combined financial position that
would have resulted had the Merger been consummated at the dates or during the
periods indicated, nor is it necessarily indicative of future results of
operations or combined financial position.
The information shown below should be read in conjunction with, and is
qualified in its entirety by, the historical financial statements of SNB and
Crossroads, including the respective notes thereto, and the pro forma financial
information included herein. See "--Selected Historical Financial Data of SNB,"
"--Selected Historical Financial Data of Crossroads."
SNB BANCSHARES, INC. AND SUBSIDIARY
COMBINED WITH CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
CERTAIN UNAUDITED PRO FORMA AND PER SHARE DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income............................... $ 9,313 $ 7,812 $ 6,352
Provision for loan losses......................... 505 320 219
Noninterest income................................ 2,187 1,780 1,377
Noninterest expense............................... 7,165 5,788 4,612
Income before income taxes and extraordinary
item............................................. 3,830 3,484 2,898
Income before extraordinary item.................. 2,607 2,393 1,998
COMMON SHARE DATA:
SNB HISTORICAL:
Income per share before extraordinary item,
diluted.......................................... $ 0.73 $ 0.81 $ 0.80
Book value per share.............................. 7.93 7.22 5.62
Dividends per share............................... 0.20 0.18 0.16
CROSSROADS HISTORICAL:
Income per share before extraordinary item,
diluted.......................................... $ 2.76 $ 2.54 $ 2.05
Book value per share.............................. 20.24 17.57 15.30
Dividends per share............................... 0.20 0.20 0.20
CROSSROADS EQUIVALENT PRO FORMA:
Income per share before extraordinary item,
diluted.......................................... $ 2.29 $ 2.41 $ 2.26
Book value per share.............................. 22.21 23.26 15.92
Dividends per share............................... 0.46 0.44 0.38
SNB PRO FORMA COMBINED:
Income per share before extraordinary item,
diluted.......................................... $ 0.79 $ 0.83 $ 0.78
Book value per share.............................. 7.66 8.02 5.49
Dividends per share............................... 0.16 0.15 0.13
</TABLE>
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<PAGE>
SELECTED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data gives effect to the
acquisition of Crossroads as of the date or at the beginning of the period
indicated, assuming the acquisition is accounted for as a pooling-of-interests
transaction. The unaudited pro forma financial data is presented for
informational purposes only and is not necessarily indicative of the combined
financial position or results of operation which actually would have occurred
if the transaction had been consummated at the date and for the periods
indicated or which may be obtained in the future.
SNB BANCSHARES, INC. AND SUBSIDIARY
COMBINED WITH CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
SUMMARY OF PRO FORMA FINANCIAL DATA
The following unaudited selected pro forma financial data give effect to the
Merger as of the dates and for the periods indicated and pursuant to the
accounting basis described below. The unaudited pro forma financial data are
presented for informational purposes only and are not necessarily indicative of
the combined financial position or results of operations which actually would
have occurred if the Merger had been consummated at the date and for the
periods indicated or which may be obtained in the future. The information
should be read in conjunction with the unaudited Pro Forma Financial
Information appearing elsewhere in this Proxy Statement/Prospectus.
Selected Pro Forma Combined Financial Data for SNB and Crossroads. The
following unaudited pro forma combined data give effect to the Merger as of
December 31, 1997 and for each of the years ended December 31, 1997, 1996 and
1995, assuming the Merger was consummated on December 31, 1997 for "Balance
Sheet Data" and at the beginning of each period presented for "Income Statement
Data."
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
1997
----------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C>
BALANCE SHEET DATA:
Total Assets........................................... $216,462
Cash................................................... 12,274
Federal Funds Sold..................................... 9,075
Investment Securities.................................. 41,234
Loans, net............................................. 143,623
Total Deposits......................................... 188,861
Stockholders' Equity................................... 22,750
Book Value Per Common Share............................ $ 7.66
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Total Interest Income................................ $16,658 $14,425 $11,847
Total Interest Expense............................... 7,345 6,613 5,495
------- ------- -------
Net Interest Income................................ 9,313 7,812 6,352
Provision for Loan Losses............................ 505 320 219
------- ------- -------
Net Interest Income After Provision for Loan
Losses............................................ 8,808 7,492 6,133
Total Noninterest Income............................. 2,187 1,780 1,377
Total Noninterest Expense............................ 7,165 5,788 4,612
Income Tax Expense................................... 1,223 1,091 900
------- ------- -------
Income From Continuing Operations.................. $ 2,607 $ 2,393 $ 1,998
======= ======= =======
Income From Continuing Operations Per Share--
Basic............................................. $ 0.88 $ 0.94 $ 0.85
======= ======= =======
</TABLE>
9
<PAGE>
ADDITIONAL PROPOSALS PRESENTED TO SNB SHAREHOLDERS ONLY
At the SNB Meeting, the shareholders of SNB will be asked to vote on the
following additional proposals:
PROPOSAL II
To approve an amendment to the articles of incorporation of SNB which will
increase the number of shares of SNB's Common Stock authorized to be issued
from 5,000,000 to 10,000,000 shares;
PROPOSAL III
(a) To approve an amendment to the articles of incorporation of SNB to
provide for a restructuring of the Board of Directors of SNB. The Board of
Directors of SNB is presently divided into five classes, the terms of which are
for five (5) years each and are staggered to provide for the election of
approximately 20% of the directors of SNB each year. The Board presently
consists of eighteen (18) members. Under the proposed amendment, the directors
would consist of three (3) classes, each of a term of three years each and
staggered to provide for the election each year of approximately one-third of
the directors of SNB;
(b) In the event the foregoing proposal to amend the articles of
incorporation of SNB is approved, to elect eight (8) persons to serve as the
Board of Directors of SNB;
PROPOSAL IV
To ratify the appointment of McNair, McLemore, Middlebrooks & Co. LLP as
independent accountants of SNB for the year ended December 31, 1998;
10
<PAGE>
CERTAIN CONSIDERATIONS
In addition to the other information contained in this Joint Proxy
Statement/Prospectus, the following factors should be considered carefully by
shareholders of SNB and Crossroads in evaluating the Merger.
MANAGEMENT OF GROWTH
SNB has experienced significant growth in the last several years. SNB
intends to continue to pursue an aggressive growth strategy for the
foreseeable future, including possible acquisitions, and its future operating
results will depend largely upon its ability to successfully integrate any
businesses which it acquires, including Crossroads, and to manage its growth.
The process of integrating acquired businesses into SNB's operations may
result in unforeseen difficulties and may require a disproportionate amount of
resources and management attention. There is no assurance that SNB will be
able to successfully enter other markets or that any such expansion will be as
profitable as existing operations. If SNB management is unable to manage
growth effectively, SNB's business, its results of operations and its
financial condition could be materially and adversely affected.
HIGHLY COMPETITIVE BUSINESS
The SNB business is extremely competitive. Certain of SNB's primary
competitors offer substantially similar services as SNB and some have greater
market recognition and greater financial, technical, marketing and human
resources than SNB. There can be no assurance that SNB will be able to compete
successfully against existing companies or new entrants to the banking
industry.
VOLATILITY OF STOCK PRICE
The market price of the SNB Common Stock could be subject to significant
fluctuations in response to SNB's operating results and other factors, and
there can be no assurance that the market price of the SNB Common Stock will
not decline below the current market price. In addition, the stock market has
from time to time experienced price and volume volatility. These fluctuations
may be unrelated to the operating performance of particular companies whose
shares are publicly traded and may adversely affect the market price of the
SNB Common Stock. See "COMPARATIVE MARKET PRICES AND DIVIDENDS--SNB Market
Prices".
DEPENDENCE ON SENIOR MANAGEMENT
The success of SNB has been largely dependent on the skills, experience and
efforts of its senior management. The loss of the services of H. Averett
Walker, President of SNB, or other members of senior management of SNB could
have a material adverse effect on SNB's business and prospects. Mr. Walker is
operating under an employment agreement dated January 10, 1996. That agreement
may be terminated by SNB for cause only; it may be terminated by Mr. Walker
for cause or, upon 30-day notice, without cause. SNB believes that its future
success will also depend upon its ability to attract, retain and motivate
qualified personnel. There can be no assurance that SNB will be successful in
attracting and retaining such personnel.
DILUTIVE EFFECT OF EXERCISE OF FOUNDERS WARRANTS
Certain organizers of SNB and its predecessor, Security National Bank, and
their transferees, most of whom are presently directors or executive officers
of SNB, hold unexercised Founders Warrants to purchase in the aggregate
370,350 shares of SNB's Common Stock as of December 31, 1997. As of that date
those shares of SNB's Common Stock could have been purchased by the holders of
those warrants at a price of $3.33 per share, a price considerably less than
the current market price of SNB's Common Stock and its book value as of
December 31, 1997. The exercise of those options will dilute the per share
book value of SNB's Common Stock. The Warrants will expire in November, 1998
if not exercised by that time, but it is expected that all Warrants will be
exercised.
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THE CROSSROADS MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
Crossroads Common Stock in connection with the solicitation by the Crossroads
Board of Directors of proxies for use at the Crossroads Meeting, at which
Crossroads shareholders will be asked to vote upon a proposal to approve the
Agreement and the Merger. The Crossroads Meeting will be held at p.m.,
local time, on June , 1998, at the main office of Crossroads, located at 1208
Washington Street, Perry, Georgia 31069.
Crossroads shareholders are requested promptly to sign, date, and return the
accompanying proxy card to Crossroads in the enclosed postage-paid envelope.
Any Crossroads shareholder who has delivered a proxy may revoke it at any
time before it is voted by giving notice of revocation in writing or
submitting to Crossroads a signed proxy bearing a later date, provided that
such notice or proxy is actually received by Crossroads prior to the taking of
the shareholder vote, or by electing to vote in person at the Crossroads
Meeting. Any notice of revocation should be sent to Crossroads Bancshares,
Inc., P.O. Box 1308, 1208 Washington Street, Perry, Georgia 31069, Attention:
Carol A. Bryant. The shares represented by properly executed proxies received
at or prior to the Crossroads Meeting and not subsequently revoked will be
voted as directed in such proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES
REPRESENTED BY PROXIES RECEIVED WILL BE VOTED FOR APPROVAL OF THE AGREEMENT
AND IN THE DISCRETION OF THE PROXY HOLDER AS TO ANY OTHER MATTERS THAT
PROPERLY MAY COME BEFORE THE CROSSROADS MEETING. As of the date of this Joint
Proxy Statement/Prospectus, Crossroads is unaware of any other matter to be
presented at the Crossroads Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or in person by the directors, officers, and employees of
Crossroads, who will receive no additional compensation for such solicitation
but may be reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
Crossroads shareholders should not forward any stock certificates with their
proxy cards.
RECORD DATE; VOTE REQUIRED
Crossroads' Board of Directors has established the close of business on May
, 1998, as the Record Date for determining the shareholders entitled to
notice of and to vote at the Crossroads Meeting. Only record holders of
Crossroads Common Stock as of the Record Date will be entitled to vote at the
Crossroads Meeting. Approval of the Agreement requires the affirmative vote of
60 percent (60%) of the shares of Crossroads Common Stock entitled to vote at
the Crossroads Meeting as required by Crossroads Articles of Incorporation.
Therefore, an abstention or failure to return a properly executed proxy card
will have the same effect as a vote against the Agreement. As of the Record
Date, there were approximately 303 holders of 291,982 shares of Crossroads
Common Stock outstanding and entitled to vote at the Crossroads Meeting, with
each share entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares
of Crossroads Common Stock is necessary to constitute a quorum of the
shareholders in order to take action at the Crossroads Meeting. For these
purposes, shares of Crossroads Common Stock that are present, or represented
by proxy, at the Crossroads Meeting will be counted for quorum purposes
regardless of whether the holder of the shares or proxy fails to vote on the
Agreement.
The directors and executive officers of Crossroads and their affiliates
beneficially owned, as of the Record Date, 92,968 shares (or approximately
31.84% of the outstanding shares) of Crossroads Common Stock. All directors
and executive officers of Crossroads have executed irrevocable proxies which
authorize SNB to vote the shares owned by such persons in favor of the
Agreement. It is the intention of SNB to vote such shares in favor of the
Agreement.
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As of the Record Date, the directors and executive officers of SNB and their
affiliates did not beneficially own any shares of Crossroads Common Stock. As
of that date, neither Crossroads nor SNB held any shares of Crossroads Common
Stock in a fiduciary capacity for others.
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THE SNB MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to the holders of
SNB Common Stock in connection with the solicitation by the SNB Board of
Directors of proxies for use at the SNB Meeting, at which SNB shareholders
will be asked to vote upon (i) the approval of an Agreement and Plan of Merger
(the "Agreement"), entered into with Crossroads Bancshares, Inc.
("Crossroads") on January 29, 1998, as amended on February 12, 1998, pursuant
to which Crossroads will merge with and into SNB (the "Merger"); (ii) the
approval of an amendment to the articles of incorporation of SNB to increase
the number of shares of the Company's common stock which the corporation is
authorized to issue from 5,000,000 shares to 10,000,000 shares; (iii) the
approval of an amendment to the articles of incorporation of SNB which will
provide for a restructuring of the Board of Directors of SNB into three
classes which shall be as nearly equal in number as possible, with staggered
terms of three (3) years each; (iv) in the event of the approval of the
amendment to the articles of incorporation restructuring the Board of
Directors, the election of eight (8) persons to serve as the directors of SNB;
(v) the ratification of the appointment of McNair, McLemore, Middlebrooks &
Co. LLP as independent accountants for the year ended December 31, 1998; and
(vi) such other business as may properly come before the annual meeting or any
adjournments thereof.
The SNB Meeting will be held at p.m., local time, on June , 1998, at the
Macon Centreplex, 200 Coliseum Drive, Macon, Georgia 31201.
SNB shareholders are requested promptly to sign, date, and return the
accompanying proxy card to SNB in the enclosed postage-paid envelope. Any SNB
shareholder who has delivered a proxy may revoke it at any time before it is
voted by giving notice of revocation in writing or submitting to SNB a signed
proxy bearing a later date, provided that such notice or proxy is actually
received by SNB prior to the taking of the shareholder vote, or by electing to
vote in person at the SNB Meeting. Any notice of revocation should be sent to
SNB Bancshares, Inc., P.O. Box 4748, 2918 Riverside Drive, Macon, Georgia
31208-4748, Attention: Shirley Jackson. The shares of SNB Common Stock
represented by properly executed proxies received at or prior to the SNB
Meeting and not subsequently revoked will be voted as directed in such
proxies. IF INSTRUCTIONS ARE NOT GIVEN, SHARES REPRESENTED BY PROXIES RECEIVED
WILL BE VOTED IN FAVOR OF ALL PROPOSALS AND FOR THE ELECTION OF ALL PERSONS
NOMINATED BY MANAGEMENT TO SERVE AS DIRECTORS OF SNB AND IN THE DISCRETION OF
THE PROXY HOLDER AS TO ANY OTHER MATTERS THAT PROPERLY MAY COME BEFORE THE SNB
MEETING. As of the date of this Joint Proxy Statement/Prospectus, SNB is
unaware of any other matter to be presented at the SNB Meeting.
Solicitation of proxies will be made by mail but also may be made by
telephone or in person by the directors, officers, and employees of SNB, who
will receive no additional compensation for such solicitation but may be
reimbursed for out-of-pocket expenses. Brokerage houses, nominees,
fiduciaries, and other custodians will be requested to forward solicitation
materials to beneficial owners and will be reimbursed for their reasonable
out-of-pocket expenses.
RECORD DATE; VOTE REQUIRED
SNB's Board of Directors has established the close of business on May ,
1998, as the Record Date for determining the SNB shareholders entitled to
notice of and to vote at the SNB Meeting. Only SNB shareholders of record as
of the Record Date will be entitled to vote at the meeting. The affirmative
vote of two-thirds of the SNB Common Stock outstanding and entitled to vote at
the SNB Meeting will be required to approve the Agreement and the two proposed
amendments to the articles of incorporation of SNB. Directors are elected by
the affirmative vote of a majority of the shares represented at the Meeting.
The affirmative vote of a majority of the votes cast at the Meeting will be
required to approve the retention of McNair, McLemore, Middlebrooks & Co., LLP
as the independent accountants of SNB and such other business as may come
before the Meeting. Abstentions or failures to return a properly executed
proxy will have the same effect as a vote against the Agreement. Broker non-
votes, which occur when a broker submits a proxy card without exercising
discretionary
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voting authority on a non-routine matter, are not counted for purposes of
determining whether a proposal has been approved. As a result, broker non-
votes will have the effect of votes against the Agreement, the proposed
amendments to the articles of incorporation, and the election of directors. As
of March 27, 1998, there were approximately 540 holders of 2,297,331 shares of
SNB Common Stock outstanding and entitled to vote at the SNB Meeting, with
each share entitled to one vote.
The presence, in person or by proxy, of a majority of the outstanding shares
of SNB Common Stock entitled to vote at the SNB Meeting is necessary to
constitute a quorum of the shareholders in order to take action at the
meeting. For these purposes, shares of SNB Common Stock that are present, or
represented by proxy, at the SNB Meeting will be counted for quorum purposes
regardless of whether the holder of the shares or proxy fails to vote on any
matter or whether a broker with discretionary authority fails to exercise its
discretionary voting authority with respect to any matter.
The directors and executive officers of SNB beneficially owned, as of March
27, 1998, 1,021,007 shares (or approximately 44.44% of the outstanding shares)
of SNB Common Stock. As of the Record Date, the directors and executive
officers of Crossroads did not beneficially own any shares of SNB Common
Stock. As of that date, neither Crossroads nor SNB held any shares of SNB
Common Stock in a fiduciary capacity for others.
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THE MERGER
The following material describes certain aspects of the Merger. This
description does not purport to be complete and is qualified in its entirety
by reference to the Appendices hereto, including the Agreement, which is
attached as Appendix A to this Joint Proxy Statement/Prospectus and
incorporated herein by reference. All shareholders are urged to read the
Appendices in their entirety.
GENERAL
Upon consummation of the Merger, Crossroads will merge with and into SNB,
SNB will survive the Merger and the separate existence of Crossroads will
cease. Crossroads Bank will become a wholly owned subsidiary of SNB following
consummation of the Merger, although its name may be changed to achieve
consistency with the marketing program of SNB.
At the Effective Date, each share of Crossroads Common Stock issued and
outstanding will be converted into the right to receive a number of shares of
SNB Common Stock equal to (i) 846,748 divided by (ii) the aggregate number of
shares of Crossroads Common Stock outstanding on the Effective Date; provided,
however, that if the number of shares of Crossroads Common Stock outstanding
on the Effective Date is 291,982 shares the Exchange Ratio will be 2.9. Each
share of SNB Common Stock outstanding immediately prior to the Effective Date
will remain outstanding and unchanged as a result of the Merger. No fractional
shares of SNB Common Stock will be issued in connection with the Merger. SNB
will pay cash in lieu of any fractional shares (computed to the nearest cent)
in an amount equal to such fraction multiplied by $18.00.
BACKGROUND OF AND REASONS FOR THE MERGER
The Board of Directors of Crossroads has been concerned for some time about
increased competition in its primary market of Houston County, Georgia.
Competition from large regional banks in that market has increased
significantly in recent years, and several community banks have announced
plans to expand into that market. Crossroads Bank, the wholly owned subsidiary
of Crossroads, had equity capital of $5.9 million dollars as of December 31,
1997. A bank is limited by its capital in the size of extensions of credit
which can be legally made by it. The Board of Directors concluded that the
accumulation of capital through retained earnings would be inadequate to
significantly increase the size of the loans which could be made by Crossroads
Bank, and it entertained doubts as to the ability of Crossroads to raise
additional capital of the magnitude needed to significantly increase its
lending limits in the local market. The resulting restrictions on the ability
of Crossroads Bank to extend credit significantly impairs the ability of
Crossroads Bank to establish and maintain large banking relationships.
Accordingly, the Board of Directors of Crossroads considered other options.
Houston and Bibb County are contiguous, and SNB considers Houston County to
be a natural and logical extension of its primary banking market of Bibb
County. Crossroads and SNB have established a working relationship through a
series of loan participations pursuant to which the subsidiary banks of those
institutions purchase a portion of loans made by one another which exceeded
the applicable lending limits of the individual banks. As a result of that
relationship SNB and Crossroads concluded that both banks adhered to a similar
community banking philosophy. Informal discussions between members of the
Board of Directors of both SNB and Crossroads suggested that a combination of
the two financial institutions would increase economies of scale and enable
the combined institutions to increase their legal lending limits and offer
customers of both institutions additional services, while continuing as a
locally owned community financial institution. Those informal discussions
first occurred in January, 1997.
Thereafter, on October 1, 1997 Security National Bank opened a mortgage loan
production office in Houston County. At the invitation of Crossroads,
representatives of SNB met again with representatives of Crossroads in
December, 1997 to explore in greater detail the possibility of a merger
between those entities. Further meetings occurred in December, 1997 and
January, 1998 for the purpose of exchanging financial and other pertinent
information. A proposal was first made by SNB to merge with Crossroads on
January 21, 1998, subject to further review and evaluation of financial and
other information.
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The Board of Directors of Crossroads perceived a compatibility of
management, personnel and philosophy between SNB and Crossroads, and felt that
a strategic merger with another community financial institution was in the
best interest of Crossroads and its shareholders. The directors reviewed the
terms of several other mergers as well as a competing offer from another bank
to acquire Crossroads. After an evaluation of the merits of the respective
proposals, including the relative financial condition, results of operations,
dividend records and growth potential of both SNB and Crossroads, the value of
the consideration offered to Crossroads' shareholders relative to the market
value and book value of Crossroads' Common Stock and Crossroads earnings, the
market price data and relative liquidity of SNB Common Stock and the lack of
an active market for Crossroads' Common Stock, as well as the tax consequences
of the merger the Board of Directors of Crossroads approved the merger
proposal of SNB. A definitive agreement was then negotiated between the
parties and was unanimously approved by the Board of Directors of both
institutions.
CROSSROADS' REASONS FOR THE MERGER.
The Crossroads Board of Directors has unanimously approved the Agreement and
has determined that the Merger is in the best interests of Crossroads and its
shareholders. The terms of the Merger were the result of arms-length
negotiations between representatives of Crossroads and representatives of SNB.
Without assigning any relative or specific weights to the factors, the Board
of Directors of Crossroads considered the following material factors:
(a) the information presented to the directors by Crossroads' management
concerning (i) the business, operations, earnings and financial condition,
including capital levels and asset quality, of SNB, and compliance with
regulatory capital requirements on an historical and prospective basis, and
(ii) the results of a due diligence review of SNB by Crossroads'
representatives;
(b) the alternatives to the Merger, including the merits of another
acquisition proposal and a review of the terms of other comparable mergers;
(c) the enhancement of shareholder value as a result of the value of the
consideration to be received by Crossroads' shareholders relative to
Crossroads' book value and earnings per share of Crossroads' Common Stock;
(d) the anticipated synergies and operating efficiencies, increased
access to capital, increased utilization of capital for lending, and the
increased managerial resources and enhanced service capabilities that would
result from the Merger;
(e) the competitive and regulatory environment for financial institutions
and commercial lending businesses generally;
(f) the income tax aspects of the Merger as a tax-free exchange of
Crossroads Common Stock for SNB Common Stock;
(g) the likelihood that the Merger will be approved by applicable
regulatory authorities; and
(h) the current lack of marketability of the Crossroads Common Stock,
contrasted with the ability of Crossroads' shareholders to exchange their
Crossroads Common Stock for SNB Common Stock in connection with the Merger
and thereafter have the ability to trade such securities on The Nasdaq
Stock Market.
Each member of the Board of Directors of Crossroads has executed in favor of
SNB an irrevocable proxy authorizing SNB to vote all shares of Crossroads
Common Stock owned by such director in favor of the Merger.
CROSSROADS' BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT CROSSROADS
SHAREHOLDERS VOTE FOR APPROVAL OF THE AGREEMENT.
SNB'S REASONS FOR THE MERGER.
The SNB Board of Directors has unanimously approved the Agreement and has
determined that the Merger is in the best interests of SNB and its
shareholders. In approving the Agreement, the SNB Board considered a
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number of factors. Without assigning any relative or specific weights to the
factors, the SNB Board of Directors considered the following material factors:
(a) Crossroads' business, operations, earnings, and financial condition,
including capital levels and asset quality, on an historical, prospective,
and pro forma basis and in comparison to other financial institutions
serving the Houston County market;
(b) the results of a due diligence review of Crossroads by SNB
representatives;
(c) the demographic, economic, and financial characteristics of Houston
County in which Crossroads operates, on an historical and prospective
basis;
(d) a variety of factors affecting and relating to the overall strategic
focus of SNB, including SNB's desire to expand its limited operations in
Houston County;
(e) the financial terms and income tax consequences of the proposed
Merger;
(f) the commercial lending experience of the management of Crossroads and
its subsidiaries;
(g) the management philosophy of Crossroads and its compatibility with
that of SNB.
SNB'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SNB STOCKHOLDERS VOTE
FOR APPROVAL OF THE AGREEMENT. (PROPOSAL I).
FAIRNESS OPINIONS
Neither SNB nor Crossroads has sought or received an opinion from any
independent third party regarding the fairness of the Merger to their
respective shareholders, nor was any special committee formed to negotiate or
make recommendations on behalf of those shareholders.
EFFECTIVE DATE OF THE MERGER
Subject to the conditions to the obligations of the parties to effect the
Merger, the Effective Date will occur on the date and at the time specified in
the Articles of Merger filed by SNB with the Georgia Secretary of State. If no
effective date or time is specified, the Merger will become effective upon the
filing of the Articles of Merger. Unless otherwise agreed upon by SNB and
Crossroads, and subject to the conditions to the obligations of the parties to
effect the Merger, the parties will use their reasonable efforts to cause the
Effective Date to occur on the last business day of the month in which the
last of the following events occurs: (i) the effective date (including the
expiration of any applicable waiting period) of the last federal or state
regulatory approval required for the Merger or (ii) the date on which the
Agreement is approved by the requisite vote of Crossroads and SNB
shareholders.
No assurance can be provided that the necessary shareholder and regulatory
approvals can be obtained or that other conditions precedent to the Merger can
or will be satisfied. SNB and Crossroads anticipate that all conditions to
consummation of the Merger will be satisfied so that the Merger can be
consummated in the third quarter of 1998. However, delays in the consummation
of the Merger could occur.
The Board of Directors of either SNB or Crossroads generally may terminate
the Agreement if the Merger is not consummated by September 30, 1998, unless
the failure to consummate by that date is the result of a breach of the
Agreement by the party seeking termination. See "--Conditions to Consummation
of the Merger" and "--Waiver, Amendment, and Termination of the Agreement."
DISTRIBUTION OF STOCK CERTIFICATES AFTER THE MERGER
Promptly after the Effective Date, SNB or an exchange agent selected by it
(the "Exchange Agent") will mail to the former shareholders of Crossroads a
letter of transmittal, together with instructions for the exchange of such
shareholders' certificates representing shares of Crossroads Common Stock for
certificates representing shares of SNB Common Stock.
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CROSSROADS SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL
THEY RECEIVE THE FORM LETTER OF TRANSMITTAL AND INSTRUCTIONS. Upon surrender
to the Exchange Agent of certificates for Crossroads Common Stock, together
with a properly completed letter of transmittal, there will be issued and
mailed to each holder of Crossroads Common Stock a certificate or certificates
representing the number of shares of SNB Common Stock to which such holder is
entitled as a result of the Merger. After the Effective Date, holders of
record of Crossroads Common Stock as of the Effective Date will be entitled to
vote at any meeting of SNB shareholders the number of shares of SNB Common
Stock into which their Crossroads Common Stock has been converted, regardless
of whether such shareholders have surrendered their Crossroads stock
certificates. NO DIVIDEND OR OTHER DISTRIBUTION PAYABLE AFTER THE EFFECTIVE
DATE WITH RESPECT TO SNB COMMON STOCK, HOWEVER, WILL BE PAID TO THE HOLDER OF
ANY UNSURRENDERED CROSSROADS STOCK CERTIFICATE UNTIL THE HOLDER DULY
SURRENDERS SUCH CERTIFICATE. Upon such surrender, all undelivered dividends
and other distributions will be delivered to such shareholder, in each case
without interest.
After the Effective Date, there will be no transfers of shares of Crossroads
Common Stock on Crossroads' stock transfer books. If certificates representing
shares of Crossroads Common Stock are presented for transfer after the
Effective Date, they will be canceled and exchanged for the shares of SNB
Common Stock deliverable in respect thereof.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to a number of conditions, including,
but not limited to:
(a) approval from the Federal Reserve and the Georgia Department without
any conditions or restrictions that would, in the reasonable judgment of
either party, so materially adversely impact the economic benefits of the
transactions contemplated by the Agreement as to render inadvisable the
consummation of the Merger, and the expiration of applicable waiting
periods under the BHCA;
(b) approval by the holders of 60 percent (60%) of the shares of
Crossroads Common Stock entitled to vote on the Merger;
(c) approval by the holders of 66.67% of the shares of SNB Common Stock
entitled to vote on the Merger;
(d) the absence of any action by any court or governmental authority
restraining or prohibiting the Merger;
(e) the receipt of all consents by SNB and Crossroads required for the
consummation of the Merger;
(f) the receipt by Crossroads of an opinion of Martin, Snow, Grant &
Napier, LLP to the effect that, among other things: (i) the Merger will
constitute a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code; (ii) the exchange in the Merger of Crossroads
Common Stock for SNB Common Stock will not give rise to gain or loss to
Crossroads shareholders, except to the extent of any cash received for
fractional shares or upon the exercise by a shareholder of his or her
dissenters' rights; and (iii) Crossroads will not recognize gain or loss as
a consequence of the Merger;
(g) approval for listing on The Nasdaq Stock Market of the shares of SNB
Common Stock to be issued in the Merger; and
(h) receipt of letters from McNair, McLemore & Middlebrooks Co. LLP dated
as of the Effective Date, confirming that the Merger will qualify for
pooling-of-interests accounting treatment.
Consummation of the Merger also is subject to the satisfaction or waiver of
various other conditions specified in the Agreement, including, among others:
(i) the delivery by SNB and Crossroads of opinions of their respective counsel
and certificates executed by their respective Chief Executive Officers and
Chief Financial officers as to compliance with the Agreement; and (ii) as of
the Effective Date, the accuracy of certain representations and warranties and
the compliance in all material respects with the agreements and covenants of
each party.
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REGULATORY APPROVALS
The Merger may not proceed in the absence of receipt of the requisite
regulatory approvals. There can be no assurance that such regulatory approvals
will be obtained or as to the timing of such approvals. There also can be no
assurance that such approvals will not be accompanied by conditions which
cause such approvals to fail to satisfy the conditions set forth in the
Agreement. Applications for the approvals described below have been submitted
to the appropriate regulatory agencies.
SNB and Crossroads are not aware of any material governmental approvals or
actions that are required for consummation of the Merger, except as described
below. Should any other approval or action be required, it presently is
contemplated that such approval or action would be sought.
The Merger requires the prior approval of the Federal Reserve, pursuant to
Section 3 of the BHC Act. In granting its approval under Section 3 of the BHC
Act, the Federal Reserve must take into consideration, among other factors,
the financial and managerial resources and future prospects of the
institutions and whether the acquisition can reasonably be expected to produce
benefits to the public, such as greater convenience, increased competition, or
gains in efficiency, that outweigh possible adverse effects, such as undue
concentration of resources, decreased competition, conflicts of interest, or
unsound banking practices. Under the BHC Act, the Merger may not be
consummated until the 15th day following the date of Federal Reserve approval,
during which time the United States Department of Justice may challenge the
transaction on antitrust grounds. The commencement of any antitrust action
would stay the effectiveness of the Federal Reserve's approval, unless a court
specifically orders otherwise.
The Merger also is subject to the approval of the Georgia Department. In its
evaluations, the Georgia Department will take into account considerations
similar to those applied by the Federal Reserve.
RIGHTS OF DISSENTING SHAREHOLDERS
Any shareholder of record of Crossroads who objects to the Merger and who
fully complies with Section 14-2-1301 et seq. of the Georgia Code will be
entitled to demand and receive payment in cash of an amount equal to the fair
value of all, but not less than all, of his or her shares of Crossroads Stock
if the Merger is consummated. A shareholder of record may assert dissenters'
rights as to fewer than the shares registered in such shareholder's name only
if he or she dissents with respect to all shares beneficially owned by any one
beneficial owner and notifies Crossroads in writing of the name and address of
each person on whose behalf he or she asserts dissenters' rights. For the
purpose of determining the amount to be received in connection with the
exercise of statutory dissenters' rights under the Georgia Code, the fair
value of a dissenting shareholder's Crossroads Stock equals the value of the
shares immediately before the Effective Date of the Merger, excluding any
appreciation or depreciation in anticipation of the Merger.
Any Crossroads shareholder desiring to receive payment of the fair value of
his or her Crossroads Stock in accordance with the requirements of the Georgia
Code: (a) must deliver to Crossroads prior to the time the shareholder vote on
the Agreement is taken, a written notice of his or her intent to demand
payment for his or her shares if such Merger is consummated; (b) must not vote
his or her shares in favor of the Agreement; and (c) must demand payment and
deposit stock certificates representing Crossroads Stock in accordance with
the terms of a notice which will be sent to the shareholder by SNB (as the
Surviving Corporation in the Merger) no later than 10 days after such
Agreement is consummated. A filing of the written notice of intent to dissent
with respect to the Agreement should be sent to: Crossroads Bancshares, Inc.,
P.O. Box 1308, 1208 Washington Street, Perry, Georgia 31069, Attention:
President. A VOTE AGAINST THE AGREEMENT ALONE WILL NOT SATISFY THE
REQUIREMENTS FOR THE SEPARATE WRITTEN NOTICE OF INTENT TO DISSENT TO THE
MERGER, THE SEPARATE WRITTEN DEMAND FOR PAYMENT OF THE FAIR VALUE OF SHARES OF
CROSSROADS STOCK AND THE DEPOSIT OF THE STOCK CERTIFICATES, WHICH ARE REFERRED
TO IN CONDITIONS (A) AND (C) ABOVE. RATHER, A DISSENTING SHAREHOLDER MUST
SEPARATELY COMPLY WITH ALL OF THOSE CONDITIONS.
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Within 10 days of the later of the Effective Date or receipt of a payment
demand by a shareholder who deposits his or her stock certificates in
accordance with the Crossroads' dissenters' notice sent to those shareholders
who notified Crossroads of their intent to dissent, described in (c) above,
SNB (as the Surviving Corporation in the Merger) must offer to pay to each
dissenting shareholder the amount SNB estimates to be the fair value of the
dissenting shareholder's shares, plus accrued interest. Such notice and offer
must be accompanied by: (a) Crossroads' balance sheet as of the end of a
fiscal year ending not more than 16 months before the date of making an offer,
an income statement for that year, a statement of changes in shareholders'
equity for that year, and the latest available interim financial statements,
if any; (b) an explanation of how the interest was calculated; (c) a statement
of the dissenting shareholder's right to demand payment of a different amount
under Section 14-2-1327 of the Georgia Code; and (d) a copy of the dissenters'
rights provisions of the Georgia Code.
If the dissenting shareholder accepts SNB's offer, by written notice to such
entity, within 30 days after SNB's offer or is deemed to have accepted the
offer by reason of failing to respond to such offer, SNB must make payment for
his or her shares within 60 days after the making of the offer or the
Effective Date, whichever is later. Upon payment of the agreed value, the
dissenting shareholder will cease to have any interest in his or her shares of
Crossroads Stock.
If within 30 days after SNB offers payment for the shares of a dissenting
shareholder, the dissenting shareholder does not accept the estimate of fair
value of his or her shares and interest due thereon and demands payment of his
or her own estimate of the fair value of the shares and interest due thereon,
then SNB, within 60 days after receiving the payment demand of a different
amount from a dissenting shareholder, must file an action in a court of
competent jurisdiction in Houston County, Georgia, requesting that the fair
value of such shares be found and determined. SNB must make all dissenting
shareholders whose demands remain unsettled parties to the proceeding. If SNB
does not commence the proceeding within such 60-day period, it shall be
required to pay each dissenting shareholder whose demand remains unsettled the
amount demanded by the dissenting shareholder.
The shareholders of SNB are not entitled to dissent from the proposed
transaction because the SNB Common Stock is listed on The Nasdaq Stock Market.
The foregoing does not purport to be a complete statement of the provisions
of the Georgia Code relating to statutory dissenters' rights and is qualified
in its entirety by reference to the Dissenters' Rights provisions of the
Georgia Code, which are reproduced in full in Appendix B to this Proxy
Statement/Prospectus and which are incorporated herein by reference.
WAIVER, AMENDMENT, AND TERMINATION OF THE AGREEMENT
Prior to the Closing Date, and to the extent permitted by law, any provision
of the Agreement generally may be (i) waived by the party benefitted by the
provision or (ii) amended by a written agreement between SNB and Crossroads
approved by their respective Boards of Directors; provided, however, that
after approval by the SNB and Crossroads shareholders, no amendment that would
require further approval by such shareholders under the Georgia Code may be
made without the approval of such shareholders.
The Agreement may be terminated, and the Merger abandoned, at any time prior
to the Effective Date, either before or after approval by the SNB and the
Crossroads shareholders, upon written notice to the other party as follows:
(i) by either party (provided that the terminating party is not then in
material breach of any representation, warranty, covenant or other
agreement contained in the Agreement) in the event of a material breach of
any representation, warranty, covenant or agreement contained in the
Agreement which cannot or has not been cured within thirty (30) days after
the giving of written notice to the breaching party of such breach and,
with respect to a material breach of any representation or warranty the
breach relates to matters that are reasonably likely to have, individually
or in the aggregate, a material adverse effect on the aggrieved party;
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(ii) by either party, if the shareholders of either SNB or Crossroads
have not approved the Agreement in accordance with the provisions of the
Georgia Code;
(iii) by either party, in the event any required consents of any
regulatory authority for consummation of the Merger and the other
transactions contemplated hereby has been denied by final non-appealable
action of such authority or if any action taken by such authority is not
appealed within the time limit for appeal (provided that the terminating
party is not then in material breach of any representation, warranty,
covenant or other agreement contained in this Agreement);
(iv) by the Board of Directors of either party in the event that the
Merger shall not have been consummated by September 30, 1998, provided the
failure to consummate the Merger on or before such date was not caused by
any breach of this Agreement by the party electing to terminate for such
reason;
(v) by the Board of Directors of either party (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in the Agreement) in the
event that any of the conditions precedent to the obligations of such party
to consummate the Merger cannot be satisfied or fulfilled by September 30,
1998;
(vi) by the Board of Directors of Crossroads in connection with entering
into a definitive agreement in accordance with 7.8(b) of the Agreement,
provided that it has complied with all provisions thereof, including the
notice provisions therein, and that it makes simultaneous payment of the
Expenses; or
(vii) by mutual consent of the Board of Directors of both parties.
If the Agreement is terminated, the parties will have no further
obligations, except with respect to certain provisions, including those
providing for payment of expenses and restricting disclosure of confidential
information. See "--Expenses and Fees" for additional information concerning
the payment of expenses.
CONDUCT OF BUSINESS PENDING THE MERGER
Each of SNB and Crossroads generally has agreed, unless the prior consent of
the other party is obtained, and except as otherwise contemplated by the
Agreement, to operate its business only in the ordinary course, to preserve
intact its business organization and assets and to maintain its rights and
franchises. In addition, the Agreement contains certain other restrictions
applicable to the conduct of the business of Crossroads prior to consummation
of the Merger, as described below.
Crossroads has agreed not to take certain actions relating to the operation
of its business pending consummation of the Merger without the prior approval
of SNB. Those actions generally include, without limitation: (i) amending its
Articles of Incorporation or Bylaws; (ii) becoming responsible for any
obligation for borrowed money except in the ordinary course of business
consistent with past practices; (iii) changing its authorized or issued
capital stock or paying any dividend or other distribution in respect of its
capital stock, except that Crossroads was permitted to declare and pay a cash
dividend payable on March 1, 1998 to shareholders of record on February 15,
1998 in the amount of $.20 cents per share; (iv) disposing of any asset other
than in the ordinary course of business; (v) adopting any new employee benefit
plan or program, or materially changing any existing plan or program except
for any change required by law or advisable to maintain the tax qualified
status of any such plan; (vi) commencing any litigation (except in accordance
with past practice), settling any litigation involving liability of the
holding company or any subsidiary for damages in excess of $50,000 or material
restrictions upon its operations; (vii) entering into or amending any
employment contract which Crossroads does not have the unconditional right to
terminate without liability, or grant any increase in compensation or benefits
to employees or officers of Crossroads; or (viii) entering into, modifying or
terminating any material contract except in the ordinary course of business.
DIRECTORS AND EXECUTIVE OFFICERS FOLLOWING THE MERGER
Management. The officers and directors of SNB following the Merger shall be
those officers and directors of SNB immediately prior to the Merger, except
that SNB will nominate and recommend the election of four of the existing
directors of Crossroads to serve as directors of SNB following the Merger.
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Crossroads Bank will be operated as a wholly owned subsidiary of SNB unless
and until such time as SNB in its business judgment deems a change in such
status warranted. It is the present intention of SNB to involve William D.
Watson, who presently serves as President of Crossroads Bank, as the President
of Crossroads Bank subsequent to the effective time of the Merger, although
Mr. Watson presently serves at the will of the Board of Directors of
Crossroads and the Agreement does not contemplate an employment contract with
Mr. Watson. Carol A. Bryant, Ronald K. Bell, Ronald J. Baggett, and Ray M.
Durham, all of whom are presently employed by Crossroads Bank, will remain
with the resulting organization in a roll similar to that presently occupied
by them with Crossroads Bank.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The Agreement also provides that, after the Effective Date, SNB will provide
generally to officers and employees of Crossroads and Crossroads Bank who
become officers or employees of SNB or its subsidiaries, employee benefits
under employee benefit plans on terms and conditions that, taken as a whole,
are substantially similar to those currently provided by SNB and its
subsidiaries to their similarly situated officers and employees, except that
for a period of twelve (12) months after the Effective Date SNB shall provide
generally to officers and employees of Crossroads and Crossroads Bank
severance benefits in accordance with the policies of either Crossroads, as
disclosed to SNB, or SNB, whichever will provide the greater benefit to the
officer or employee. For purposes of participation and vesting under such
employee benefit plans, service with Crossroads or its subsidiaries prior to
the Effective Date will be treated as service with SNB or its subsidiaries.
The Agreement further provides that SNB will honor all employment, severance,
consulting, and other compensation contracts previously disclosed to SNB
between Crossroads or its subsidiaries and any current or former director,
officer, or employee, and all provisions for vested amounts earned or accrued
through the Effective Date under Crossroads' benefit plans.
SNB has agreed that all rights to indemnification and all limitations of
liability presently existing in favor of the officers and directors of
Crossroads and Crossroads Bank as provided by their respective articles of
incorporations and bylaws and with respect to matters occurring prior to the
Effective Date of the Merger, shall survive the Merger and shall continue in
full force and effect for a period of not less than six (6) years from the
Effective Date of that Merger.
As of the Record Date, the directors and executive officers of Crossroads
beneficially owned no shares of SNB Common Stock.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
THE FOLLOWING IS A SUMMARY OF MATERIAL ANTICIPATED FEDERAL INCOME TAX
CONSEQUENCES OF THE MERGER. THIS SUMMARY IS BASED ON THE FEDERAL INCOME TAX
LAWS NOW IN EFFECT AND AS CURRENTLY INTERPRETED; IT DOES NOT TAKE INTO ACCOUNT
POSSIBLE CHANGES IN SUCH LAWS OR INTERPRETATIONS, INCLUDING AMENDMENTS TO
APPLICABLE STATUTES OR REGULATIONS OR CHANGES IN JUDICIAL OR ADMINISTRATIVE
RULINGS, SOME OF WHICH MAY HAVE RETROACTIVE EFFECT. THIS SUMMARY DOES NOT
PURPORT TO ADDRESS ALL ASPECTS OF THE POSSIBLE FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER AND IS NOT INTENDED AS TAX ADVICE TO ANY PERSON. IN PARTICULAR,
AND WITHOUT LIMITING THE FOREGOING, THIS SUMMARY DOES NOT ADDRESS THE FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SHAREHOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES OR STATUS (FOR EXAMPLE, AS FOREIGN PERSONS, TAX-
EXEMPT ENTITIES, DEALERS IN SECURITIES, INSURANCE COMPANIES, OR CORPORATIONS,
AMONG OTHERS). NOR DOES THIS SUMMARY ADDRESS ANY CONSEQUENCES OF THE MERGER
UNDER ANY STATE, LOCAL, ESTATE, OR FOREIGN TAX LAWS. SHAREHOLDERS, THEREFORE,
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC TAX
CONSEQUENCES TO THEM OF THE MERGER, INCLUDING TAX RETURN REPORTING
REQUIREMENTS, THE APPLICATION AND EFFECT OF FEDERAL, FOREIGN, STATE, LOCAL,
AND OTHER TAX LAWS, AND THE IMPLICATIONS OF ANY PROPOSED CHANGES IN THE TAX
LAWS.
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A federal income tax ruling with respect to this transaction was not
requested from the Internal Revenue Service. Instead, Martin, Snow, Grant &
Napier, LLP, counsel to SNB, has rendered an opinion to SNB and Crossroads
concerning certain federal income tax consequences of the proposed Merger
under federal income tax law. It is such firm's opinion that:
(a) The Merger will be a tax-free reorganization within the meaning of
Section 368(a) of the Code.
(b) The shareholders of Crossroads will recognize no gain or loss upon
the exchange of their Crossroads Common Stock solely for shares of SNB
Common Stock except for the recognition of gain as required by Section 302
of the Code with respect to the receipt by the shareholders (or option
holders) of Crossroads Common Stock of cash in lieu of fractional shares.
(c) Crossroads shareholders who dissent from the Merger will be treated
as having received such payment as a distribution in redemption of their
shares of stock as required by Section 356(a) of the Code. Crossroads
shareholders electing to exercise dissenters' rights should consult their
own tax advisors as to the tax treatment in their particular circumstances.
(d) No income, gain or loss will be recognized by SNB or Crossroads as a
consequence of the Merger.
(e) The aggregate tax basis of SNB Common Stock received by Crossroads
shareholders pursuant to the Merger will be the same tax basis of the
shares of Crossroads Common Stock exchanged therefor decreased by any
portion of such tax basis allocated to fractional shares of SNB Common
Stock that are treated as redeemed by SNB.
(f) The holding period of the shares of SNB Common Stock received by the
Crossroads shareholders will include the holding period of the shares of
Crossroads Common Stock exchanged therefor, provided that the stock of
Crossroads is held as a capital asset on the date of the consummation of
the Merger.
Among other things, the opinion of Martin, Snow, Grant & Napier, LLP is
based on Crossroads shareholders' maintaining sufficient equity ownership
interest in SNB after the Merger. The Internal Revenue Service takes the
position for purposes of issuing an advance ruling on reorganizations that the
shareholders of an acquired corporation (i.e., Crossroads) must maintain a
continuing equity ownership interest in the acquiring corporation (i.e., SNB)
equal, in terms of value, to at least 50% of their interest in the acquired
corporation. Moreover, shares of Crossroads Common Stock and SNB Common Stock
held by Crossroads shareholders and otherwise sold, redeemed or disposed of
prior to or shortly after the Effective Date are taken into account.
Management of SNB has represented that it has no plan or intention to cause
SNB to redeem or otherwise reacquire the shares of SNB Common Stock issued in
the Merger. In addition to the foregoing requirements, certain additional
matters must be true with respect to the Merger. SNB believes that the factual
matters will be satisfied.
THE TAX OPINION DOES NOT ADDRESS ANY STATE, LOCAL, OR OTHER TAX CONSEQUENCES
OF THE MERGER. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TAX CONSEQUENCES OF THE PROPOSED TRANSACTION TO THEM INDIVIDUALLY,
INCLUDING TAX CONSEQUENCES UNDER STATE OR LOCAL LAW.
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a pooling of
interests. Under the pooling-of-interests method of accounting, the recorded
amounts of the assets and liabilities of Crossroads will be carried forward
and recorded on the financial statements of SNB at their previously recorded
amounts. In order for the Merger to qualify for pooling-of-interests
accounting treatment, substantially all (90% or more) of the outstanding
Crossroads Common Stock must be exchanged for SNB Common Stock. There are
certain other criteria that must be satisfied in order for the Merger to
qualify as a pooling of interests, some of which criteria cannot be satisfied
until after the Effective Date.
For information concerning certain conditions to be imposed on the exchange
of Crossroads Common Stock for SNB Common Stock in the Merger by affiliates of
Crossroads and certain restrictions to be imposed on the
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<PAGE>
transferability of the SNB Common Stock received by those affiliates in the
Merger in order, among other things, to ensure the availability of pooling-of-
interests accounting treatment, see "--Resales of SNB Common Stock."
EXPENSES AND FEES
The Agreement provides, in general, that each of the parties will bear and
pay its own expenses in connection with the transactions contemplated by the
Agreement, including fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel, except that SNB and
Crossroads shall each pay one-half of the filing fees incurred in filing the
registration statement with the Securities and Exchange Commission and similar
authorities and of the fees and expenses incurred in connection with the
printing of the registration statement and proxy statement/prospectus.
The Agreement also provides that if it is terminated because one of the
parties breaches its representations and warranties or one of its covenants,
and the breach cannot be or has not been cured within 30 days after written
notice of the breach is given to the breaching party, then the breaching party
agrees to pay the non-breaching party an amount equal to all fees and expenses
incurred by the non-breaching party in connection with the Merger.
RESALES OF SNB COMMON STOCK
The shares of SNB Common Stock issued in connection with Merger will be
freely transferable under the Securities Act, except for shares issued to any
shareholder who may be deemed to be an "affiliate" (generally including,
without limitation, directors, certain executive officers, and beneficial
owners of 10% or more of any class of capital stock) of Crossroads for
purposes of Rule 145 under the Securities Act as of the date of the Annual
Meeting or for purposes of applicable interpretations regarding pooling-of-
interests accounting treatment. Such affiliates may not sell their shares of
SNB Common Stock acquired in connection with the Merger except pursuant to an
effective registration statement under the Securities Act or other applicable
exemption from the registration requirements of the Securities Act and until
such time as financial results covering at least 30 days of combined
operations of SNB and Crossroads after the consummation of the Merger have
been published. SNB may place restrictive legends on certificates representing
SNB Common Stock issued to all persons who are deemed to be "affiliates" of
Crossroads under Rule 145. In addition, Crossroads has agreed to use its
reasonable efforts to cause each person or entity that is an "affiliate" to
enter into a written agreement in substantially the form attached to the
Merger Agreement relating to such restrictions on sale or other transfer. Such
agreements by Crossroads affiliates are conditions to the obligations of SNB
to close the Merger. This Joint Proxy Statement/Prospectus does not cover
resales of SNB Common Stock received by any person who may be deemed to be an
affiliate of Crossroads.
DESCRIPTION OF SNB COMMON STOCK
SNB is currently authorized to issue 5,000,000 shares of SNB Common Stock,
of which 2,297,331 shares were issued and outstanding at March 27, 1998.
Shareholders of SNB will be requested at the Meeting to approve an increase in
the number of shares which SNB is authorized to issue to 10,000,000 shares.
Holders of SNB Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
The ability of SNB to pay dividends is affected by the ability of its
subsidiaries to pay dividends, which is limited by applicable regulatory
requirements and capital guidelines. At February 28, 1998, under such
requirements and guidelines, Security National Bank had $3,055,248 of
undivided profits legally available for the payment of dividends without
regulatory approval. See "Certain Regulatory Considerations--Payment of
Dividends."
CERTAIN DIFFERENCES IN RIGHTS OF SHAREHOLDERS
General
On the Effective Date, Crossroads shareholders will become shareholders of
SNB, and their rights as shareholders will be determined by SNB's Articles of
Incorporation and Bylaws. The following is a summary of
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the material differences in the rights of shareholders of SNB and Crossroads.
Both SNB and Crossroads are Georgia corporations governed by the Georgia Code.
Accordingly, there are no material differences between the rights of a SNB
shareholder and the rights of a Crossroads shareholder solely under the
Georgia Code. This summary does not purport to be a complete discussion of,
and is qualified in its entirety by reference to, the Georgia Code and the
Articles of Incorporation and Bylaws of each corporation.
AUTHORIZED CAPITAL STOCK
SNB is currently authorized to issue 5,000,000 shares of common stock, $1.00
par value, of which 2,297,331 shares were outstanding as of March 27, 1998.
Shareholders of SNB will be requested at the Meeting to approve an increase in
the number of shares which SNB is authorized to issue to 10,000,000 shares.
The Articles of Incorporation of SNB do not provide for the issuance of any
other class of shares.
Crossroads is authorized to issue 5,000,000 shares of Crossroads Common
Stock, $10.00 par value, of which 291,982 shares of Crossroads Common Stock
were issued and outstanding as of March 31, 1998. No other class of stock is
authorized. The payment of cash dividends is subject to authorization by the
Board of Directors of Crossroads.
REMOVAL OF DIRECTORS
Both SNB's and Crossroads' Bylaws provide that any director may be removed
from office with or without cause by the affirmative vote of the holders of a
majority of the shares entitled to vote at an election of directors. In
addition, the Bylaws of both parties provide that a director may be removed
from office by the Board of Directors of that party if such director is
adjudicated an incompetent by a court, if he or she is convicted of a felony,
or if he or she fails to attend regular meetings of the Board of Directors for
three consecutive meetings without having been excused by the Board of
Directors.
VOTE REQUIRED FOR SHAREHOLDER APPROVAL
The Bylaws of both SNB and Crossroads provide that, if a quorum is present,
the affirmative vote of a majority of the shares of the company's Common Stock
represented at the meeting and entitled to vote on the subject matter will
represent the act of the shareholders, except as otherwise provided by law or
the company's Articles of Incorporation or Bylaws. The Articles of
Incorporation of Crossroads requires that any business combination, including
a merger, be approved by the affirmative vote of the holders of at least 60
percent (60%) of all classes of stock of Crossroads entitled to vote in the
election of directors, and in addition, imposes certain price requirements in
the event the business combination is not approved by the Board of Directors
of Crossroads. The Articles of Incorporation of SNB require that a merger or
disposition of all or substantially all of the assets of SNB be approved by
the affirmative vote of the holders of two-thirds (66.67%) of all classes of
stock entitled to vote in the election of directors, but does not contain any
pricing requirements. Directors of Crossroads are elected by a plurality of
the votes cast by the shares entitled to vote in the election of directors at
a meeting at which a quorum is present. The Articles of Incorporation of SNB
provide that a director is elected by the affirmative vote of a majority of
the shares represented at the annual meeting of shareholders at which the
director stands for election; Proposal III, if adopted by the shareholders of
SNB, will provide for the election of directors of SNB by a plurality of the
votes cast at the meeting.
ACTION BY SHAREHOLDERS WITHOUT A MEETING
Neither SNB Bylaws nor those of Crossroads contain any restrictions on the
right of shareholders to consent in writing in lieu of a shareholders' meeting
to the taking of action required or permitted to be taken at a shareholders'
meeting. The Bylaws of both SNB and Crossroads provide that special meetings
of shareholders or a special meeting in lieu of the annual meeting of
shareholders shall be called by the companies upon the written request of the
holders of 25 percent (25%) or more of all the shares of stock of the
corporation entitled to vote in an election of directors, and that special
meetings of the shareholders may be called at any time by the President,
Chairman of the Board, or the Board of Directors. Notice of such meetings must
be delivered not less than ten (10) days, nor more than fifty (50) days,
before the date of such meeting, either personally, by mail, or by telegram.
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NUMBER OF DIRECTORS
The Articles of Incorporation of SNB currently provide that the Board of
Directors of SNB shall consist of not less than five (5) nor more than twenty-
five (25) persons, with the number of directors to be fixed each year by the
Board of Directors or resolution of the shareholders adopted at the annual
meeting of shareholders by the affirmative vote of a majority of the shares
represented at the annual meeting. The Articles of Incorporation of SNB
further provide for the division of the Board of Directors into five (5)
classes with terms of five (5) years each, staggered as to each class. There
are presently eighteen (18) members of the Board of Directors of SNB. The
shareholders of SNB will be requested at the Meeting to vote on a proposal to
divide the Board of Directors into three classes with terms of three years
each, staggered as to each class. The Board of Directors of SNB has by
resolution provided that in the event Proposal III(a) is approved by the
shareholders of SNB the Board of Directors will consist initially of eight (8)
persons. All 18 SNB directors have signed an agreement to resign if the board
is restructured. In the event the Merger is approved and consummated, it is
anticipated the Board will be increased to twelve (12) members, four (4) of
whom will be recommended and nominated from the existing Board of Directors of
Crossroads.
The Bylaws of Crossroads provides that the Board of Directors of Crossroads
shall consist of not less than three (3), nor more than twenty-five (25),
persons with the exact number within such minimum and maximum numbers to be
fixed and determined from time to time by resolution of the Board of
Directors, or by resolution of the shareholders at any annual or special
meeting of shareholders. Each director serves from the time of his election
until the next succeeding annual meeting and thereafter until his successor
shall have been elected and qualified. There are presently fifteen (15)
members of the Board of Directors of Crossroads.
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COMPARATIVE MARKET PRICES AND DIVIDENDS
SNB MARKET PRICES
The SNB Common Stock has been listed on The Nasdaq Stock Market under the
symbol "SNBJ" since December 1, 1997. Prior to that date the Common Stock of
SNB was not traded on a stock exchange or on The Nasdaq Stock Market, although
certain brokerage firms made a market in SNB's Common Stock. The following
table sets forth, for the indicated periods, the high and low closing sales
prices for SNB Common Stock as reported by The Nasdaq Stock Market and as
known to management prior to listing on The Nasdaq Stock Market. (All sales
prices have been retroactively restated to reflect a 20% stock split effected
as a dividend on March 20, 1995; a 100% stock split effected as a dividend on
June 1, 1996; and a 25% stock split effected as a dividend on September 25,
1997.)
<TABLE>
<CAPTION>
CALENDAR PERIOD SALES PRICE
- --------------- -------------
HIGH LOW
------ ------
<S> <C> <C>
1996
First Quarter................................................... No Trades
Second Quarter.................................................. $10.20 $ 9.95
Third Quarter................................................... 13.20 $12.00
Fourth Quarter.................................................. No Trades
1997
First Quarter................................................... $12.00 $10.80
Second Quarter.................................................. $14.41 $12.00
Third Quarter................................................... $15.00 $13.63
Fourth Quarter.................................................. $19.50 $16.00
1998
First Quarter................................................... $23.00 $18.00
</TABLE>
CROSSROADS MARKET PRICES
Crossroads Common Stock is not listed for quotation on The Nasdaq Stock
Market or any other stock exchange. The price of the Crossroads Common Stock
in the last known arms-length transaction, which occurred prior to the date
the Merger was publicly announced on January 29, 1998, occurred on August 22,
1997 and was for a price of $18.00 per share. Based on transactions of which
Crossroads' management is aware, 4,300 shares of Crossroads Common Stock were
traded in 1996 at prices ranging from a low of $18.00 per share to a high of
$20.00 per share. In 1997 9,600 shares of Crossroads Common Stock was traded
at prices ranging from a low of $18.00 per share to a high of $20.00 per
share. 100 shares of Crossroads Common Stock have traded in 1998 in a
transaction between family members.
RECENT PRICES
On May , 1998, the last day on which SNB Common Stock was traded prior to
the mailing of this Joint Proxy Statement/Prospectus, the last reported sales
price of SNB Common Stock as reported on The Nasdaq Stock Market was $ per
share. At the close of trading on January 20, 1998, the date of the last sale
reported by The Nasdaq Stock Market prior to January 29, 1998 (the date the
proposed Merger was publicly announced), the last reported sales price of SNB
Common Stock was $18.00 per share. The last known sales price of Crossroads
Common Stock in an arms-length transaction was $18.00 per share.
DIVIDENDS
The holders of SNB Common Stock are entitled to receive cash dividends when
and if declared by the Board of Directors out of funds legally available
therefor. SNB has declared the following cash dividends in recent years (all
amounts have been retroactively restated to reflect a 20% stock split effected
as a dividend on March 20, 1995; a 100% stock split effected as a dividend on
June 1, 1996; and a 25% stock split effected as a
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dividend on September 25, 1997); $0.16 per share in 1995; $0.18 per share in
1996; $0.19 per share in 1997; and $0.05 per share through March 31, 1998.
The future declaration and payment of dividends will depend upon the
earnings of SNB and its subsidiaries, business conditions, operating results,
capital and reserve requirements, and the Board of Directors' consideration of
other relevant factors.
The payment of cash dividends to the holders of Crossroads Common Stock is
subject to authorization by the Board of Directors of Crossroads. Crossroads
has historically paid dividends on an annual basis. It declared per share cash
dividends of $0.20 per share in 1997, 1996, and 1995 and also in the first
quarter of 1998. The primary source of funds available to Crossroads is the
receipt of dividends from the Crossroads Bank.
SNB and Crossroads are legal entities separate and distinct from their
respective subsidiaries and their revenues depend in significant part on the
payment of dividends from their subsidiaries, which subsidiaries are subject
to certain legal restrictions on the amount of dividends they are permitted to
pay. See "Certain Regulatory Considerations--Payment of Dividends."
SHAREHOLDERS OF RECORD
As of March 27, 1998, there were approximately 540 holders of record of SNB
Common Stock, and 303 holders of record of Crossroads Common Stock.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
GENERAL
The following unaudited pro forma condensed combined financial statements
are presented assuming the Merger will be accounted for as a pooling of
interests and reflect the combination of the historical consolidated financial
statements of SNB and Crossroads. The following financial statements do not
reflect any anticipated cost savings which may be realized by SNB after
consummation of the Merger.
The pro forma information does not purport to represent what SNB's and
Crossroads' combined results of operations actually would have been for the
periods reflected therein had the Merger been accomplished during those
periods.
30
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
COMBINED WITH CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1997
The following unaudited pro forma condensed balance sheet as of December 31,
1997 has been prepared to reflect the acquisition by SNB of 100% of Crossroads
after giving effect to the adjustments described in the notes to the pro forma
condensed financial statements. The acquisition will be accounted for as a
pooling of interests. This statement should be read in conjunction with the
other financial statements and notes thereto included elsewhere in this Proxy
statement.
<TABLE>
<CAPTION>
PRO FORMA
SNB CROSSROADS ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (NOTES A AND B) COMBINED
---------- ---------- --------------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and due from banks........ $ 7,770 $ 4,504 $ 12,274
Federal funds sold............. 280 8,795 9,075
Investment securities.......... 30,986 10,248 41,234
Loans, net..................... 97,530 46,093 143,623
Premises and equipment, net.... 3,971 2,103 6,074
Other real estate.............. 276 601 877
Investment in Crossroads....... 5,910 (1) --
(5,910)(2) --
Other assets................... 2,080 1,224 3,305
-------- ------- ------- --------
Total Assets................. $142,893 $73,568 $ -- $216,462
======== ======= ======= ========
LIABILITIES
Deposits....................... $121,941 $66,920 $188,861
Notes payable and other
borrowed money................ 2,329 76 2,405
Other liabilities.............. 1,783 662 2,446
-------- ------- ------- --------
Total Liabilities............ 126,053 67,598 193,712
-------- ------- ------- --------
STOCKHOLDERS' EQUITY
Common stock................... 2,124 -- 847 (1) 2,971
Additional paid in capital..... 9,726 -- 2,021 (1) 11,747
Retained earnings.............. 4,920 -- 3,042 (1) 7,962
Net unrealized gain (loss) on
securities.................... 70 -- 70
Equity of Crossroads........... 5,910 (5,910)(2) --
-------- ------- ------- --------
Total Equity................. 16,840 5,910 -- 22,750
-------- ------- ------- --------
Total Liabilities and
Stockholders' Equity........ $142,893 73,568 $ -- $216,462
======== ======= ======= ========
</TABLE>
31
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
COMBINED WITH CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
PRO FORMA CONDENSED STATEMENT OF INCOME
DECEMBER 31, 1997
The following unaudited pro forma condensed statement of income as of
December 31, 1997 has been prepared to reflect the acquisition by SNB of 100%
of Crossroads after giving effect to the adjustments described in the notes to
the pro forma condensed financial statement. The acquisition will be accounted
for as a pooling of interests. This statement should be read in conjunction
with the other financial statements and notes thereto included elsewhere in
this Proxy statement.
<TABLE>
<CAPTION>
PRO FORMA
SNB CROSSROADS ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (NOTES A AND B) COMBINED
---------- ---------- --------------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income............... $11,560 $5,098 $16,658
Interest Expense.............. 4,941 2,404 7,345
------- ------ --- -------
Net Interest Income......... 6,619 2,694 9,313
Provision for Loan Losses..... 372 133 505
------- ------ --- -------
Net Interest Income After
Provision for Loan Losses.... 6,247 2,561 8,808
Other Income.................. 1,396 791 2,187
Other Expense................. 5,055 2,110 7,165
------- ------ --- -------
Income Before Income Taxes.. 2,588 1,242 3,830
Income Taxes.................. 785 438 1,223
------- ------ --- -------
Net Income.................. $ 1,803 $ 804 $ 2,607
======= ====== === =======
Income Per Common Share
Basic....................... $ 0.88
Diluted..................... $ 0.79
Average Common Shares
Outstanding
Basic....................... 2,952
Diluted..................... 3,309
</TABLE>
32
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
COMBINED WITH CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
PRO FORMA CONDENSED STATEMENT OF INCOME
DECEMBER 31, 1996
The following unaudited pro forma condensed statement of income as of
December 31, 1996 has been prepared to reflect the acquisition by SNB of 100%
of Crossroads after giving effect to the adjustments described in the notes to
the pro forma condensed financial statement. The acquisition will be accounted
for as a pooling of interests. This statement should be read in conjunction
with the other financial statements and notes thereto included elsewhere in
this Proxy statement.
<TABLE>
<CAPTION>
PRO FORMA
SNB CROSSROADS ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (NOTES A AND B) COMBINED
---------- ---------- --------------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income............... $10,204 $4,221 $14,425
Interest Expense.............. 4,608 2,005 6,613
------- ------ --- -------
Net Interest Income......... 5,596 2,216 7,812
Provision for Loan Losses..... 257 63 320
------- ------ --- -------
Net Interest Income After
Provision for Loan Losses.... 5,339 2,153 7,492
Other Income.................. 1,102 678 1,780
Other Expense................. 4,112 1,676 5,788
------- ------ --- -------
Income Before Income Taxes.. 2,329 1,155 3,484
Income Taxes.................. 687 404 1,091
------- ------ --- -------
Net Income.................. $ 1,642 $ 751 $ 2,393
======= ====== === =======
Income Per Common Share
Basic....................... $ 0.94
Diluted..................... $ 0.83
Average Common Shares Out-
standing
Basic....................... 2,551
Diluted..................... 2,869
</TABLE>
33
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
COMBINED WITH CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
PRO FORMA CONDENSED STATEMENT OF INCOME
DECEMBER 31, 1995
The following unaudited pro forma condensed statement of income as of
December 31, 1995 has been prepared to reflect the acquisition by SNB of 100%
of Crossroads after giving effect to the adjustments described in the notes to
the pro forma condensed financial statement. The acquisition will be accounted
for as a pooling of interests. This statement should be read in conjunction
with the other financial statements and notes thereto included elsewhere in
this Proxy statement.
<TABLE>
<CAPTION>
PRO FORMA
SNB CROSSROADS ADJUSTMENTS PRO FORMA
HISTORICAL HISTORICAL (NOTES A AND B) COMBINED
---------- ---------- --------------- ---------
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Interest Income............... $8,041 $3,806 $11,847
Interest Expense.............. 3,731 1,764 5,495
------ ------ --- -------
Net Interest Income......... 4,310 2,042 6,352
Provision for Loan Losses..... 109 110 219
------ ------ --- -------
Net Interest Income After
Provision for Loan Losses.... 4,201 1,932 6,133
Other Income.................. 871 506 1,377
Other Expense................. 3,121 1,491 4,612
------ ------ --- -------
Income Before Income Taxes.. 1,951 947 2,898
Income Taxes.................. 561 339 900
------ ------ --- -------
Net Income.................. $1,390 $ 608 $ 1,998
====== ====== === =======
Income Per Common Share
Basic....................... $ 0.85
Diluted..................... $ 0.78
Average Common Shares
Outstanding
Basic....................... 2,347
Diluted..................... 2,577
</TABLE>
34
<PAGE>
BUSINESS OF SNB
GENERAL
SNB is a Georgia corporation formed to act as a bank holding company for
Security National Bank under the federal Bank Holding Company Act of 1956, as
amended, and the bank holding company laws of Georgia. SNB was incorporated on
February 10, 1994 at the instruction of management of Security National Bank
(the "Bank"). At a special meeting of the shareholders of the Bank on August
2, 1994, the shareholders of the Bank voted in favor of a plan of
reorganization and agreement of merger pursuant to which the Bank became a
wholly owned subsidiary of SNB. The reorganization was effective on September
30, 1994, as a result of which the shares of common stock of the Bank then
issued and outstanding were converted into shares of the common stock of SNB.
The Bank has operated as a wholly owned subsidiary of SNB since that time,
although the functions and business of the Bank, its Board of Directors, staff
and physical office locations under went no changes as a result of the
reorganization. Substantially all of the business of SNB is conducted through
the Bank.
THE BANK
History
The Bank is a national bank which engages in the commercial banking business
in Bibb County, Georgia. The Bank commenced operations on November 4, 1988. As
of December 31, 1997 the Bank had assets of $140.7 million; loans of $96.8
million; deposits of $124.5 million; and equity capital of $12.2 million.
Business
The Bank offers a full range of deposit products typically offered by
commercial banks, including various checking, savings, interest-bearing
transaction accounts, certificates of deposit, and IRA accounts. The Bank's
lending services include a wide variety of commercial, consumer, SBA, mortgage
and equity line loans designed to meet customer needs. Additionally, the Bank
offers safe deposit boxes, automated teller machines, credit cards, wire
transfers, traveler's checks, money orders, night depository and other
services for the convenience of its customers. No trust services are currently
operated.
Banking Premises
The Bank commenced operations in its first location at 2918 Riverside Drive
in Macon. During 1991, the Bank acquired facilities at 700 Walnut Street in
the downtown business district and relocated its main office to that site. The
main office has since been relocated to 2918 Riverside Drive, and the Walnut
Street facility presently serves as a branch office. In 1993, the Bank opened
its third full service office, known as the Log Cabin Branch, at 4699 Log
Cabin Drive in Macon. A fourth banking office was established in 1995 at 1897
Shurling Drive to serve the northeastern segment of the local market area.
That branch was relocated to 614 Shurling Drive in 1997. A remote ATM/night
depository facility was established in 1996 on Forsyth Road in northwest
Macon. In October, 1996 the Bank converted its data processing software to a
more advanced system, and 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 main office.
In August, 1997 a fifth office was opened at 3945 Pio Nono Avenue in south
Macon, and in July, 1997 the Bank purchased land at 4519 Hartley Bridge Road
in southwest Macon, where it intends to open its sixth full service office by
the third quarter of 1998. The Bank has also established a mortgage loan
production office in Warner Robins, Houston County, Georgia.
The Bank's fixed assets represented 2.8% of total assets as of December 31,
1997. The facilities are considered modern and adequate for servicing the
needs of the existing customer base of the Bank.
35
<PAGE>
Market Area
The Bank is located and presently conducts most of its business in Bibb
County, which had an estimated population in 1996 of approximately 155,000.
The Bank opened a mortgage lending facility in 1997 in Houston County, which
had an estimated population in 1996 of 101,000. The Bank also conducts
business to a lesser extent in the surrounding counties of Jones, Monroe,
Twiggs, Crawford, Peach and Wilkinson. The loan portfolio of the Bank is
concentrated in various commercial, real estate and consumer loans to
individuals and entities located in Middle Georgia, and the ultimate
collectibility of the loans and future growth of the Bank are largely
dependent upon economic conditions in the Middle Georgia area. The Bank's
agricultural loans are negligible. The economy of the Middle Georgia area has
been generally favorable in recent years, although population growth in Bibb
County has been moderate. Robins Air Force Base, located in contiguous Houston
County, is a major Middle Georgia employer which has recently survived
national base closure mandates and has expanded in size.
Competition
The financial services industry in Macon and Bibb County is highly
competitive. As of June 30, 1997 the Bank held a 6.0% market share of Bibb
County deposits held in banks, savings and loans, and credit unions. Bibb
County is currently served by eight (8) commercial banks with 77.8% of the
deposit market, one savings bank with 18.5% of the market, fourteen (14)
credit unions with 3.7% of the market, and various finance companies. During
1995 and 1996, the acquisition of Bank South, N.A. by NationsBank, N.A.
provided an opportunity in the local marketplace for the Bank to attract
transition customers who preferred community banking services of a smaller
institution. The Bank's average deposits in 1997 increased by 16.8% over 1996,
from $102.1 million to $119.3 million. Average deposits in 1996 grew by 27.6%
over 1995 average deposits of $80 million. Growth since then has moderated,
although it remains substantial.
Employees
As of December 31, 1997, the Bank had 66 full time and 6 part time
employees. In the opinion of management, the Bank enjoys an excellent
relationship with its employees. The Bank is not a party to any collective
bargaining agreement.
36
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
Selected Balance Sheet
Data:
Total Assets............. $ 142,893 $ 134,085 $ 107,566 $ 78,156 $ 66,022
Total Loans.............. 99,071 86,422 64,586 52,443 41,183
Total Deposits........... 121,941 113,032 92,969 67,209 56,876
Investment Securities.... 30,985 32,656 34,440 18,649 19,976
Stockholders' Equity..... 16,840 14,932 8,426 7,082 6,399
Selected Income Statement
Data:
Interest Income.......... $ 11,560 $ 10,204 $ 8,041 $ 5,616 $ 4,639
Interest Expense......... 4,941 4,608 3,731 2,090 1,989
--------- --------- --------- -------- --------
Net Interest Income.... 6,619 5,596 4,311 3,526 2,650
Provision for Loan
Losses.................. 372 257 109 302 378
Other Income............. 1,396 1,102 871 1,046 840
Other Expense............ 5,055 4,112 3,121 2,782 2,334
--------- --------- --------- -------- --------
Income Before Tax........ 2,588 2,329 1,952 1,488 778
Income Tax Expense....... 785 687 561 436 205
--------- --------- --------- -------- --------
Net income before
minority interest and
cumulative effect....... 1,803 1,642 1,391 1,052 573
Minority interest........ 0 0 0 0 0
--------- --------- --------- -------- --------
Net income before
cumulative effect....... 1,803 1,642 1,391 1,052 573
Cumulative effect........ 0 0 0 0 53
--------- --------- --------- -------- --------
Net Income............. $ 1,803 $ 1,642 $ 1,391 $ 1,052 $ 626
========= ========= ========= ======== ========
Per Share Data: (a)
Net Income (Diluted)..... $ 0.73 $ 0.81 $ 0.80 $ 0.65 $ 0.39
Book Value............... 7.93 7.22 5.62 4.72 4.27
Tangible Book Value...... 7.93 7.22 5.62 4.72 4.27
Dividends................ 0.19 0.18 0.16 0.13 0.07
Profitability Ratios:
Net Income to Average
Assets.................. 1.32% 1.40% 1.51% 1.50% 1.03%
Net Income to Average
Stockholders' Equity.... 11.41% 14.93% 18.16% 15.53% 10.12%
Net Interest Margin...... 5.28% 5.08% 4.97% 5.39% 4.67%
Loan Quality Ratios:
Net Charge-Offs to Total
Loans................... 0.36% 0.00% 0.00% 0.05% 1.21%
Reserve for Loan Losses
to Total Loans and
OREO.................... 1.40% 1.59% 1.74% 1.94% 1.79%
Nonperforming Assets to
Total Loans and OREO.... 1.10% 1.54% 0.76% 0.96% 0.96%
Reserve for Loan Losses
to Nonperforming
Loans................... 171.59% 137.20% 848.12% 320.75% 149.20%
Reserve for Loan Losses
to Total Nonperforming
Assets.................. 128.10% 103.83% 227.42% 201.98% 186.22%
Liquidity Ratios:
Loans to Total
Deposits................ 81.25% 76.46% 69.47% 78.03% 72.41%
Loans to Average Earning
Assets.................. 79.08% 78.47% 74.51% 80.16% 72.54%
Noninterest-Bearing
Deposits to Total
Deposits................ 20.06% 18.53% 15.32% 19.47% 16.18%
Capital Adequacy Ratios:
Common Stockholders'
Equity to Total
Assets.................. 11.79% 11.14% 7.83% 9.06% 9.69%
Total Stockholders'
Equity to Total
Assets.................. 11.79% 11.14% 7.83% 9.06% 9.69%
Dividend Payout Ratio.... 22.71% 19.09% 17.26% 19.01% 15.97%
</TABLE>
- --------
(a) Per share data for all periods has been retroactively restated for a 20%
stock split on March 20, 1995, a 100% stock split on June 1, 1996, and a
25% stock split on September 25, 1997. All stock splits were effected in
the form of dividends.
37
<PAGE>
MANAGEMENT OF SNB
The following tables set forth certain information as of March 27, 1998, to
the best of management's knowledge, of each of the eight nominees for election
as directors of SNB (each of whom has served as a director of SNB since
January 1, 1997 and each of whom, if elected, will serve as a director of SNB
after the Merger with Crossroads, if consummated) as well as the other persons
who have served as directors of SNB since January 1, 1997, including his name,
director classification with respect to director nominees, age, positions
held, length of service as a director of SNB (or of the Bank prior to SNB's
formation) and the number of shares of SNB's Common Stock beneficially owned.
Unless otherwise noted, each person listed in the table has sole voting and
sole investment power with respect to the shares listed in the table.
DIRECTOR NOMINEES:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
YEAR NUMBER OF SHARES &
DIRECTOR FIRST PERCENT OF CLASS (2)
CLASSI- POSITION(S) ELECTED -----------------------
NAME & ADDRESS FICATION(1) AGE HELD DIRECTOR (3) (4)
-------------- ----------- --- ---------------------------- -------- ---------- ----------
<C> <S> <C> <C> <C> <C> <C>
Alford C. Bridges.......... I 59 Director, 1988 61,200 61,200
Macon, Georgia SNB & Security (2.66%) (2.43%)
National Bank
Richard W. White, Jr. ..... I 44 Director, 1988 39,150 39,150(5)
Macon, Georgia SNB & Security (1.70%) (1.55%)
National Bank
Robert C. Ham.............. II 68 Chairman of 1988 79,625 79,625
Macon, Georgia Board of Directors, (3.47%) (3.16%)
SNB & Security
National Bank
Robert T. Mullis........... II 55 Director, 1988 164,355 164,355(6)
Macon, Georgia SNB & Security (7.15%) (6.52%)
National Bank
Joe E. Timberlake, III..... II 57 Director, 1988 103,951 103,951(7)
Macon, Georgia SNB & Security (4.52%) (4.13%)
National Bank
Benjamin W. Griffith, III.. III 45 Director, 1988 72,215 94,715(8)
Macon, Georgia SNB & Security (3.14%) (3.76%)
National Bank
Ben G. Porter.............. III 64 Director, 1996 69,750 69,750
Macon, Georgia SNB & Security National Bank (3.04%) (2.77%)
H. Averett Walker.......... III 44 Director, 1996 28,710 40,310(9)
Macon, Georgia President & CEO, SNB & (1.25%) (1.60%)
Security National Bank
</TABLE>
38
<PAGE>
OTHER CURRENT DIRECTORS OF SNB.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
YEAR NUMBER OF SHARES &
FIRST PERCENT OF CLASS (2)
POSITION(S) ELECTED -----------------------
NAME & ADDRESS AGE HELD DIRECTOR (3) (4)
-------------- --- ---------------------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Robert C. Allen......... 72 Director & Vice Chm, 1988 60,000 60,000
Macon, Georgia SNB & Security National Bank (2.61%) (2.38%)
William P. Brooks, 54 Director, SNB & 1988 48,300 73,800(10)
M.D. ..................
Macon, Georgia Security National Bank (2.10%) (2.93%)
Lee R. Greene, Jr. ..... 77 Director, SNB & 1988 39,600 39,600
Macon, Georgia Security National Bank (1.72%) (1.57%)
James W. Kinman......... 68 Director, SNB & 1996 13,965 13,965
Macon, Georgia Security National Bank (0.61%) (0.55%)
Sydney J. Pyles......... 69 Director, SNB & 1988 36,000 66,000(11)
Macon, Georgia Security National Bank (1.57%) (2.62%)
John F. Rogers, Jr. .... 68 Director, SNB & 1996 35,823 35,823(12)
Macon, Georgia Security National Bank (1.56%) (1.42%)
Charles W. Selby, Sr. .. 69 Director, SNB & 1988 36,750 60,750(13)
Macon, Georgia Security National Bank (1.60%) (2.41%)
Frank M. Shepherd, 57 Director, SNB & 1988 56,782 83,482(14)
Jr. ...................
Irwinton, Georgia Security National Bank (2.47%) (3.31%)
Chris R. Sheridan, 48 Director, SNB & 1996 30,900 30,900(15)
Jr. ...................
Macon, Georgia Security National Bank (1.35%) (1.23%)
Frank G. Wall, Jr. ..... 64 Director, SNB & Security 1988 31,500 57,750(16)
McIntyre, Georgia National Bank (1.37%) (2.29%)
All directors and execu-
tive 1,021,007 1,217,557
officers as a group (23 (44.44%) (48.34%)
persons)
</TABLE>
- --------
(1) Terms of Class I directors expire in 1999; those of Class II directors in
2000; and those of Class III directors in 2001.
(2) Beneficial ownership is determined in accordance with Item 403 of
Regulation S-B of the Securities and Exchange Commission, and includes all
shares which the listed individual has the right to acquire within sixty
(60) days pursuant to options or warrants. SNB has relied upon information
contained in statements filed with the Securities and Exchange Commission
under Section 13(d) or 13(g) of the Exchange Act concerning beneficial
ownership.
(3) For percentage of class calculations in Column (3), percentage of
beneficial ownership is determined based on the 2,297,331 shares of SNB
Common Stock issued and outstanding at March 27, 1998.
(4) For percentage of class calculations included in Column (4), the issuance
of all outstanding warrants of SNB Common Stock are treated as if issued
and outstanding. In connection with its original stock offering, the Bank
issued warrants to purchase common stock to its organizers, interim
directors and initial executive officers (the "Founders Warrants"). Each
warrant originally entitled the owner to purchase one share of the Bank
stock at the exercise price of $10 per share until the warrant expires. By
virtue of the formation of SNB in 1994, the Founders Warrants were
transformed into entitlements to purchase equal amounts of SNB stock. All
Founders Warrants issued expire in November, 1998. Due to subsequent stock
splits and the exercise of warrants since 1996, there were as of March 27,
1998 warrants to purchase 196,550 shares of SNB Common Stock which could
be purchased pursuant to warrants granted, outstanding and eligible to be
exercised at an adjusted price of $3.33 per share.
39
<PAGE>
At the 1996 Annual Meeting of Shareholders, the SNB Bancshares, Inc. 1996
Incentive Stock Option Plan was approved by a majority vote of the
shareholders. Under this option plan, up to 81,250 shares, after adjustment
for stock splits, were made available for grants to officers and key
individuals of the Bank by the Board of Directors. All authorized shares
were granted under the plan, but certain persons to whom the options had
been granted left the employment of the Bank and as a result options to
purchase 18,750 shares expired under the plan. As of March 27, 1998, none of
the options had been exercised and options to purchase 62,500 shares were
outstanding. Of the 62,500 option shares outstanding, 56,250 option shares
are held by executive officers of SNB and 6,250 option shares are held by a
non-executive officer of the Bank. Options to purchase 25,000 shares are
exercisable within 60 days of March 27, 1998 and are included as if
exercised for the percentage calculations in Column (4) above.
(5) Includes 15,750 shares held jointly with Mr. White's wife.
(6) Includes 132,747 shares held directly by Mr. Mullis; 9,040 shares held by
a broker as custodian for Mr. Mullis; 6,086 shares held jointly with
Michael C. Griffin; and 16,482 shares for which Mr. Mullis holds a power
of attorney. Mr. Mullis disclaims beneficial ownership for the shares held
jointly with Mr. Griffin and the shares for which he holds a power of
attorney.
(7) Includes 11,050 shares held by Mr. Timberlake as trustee for revocable
family trusts; 6,701 shares held by a broker as custodian for Mr.
Timberlake, and 400 shares held in a brokerage account in the name of
Mr. Timberlake as trustee for a revocable family trust.
(8) Includes 22,500 unexercised Founders Warrants.
(9) Includes 4,660 shares held in Mr. Walker's IRA account, 4,100 shares which
may be purchased pursuant to acquired unexercised Founders Warrants, and
7,500 shares which may be purchased within 60 days from March 27, 1998
pursuant to the Incentive Stock Option Plan.
(10) Includes 25,500 unexercised Founders Warrants; 18,000 shares held by a
broker for Dr. Brooks' IRA account; and 30,300 shares held by a broker
for Dr. Brooks and his minor children.
(11) Includes 30,000 unexercised Founders Warrants; and 27,000 shares held by
a broker for Mr. Pyles' account in the Sydney J. Pyles Plumbing and
Heating Company Profit Sharing Plan.
(12) Includes 18,273 shares held by a broker for Mr. Rogers' IRA account.
(13) Includes 24,000 unexercised Founders Warrants; 3,825 shares held by Mr.
Selby's wife, Evelyn B. Selby; and 4,125 shares held by Evelyn B. Selby
as custodian for children.
(14) Includes 26,700 unexercised Founders Warrants; 26,700 shares held jointly
with his wife; 13,590 shares held by Shepherd Brothers Timber Company,
Inc., 2,777 shares held by the Shepherd Brothers Profit Sharing Plan, and
875 shares jointly owned by Frank & Jeffery Shepherd.
(15) Includes 3,000 shares held by Chris R. Sheridan & Co. and 2,325 shares
held by Mr. Sheridan's children.
(16) Includes 26,250 unexercised Founders Warrants.
SNB has committed that in the event the proposed acquisition of Crossroads
is approved by shareholders of Crossroads and SNB and is subsequently
consummated it will nominate and recommend for election to the Board of
Directors of SNB four of Crossroads' existing directors. Those four directors
have not been identified, but will be selected from among those directors for
whom information is furnished hereinafter. See "Management and Security
Ownership of Crossroads."
40
<PAGE>
EXECUTIVE OFFICERS.
The following table sets forth the name, age and positions with SNB and of
the Bank of each executive officer of SNB as of March 27, 1998, and the number
of shares of SNB Common Stock beneficially owned. All executive officers of
SNB serve at the pleasure of the Board of Directors.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NUMBER OF SHARES &
PERCENT OF CLASS (1)
POSITION(S) -----------------------
NAME & ADDRESS AGE HELD (2) (3)
-------------- --- -------------------------------------- ---------- ----------
<S> <C> <C> <C> <C>
Robert C. Ham........... 68 Chairman of Board of Directors, 79,625 79,625(4)
Macon, Georgia SNB & Security National Bank (3.47%) (3.16%)
H. Averett Walker....... 44 Director, President & CEO, 28,710 40,310(5)
Macon, Georgia SNB & Security National Bank (1.25%) (1.60%)
Richard A. 48 Executive Vice President, 3,000 8,000(6)
Collinsworth...........
Macon, Georgia SNB & Security National Bank (0.13%) (0.32%)
Shirley D. Jackson...... 60 Senior Vice President & 1,500 21,500(7)
Macon, Georgia Secretary, SNB; Senior Vice President, (0.07%) (0.85%)
Security National Bank
Michael T. O'Dillon..... 43 Senior Vice President, 5,400 10,400(8)
Macon, Georgia Treasurer & CFO, SNB; (0.24%) (0.41%)
Senior Vice President & Cashier,
Security National Bank
R. Chris Smith.......... 48 Vice President of Security 2,500 2,500
Macon, Georgia National Bank (0.11%) (0.10%)
Betsy J. Baugham........ 48 Assistant Vice President of 31 31
Macon, Georgia Security National Bank ( 0.00%) (0.00%)
</TABLE>
- --------
(1) See note (2) in the subsection above relating to beneficial ownership of
director nominees and other current directors of SNB.
(2) See note (3) in the subsection above relating to beneficial ownership of
director nominees and other current directors of SNB.
(3) See note (4) in the subsection above relating to beneficial ownership of
director nominees and other current directors of SNB.
(4) Mr. Ham's shares are included in the total number of shares beneficially
owned by the eighteen (18) directors listed above.
(5) Includes 4,660 shares held in Mr. Walker's IRA account. Mr. Walker's
shares are included in the total number of shares beneficially owned by
the eighteen (18) directors listed above. Includes 4,100 shares which may
be purchased pursuant to acquired unexercised Founders Warrants and 7,500
shares which may be purchased within 60 days from March 27, 1998 pursuant
to the Incentive Stock Option Plan.
(6) Included 5,000 shares which Mr. Collinsworth has a right to purchase
within 60 days from March 27, 1998 pursuant to the Incentive Stock Option
Plan.
(7) Includes 15,000 unexercised Founders Warrants and 5,000 shares which may
be purchased within 60 days from March 27, 1998 pursuant to the Incentive
Stock Option Plan.
(8) Includes 5,000 shares which may be purchased within 60 days from March 27,
1998 pursuant to the Incentive Stock Option Plan.
41
<PAGE>
BIOGRAPHIES OF DIRECTOR NOMINEES, DIRECTORS AND EXECUTIVE OFFICERS OF SNB.
The following information is set forth with respect to the eight nominees
for election as directors of SNB and for the other persons who currently serve
on the Board of Directors of SNB. There are no family relationships among any
directors and executive officers of SNB. There are no nominees who are members
of any other Board of Directors of any company with a class of securities
registered with the Securities and Exchange Commission pursuant to Section 12
of the Securities and Exchange Act of 1934, as amended, or any company which
is subject to the requirements of Section 15(d) of that Act, or any company
registered with the Securities and Exchange Commission as an investment
company under the Investment Company Act of 1940, as amended.
During the previous five years, no director or executive officer was the
subject of a legal proceeding (as defined below) that is material to an
evaluation of the ability or integrity of any director or executive officer. A
"legal proceeding" includes: (a) any bankruptcy petition filed by or against
any business of which such person was a general partner or executive prior to
that time; (b) any conviction in a criminal proceeding or subject to a pending
criminal proceeding (excluding traffic violations and other minor offenses);
(c) any order, judgment, or decree of any court of competent jurisdiction,
permanently or temporarily enjoining, barring, suspending or otherwise
limiting his involvement in any type of business, securities or banking
activities; and (d) any finding by a court of competent jurisdiction (in a
civil action), the Securities and Exchange Commission or the Commodity Futures
Trading Commission of a violation of a federal or state securities or
commodities law (such finding having not been reversed, suspended or vacated).
ROBERT C. ALLEN was employed with Security Life Insurance Company of Georgia
where he served as Vice President of Administration and as a member of the
company's Board of Directors from 1954 to 1985. Since his retirement in 1985,
he has been active in handling his personal investments and real estate
holdings.
BETSY J. BAUGHAM has served as Human Resources and Training Officer since
September 30, 1996. Ms. Baugham has 30 years of business experience, including
10 years employment by Charter Medical in the Human Resources and Information
Services departments, five years in an administrative/human resources capacity
at Bibb Distributing Company, and six years banking experience at Exchange
National Bank's operations division in Tampa, Florida.
ALFORD C. BRIDGES is President and Chief Executive Officer of Whiteway
Development Corporation d/b/a Appling Brothers, a Macon--Middle Georgia
grading, paving and construction company which he acquired in 1976. Mr.
Bridges has also served since 1969 as President of Gateway Development Center,
Inc., a real estate holding company. Mr. Bridges has additional interests in
various closely-held businesses in the Middle Georgia area involving
contracting, apartment complexes and real estate investments.
WILLIAM P. BROOKS, M.D. has been a practicing physician since 1968. Dr.
Brooks owns and operates South Macon Family Physicians Clinic, where he serves
as President. He is active in local medical affairs, having served on the
Board of Bibb County Medical Society for the past fifteen years. He
participates in state medical activities, serving on the Board of Directors of
The Medical Association of Georgia. Dr. Brooks also serves on the Georgia
Partners for Health Care Board, a managed care LLC. He is an active investor
in stocks, bonds and real estate. His main real estate interest is rental
property and apartment complexes.
RICHARD A. COLLINSWORTH has served as Executive Vice President of SNB and
the Bank since January, 1996. Prior to joining the company, he was City
Commercial Banking Manager for Bank South in Macon in 1995. He has an
extensive twenty-six year banking background which includes NationsBank in
North Carolina and Texas and Henderson National Bank in Hunstville, Alabama.
He has held leadership positions in commercial bank lending and support
functions, internal reorganizations, marketing, product development, pricing
and management.
LEE R. GREENE, JR. is the former owner of Greene Plumbing & Heating Company,
a large Macon based mechanical contracting company, which he founded in 1946.
Since his retirement in 1983, Mr. Greene has been
42
<PAGE>
active in managing personal investments and real estate holdings. He is now
serving as Vice President and part owner of Greene & Associates, Inc.
(mechanical contractors). Mr. Greene is also a principal in Ashburn
Developers, Inc.
BENJAMIN W. GRIFFITH, III is President and owner of Southern Pine
Plantations, Inc., a Macon based real estate development and timberland
company which he founded in 1983. Mr. Griffith also holds ownership interests
in various timber, mining and real estate investments; Forestry Consultants of
GA, Inc.; Southern Timberlands, Inc.; Georgia Mine & Minerals, Inc.; Southern
Pine Plantations of Georgia, Inc.; Southern Pine Plantations of Florida, Inc.;
and Georgia Industrial Minerals.
ROBERT C. HAM has a fifty year background in banking, thirty-five of which
has been in Macon, Georgia. Mr. Ham was employed by Central Bank of Georgia,
now First Union National Bank of Georgia, where he served as President and
Chief Executive Officer from 1973 to 1987. Mr. Ham was President and CEO of
the Bank from 1988 through 1996, having organized a group to form the Bank in
1988. Mr. Ham currently serves as Chairman of the Board of Directors of SNB
and the Bank.
SHIRLEY D. JACKSON has a thirty-five year background in banking in Macon,
Georgia. Mrs. Jackson was one of three founding executive officers of the
Bank, and currently serves as Senior Vice President and Secretary of SNB, and
Senior Vice President and Secretary of the Board of Directors of the Bank. She
was employed by Central Bank of Georgia, now First Union National Bank of
Georgia, from 1973 to 1987, where she served as Vice President with functional
responsibilities of commercial and consumer lending.
JAMES W. KINMAN is Chairman of the Board and owner of Lowe Electric Company,
a commercial and residential electric and plumbing supplies company in Macon,
Georgia which he joined in 1961. Mr. Kinman was a former director of Bank
South in Macon before joining the SNB board in January, 1996.
ROBERT T. MULLIS is involved in solid waste and real estate interests and
holds an ownership interest in Diamond Waste, Inc.; RTM Industries, Inc.; and
Melrose Holdings, Inc.
MICHAEL T. O'DILLON was one of three founding executive officers of the
Bank, and currently serves as Senior Vice President, Treasurer and Chief
Financial Officer of SNB, and Senior Vice President, Cashier and Corporate
Secretary of the Bank. He was employed by Central Bank of Georgia, now First
Union National Bank of Georgia, from 1977 to 1987, where he served as Vice
President and Corporate Secretary in charge of operations and financial
reporting.
BEN G. PORTER owns RMS Warehouse Properties and Snelling Personal Services.
He retired from Charter Medical Corporation in 1988, where he served as Senior
Vice President and President of Charter Medical International. He continues to
serve as a consultant to Charter Medical. Mr. Porter was the former owner of
Piedmont Communications Corporation, an operator of three radio stations.
Prior to becoming a board member of SNB and the Bank in January, 1996 Mr.
Porter served as a Director and as a member of the Executive Committee of Bank
South Corporation in Atlanta.
SYDNEY J. PYLES has recently retired from Sydney Pyles Plumbing & Heating
Company, Inc., a mechanical contracting company where he served as President
since 1964.
JOHN F. ROGERS, JR. founded Rogers Oil Company in 1960 and diversified the
company to include retail gasoline stations, wholesale gasoline sales,
convenience stores, car washes, and apartment complexes. He sold the company
in 1982 and now maintains private investments. Prior to becoming a board
member of SNB and the Bank in January, 1996, he served as a board member of
Bank South in Macon.
CHARLES W. SELBY, a retired Macon businessman, is the Chairman of the Board
and former President of Warren Associates, Inc., a Macon based general
contracting company which he founded in 1972.
43
<PAGE>
FRANK M. SHEPHERD has been President and co-owner since 1963 of Shepherd
Brothers Timber Company, Inc., a company involved in ownership, harvesting and
marketing of timber in the southeast.
CHRIS R. SHERIDAN, JR. is Vice President of Chris R. Sheridan & Co., a firm
of building contractors in Macon, Georgia, and a software developer with
Timberline Software Corporation. Mr. Sheridan is a Georgia Registered Civil
Engineer and a member of the Georgia Society of Professional Engineers. Before
joining the Board of SNB and the Bank in January, 1996, he served as Chairman
of the Bank South, Macon Board of Directors.
R. CHRIS SMITH has served as Vice President of Operations of the Bank since
July, 1996. Mr. Smith has 30 years of banking experience in all phases of bank
operations. He began his banking career with the Georgia Bank & Trust Company
in 1968. The Georgia Bank & Trust Company was subsequently acquired by Bank
South, Macon, and Mr. Smith served as Vice President of Operations for 12
years. Upon the merger of Bank South, Macon with Bank South, N.A. Mr. Smith
served as Regional Vice President of Operations (Macon).
JOE E. TIMBERLAKE, III currently serves as Director to Thomas & Howard
Company, as Director and Treasurer of Flintlake, Inc., and as a managing
partner in Timberlands Partnership. Mr. Timberlake was President of Timberlake
Grocery Company of Macon, a wholesale grocery company, from 1976 through 1992.
Mr. Timberlake sold the company in 1992, and now maintains private
investments.
H. AVERETT WALKER served as President and Chief Operating Officer of SNB and
the Bank from January, 1996 through December, 1996. He now serves as President
and Chief Executive Officer. His extensive banking career includes over two
years with Bank South as Middle Georgia Regional President in Macon, and ten
years with NationsBank including positions as Regional President in
Albany/Moultrie and President in LaGrange. His banking experience began with
seven years at Commercial Bank of Thomasville with various lending and
collections responsibilities.
FRANK G. WALL, JR. has been President since 1974 of Springhill Services,
Inc., a warehousing, trucking and equipment rental company based in McIntyre,
Georgia. Mr. Wall also holds ownership interests in SanTel Contractors, Inc.
and Wilco Air, Inc.
RICHARD W. WHITE, JR. has been President and part owner of White Brothers
Warehouse, Inc., a wholesale distributor of auto parts, since 1985, and an
officer since 1976.
COMMITTEES OF THE BOARD OF DIRECTORS AND ATTENDANCE
SNB does not have any standing audit, nominating or compensation committee
or any committee performing similar functions. However, the same persons who
currently serve as directors of SNB also comprise the Board of Directors of
the Bank, the wholly owned subsidiary of SNB. The Bank has established and
maintains various committees to assist it in the discharge of its duties.
Audit Committee. The Audit and Examination Committee is responsible for
overseeing all audit functions, development and implementation of a written
audit policy, review of federal and state examinations, evaluation of internal
controls and overseeing compliance with all audits and examinations required
by law. The members of the Audit and Examination Committee are Charles W.
Selby, Sr. (Chairman), Sydney J. Pyles, Frank M. Shepherd, Jr., James W.
Kinman, Richard W. White, Jr., Lee R. Greene, Jr., H. Averett Walker, and
Robert C. Ham. The Audit and Examination Committee held two (2) meetings
during 1997.
Personnel Committee. The Personnel Committee establishes compensation for
the executive officers and management of the Bank, reviews the selection and
hiring of key officers, oversees the administration of employee benefit
programs and sets guidelines for compensation for all employees. The members
of the Personnel Committee are Robert C. Allen (Chairman), Benjamin W.
Griffith, III, James W. Kinman, Robert T. Mullis, Frank G. Wall, Jr., H.
Averett Walker and Robert C. Ham. The Personnel Committee held four (4)
meetings during 1997.
44
<PAGE>
Executive Committee. The Executive Committee possesses and may exercise any
and all powers of the full Board of Directors of the Bank in the management
and direction of the business affairs of the Bank during the intervals between
the meetings of the Bank's full Board of Directors. The Executive Committee of
the Bank consists of Robert C. Ham (Chairman), Ben G. Porter, Robert C. Allen,
H. Averett Walker, Joe E. Timberlake, III, Alford C. Bridges, and Chris R.
Sheridan, Jr. The Executive Committee met seven (7) times during 1997.
Security National Bank also maintains committees to assist it in its
investment, marketing and lending functions, as well as an electronic data
processing steering committee and a building committee.
The Board of Directors of SNB held eleven (11) meetings in 1997. No director
failed to attend at least 75% of the aggregate of (a) the regular and called
full board meetings of SNB and the Bank, and (b) applicable committee meetings
of the Bank which they were eligible to attend, except for Benjamin W.
Griffith, III (66%), Sydney J. Pyles (59%), John F. Rogers, Jr. (73%), and
Frank M. Shepherd, Jr. (56%).
45
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SNB's directors and executive officers, their immediate family members and
certain companies and other entities associated with them, have been customers
of and have had banking transactions with the Bank and are expected to
continue such relationships in the future. As of February 28, 1998 the
aggregate outstanding balance of all such loans was $3,182,795, or 25.99% of
the shareholders' equity of the Bank. In the opinion of SNB's management, the
extensions of credit made by the Bank to such individuals, companies and
entities since January 1, 1997 (i) were made in the ordinary course of
business, (ii) 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 (iii) did not involve more than a normal
risk of collectibility or present other unfavorable features.
In 1998 the Bank contracted with Chris R. Sheridan & Co., of which director
Chris R. Sheridan, Jr. is a principal, for the construction of the facilities
to be located at its Hartley Bridge Road location. It is anticipated that the
total compensation to be paid to Chris R. Sheridan & Co. will approximate
$583,641. Chris R. Sheridan & Co. has subcontracted a portion of that work to
Whiteway Development Corporation, of which director Alford C. Bridges is a
principal, and it is anticipated that Whiteway Development Corporation will be
paid approximately $97,000 pursuant to that subcontract. The contract with
Chris R. Sheridan & Co. was reviewed by the architectural firm employed by the
Bank to confirm the reasonableness of the price.
Chris R. Sheridan & Co. also renovated the Bank's Pio Nono branch building
in 1997 and was paid $65,762 by the Bank for that work.
Warren Associates, Inc., of which director Charles W. Selby, Sr. is a
principal, was hired by the Bank to renovate the Bank's main offices on
Riverside Drive in 1997. Warren Associates, Inc. was paid $134,677 by the Bank
for that work.
Otherwise, there have been no transactions during the preceding two years,
or proposed transactions, to which the Bank or SNB was or is to be a party in
which any director, executive officer, or nominee, or any member of their
immediate family, was a party.
46
<PAGE>
SECURITY OWNERSHIP OF SNB
The following table shows all persons known to SNB to be the beneficial
owner of more than five (5) percent (5%) of SNB's voting securities as of
March 27, 1998.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NUMBER OF SHARES &
PERCENT OF CLASS (2)
NAME AND ADDRESS ---------------------
OF BENEFICIAL OWNER (2) (3)
- ------------------- ---------- ----------
<S> <C> <C>
Robert T. Mullis 164,355 164,355(4)
Macon, Georgia....................................... 7.15% 6.52%
All directors and executive officers of SNB as a group 1,021,007 1,217,557
(23 persons)......................................... 44.44% 48.34%
</TABLE>
- --------
(1) Beneficial ownership is determined in accordance with Item 403 of
Regulation S-B of the Securities and Exchange Commission, and includes all
shares which the listed individual has the right to acquire within sixty
(60) days pursuant to options or warrants. SNB has relied upon information
contained in statements filed with the Securities and Exchange Commission
under Section 13(d) or 13(g) of the Exchange Act concerning beneficial
ownership.
(2) For percentage of class calculations in column (2), percentage of
beneficial ownership is determined based on the 2,297,331 shares of SNB
Common Stock issued and outstanding at March 27, 1998.
(3) For percentage of class calculations included in Column (3), the issuance
of all outstanding warrants of SNB Common Stock are treated as if issued
and outstanding. In connection with its original stock offering, the Bank
issued warrants to purchase common stock to its organizers, interim
directors and initial executive officers (the "Founders Warrants"). Each
warrant originally entitled the owner to purchase one share of the Bank
stock at the exercise price of $10 per share until the warrant expires. By
virtue of the formation of SNB in 1994, the Founders Warrants were
transformed into entitlements to purchase equal amounts of SNB stock. All
Founders Warrants issued expire in November, 1998. Due to subsequent stock
splits and the exercise of warrants since 1996, there were as of March 27,
1998 warrants to purchase 196,550 shares of SNB Common Stock which could
be purchased pursuant to warrants granted, outstanding and eligible to be
exercised at an adjusted price of $3.33 per share. At the 1996 Annual
Meeting of Shareholders, the SNB Bancshares, Inc. 1996 Incentive Stock
Option Plan was approved by a majority vote of the shareholders. Under this
option plan, up to 81,250 shares, after adjustment for stock splits, were
made available for grants to officers and key individuals of the Bank by the
Board of Directors. All authorized shares were granted under the plan, but
certain persons to whom the options had been granted left the employment of
the Bank and as a result options to purchase 18,750 shares expired under the
plan. As of March 27, 1998, none of the options had been exercised and
options to purchase 62,500 shares were outstanding. Of the 62,500 option
shares outstanding, 56,250 option shares are held by executive officers of
SNB and 6,250 option shares are held by a non-executive officer of the Bank.
Options to purchase 25,000 shares are exercisable within 60 days of March
27, 1998 and are included as if exercised for the percentage calculations in
Column (3) above.
(4) Includes 132,747 shares held directly by Mr. Mullis; 9,040 shares held by
a broker as custodian for Mr. Mullis; 6,086 shares held jointly with
Michael C. Griffin; and 16,482 shares for which Mr. Mullis holds a power
of attorney. Mr. Mullis disclaims beneficial ownership for the shares held
jointly with Mr. Griffin and the shares for which he holds a power of
attorney.
Additional information about Mr. Mullis, who is a director of SNB, is set
forth in "Management of SNB".
47
<PAGE>
EXECUTIVE COMPENSATION FOR SNB
SUMMARY COMPENSATION TABLE
The following table summarizes the cash and noncash compensation for each of
the last three fiscal years for H. Averett Walker, Director, President and CEO
of SNB and Security National Bank, and Robert C. Ham, Chairman of the Board of
SNB and Security National Bank. With the exception of stock options, all forms
of compensation are derived from Security National Bank, SNB furnishes no cash
compensation. There are no other executive officers of SNB or Security
National Bank whose salary and bonus for the 1997 fiscal year, plus the value
of any salary or bonus foregone, exceeded $100,000.00.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
---------------------------- ---------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING
COMPEN- STOCK OPTIONS/ ALL OTHER
NAME & PRINCIPAL POSITION SALARY(1) BONUS(2) SATION(3) AWARD(S) SARS(4) COMPENSATION(5)
- ------------------------- YEAR --------- -------- --------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
H. Averett Walker....... 1997 $129,799 $15,767 $ 0 $ 0 0 $11,721
Director, President & 1996 117,376 23,405 0 0 18,750 3,300
CEO, SNB & Security 1995 0 0 0 0 0 0
National Bank(6)
Robert C. Ham........... 1997 81,970 0 0 0 0 12,252
Chairman of Board 1996 133,898 24,341 0 0 0 20,017
of Directors, SNB & 1995 106,959 18,922 0 0 0 14,141
Security National
Bank(7)
</TABLE>
- --------
(1) Includes amounts deferred at the election of the individuals into the
Bank's 401(K) Savings Incentive and Profit Sharing Plan as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Walker................................................ $9,450 $ 0 $ 0
Ham................................................... 9,500 9,500 9,730
</TABLE>
(2) Includes accrued amounts earned from the Bank's Annual Cash Incentive
Bonus Plan, shown above in the year accrued. Bonuses are distributed in
January of the subsequent calendar year.
(3) Perquisites and other personal benefits are excluded because the aggregate
amount does not exceed the lesser of $50,000 or 10% of annual salary and
bonus for the named executives.
(4) Number of option shares, as adjusted for subsequent stock splits, granted
to Mr. Walker in May, 1996 from the SNB 1996 Incentive Stock Option Plan.
(5) Includes cash fees paid to the individuals in their capacities as
directors of Security National Bank. SNB pays no director fees. Director
fees of $3,600 and $3,300 were paid to Mr. Walker in 1997 and 1996,
respectively. Director fees of $3,600, $3,600 and $3,000 were paid to Mr.
Ham in 1997, 1996 and 1995, respectively. Includes the Bank's
discretionary and matching contributions to Mr. Walker's 401(K) Savings
Incentive and Profit Sharing Plan in the amount of $8,121 for the year
1997. Includes the Bank's discretionary and matching contributions to Mr.
Ham's 401(K) Savings Incentive and Profit Sharing Plan in the amounts of
$8,652, $16,417 and $11,141 for the years 1997, 1996 and 1995,
respectively.
(6) Mr. Walker was elected to his positions with SNB and Security National
Bank in January, 1996. During the year 1996, Mr. Walker served as
Director, President and Chief Operating Officer of SNB and the Bank.
(7) During the year 1996, Mr. Ham also served as CEO of SNB and the Bank.
Prior to January, 1996, Mr. Ham served as President and CEO of SNB and the
Bank.
48
<PAGE>
STOCK OPTION GRANT AND EXERCISE TABLES
There were no grants made during the last fiscal year for stock options or
stock appreciation rights to any executive officer of SNB or the Bank. During
1997 there were no exercises of grants previously made to any executive
officer of SNB or the Bank.
H. Averett Walker currently holds options for 18,750 shares of SNB Common
Stock at an exercise price of $9.00 per share, as adjusted for stock splits,
which were granted on May 2, 1996 at fair market value from the SNB
Bancshares, Inc. 1996 Incentive Stock Option Plan. Options become exercisable
in accordance with the following vesting schedule: 20% on May 2, 1997; 20% on
May 2, 1998; 20% on May 2, 1999; 20% on May 2, 2000; and 20% on May 2, 2001.
As of December 31, 1997 20% of Mr. Walker's options were vested and
exercisable.
The following table provides certain information regarding the number and
value of unexercised options at the end of the last fiscal year.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF SECURITIES IN-THE-MONEY
ACQUIRED UNDERLYING UNEXERCISED OPTIONS/SARS AT
ON VALUE OPTIONS/SARS FY-END($)(1)
EXERCISE REALIZED AT FY-END(#) EXERCISABLE/
NAME (#) ($)(1) EXERCISABLE/UNEXERCISABLE UNEXERCISABLE
- ---- -------- -------- ------------------------- --------------------
<S> <C> <C> <C> <C>
H. Averett Walker....... 0 $ 0 3,750/15,000 $33,750/$135,000
Robert C. Ham........... 0 0 -0-/-0- -0-/-0-
</TABLE>
- --------
(1) Market value of underlying securities at exercise or year-end, valued at
$18.00 per share, minus the exercise of base price.
49
<PAGE>
EMPLOYMENT CONTRACT AND CHANGE IN CONTROL ARRANGEMENT
On January 10, 1996, SNB and the Bank entered into a letter agreement with
H. Averett Walker ("Walker"), employing Walker as President and Chief
Operating Officer of SNB and the Bank for an initial base salary of
$125,000.00 during 1996. The term of the agreement continues from and after
the date commenced until terminated in accordance with the letter agreement.
The base salary to be paid to Walker in future years is to be determined
annually by the Personnel Committee of Bank's Board of Directors. The
agreement calls for Walker's participation in the officers' annual cash
incentive bonus plan and various other fringe benefits.
On May 2, 1996, after approval of the SNB Bancshares, Inc., 1996 Incentive
Stock Option Plan by shareholders at the 1996 Annual Meeting, Walker was
granted incentive stock options to purchase up to 18,750 shares of SNB's
Common Stock at a fair market value of $9.00 (both the number of shares and
the purchase price have been adjusted to reflect subsequent stock splits) as
determined by the Board of Directors at the date of such grant. The options
vest at the rate of 20% per year until fully vested five (5) years after the
grant date. Upon Walker's death or total disability, SNB is committed to pay
any accrued but unpaid base salary, and all options granted as of the date of
death or total disability shall remain exercisable. If Walker's employment is
terminated "for cause" (as defined), all payments and benefits under the
letter agreement cease effective with the termination of employment, and all
options which have not vested are forfeited. If SNB and the Bank terminate
Walker's employment without cause, he will continue to receive base salary and
insurance benefits for six months, and vested options may be exercised within
30 days after the termination date.
Walker's letter agreement includes "change of control" provisions (as
defined), whereby, if a change in control occurs or is proposed within the
first six (6) years of the agreement and Walker's employment is terminated
within one (1) year of such change of control, Walker will be entitled to one
year of base salary, bonus compensation and insurance benefits, with all
options becoming immediately exercisable. The agreement includes certain one
(1) year restrictions on Walker concerning nondisclosure of proprietary
information, and covenants not to compete or solicit customers or employees of
SNB or the Bank.
There are no other compensatory plans, employment contracts or change in
control arrangements with any of the executive officers included above which
would result in any payments to said officers as a result of resignation,
retirement or any other termination of such individual's employment with SNB
or the Bank or from a change in control of SNB or the Bank.
50
<PAGE>
COMPENSATION PURSUANT TO PLANS
STOCK WARRANTS:
Executive officer Jackson is the holder of certain warrants issued in
connection with the initial organization and stock offering of the Bank in
1988 (the "Founders Warrants"). During organization, the Bank issued warrants
to purchase Common Stock to its organizers, interim directors and initial
executive officers. Each warrant entitles the owner to purchase one share of
Common Stock at the exercise price of $3.33 per share, adjusted to reflect
subsequent stock splits, until the warrant expires. All warrants issued expire
ten (10) years from the date of issuance of the Bank's charter.
Due to the formation of SNB in 1994, all outstanding warrants for the Bank's
Common Stock were automatically converted into warrants for equal amounts of
SNB's Common Stock. Due to the 20% stock split effected in the form of a
dividend on March 20, 1995, the 100% stock split effected in the form of a
dividend on June 1, 1996, and the 25% stock split effected in the form of a
dividend on September 25, 1997, the Founders Warrants currently held by
Jackson have an amended exercise price of $3.33 per share.
Ms. Jackson holds a total of 15,000 unexercised Founders Warrants which were
issued to her in her capacity as an initial executive officer of the Bank.
INCENTIVE STOCK OPTIONS:
On May 2, 1996, after approval of the SNB Bancshares, Inc., 1996 Incentive
Stock Option Plan by shareholders at the Annual Meeting, the Board of
Directors granted key officers the right to purchase shares of SNB's Common
Stock at the price of $9.00, representing the market value of the stock at the
date of the option grant after adjustment to reflect the effect of stock
splits or dividends. The purchase price is adjusted to reflect the effect of
stock splits or dividends. Option holders may exercise in accordance with a
vesting schedule beginning with twenty (20%) percent the first year and
increasing twenty (20%) percent for each year thereafter such that one hundred
(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.
Robert C. Ham holds no option shares from the plan. H. Averett Walker holds
18,750 option shares, and executive officers Richard A. Collinsworth, Shirley
D. Jackson and Michael T. O'Dillon hold, as a group, 37,500 option shares in
the plan. No option shares have been exercised since the initiation of the
plan. At December 31, 1997, 62,500 option shares were outstanding. As of March
27, 1998, 25,000 shares were eligible to be purchased pursuant to the exercise
of those options.
401(K) SAVINGS INCENTIVE AND PROFIT SHARING PLAN:
During 1997, executive officers Ham, Walker, Collinsworth, Smith, Baugham,
Jackson and O'Dillon participated in the Bank's 401(K) Savings Incentive and
Profit Sharing Plan (the "Plan"), which became effective as of January 1, 1990
and which was ratified by a majority vote of the stockholders at the April 19,
1990 Annual Meeting. The Plan combines features whereby each participant may
elect to defer certain portions of his salary into the 401(K) program and
receive credit for certain matching amounts from the Bank, and additionally to
share in the accumulation of a profit sharing pool funded by the Bank. Except
as disclosed herein, there are currently no other stock bonus, money purchase,
thrift, pension, profit sharing or employee stock ownership plans, qualified
or unqualified, or deferred compensation arrangements in place at the Bank.
The Plan may be amended at any regular annual meeting or at any called meeting
of the stockholders by a majority vote of the stockholders. No such amendments
have been made since the Plan's adoption.
Any employee who was employed by the Bank on January 1, 1990 was deemed
eligible to participate in the Plan at its inception. Any other employee hired
subsequent to January 1, 1990 becomes eligible for
51
<PAGE>
participation upon completion of one (1) year of service and attainment of age
twenty one (21). As of December 31, 1997, forty (40) employees of the Bank
were eligible to participate and thirty seven (37) had chosen to participate
in the Plan. Directors of the Bank are not eligible to participate in the Plan
in their capacities as directors.
The annual amount of expense incurred by the Bank for contribution to the
Plan is calculated by first determining the Bank's pre-tax adjusted operating
earnings, defined as annual pre-tax operating earnings, less capital gains,
plus capital losses. The Bank's annual contribution is 10% of the pre-tax
adjusted operating earnings, not to exceed 15% of annual eligible
participating salaries, or such other maximum deductible amount as may be
determined by Code Section 404 of the Internal Revenue Code of 1986, as
amended.
The Bank's total annual expense accrual is allocated among elements of the
Plan in the following manner.
401(K) Expense:
An amount is contributed by the Bank to the 401(K) plan which, when
combined with employee salary deferrals, equals one half of the 15% of
annual participating salaries in the 401(K) plan. The Bank's 401(K)
contribution is allocated each year among the participants based on the
amount of each participating employee's elected salary deferral as a
percentage of total elected salary deferrals.
Profit Sharing Expense:
The remaining one half of the 15% of annual participating salaries is
then contributed by the Bank to the Profit Sharing Plan. This Profit
Sharing contribution is allocated each year among the eligible employees'
accounts in the Profit Sharing Plan based on the amount of each
participating employee's salary as a percentage of eligible salaries.
Cash Bonus Expense:
For any given year, if the sum of the Bank's total annual contribution to
the Plan and the amount of total employee 401(K) salary deferral
contributions equals more than 15% of eligible participating salaries, then
the amount in excess of 15% of eligible participating salaries is
distributed as a cash bonus. Each participant shares in the cash bonus on a
pro rata basis according to the percentage of each eligible employee's
salary to total eligible salaries. Employees who are not eligible to
participate in the Plan do not participate in the cash bonus, if any.
Based upon the calculations described above relating to the Bank's operating
results for the year, expense under the Plan was $185,436 for the year ended
December 31, 1997, $167,890 for the year ended December 31, 1996, and $160,452
for the year ended December 31, 1995. These amounts are included in Salaries
and Employee Benefits expense in the Statements of Operations. The Bank made
contributions to the 401(K) and Profit Sharing Plans amounting to $43,504.18
for executive officers Ham, Walker, Collinsworth, O'Dillon, Jackson, Smith and
Baugham in 1997, $32,461 for executive officers Ham, Jackson and O'Dillon for
the Plan year 1996, and $21,815 for executive officers Ham, Jackson and
O'Dillon for the Plan year 1995. Executive officers Walker, Collinsworth,
Smith and Baugham were not eligible to participate in the Plan until 1997.
ANNUAL CASH INCENTIVE PLAN:
In the March, 1994 meeting of the Bank's Board of Directors, an Annual Cash
Incentive Plan program was approved. All officers and full-time employees of
the Bank, including executive officers, participate in the Plan. Under the
Plan, goals are established based on performance factors such as earnings,
asset quality, performance against similar peer banks, and achievement of
certain other related objectives in conjunction with the Bank's five year
strategic plan and annual budget. The annual bonus for executive officers, up
to a maximum of 40% of base salary, was designed based on market comparisons
of the annual bonuses for similar positions at other companies. Individual
performance, separate from overall Bank performance, can affect bonus amounts
according to pre-established goals for each participant. Other Bank officers
participate in the Plan up to maximums of from 20% to 30% of base salaries per
scales set commensurate with position and responsibility.
52
<PAGE>
Full-time employees participate in the Plan up to a maximum of 10% of base
salaries based on the attainment of several overall profitability goals.
Payments of $146,774 in 1997 bonus awards were made to all participants in
January, 1998. Total cash incentive plan expense accrued by the Bank during
1997 was $144,163. Payments to executive officers Walker, Collinsworth,
Jackson, O'Dillon, Smith and Baugham amounted to $65,389 for the 1997 plan
year.
OTHER PLANS:
The executive officers are participants in the Bank's group insurance plans
for employees, which include medical insurance, life insurance, dependent life
insurance, accidental death and disability insurance and long term disability
insurance. These group insurance plans do not discriminate in scope, terms or
operations in favor of officers of the Bank and are available generally to all
salaried employees.
OTHER EXECUTIVE COMPENSATION:
No executive officer received during 1997 perquisites or other personal
benefits not described above which exceeded the lesser of (a) 10% of the
executive officer's disclosed total annual salary and bonus or (b) $50,000. As
of December 31, 1997, except as disclosed herein, there were no other
restricted stock award plans, stock option plans, stock appreciation rights,
or long term incentive plans for any officers or employees of SNB or the Bank.
53
<PAGE>
COMPENSATION OF DIRECTORS
SNB pays no fees to its directors. In 1997, the Bank paid its directors
$300.00 per month, without regard to attendance at meetings of the Board of
Directors. That amount was increased to $400.00 per month effective February,
1998. No additional fee is payable for participation in committees or for
attendance of committee meetings. No annual bonuses or other perquisites are
provided to directors.
PENDING LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which SNB or the Bank is a party or
of which any of its property is the subject. There are no material proceedings
to which any director, officer, principal stockholder or any of their related
interests, is a party, or has a material interest adverse to SNB or the Bank.
54
<PAGE>
SNB BANCSHARES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
SUMMARY
The following discussion reviews the results of operations and assesses the
financial condition of SNB Bancshares, Inc. ("SNB") in Macon, Georgia. This
discussion should be read in conjunction with the company's consolidated
financial statements and accompanying notes. These financial statements and
management's discussion and analysis 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 SNB conducts its
operations.
SNB 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 SNB. 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 SNB. The functions
of SNB as the parent holding company are limited in scope, so that the
consolidated financial statements of SNB 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 SNB.
55
<PAGE>
The following table illustrates selected key financial data of the company
for the past five years.
TABLE 1
SELECTED FIVE YEAR FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- -------- -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA AND
NUMBER OF SHARES)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net Interest Income..... $ 6,619 $ 5,596 $ 4,311 $ 3,526 $ 2,650
Provision for Loan
Losses................. 372 257 109 302 378
Other Income............ 1,396 1,102 871 1,046 840
Other Expense........... 5,055 4,112 3,121 2,782 2,334
Income Taxes............ 785 687 561 436 205
Extraordinary Items..... 0 0 0 0 0
Cumulative Effect of
Accounting Change...... 0 0 0 0 53
Net Income.............. 1,803 1,642 1,391 1,052 626
PER SHARE DATA: (a)
Earnings Per Common and
Common Equivalent
Share.................. $ 0.73 $ 0.81 $ 0.80 $ 0.65 $ 0.39
Cash Dividends Paid..... 0.19 0.18 0.16 0.13 0.07
RATIOS:
Return on Average
Assets................. 1.32% 1.40% 1.51% 1.50% 1.03%
Return on Average
Equity................. 11.41% 14.93% 18.16% 15.53% 10.12%
Dividend Payout Ratio
(b).................... 22.73% 19.09% 17.26% 19.01% 15.98%
Average Equity to
Average Assets......... 11.61% 9.37% 8.31% 9.65% 10.13%
BALANCE SHEET DATA:
(at year end)
Assets.................. $ 142,893 $ 134,085 $107,566 $ 78,156 $ 66,022
Investment Securities... 30,985 32,656 34,440 18,649 19,976
Loans, Net of Income.... 98,925 86,247 64,400 52,277 41,064
Allowance for Loan
Losses................. 1,395 1,383 1,128 1,020 743
Deposits................ 121,941 113,032 92,969 67,209 56,876
Stockholders' Equity.... 16,840 14,932 8,426 7,082 6,399
Shares Outstanding...... 2,123,531 1,654,852 600,000 500,000 500,000
</TABLE>
- --------
(a) Per share data for all periods has been retroactively restated for a 20%
stock split on March 20, 1995, a 100% stock split on June 1, 1996, and a
25% stock split on September 25, 1997. All stock splits were effected in
the form of dividends.
(b) Determined by dividing dividends declared by current year net income.
Consolidated total assets of $142.9 million at December 31, 1997 were up by
$8.8 million, or 6.6%, over total assets at December 31, 1996. Total assets of
$134.1 million at December 31, 1996 were up by $26.5 million, or 24.7%, over
total consolidated assets at December 31, 1995. On average the balance sheet
grew by 16.0% during 1997, 27.5% during 1996, 31.1% during 1995, and 15.0%
during 1994. These growth rates for the past several years are significantly
higher than the economic growth statistics for the company's Macon-Bibb County
market area. The strong growth trend demonstrates the company's capture of a
larger percentage of the local financial services market due primarily to
recent industry consolidations and restructuring efforts of the larger super
regional banks in the area, particularly in the years 1995 and 1996. 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.
56
<PAGE>
TABLE 2
AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
-----------------------------------------------------
1997 % 1996 % 1995 %
-------- ------ -------- ------ ------- ------
(AMOUNTS IN $1000S)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash & Due From Banks... $ 6,091 4.5 % $ 4,084 3.5 % $ 2,836 3.1 %
Time Deposits--Other
Banks.................. 20 0.0 % 0 0.0 % 0 0.0 %
Federal Funds Sold...... 3,127 2.3 % 2,092 1.8 % 3,057 3.3 %
Taxable Investment
Securities............. 20,404 15.0 % 22,435 19.1 % 18,245 19.8 %
Non-Taxable Inv.
Securities............. 9,878 7.3 % 9,827 8.4 % 7,699 8.4 %
Market Adjustment--
Securities............. (32) 0.0 % (28) 0.0 % (250) (0.3)%
Loans, Net of Interest.. 91,893 67.5 % 75,803 64.6 % 57,933 62.9 %
Allowance for Loan
Losses................. (1,448) (1.1)% (1,284) (1.1)% (1,083) (1.2)%
Bank Premises &
Equipment.............. 3,480 2.6 % 2,612 2.2 % 2,193 2.4 %
Other Real Estate....... 417 0.3 % 373 0.3 % 284 0.3 %
Other Assets............ 2,289 1.7 % 1,454 1.2 % 1,167 1.3 %
-------- ------ -------- ------ ------- ------
Total Assets........ $136,119 100.0 % $117,368 100.0 % $92,081 100.0 %
======== ====== ======== ====== ======= ======
LIABILITIES & STOCKHOLDERS' EQUITY
Deposits:
Non-Interest Bearing.. $ 19,999 14.69% $ 16,936 14.43% $12,734 13.83%
Interest Bearing...... 95,723 70.32% 83,670 71.29% 67,254 73.04%
Federal Funds Purchased
and Repurchase
Agreements Sold........ 486 0.36% 212 0.18% 58 0.06%
Demand Notes--US
Treasury............... 416 0.31% 431 0.37% 491 0.53%
Other Borrowed Money--
FHLB................... 1,550 1.14% 3,701 3.15% 2,871 3.12%
Obligations--Capital
Leases................. 0 0.00% 0 0.00% 2 0.00%
Other Liabilities....... 2,146 1.58% 1,417 1.21% 1,032 1.12%
-------- ------ -------- ------ ------- ------
Total Liabilities....... 120,320 88.39% 106,367 90.63% 84,442 91.70%
-------- ------ -------- ------ ------- ------
Common Stock............ 1,814 1.33% 1,363 1.16% 578 0.63%
Surplus................. 9,643 7.08% 6,226 5.30% 4,500 4.89%
Undivided Profits....... 4,341 3.19% 3,412 2.91% 2,561 2.78%
-------- ------ -------- ------ ------- ------
Total Stockholders'
Equity............. 15,798 11.61% 11,001 9.37% 7,639 8.30%
-------- ------ -------- ------ ------- ------
Total Liabilities &
Stockholders'
Equity............. $136,119 100.00% $117,368 100.00% $92,081 100.00%
======== ====== ======== ====== ======= ======
</TABLE>
LOANS
The Bank's loan portfolio constitutes the major interest earning asset of
SNB. 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 central Georgia.
Accordingly, the ultimate collectibility of the loans is largely dependent
upon economic conditions in the central Georgia area. The local economy is
generally stable.
Loans net of unearned income of $98.9 million and $86.2 million at December
31, 1997 and 1996 respectively, amounted to 69.2% and 64.3% of total assets,
and 81.1% and 76.3% of deposits. The average yields generated by interest and
fees from the loan portfolio amounted to 10.49% during 1997, 10.92% during
1996 and 11.02% during 1995. SNB's allowance for loan losses at December 31,
1997, 1996 and 1995 amounted to 1.41%, 1.60% and 1.75%, respectively, of
outstanding net loans.
57
<PAGE>
The following table presents the amount of loans outstanding by category,
both in dollars and in percentages of the total portfolio, at the end of each
of the past five years.
TABLE 3
LOANS BY TYPE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Commercial, Financial and
Agricultural................ $21,454 $15,129 $11,331 $ 9,983 $ 9,853
Real Estate--Construction.... 1,971 2,864 2,848 2,012 1,552
Real Estate--Mortgage
Mortgage Loans Held for
Sale........................ 1,181 0 0 0 0
Other Mortgage............. 64,396 59,872 44,737 35,975 26,290
Loans to Individuals......... 10,069 8,557 5,670 4,473 3,488
------- ------- ------- ------- -------
Total Loans.............. 99,071 86,422 64,586 52,443 41,183
Unearned Income.............. (146) (175) (186) (166) (118)
------- ------- ------- ------- -------
Total Net Loans.......... $98,925 $86,247 $64,400 $52,277 $41,065
======= ======= ======= ======= =======
Percentage of Total
Portfolio:
Commercial, Financial and
Agricultural.............. 21.7 % 17.5 % 17.6 % 19.1 % 24.0 %
Real Estate--Construction.. 2.0 % 3.3 % 4.4 % 3.9 % 3.8 %
Real Estate--Mortgage
Mortgage Loans Held for
Sale...................... 1.2 % 0.0 % 0.0 % 0.0 % 0.0 %
Other Mortgage............. 65.1 % 69.5 % 69.5 % 68.7 % 64.0 %
Loans to Individuals......... 10.2 % 9.9 % 8.8 % 8.6 % 8.5 %
------- ------- ------- ------- -------
Total Loans.............. 100.2 % 100.2 % 100.3 % 100.3 % 100.3 %
Unearned Income.............. (0.2)% (0.2)% (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, 1997.
TABLE 4
LOAN MATURITY DISTRIBUTION AND INTEREST SENSITIVITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------
OVER ONE
ONE YEAR OVER
YEAR THROUGH FIVE
OR LESS FIVE YEARS YEARS TOTAL
------- ---------- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Selected loan categories:
Commercial, financial and agricultural....... $15,018 $6,007 $429 $21,454
Real estate--construction.................... 1,754 217 0 1,971
------- ------ ---- -------
Total...................................... $16,772 $6,224 $429 $23,425
======= ====== ==== =======
Loans shown above due after one year:
Having predetermined interest rates.......... $ 4,191
Having floating interest rates............... 2,462
-------
Total...................................... $ 6,653
=======
</TABLE>
58
<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 $31.0 million, or 21.7% of total
assets at December 31, 1997, down from $32.7 million, or 24.4% of total assets
at December 31, 1996. 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 1997.
The average 1997 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 6.62%, compared to 6.44%
in 1996 and 6.51% in 1995. The stability of the bond yields over this time
frame indicates a reasonably stable interest rate environment in the bond
markets. During 1997, the investment securities portfolio, excluding
unrealized gains and losses, represented 24.2% of average earning assets and
22.2% of average total assets. During 1996, the portfolio averaged 29.3% of
earning assets and 27.5% of total assets.
At December 31, 1997, the major portfolio components, based on amortized or
accreted cost, included 11.4% in U. S. Treasury securities, 48.9% in U. S.
agency obligations, 6.6% in mortgage backed securities, 31.2% in tax exempt
state, county and municipal bonds and 1.9% in stocks of the Federal Reserve
Bank and Federal Home Loan Bank. On December 31, 1997, the market value of the
total bond portfolio as a percentage of the book value was 100.7%, up from
100.4% a year earlier. The bond markets have experienced relatively stable
years during 1997 and 1996, 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 $335,547 and gross unrealized losses
of $105,223, for a net unrealized gain of $230,324. As of December 31, 1996,
the portfolio had a net unrealized gain of $123,864. In accordance with SFAS
No. 115, stockholders' equity included net unrealized gains of $69,955 and
$16,083 recorded on the Available for Sale portfolio as of December 31, 1997
and 1996, respectively, net of deferred tax effects. No trading account has
been established by SNB and none is anticipated.
In December, 1995, SNB 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 SNB to more effectively manage its
interest rate risk position. The amortized cost of the investment securities
transferred was $1.9 million.
59
<PAGE>
The following table summarizes the Available for Sale and Held to Maturity
investment securities portfolios as of December 31, 1997, 1996 and 1995.
Available for Sale securities are shown at fair value, while Held to Maturity
securities are shown at amortized or accreted cost.
TABLE 5
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Securities Available for Sale
U. S. Treasury......................................... $ 3,565 $ 4,070 $ 5,070
U. S. Government Agencies
Mortgage-Backed...................................... 2,048 414 1,166
Other................................................ 14,536 15,834 15,754
State, County & Municipal.............................. 4,521 4,867 4,457
Other Investments...................................... 583 698 645
------- ------- -------
$25,253 $25,883 $27,092
======= ======= =======
Securities Held to Maturity
U. S. Treasury......................................... $ 0 $ 0 $ 497
U. S. Government Agencies
Mortgage-Backed...................................... 0 56 264
Other................................................ 500 1,000 1,000
State, County & Municipal.............................. 5,232 5,717 5,587
Other Investments...................................... 0 0 0
------- ------- -------
$ 5,732 $ 6,773 $ 7,348
======= ======= =======
Total Investment Securities
U. S. Treasury......................................... $ 3,565 $ 4,070 $ 5,567
U. S. Government Agencies
Mortgage-Backed...................................... 2,048 470 1,430
Other................................................ 15,036 16,834 16,754
State, County & Municipal.............................. 9,753 10,584 10,044
Other Investments...................................... 583 698 645
------- ------- -------
$30,985 $32,656 $34,440
======= ======= =======
</TABLE>
60
<PAGE>
The following table illustrates the contractual maturities and weighted
average yields of investment securities held at December 31, 1997. 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. No prepayment assumptions have been estimated in the
table. 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
<TABLE>
<CAPTION>
INVESTMENT SECURITIES INVESTMENT SECURITIES
HELD TO MATURITY AVAILABLE FOR SALE
DECEMBER 31, 1997 DECEMBER 31, 1997
----------------------- ------------------------
CARRYING AVERAGE FAIR CARRYING AVERAGE FAIR
VALUE YIELD VALUE VALUE YIELD VALUE
-------- ------- ------ -------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury:
Within 1 Year................ $ 0 0.00% $ 0 $ 0 0.00% $ 0
1 to 5 Years................. 0 0.00% 0 3,515 6.39% 3,565
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 $ 3,515 6.39% $ 3,565
------ ---- ------ ------- ----- -------
Mortgage-Backed
Government Agencies:
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% 0 154 10.27% 165
More Than 10 Years........... 0 0.00% 0 1,882 5.24% 1,884
------ ---- ------ ------- ----- -------
$ 0 0.00% $ 0 $ 2,036 5.62% $ 2,048
====== ==== ====== ======= ===== =======
Other U.S. Government
Agencies:
Within 1 Year................ $ 500 5.44% $ 500 $ 2,000 3.38% $ 1,961
1 to 5 Years................. 0 0.00% 0 12,612 6.26% 12,575
5 to 10 Years................ 0 0.00% 0 0 0.00% 0
More Than 10 Years........... 0 0.00% 0 0 0.00% 0
------ ---- ------ ------- ----- -------
$ 500 5.44% $ 500 $14,612 5.86% $14,536
====== ==== ====== ======= ===== =======
State, County and Municipal:
Within 1 Year................ $1,070 8.35% $1,078 $ 1,675 8.00% $ 1,688
1 to 5 Years................. 2,346 7.60% 2,402 677 8.10% 697
5 to 10 Years................ 1,514 7.60% 1,569 1,643 8.69% 1,711
More Than 10 Years........... 302 7.71% 308 405 7.84% 425
------ ---- ------ ------- ----- -------
$5,232 7.76% $5,357 $ 4,400 8.26% $ 4,521
====== ==== ====== ======= ===== =======
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% 0 583 7.01% 583
------ ---- ------ ------- ----- -------
$ 0 0.00% $ 0 $ 583 7.01% $ 583
====== ==== ====== ======= ===== =======
Total Securities:
Within 1 Year................ $1,570 7.43% $1,578 $ 3,675 5.49% $ 3,649
1 to 5 Years................. 2,346 7.60% 2,402 16,805 6.36% 16,837
5 to 10 Years................ 1,514 7.60% 1,569 1,797 8.83% 1,876
More Than 10 Years........... 302 7.71% 308 2,870 5.97% 2,892
------ ---- ------ ------- ----- -------
$5,732 7.56% $5,857 $25,147 6.36% $25,253
====== ==== ====== ======= ===== =======
</TABLE>
61
<PAGE>
As of December 31, 1997, 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
SNB holds additional earning assets in overnight Federal Funds Sold. These
balances amounted to $0.3 million and $5.0 million as of December 31, 1997 and
1996, 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 7.9% from $113.0 million at December 31, 1996 to $121.9 million
at December 31, 1997. Average deposits for the year 1997 were $115.7 million,
up 15.0% from average deposits in 1996. During 1997, 17.3% of average deposits
were held in non-interest bearing checking accounts, 26.2% were in low yield
interest bearing transaction and savings accounts, and 56.5% were in time
certificates with higher yields. Comparable average deposit mix percentages
during 1996 were 16.8%, 25.5% and 57.7%, respectively.
The average cost of total deposits, including non-interest checking
accounts, during 1997 was 4.12%, down from 4.29% in 1996 and 4.39% in 1995.
The slight decrease in 1997 average deposits cost resulted from a continuing
gradual shift to a more favorable mix in non-interest and low cost deposits,
declines in the rates paid on interest checking and savings account balances,
and the lower repricing of maturing certificates.
The Bank's total interest expense on deposits and borrowed funds as a
percentage of average earning assets amounted to 3.94% during 1997, down from
4.18% during 1996 and 4.29% during 1995. The reduction in the average cost of
funds during 1997 reflects the declining rates on interest checking and
certificates of deposit, deposit mix improvements, and less reliance on more
costly Federal Home Loan Bank borrowings. The mild reduction in overall cost
of funds from 1995 to 1996 reflects lower rates on interest checking and
savings deposits and deposit mix improvements.
The following table reflects average balances of deposit categories for
1997, 1996 and 1995.
TABLE 7
AVERAGE DEPOSITS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------
1997 % 1996 % 1995 %
-------- ----- -------- ----- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Non-Interest Bearing Demand
Deposits...................... $ 19,999 17.3% $ 16,936 16.8% $12,734 15.9%
Interest Bearing Demand
Deposits...................... 9,971 8.6% 8,727 8.7% 5,820 7.3%
Money Market Accounts.......... 16,060 13.9% 13,062 13.0% 8,041 10.1%
Savings Deposits............... 4,300 3.7% 3,854 3.8% 3,733 4.7%
Time Deposits of $100,000 or
More.......................... 17,001 14.7% 14,202 14.1% 11,719 14.7%
Other Time Deposits............ 48,389 41.8% 43,825 43.6% 37,941 47.4%
-------- ----- -------- ----- ------- -----
$115,720 100.0% $100,606 100.0% $79,988 100.0%
======== ===== ======== ===== ======= =====
</TABLE>
62
<PAGE>
The following table summarizes the maturities of time deposits of $100,000
or more as of December 31, 1997, 1996 and 1995. 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 and has no brokered deposits.
TABLE 8
MATURITY DISTRIBUTION OF TIME DEPOSITS OF $100,000 OR MORE
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-----------------------
1997 1996 1995
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
3 Months or Less....................................... $ 4,721 $ 3,147 $ 4,467
Over 3 Months through 6 Months......................... 2,025 2,089 1,979
Over 6 Months through 12 Months........................ 4,049 4,325 4,098
Over 12 Months......................................... 5,205 3,962 5,307
------- ------- -------
$16,000 $13,523 $15,851
======= ======= =======
</TABLE>
BORROWED MONEY
Other interest bearing sources of funds at December 31, 1997 totaled $2.3
million, down from $4.1 million at December 31, 1996. Of the 1997 balance,
$1.3 million consisted of various advance agreements from the Federal Home
Loan Bank (FHLB) under the fixed and principal reducing credit programs, only
$0.1 million of which matures within the next twelve months. Demand Notes to
the U. S. Treasury of $0.7 million represented accumulated federal tax deposit
payments through the Treasury Department's note option program. Federal funds
purchased and securities sold under agreements to repurchase amounted to $0.3
million. Reliance on other borrowed money as a funding source decreased on
average from $4.3 million during 1996 to $2.5 million in 1997 due to early
payoffs of some FHLB notes. The cost of non-deposit borrowed money components
averaged 7.06% in 1997, up from 6.77% in 1996 and 6.37% in 1995, due to the
higher cost of longer term FHLB notes.
Other interest bearing sources of funds at December 31, 1996 amounted to
$4.1 million, down from $4.7 million at December 31, 1995. The 1996 balance
consisted primarily of $3.6 million in FHLB notes, $1.6 million of which
matured within the next year, and $0.5 million in Demand Notes to the U. S.
Treasury.
OTHER LIABILITIES
Other liabilities of $1.8 million at December 31, 1997 and $2.0 million at
December 31, 1996 consist of interest payable on deposits, federal income
taxes payable and other accrued but unpaid expenses.
LIQUIDITY
SNB, 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, 1997, approximately $25.1 million in
bonds, at amortized or accreted cost, were carried in the Available for Sale
portfolio, and $3.7 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.
63
<PAGE>
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 81.1%, 76.3% and 69.3% at December 31, 1997, 1996 and 1995,
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, 1997, the Bank had $16.0 million in
certificates of deposit of $100,000 or more. Although this represents 13.1% 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. The
parent company has a large excess cash position from new stock issued in 1996
and 1997. 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 SNB in the future without any material adverse impact on operating
results.
CAPITAL RESOURCES AND DIVIDENDS
SNB has always placed great emphasis on maintaining a strong capital base
and continues to exceed all minimum capital requirements. SNB's equity capital
of $16.8 million at December 31, 1997 amounts to 11.8% of total assets,
compared to 11.1% at December 31, 1996 and 7.8% at December 31, 1995. On
average, the equity capital was 11.6% of assets during 1997, compared to 9.4%
for 1996 and 8.3% for 1995. The significant increase in capital levels during
1996 and 1997 reflects an influx of over $5.6 million in proceeds over the
past two years from the issuance of new stock in three different events. In
September, 1996, SNB issued a stock offering for the sale of 340,700 new
shares of the company's common stock, as adjusted for the 25% stock split
effected as a dividend in September, 1997. The issue, which generated $3.6
million in new capital, was fully subscribed and successfully completed by
February, 1997. At the beginning of 1996, SNB issued an additional 203,500
shares of its common stock in a private placement, as adjusted for stock
splits in June, 1996 and September, 1997, 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 1996 and 1997, producing
another $0.3 million in capital. Management foresees the principal uses of the
new capital to be (a) sustaining the capital adequacy of the Bank as it
continues to grow at a steady pace, (b) expanding the Bank's presence in Macon
and middle Georgia with more physical locations and improved delivery systems,
(c) expansion into contiguous Houston County, and (d) 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 370,350 warrants as of December
31, 1997 at $3.333 per share, as adjusted for stock splits, will generate an
additional $1.2 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 can consist 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
64
<PAGE>
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%. SNB's capital ratios under these
guidelines as of December 31, 1997 and 1996 are well above the levels for a
well capitalized bank as shown in the following table.
TABLE 9
CAPITAL RATIOS(A)
<TABLE>
<CAPTION>
AS OF DECEMBER 31,
-------------------
1997 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Tier 1 Capital:
Stockholders' Equity..................................... $ 14,827 $ 14,645
Less Intangible Assets................................... 0 0
--------- ---------
Total Tier 1 Capital................................... 14,827 14,645
--------- ---------
Tier 2 Capital:
Eligible Portion of Allowance for Loan Losses............ 1,244 1,131
Subordinated and Other Qualifying Debt................... 0 0
--------- ---------
Total Tier 2 Capital................................... 1,244 1,131
--------- ---------
Total Risk Based Capital............................. $ 16,071 $ 15,776
========= =========
Total Net Risk Weighted Assets....................... $ 99,417 $ 90,258
========= =========
</TABLE>
REGULATORY REQUIREMENT:
<TABLE>
<CAPTION>
WELL
MINIMUM CAPITALIZED
------- -----------
<S> <C> <C> <C> <C>
Total Risk Based Capital Ratio.................. 8.0% 10.00% 16.2% 17.5%
Tier 1 Capital Ratio............................ 4.0% 6.00% 14.9% 16.2%
Leverage Ratio.................................. 4.0% 5.00% 11.7% 11.1%
</TABLE>
- --------
(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".
Cash dividends of $409,501, or $.19 per common share, were declared and paid
during 1997, up from $313,550, or $.18 per common share, paid during 1996, and
$240,000, or $.16 per share, in 1995. The ratios of cash dividends paid to net
income for these years were 22.7%, 19.1% and 17.3%, respectively. No dividends
were paid in years prior to 1992. Since the commencement of cash dividend
payments in 1992, the SNB Board of Directors has consistently declared and
paid dividends on a quarterly basis.
On March 20, 1995, SNB issued a 20% stock split effected in the form of a
dividend. On June 1, 1996, a 100% stock split was issued and effected in the
form of a dividend, and on September 25, 1997, a 25% stock split was issued
and 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.
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.
EXPANDED COVERAGE OF MARKET AREA
Bibb County:
As the Bank grows, it continues to add physical office locations to service
its existing middle Georgia market. SNB is adequately capitalized to meet all
anticipated capital expenditure needs. In July, 1997, to expand and improve
its physical coverage of Macon, the Bank purchased a land lot at 4519 Hartley
Bridge Road in
65
<PAGE>
southwest Macon. A new branch building will be constructed and opened in 1998
to serve a growing area of the market currently devoid of banking offices. The
Bank purchased an existing facility and opened its fifth full service office
at 3945 Pio Nono Avenue in south Macon in August, 1997. The Bank's existing
Shurling Drive branch was relocated to a larger and more convenient major
intersection at 614 Shurling Drive. 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 main office.
Platformation and other improvements to the Bank's internal information
technology were made in 1997. 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. The
additional fixed assets purchased during 1997 and 1996 were financed through
the original equity base and retained earnings of the company with no external
borrowing.
Houston County:
In October, 1997, the Bank made its first expansion move into neighboring
Houston County to the south. Houston County is included in the same Macon-
Warner Robins metropolitan statistical area as SNB's principal Bibb County
market. The Warner Robins Air Force Base is the largest employer in the middle
Georgia area and makes the two counties a common market. A mortgage loan
production office was established in Warner Robins, Georgia under the
management of a veteran mortgage originator from the area. In conjunction, the
mortgage lending function has recently been strengthened in Bibb County as
well. Bank management is currently seeking to locate land sites for one or
more branches in Houston County to serve a market which is deemed to be a
natural extension of the company's existing Bibb County territory.
ACQUISITION
On January 29, 1998, SNB entered into an Agreement and Plan of Merger with
Crossroads Bancshares, Inc. ("Crossroads") in Perry, Georgia, pursuant to
which Crossroads will be merged with and will become a wholly-owned subsidiary
of SNB. Pending approval of stockholders and regulatory authorities,
Crossroads stockholders will receive 2.9 shares of the common stock of SNB in
a business combination accounted for as a pooling of interests. The completion
of the transaction is anticipated by mid-year 1998. Crossroads operates three
offices in Houston County--one in Perry, Georgia and two in Warner Robins,
Georgia. At December 31, 1997 Crossroads had total assets of $74 million,
deposits of $67 million, and stockholders' equity of $6 million. The merger
will allow SNB to establish an immediate presence in its primary targeted
market for expansion. Since the merger will be accomplished through a stock
swap, SNB's capital ratios will remain well above industry standards after the
combination is completed.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
SNB's net income was $1,802,936, $1,642,274, and $1,390,795 for 1997, 1996
and 1995, respectively. Diluted earnings per share amounted to $0.73 in 1997,
$0.81 in 1996, and $0.80 in 1995. Per share data for all periods have been
retroactively restated for stock splits effected as dividends as follows: a
20% stock split on March 20, 1995, a 100% stock split on June 1, 1996, and a
25% stock split on September 25, 1997. The company's return on average assets
amounted to 1.32% for 1997, 1.40% for 1996, and 1.51% for 1995. The return on
average equity was 11.41%, 14.93%, and 18.16%, respectively.
The mild declining trend in earnings per share and profitability ratios
results from several factors. First, the company has seen an influx of new
capital in the past two years. The issuance of additional stock and the
exercise of a portion of outstanding founders' warrants in 1996 and 1997
generated $5,646,672 in new equity and 623,531 new outstanding shares, after
split adjustments. As of December 31, 1997, an additional 370,350 warrant
shares remained to be issued, which will generate $1,234,500 in additional
capital during 1998. The company's current equity strength will allow for
substantial future growth and expansion without concern for raising additional
capital.
Second, expansion of SNB's physical branch network in the past two years has
added significantly to overhead as discussed below. Offices opened in 1996 and
1997 have not yet reached an optimum size in deposits
66
<PAGE>
and loans to cover fixed costs and contribute significantly to earnings. These
branches should trend toward profitability as more seasoned growth is realized
at the newer offices in the future.
Third, management has taken steps to grow internal support systems which can
accommodate a larger organization in the future. Recent expenditures on
technology include new mainframe software for the Bank's internal data
processing system, check imaging and platformation, and a separate operations
and processing center. The company's data processing facility can now support
a multi-bank environment with minimal additional costs. Similar steps have
been taken to strengthen staff in commercial lending, mortgage lending, credit
administration, personnel and operations.
Fourth, the expense provision for loan losses has been increased steadily
over the past three years to ensure an adequate loan loss reserve balance in
the face of strong loan growth, and to cover higher 1997 net charge offs taken
to purge several weaker portfolio credits.
Management envisions future deployment of excess capital (a) to sustain the
capital adequacy of the lead bank as it continues to gain Bibb County market
share, (b) to expand through acquisitions in targeted Georgia markets, (c) to
complete the expansion of physical locations and delivery systems in existing
markets, and (d) to enhance corporate infrastructure support systems to
prepare for SNB's new multi-bank holding company environment.
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. SNB's average net interest rate margin, on a taxable
equivalent basis, has been strong by industry standards at 5.50% in 1997,
5.32% in 1996 and 5.20% in 1995. Net interest income before tax equivalency
adjustments in 1996 amounted to $6,618,798, up 18.3% from $5,596,294 in 1996.
The 1996 net interest income total was up 29.8% from $4,310,577 recorded in
1995. 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 SNB's
incremental statutory corporate federal income tax rate of 34%.
TABLE 10
NET INTEREST INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Interest Income...................................... $ 11,560 $ 10,204 $ 8,041
Taxable Equivalent Adjustment........................ 269 264 210
-------- -------- -------
Interest Income(1)................................. 11,829 10,468 8,251
Interest Expense..................................... 4,941 4,608 3,731
-------- -------- -------
Net Interest Income(1)............................. $ 6,888 $ 5,860 $ 4,520
======== ======== =======
</TABLE>
The resulting average net interest rate margins during the years 1997, 1996
and 1995 were as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
(AS A % OF AVERAGE EARNING ASSETS)
<S> <C> <C> <C>
Interest Income(1)....................... 9.44% 9.50% 9.49%
Interest Expense......................... 3.94% 4.18% 4.29%
Net Interest Rate Margin(1)............ 5.50% 5.32% 5.20%
</TABLE>
- --------
(1) Reflects taxable equivalent adjustments using the statutory federal income
tax rate of 34% in adjusting interest on tax exempt securities to a fully
taxable basis.
67
<PAGE>
Tax equivalent net interest income increased by $1,028,000 from 1996 to
1997. This significant increase in absolute dollars of margin in 1997 was
driven by strong balance sheet growth. The average margin yield improved by 18
basis points, from 5.32% in 1996 to 5.50% in 1997. Due to the stability of the
interest rate environment over the two year period, the margin improvement was
not rate driven, but instead can be attributed to volume growth and changes in
the balance sheet mix. Average interest earning assets rose by 13.8% in 1997
over 1996. A build up of average balances in the higher yielding loan
portfolio and a decline in the lower yielding bond portfolio produced a more
profitable mix during 1996. Loans represented 67.5% of the average balance
sheet in 1997, up from 64.6% in 1996. Investment securities and federal funds
sold, on the other hand, were 24.6% of average 1997 assets, down from 29.3%
during 1996. The overall yield on average interest earnings assets, on a
taxable equivalent basis, have held steady for the past three years at 9.44%
in 1997, 9.50% in 1996 and 9.49% in 1995.
At the same time, the overall average cost of interest bearing liabilities
has fallen as follows: 5.03% in 1997, 5.24% in 1996 and 5.28% in 1995. The mix
of deposits has improved steadily in 1996 and 1997. The relative percentages
of demand and low cost transaction accounts have increased. This is attributed
to aggressive marketing in a period of flux for area super regional
competition, growing consumer business due to the convenience of a larger
branch network, and increases in business deposit relationships from larger
commercial credit lines. Rates paid on interest bearing checking and savings
accounts have trended downward over the periods. Reliance on certificates of
deposits has fallen as evidenced by decreases in the relative percentage mix.
At the same time, average CD rates have fallen as more costly promotional CDs
from earlier years have repriced at lower rates upon maturity.
Similar patterns are evident when comparing 1996 margin results to 1995. Tax
equivalent net interest income increased by $1,340,000 from 1995 to 1996. The
increase is attributed to significant balance sheet growth and improvements in
balance sheet mix. The average margin yield improved by 12 basis points, from
5.20% in 1995 to 5.32% in 1996. Average interest earning assets rose by 26.7%
in 1996 over 1995. Loans became a more dominant asset, representing 64.6% of
the average balance sheet in 1996, up from 62.9% in 1995. Lower yielding
investment securities and federal funds sold dropped to 29.3% of average 1996
assets, down from 31.5% during 1995.
The mix of deposits improved during 1996 as well. The costlier certificates
of deposit (including CDs of $100,000 or more and IRA CDs), totaled 57.7% of
average 1996 deposits, down from 62.1% in 1995. The average balances in low
cost core deposits (checking, interest bearing checking, savings and money
market accounts) improved from 38.0% in 1995 to 42.3% in 1996. A marketing
campaign in early 1996 to increase checkable deposits and a strategic decision
to place less reliance on jumbo CDs are reasons for the more profitable
deposit mix in 1996 versus 1995.
68
<PAGE>
The following table summarizes average balance sheets, interest and yield
information on a taxable equivalent basis for the years ended December 31,
1997, 1996 and 1995.
TABLE 11
AVERAGE BALANCE SHEETS, INTEREST AND YIELDS
<TABLE>
<CAPTION>
1997 1996 1995
------------------------ ------------------------ -----------------------
AVERAGE YIELD/ AVERAGE YIELD/ AVERAGE YIELD/
BALANCE INTEREST RATE BALANCE INTEREST RATE BALANCE INTEREST RATE
-------- -------- ------ -------- -------- ------ ------- -------- ------
(TAX EQUIVALENT BASIS, IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
ASSETS:
Loans, net of unearned
income: (a)(b)
Taxable................ $ 91,893 9,641 10.49% $ 75,806 8,277 10.92% $57,933 6,383 11.02%
Tax exempt (c)......... 0 0 0.00 0 0 0.00 0 0 0.00
-------- ------ -------- ------ ------- -----
Net loans.............. 91,893 9,641 10.49 75,806 8,277 10.92 57,933 6,383 11.02
-------- ------ -------- ------ ------- -----
Investment securities:
(d)
Taxable................ 20,404 1,214 5.95 22,434 1,302 5.81 18,244 1,069 5.86
Tax exempt (c)......... 9,878 791 8.01 9,827 776 7.89 7,699 619 8.04
-------- ------ -------- ------ ------- -----
Total investment
securities............ 30,282 2,005 6.62 32,361 2,078 6.44 25,943 1,688 6.51
-------- ------ -------- ------ ------- -----
Interest earning
deposits............... 20 1 5.60 0 0 0.00 0 0 0.00
Federal funds sold...... 3,127 182 5.81 2,092 112 5.37 3,057 180 5.89
-------- ------ -------- ------ ------- -----
Total interest earning
assets................. 125,322 11,829 9.44 110,159 10,468 9.50 86,933 8,251 9.49
------ ----- ------ ----- ----- -----
Non-earning assets...... 10,797 7,209 5,148
-------- -------- -------
Total assets............ $136,119 $117,368 $92,081
======== ======== =======
LIABILITIES AND
STOCKHOLDERS' EQUITY:
Interest bearing demand
deposits............... $ 9,971 137 1.38 $ 8,727 163 1.87 $ 5,820 135 2.32
Money market accounts... 16,060 653 4.06 13,062 505 3.87 8,041 265 3.30
Savings deposits........ 4,300 95 2.22 3,854 86 2.24 3,733 96 2.56
Time deposits of
$100,000 or more....... 17,001 1,025 6.03 14,202 887 6.24 11,719 726 6.20
Other time deposits..... 48,389 2,857 5.90 43,825 2,672 6.10 37,941 2,291 6.04
Federal funds purchased
and repurchase
agreements sold ....... 486 24 4.98 212 13 6.13 58 4 6.38
Demand note U.S.
Treasury............... 415 25 5.98 431 24 5.56 489 27 5.42
Other borrowed money-
FHLB................... 1,550 124 8.02 3,701 257 6.95 2,871 187 6.53
Capital leases &
mortgage debt.......... 0 0 0.00 0 0 0.00 2 0 3.86
-------- ------ -------- ------ ------- -----
Total interest bearing
liabilities............ 98,175 4,941 5.03 88,014 4,608 5.24 70,674 3,731 5.28
-------- ------ ----- -------- ------ ----- ------- ----- -----
Non-int. bearing demand
deposits............... 19,999 16,936 12,734
Other liabilities....... 2,146 1,417 1,033
Stockholders' equity.... 15,798 11,001 7,640
-------- -------- -------
Total liabilities and
stockholders' equity... $136,119 $117,368 $92,081
======== ======== =======
Interest rate spread.... 4.41% 4.27% 4.21%
===== ===== =====
Net interest income..... 6,888 5,860 4,520
====== ====== =====
Net interest margin..... 5.50% 5.32% 5.20%
===== ===== =====
</TABLE>
- --------
Notes to Table of Average Balance Sheets Interest and Yields:
(a) Interest income includes loan fees as follows (in thousands): 1997-$485,
1996-$585, and 1995-$383.
(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 $269 for 1997, $264 for 1996, and $210 for 1995,
(in thousands).
(d) Investment securities are stated at amortized or accreted cost.
69
<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
1997 compared to the year 1996 and the year 1996 compared to the year 1995.
TABLE 12
RATE/VOLUME ANALYSIS
<TABLE>
<CAPTION>
1997 COMPARED TO 1996 1996 COMPARED TO 1995
------------------------- -------------------------
CHANGE DUE TO (A) CHANGE DUE TO (A)
------------------------- -------------------------
NET NET
VOLUME RATE CHANGE VOLUME RATE CHANGE
-------- ------ ------- ------- ------ -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
INTEREST EARNED ON:
Taxable loans, net...... $ 1,756 (392) 1,364 1,969 (75) 1,894
Tax exempt loans(b)..... 0 0 0 0 0 0
Taxable investment
securities............. (118) 29 (88) 245 (11) 234
Tax exempt investment
securities(b).......... 4 11 15 171 (14) 157
Interest earning
deposits............... 0 1 1 0 0 0
Federal funds sold...... 56 14 70 (57) (11) (68)
-------- ------ ------- ------- ------ -------
Total interest
income............... 1,698 (337) 1,361 2,328 (111) 2,217
-------- ------ ------- ------- ------ -------
INTEREST PAID ON:
Interest bearing demand
deposits............... 23 (49) (26) 67 (39) 28
Money market accounts... 116 32 148 166 74 240
Savings deposits........ 10 (1) 9 3 (13) (10)
Time deposits of
$100,000 or more....... 175 (36) 138 154 7 161
Other time deposits..... 278 (93) 185 355 26 381
Federal funds
purchased.............. 17 (6) 11 10 (1) 9
Demand note U.S.
Treasury............... (1) 2 1 (3) 1 (2)
Other borrowed money-
FHLB................... (150) 16 (134) 54 16 70
Capital leases &
mortgage debt.......... 0 0 0 0 0 0
-------- ------ ------- ------- ------ -------
Total interest
expense.............. 469 (136) 333 806 71 877
-------- ------ ------- ------- ------ -------
Net interest income... 1,229 (201) 1,028 1,522 (182) 1,340
======== ====== ======= ======= ====== =======
</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 SNB's
asset/liability management function. SNB 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 SNB 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. At December 31, 1997, the company estimates through
simulation modeling that net interest income would decrease by $54,000 if
interest rates rose by 300 basis points, and increase by $54,000 if interest
rates fall by 300 basis points.
70
<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 SNB's
consolidated balance sheet as of December 31, 1997 and 1996 at various
repricing intervals. This gap analysis indicates that SNB was moderately
liability sensitive over a one year time horizon at both December 31, 1997 and
1996, with cumulative one year gaps of (5.8%) and (4.3%), 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 SNB's interest rate risk position.
Management is of the opinion that the current degree of interest rate risk is
acceptable and within policy parameters.
TABLE 13
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------
OVER 3 OVER 1 YEAR
0 UP TO 3 UP TO 12 UP TO OVER 5
MONTHS MONTHS 5 YEARS YEARS
--------- -------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Amounts maturing or repricing:
Investment securities(a)............. $ 3,649 $ 3,002 $17,666 $ 6,563
Loans, net of unearned income........ 33,192 10,839 44,817 9,503
Other earning assets................. 283 0 0 0
------- -------- ------- -------
Interest sensitive assets.......... 37,124 13,841 62,483 16,066
------- -------- ------- -------
Deposits............................. 32,265 25,144 40,074 0
Other borrowings..................... 1,013 55 990 270
------- -------- ------- -------
Interest sensitive liabilities..... 33,278 25,199 41,064 270
------- -------- ------- -------
Interest sensitivity gap......... $ 3,846 $(11,358) $21,419 $15,796
======= ======== ======= =======
Cumulative interest sensitivity
gap............................. $ 3,846 $ (7,512) $13,907 $29,703
======= ======== ======= =======
Cumulative interest sensitivity
gap as a percentage of total
interest sensitive assets....... 3.0% (5.8)% 10.7% 22.9%
======= ======== ======= =======
Cumulative interest sensitive
assets as a percentage of
cumulative interest sensitive
liabilities..................... 111.6% 87.2% 114.0% 129.8%
======= ======== ======= =======
<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>
- --------
(a) Excludes the effect of SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities", consisting of net unrealized gains of $106 in
1997 and $24 in 1996.
71
<PAGE>
PROVISION FOR LOAN LOSSES
The general nature of lending results in periodic charge offs, in spite of
SNB's continuous loan review process, credit standards, and internal controls.
The company's recent charge off history during 1994, 1995 and 1996 was
exceptionally good with minimal losses taken. Net losses increased during 1997
to a higher level. The majority of the 1997 losses are attributed to the
transition of executive management and efforts to purge weaker credits. SNB
incurred net charge offs of $359,939 during 1997, compared to $1,482 during
1996 and $1,147 in 1995. SNB expensed $372,000 in 1997, $257,000 in 1996, and
$109,143 in 1995 for loan loss provisions. The reserve for loan losses on
December 31, 1997 stood at 1.41% of outstanding net loans, compared to 1.60%
and 1.75% at December 31, 1996 and 1995.
The provision for loan losses represents management's determination of the
amount necessary to be transferred to the reserve 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 reserves 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 reserve including current
economic conditions, loan loss experience, regulatory guidelines and current
levels of nonperforming loans. Management believes that the $1,395,188 balance
in the reserve for loan losses at December 31, 1997 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, SNB 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 reserve for loan losses.
72
<PAGE>
The following table summarizes loans charged off, recoveries of loans
previously charged off and additions to the reserve which have been charged to
operating expense for the periods indicated. The company has no lease
financing or foreign loans.
TABLE 14
RESERVE FOR LOAN LOSSES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Reserve for loan losses at beginning of
year.................................... $1,383 $1,128 $1,020 $ 743 $862
Loans charged off during the year:
Commercial, financial and
agricultural.......................... 283 73 0 13 365
Real estate--construction.............. 0 0 0 0 0
Real estate--mortgage.................. 137 53 0 10 163
Loans to individuals................... 178 74 60 54 14
------ ------ ------ ------ ----
Total loans charged off.................. 598 200 60 77 542
------ ------ ------ ------ ----
Recoveries during the year of loans
previously charged off:
Commercial, financial and
agricultural.......................... 203 124 23 11 13
Real estate--construction.............. 0 0 0 0 0
Real estate--mortgage.................. 6 37 18 14 8
Loans to individuals................... 29 37 18 27 24
------ ------ ------ ------ ----
Total loans recovered.................... 238 198 59 52 45
------ ------ ------ ------ ----
Net loans charged off during the year.... 360 2 1 25 497
------ ------ ------ ------ ----
Additions to reserve--provision expense.. 372 257 109 302 378
------ ------ ------ ------ ----
Reserve for loan losses at end of year... $1,395 $1,383 $1,128 $1,020 $743
====== ====== ====== ====== ====
Reserve for loan losses to year end net
loans................................... 1.41% 1.60% 1.75% 1.95% 1.81%
====== ====== ====== ====== ====
Ratio of net loans charged off during the
year to average net loans outstanding
during the year......................... 0.39% 0.00% 0.00% 0.06% 1.38%
====== ====== ====== ====== ====
</TABLE>
An allocation of the reserve 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 reserve amounts are allocated by evaluating
the loss potential of individual loans that management has considered
impaired. The reserve 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
adoption of SFAS 114 in 1995 did not have a material effect on the
consolidated financial statements and prior years have not been restated. The
table below exhibits these allocations for the last five years.
TABLE 15
ALLOCATION OF RESERVE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
RESERVE % RESERVE % RESERVE % RESERVE % RESERVE %
------- --- ------- --- ------- --- ------- --- ------- ---
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at end of period
applicable to:
Commercial, financial
and agricultural...... $ 425 22% $ 630 18% $ 358 18% $ 323 19% $236 24%
Real estate--
construction.......... 0 2 0 3 17 4 15 4 11 4
Real estate--mortgage.. 331 66 205 69 291 69 263 69 192 64
Loans to individuals... 290 10 202 10 181 9 163 8 119 8
Unallocated............ 349 -- 346 -- 281 -- 256 -- 185 --
------ --- ------ --- ------ --- ------ --- ---- ---
Total reserve for loan
losses................. $1,395 100% $1,383 100% $1,128 100% $1,020 100% $743 100%
====== === ====== === ====== === ====== === ==== ===
</TABLE>
- --------
* Loan balance in each category expressed as a percentage of total year-end
loans.
73
<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/or 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.
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 analysis, tighter internal
controls, a monthly review process by top management to determine the adequacy
of the allowance for loan losses and to pinpoint potential problem loans, and
the general economic health of the local market area.
TABLE 16
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Nonaccrual loans...................... $ 720 $ 471 $ 218 $ 318 $ 498
Restructured loans.................... 0 0 0 0 0
------ ------ ------ ------ ------
Nonperforming loans................... 720 471 218 318 498
90 days past due and still accruing
loans................................ 93 537 0 0 0
------ ------ ------ ------ ------
Total............................. $ 813 $1,008 $ 218 $ 318 $ 498
====== ====== ====== ====== ======
Nonperforming assets:
Nonperforming loans(a).............. $ 720 $ 471 $ 218 $ 318 $ 498
Other real estate owned............. 276 324 363 187 399
------ ------ ------ ------ ------
Total............................. $ 996 $ 795 $ 581 $ 505 $ 897
====== ====== ====== ====== ======
Nonperforming assets to total loans
and other real estate................ 1.00% 0.91% 0.89% 0.96% 2.16%
====== ====== ====== ====== ======
Reserve for loan losses to
nonperforming loans.................. 193.75% 293.63% 517.43% 320.75% 149.20%
====== ====== ====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
NONACCRUAL RESTRUCTURED TOTAL
---------- ------------ -----
<S> <C> <C> <C>
Year ended December 31, 1997:
Interest at contracted rates(b)................... $69 $ 0 $69
Interest recorded as income....................... 0 0 0
--- --- ---
Reduction of interest income during 1997.......... $69 $ 0 $69
=== === ===
</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.
74
<PAGE>
At December 31, 1997, there were other loans classified for regulatory
purposes as loss, doubtful, substandard, or special mention which are not
included in the table above. Management is aware of no such loans not included
above which (i) represent or result from trends or uncertainties which
management reasonably expects will materially impact future operating results,
liquidity, or capital resources, or (ii) represent material credits about
which any information causes management to have serious doubts as to the
ability of such borrowers to comply with the loan repayment terms.
NONINTEREST INCOME
Noninterest income of $1,396,280 in 1997 represented a 26.8% increase from
$1,101,491 recorded in 1996. Service charges on deposit accounts were up
significantly, increasing by $285,049, or 40.8%, from $700,074 to $985,483.
The increase was due to strong growth in core transaction accounts and a
significant rise in fees collected for insufficient funds charges. Other
services charges, commission and fees rose by $54,038, or 20.6%, spurred
mainly from increases in ATM fees from a larger network of machines, credit
life insurance commissions and customer check sales to a growing volume of
consumer relationships. Increases were partially offset by declines in
realized gains on the sale of securities and Small Business Administration
(SBA) loans, which tend to be infrequent events. Gains on the sale of
Available for Sale securities declined by $21,859, and gains on the sale of
SBA loans dropped by $28,212.
Noninterest income in 1996 totaled $1,101,491, up 26.5% from $870,987 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 $870,987 in 1995 represented a 16.7% decline from
$1,046,122 recorded in 1994. Three major items caused the decline. First,
activity in the 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. 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 EXPENSES
Noninterest expenses were $5,054,798 for the year 1997, up 22.9% from
$4,111,698 in 1996. Almost 39% of the increase is attributed to higher costs
of salaries and benefits. The Bank has increased staff significantly during
1997 to strengthen and add internal support positions and to staff new
branches opened over the past two years. Total salaries and benefits increased
by $367,469, or 17.1%. Occupancy costs grew by 24.9%, or $143,423. The
increase is attributed to operating and depreciation costs for the new
branches and ATM sites, the new off-site data processing and operations
center, and the new loan production office in Houston County. An additional
charge of $78,861 was taken in expenses related to the relocation of the
Shurling Drive office in northeast Macon. All other operating overhead
increased by $353,347, or 25.4%. Most increases were growth and volume-
related. Higher costs were experienced in supporting the new mainframe
software and ATM network and in legal and loan collection fees. Increases were
partially offset by lower advertising and business development expenses,
correspondent bank charges and controls in printing and supplies costs.
Noninterest expenses were $4,111,698 for the year 1996, up 31.8% from
$3,120,822 in 1995. Almost 66% of the increase is attributed to higher costs
of salaries and benefits. The Bank increased staff 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
75
<PAGE>
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 $3,120,822, up 12.2% 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 accommodate Bank growth and the new Shurling Drive branch
office. Occupancy costs rose by $89,000, or 28.1%, due to costs of the new
branch location and increased depreciation and maintenance on new data
processing, proof and imaging equipment. All other overhead costs were up by
$102,000, or 9.1%. Major increases were in advertising costs and stationery
and supplies needed to introduce new technologies. Higher costs were partially
offset by reductions in FDIC deposit insurance and lower outside professional
fees.
INCOME TAXES
Federal and state income tax expense in 1997 amounted to $785,344, or an
effective rate of 30.3%, on the year's pre-tax earnings. Federal income tax
expense in 1996 was $686,813, equating to a 29.5% effective tax rate. This
effective rate is up slightly from 28.7%, or $560,804, in 1995. 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 SNB's consolidated financial statements for
a detailed analysis of income taxes.
INFLATION
Inflation impacts the financial condition and operating results of SNB.
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. SNB 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.
YEAR 2000
The banking industry relies on the validity of financial information, most
of which is generated and maintained by automated data processing systems.
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without considering the
impact of the upcoming change in the century. If not corrected, many computer
applications could fail or create erroneous results by or at the Year 2000.
The Year 2000 issue affects virtually all companies and organizations.
SNB management has formed a Year 2000 Operating Committee which is charged
with administering the phases of awareness, assessment, renovation, validation
and implementation which are required to ensure Year 2000 compliance
throughout the organization in a timely manner. The Year 2000 Operating
Committee meets on a weekly basis, reports quarterly to the Board EDP Steering
Committee. The EDP Steering Committee minutes are then reviewed by the full
Board of Directors.
The Year 2000 Operating Committee is in the assessment phase of its work.
All information and environmental systems have been examined by external
technical support. The Committee has contacted all vendors and suppliers. Due
to the relative modernity of the Bank's data processing systems and equipment,
and based on data collected to date from external sources, management is of
the opinion that the costs of becoming Year 2000 compliant in a timely manner
will not have a material adverse impact on the operating results or financial
condition of the company.
76
<PAGE>
BUSINESS OF CROSSROADS
GENERAL
Crossroads is a bank holding company organized under the laws of the State
of Georgia and registered with the FRB pursuant to the BHCA. Crossroads owns
all of the outstanding common stock of Crossroads Bank of Georgia ("Crossroads
Bank"), a Georgia state chartered bank that provides general banking services
in Houston County, Georgia. At December 31, 1997 Crossroads Bank, on a
consolidated basis, had total assets of $73,500,729.55, total loans of
$46,559,023.94, total deposits of $66,920,147.83 and total stockholders'
equity of $5,855,888.95. Crossroads Bank's net income for 1997 was
$811,563.05, or $2.78 per share.
Crossroads Bank serves its primary market of Houston County, Georgia from
its headquarters located in Perry, Georgia and two branch offices in Warner
Robins, Georgia. The banking business in this market is highly competitive.
Crossroads Bank competes for both deposits and loan customers with many other
financial institutions with equal or greater resources than are available to
Crossroads Bank. Such institutions include other commercial banks, credit
unions, insurance companies, brokerage firms and other financial service
companies.
Crossroads Bank operates a full service commercial banking business and
provides a wide range of banking services, including checking and savings
accounts; various types of certificates of deposit; agricultural, consumer,
commercial and real estate loans; safe deposit boxes; drive-in banking
facilities; and access to 24-hour teller machines through the Honor network. A
description of Crossroads Bank's primary banking activities is set forth
below.
DEPOSITS
Crossroads Bank offers a wide range of commercial and consumer deposit
accounts, including checking accounts, money market checking accounts,
negotiable order of withdrawal (NOW) accounts, individual retirement accounts,
time certificates of deposit and regular savings accounts. The sources of
deposits typically are residents and businesses and their employees with
Crossroads Bank's market area. Crossroads Bank pays competitive interest rates
on time and savings deposits and has implemented a service charge fee schedule
competitive with other financial institutions in its market area.
LENDING ACTIVITIES
Crossroads Bank's lending activities include agricultural, real estate,
consumer and commercial loans. Crossroads Bank's agricultural loans are made
for crop production expenses and to finance the purchase of farm-related
equipment. Crossroads Bank participates in the FmHa Guaranteed Loan Program.
The FmHa guarantees 90% of the principal and interest on qualified crop
production loans. Crossroads Bank's real estate loan portfolio includes
traditional first mortgage loans to individuals on single-family homes, loans
secured by farmland, and construction loans. Crossroads Bank also makes
consumer loans, consisting primarily of installment loans, to individuals for
personal, family, and household purposes, including loans for automobiles,
home improvements and investments. Crossroads Bank's commercial lending is
directed principally toward businesses located within its defined trade area
with a demand for funds that falls within its legal lending limits. Crossroads
Bank also targets businesses that are existing or are potential deposit
customers.
Lending decisions are based upon a determination of the borrower's ability
and willingness to repay the loan, which in turn are impacted, in the case of
an individual borrower, by factors such as the borrower's income, job
stability, length of time as a resident in the community, previous credit
history and collateral and, in the case of a commercial borrower, by factors
such as the borrower's cash flow, sales trends and inventory levels,
collateral and relevant economic conditions. In the case of agricultural
loans, Crossroads Bank typically looks to the borrower's cash flow as the
principal source of repayment and generally secures repayment by a security
interest in crops or farm-related equipment and, in some cases, an assignment
of crop insurance or a mortgage on real estate. Crossroads Bank is aware of
the risks associated with loans, such as fraud, bankruptcy, economic
77
<PAGE>
downturn, deterioration or non-existent collateral and changes in interest
rates. In addition, agricultural loans carry additional risks, such as
fluctuating commodity prices and the risk of adverse weather conditions.
INVESTMENT ACTIVITIES
After establishing necessary cash reserves and funding loans, Crossroads
Bank invests its remaining liquid assets in investments allowed under banking
laws and regulations. It invests primarily in obligations of the United States
or obligations guaranteed as to principal and interest by the United States
and other taxable securities and in certain obligations of states and
municipalities. Risks associated with these investments include, but are not
limited to, mismanagement in terms of interest rate, maturity and
concentration.
ASSET/LIABILITY MANAGEMENT
It is management's objective to manage Crossroads Bank's assets and
liabilities to provide a satisfactory, consistent level of profitability
within the framework of established cash, loan, investment, borrowing and
capital policies. Certain officers of Crossroads Bank are charged with the
responsibility of developing and monitoring policies and procedures that are
designed to ensure acceptable composition of the asset/liability mix. It is
managements' overall philosophy to support asset growth primarily through
growth of core deposits, which includes deposits of all categories made by
individuals, partnerships, corporations and other entities. Crossroads Bank's
asset/liability mix is monitored on a timely basis. The objective of this
policy is to manage interest-sensitive assets and liabilities so as to
minimize the impact of substantial movements in interest rates on its
earnings.
EMPLOYEES
As of December 31, 1997, Crossroads Bank had a total of 37 full-time
equivalent and 5 part-time employees to whom they provide a variety of
benefits. Crossroads Bank considers employee relations to be excellent, and
neither is a party to any collective bargaining agreement.
PROPERTIES
The principal offices of Crossroads Bank are located at 1208 Washington
Street, Perry, Georgia 31069. Branch offices are located at 1869 Watson
Boulevard and 302 Richard Russell Parkway in Warner Robins, Georgia.
Crossroads Bank owns these facilities without encumbrance.
LITIGATION
Crossroads Bank is not party to, nor is any of their property the subject
of, any material pending legal proceedings, other than ordinary routine
litigation incidental to their business, and no such proceedings are known to
be contemplated by governmental authorities.
78
<PAGE>
MANAGEMENT AND SECURITY OWNERSHIP OF CROSSROADS
MANAGEMENT
The following table sets forth, as of February 28, 1998, certain information
regarding each director and executive officer of Crossroads. All fifteen (15)
directors also serve as directors of Crossroads Bank, which will continue to
operate as a separately chartered entity following the Merger, and each of the
listed individuals will continue to serve as directors of Crossroads Bank
following the Merger. SNB has agreed that four of the following persons, as
yet unidentified, will be recommended and nominated to serve as directors of
SNB following the Merger. The management currently in place at Crossroads
Bank, however, will continue in office after the Merger.
<TABLE>
<CAPTION>
POSITION WITH
CROSSROADS OR
PRINCIPAL CROSSROADS BANK
NAME AGE OCCUPATION OF GEORGIA
---- --- ---------- ---------------
<S> <C> <C> <C>
William D. Watson....... 56 President, Crossroads President and Director of
Bank of Georgia Crossroads and Crossroads
Bank of Georgia
Carol A. Bryant......... 50 Vice President and Cashier, Secretary and Treasurer of
Crossroads Bank of Georgia Crossroads; Vice President
and Cashier of Crossroads
Bank of Georgia
Edward M. Beckham, II... 59 Oil Distributor, farmer Director of Crossroads and
Crossroads Bank of Georgia
Stewart Bloodworth...... 58 Farmer Director of Crossroads and
Crossroads Bank of Georgia
Vividawn D. Hamby....... 55 Office Manager Director of Crossroads and
Crossroads Bank of Georgia
Riley Hunt.............. 56 Part owner of funeral home, Director of Crossroads and
retirement home, and Crossroads Bank of Georgia
storage warehouses
Herman Ragin............ 70 Retired Director of Crossroads and
Crossroads Bank of Georgia
John Slezak............. 87 Owner of Quality Inn Motel, Director of Crossroads and
real estate developer Crossroads Bank of Georgia
Dr. Felix Smith......... 75 Retired veterinarian Director of Crossroads and
Crossroads Bank of Georgia
Cullen Talton........... 65 Sheriff, Houston County; Director of Crossroads and
real estate developer Director and Chairman of
the Board of Crossroads
Bank of Georgia
T. R. Tolleson, Jr. .... 42 Manager, building supply company Director of Crossroads and
Crossroads Bank of Georgia
L. C. Walker, Sr. ...... 81 Retired farm equipment dealer Director of Crossroads and
Crossroads Bank of Georgia
Larry Walker............ 56 Attorney, State Representative Director of Crossroads and
Crossroads Bank of Georgia
Gail Spivey............. 56 Retail Director of Crossroads and
Crossroads Bank of Georgia
</TABLE>
79
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH
CROSSROADS OR
PRINCIPAL CROSSROADS BANK
NAME AGE OCCUPATION OF GEORGIA
---- --- ---------- ---------------
<S> <C> <C> <C>
Mark Byrd............... 27 Developer and property management Director of Crossroads and
Crossroads Bank of Georgia
Bobby Stalnaker......... 48 Co-owner and President of Director of Crossroads and
manufacturing company Crossroads Bank of Georgia
</TABLE>
All of Crossroads' directors hold office for a term of one year or until
their respective successors are duly elected and qualified. All of Crossroads'
officers serve at the will of the Board of Directors, and until their
successors have been elected and qualified or until their earlier death,
resignation, removal, retirement, or disqualification. Except as described
under the caption "Proposed Merger--Interest of Management in the Merger",
there are no arrangements or understandings between any of the directors,
executive officers or any other persons pursuant to which any of Crossroads'
directors or executive officers have been selected for their respective
positions. L. C. Walker, Sr. is the father of Larry Walker; otherwise, there
are no family relationships between any directors or executive officers.
80
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
The following table sets forth as of February 28, 1998 the total number of
Crossroads shares beneficially owned by each director of Crossroads, each
beneficial owner of 5% or more of the outstanding Crossroads shares, and all
directors and executive officers of Crossroads as a group. The number of
Crossroads shares shown as being beneficially owned by each director are those
over which he has either sole or shared voting or investment power. Unless
otherwise indicated, the persons listed below have sole voting and investment
power with respect to their shares. At February 28, 1998, Crossroads had
291,982 shares of common stock outstanding.
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF BENEFICIAL OWNER OWNED (1) CLASS
------------------------ --------- ----------
<S> <C> <C>
William D. Watson................................. 2,000 .68%
204 Windermere Drive
Perry, GA 31069
Carol Bryant...................................... 300 .10%
398 Peggy Drive
Fort Valley, GA 31030
Edward M. Beckham, II............................. 10,500 3.60%
1102 Beckham Circle
Perry, GA 31069
Stewart Bloodworth................................ 16,318(2) 5.59%
1907 Northside Drive
Perry, GA 31069
Vividawn L. Hamby................................. 500 0.17%
7335 Nob Hill Drive
Macon, GA 31206
Riley Hunt........................................ 1,100(3) .38%
2002 Tucker Road
P.O. Box 52
Perry, Georgia 31069
Herman Ragin...................................... 3,000 1.03%
1103 Lovely Lane
Perry, GA 31069
John Slezak....................................... 12,850 4.40%
1500 Sam Nunn Boulevard
Perry, GA 31069
Dr. Felix Smith................................... 5,100(4) 1.75%
P.O. Box 956
Perry, GA 31069
Cullen Talton..................................... 5,000 1.71%
P.O. Box 100
Bonaire, GA 31005
L. C. Walker, Sr. ................................ 19,800(5) 6.78%
1357 Main Street
Perry, GA 31069
</TABLE>
81
<PAGE>
<TABLE>
<CAPTION>
SHARES PERCENT OF
NAME OF BENEFICIAL OWNER OWNED (1) CLASS
------------------------ --------- ----------
<S> <C> <C>
Larry Walker........................................ 4,200(6) 1.44%
1905 Northside Drive
Perry, GA 31069....................................
Gail Spivey......................................... 1,400 .48%
101 Donna Kay Court
Bonaire, GA 31005
Mark Byrd........................................... 200 .06%
102 Kings Crossing Court
Bonaire, GA 31005
Bobby Stalnaker..................................... 1,300(7) .44%
974 Highway 247
Kathleen, GA 31047
T. R. Tolleson, Jr. ................................ 9,400(8) 3.22%
802 Evergreen Street
Perry, GA 31069
All directors and executive
officers as a group (16 persons)................... 92,968 31.84%
</TABLE>
- --------
(1) The information contained in this column is based on information furnished
to Crossroads by the individuals identified above and shareholder records
of Crossroads.
(2) Includes 5,300 shares owned by Mr. Bloodworth's spouse.
(3) Includes 1,000 shares owned jointly with Sandra Hunt.
(4) Includes 100 shares held by Felix M. Smith, as custodian of Benjamin
Baldwin Smith, Jr.
(5) Includes 1,250 shares owned by Walker-Thompson Supply and 6,550 shares
owned by Mr. Walker's spouse.
(6) Includes 100 shares owned by Mr. Walker's spouse.
(7) Includes 300 shares owned by Mr. Stalnaker's spouse.
(8) Includes 700 shares owned by Ross Lands, Inc. and 1,000 shares owned by Mr.
Tolleson's spouse.
82
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF CROSSROADS
The following selected financial data is derived from the financial
statements of Crossroads. The financial data for the years ended December 31,
1997, 1996, 1995, 1994 and 1993 is derived from the consolidated financial
statements. The following data should be read in conjunction with Crossroads'
consolidated financial statements and the related notes contained elsewhere in
this Joint Proxy Statement/Prospectus.
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET
DATA:
Total Assets.......... $ 73,568 $ 69,976 $ 56,745 $ 50,309 $ 49,741
Total Loans........... 46,559 37,582 32,373 29,839 27,475
Total Deposits........ 66,920 63,867 51,726 45,989 45,774
Investment
Securities........... 10,248 14,112 13,429 6,453 12,569
Stockholders' Equity.. 5,910 5,131 4,535 3,839 3,526
SELECTED INCOME STATE-
MENT DATA:
Interest Income....... $ 5,098 $ 4,221 $ 3,806 $ 3,194 $ 2,990
Interest Expense...... 2,404 2,005 1,764 1,420 1,618
--------- --------- --------- --------- ---------
Net Interest In-
come............... 2,694 2,216 2,042 1,774 1,372
Provision for Loan
Losses............... 133 63 110 63 64
Other Income.......... 791 678 506 405 365
Other Expense......... 2,110 1,676 1,491 1,341 1,264
--------- --------- --------- --------- ---------
Income Before Tax..... 1,242 1,155 946 775 409
Income Tax Expense.... 438 404 339 263 132
--------- --------- --------- --------- ---------
Net income before
minority interest and
cumulative effect.... 804 751 608 512 277
Minority interest..... 0 0 0 0 0
--------- --------- --------- --------- ---------
Net income before
cumulative effect.... 804 751 608 512 277
Cumulative effect..... 0 0 0 0 (21)
--------- --------- --------- --------- ---------
Net Income.......... $ 804 $ 751 $ 608 $ 512 $ 256
========= ========= ========= ========= =========
PER SHARE DATA:
Net Income............ $ 2.75 $ 2.54 $ 2.05 $ 1.71 $ 0.85
Book Value............ 20.24 17.57 15.32 12.84 11.79
Tangible Book Value... 20.24 17.57 15.32 12.84 11.79
Dividends............. 0.20 0.20 0.20 0.00 0.00
PROFITABILITY RATIOS:
Net Income to Average
Assets............... 1.24% 1.42% 1.28% 1.08% 0.55%
Net Income to Average
Stockholders'
Equity............... 14.56% 15.54% 14.52% 13.80% 7.55%
Net Interest Margin... 4.61% 4.59% 4.68% 4.09% 3.21%
LOAN QUALITY RATIOS:
Net Charge-Offs to
Total Loans.......... 0.09% 0.01% 0.52% 0.13% 0.28%
Reserve for Loan
Losses to Total Loans
and OREO............. 0.99% 0.99% 1.00% 1.27% 1.29%
Nonperforming Assets
to Total Loans and
OREO................. 1.68% 1.46% 0.81% 2.19% 2.72%
Reserve for Loan
Losses to
Nonperforming Loans.. 258.89% 160.68% 400.00% 87.21% 64.91%
Reserve for Loan
Losses to Total
Nonperforming
Assets............... 58.91% 67.75% 123.19% 58.05% 47.47%
LIQUIDITY RATIOS:
Loans to Total
Deposits............. 69.57% 58.84% 62.59% 64.88% 60.02%
Loans to Average
Earning Assets....... 79.63% 77.91% 74.14% 68.79% 64.21%
Noninterest-Bearing
Deposits to Total
Deposits............. 25.29% 26.06% 28.09% 19.90% 18.58%
CAPITAL ADEQUACY RATIOS:
Common Stockholders'
Equity to Total
Assets............... 8.03% 7.33% 7.99% 7.63% 7.09%
Total Stockholders'
Equity to Total
Assets............... 8.03% 7.33% 7.99% 7.63% 7.09%
Dividend Payout
Ratio................ 7.26% 7.90% 9.84% 0.00% 0.00%
</TABLE>
83
<PAGE>
FINANCIAL REVIEW
SUMMARY
The following discussion reviews the results of operations and assesses the
financial condition of Crossroads Bankshares, Inc. (Crossroads) in Perry,
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 Crossroads conducts its operations.
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 1
AVERAGE BALANCE SHEETS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
---------------------------------------------------
1997 % 1996 % 1995 %
------- ------ ------- ------ ------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Cash & Due From Banks.... $ 3,229 4.97 % $ 2,503 4.72 % $ 1,811 3.81 %
Time Deposits--Other
Banks................... 0 0.00 % 11 0.02 % 83 0.17 %
Federal Funds Sold....... 8,088 12.44 % 5,576 10.51 % 4,261 8.97 %
Taxable Investment Secu-
rities.................. 6,493 9.99 % 7,291 13.75 % 7,635 16.08 %
Non-Taxable Inv. Securi-
ties.................... 17 0.03 % 0 0.00 % 0 0.00 %
Market Adjustment--Secu-
rities.................. (60) (0.09)% (105) (0.20)% (161) (0.34)%
Loans, Net of Interest... 43,868 67.48 % 35,358 66.65 % 31,688 66.73 %
Allowance for Loan Loss-
es...................... (408) (0.63)% (340) (0.64)% (388) (0.82)%
Bank Premises & Equip-
ment.................... 2,428 3.73 % 1,510 2.86 % 1,243 2.62 %
Other Real Estate........ 427 0.66 % 178 0.34 % 291 0.61 %
Other Assets............. 930 1.43 % 1,055 1.99 % 1,023 2.15 %
------- ------ ------- ------ ------- ------
TOTAL ASSETS........... $65,012 100.00 % $53,037 100.00 % $47,486 100.00 %
======= ====== ======= ====== ======= ======
LIABILITIES &
STOCKHOLDERS' EQUITY:
Deposits:
Non-Interest Bearing... $ 9,511 14.63 % $ 7,578 14.29 % $ 5,638 11.87 %
Interest Bearing....... 49,160 75.62 % 40,060 75.53 % 37,034 77.99 %
Federal Funds Purchased.. 0 0.00 % 0 0.00 % 75 0.16 %
Demand Notes--US Trea-
sury.................... 71 0.11 % 91 0.17 % 137 0.29 %
Other Borrowed Money..... 62 0.10 % 49 0.09 % 37 0.08 %
Obligations--Capital
Leases.................. 236 0.36 % 0 0.00 % 10 0.02 %
Other Liabilities........ 451 0.69 % 426 0.80 % 368 0.77 %
------- ------ ------- ------ ------- ------
Total Liabilities...... 59,491 91.51 % 48,204 90.89 % 43,299 91.18 %
------- ------ ------- ------ ------- ------
Common Stock............. 3,017 4.64 % 3,017 5.69 % 3,017 6.35 %
Retained Earnings........ 2,504 3.85 % 1,816 3.42 % 1,170 2.46 %
------- ------ ------- ------ ------- ------
Total Stockholders'
Equity................ 5,521 8.49 % 4,833 9.11 % 4,187 8.82 %
------- ------ ------- ------ ------- ------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY.. $65,012 100.00 % $53,037 100.00% $47,486 100.00 %
======= ====== ======= ====== ======= ======
</TABLE>
Consolidated total assets of $73.6 million at December 31, 1997 were up by
$3.6 million, or 5.1%, over total assets at December 31, 1996. Total assets of
$70.0 million at December 31, 1996 were up by $13.2 million,
84
<PAGE>
or 23.3%, over total consolidated assets at December 31, 1995. On average, the
balance sheet grew by 22.5% during 1997and 11.7% during 1996. This growth is
reflective of the overall strong economy and continued marketing efforts, in
addition to the opening of branch offices in 1996.
LOANS
The Bank's loan portfolio constitutes the major interest earning asset of
Crossroads. 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.
Loans net of unearned income of $46.6 million and $37.6 million at December
31, 1997 and 1996, respectively, amounted to 63.2% and 53.7% of total assets,
and 69.6% and 58.8% of deposits. The average yields generated by interest and
fees from the loan portfolio amounted to 9.72% during 1997 and 9.91% during
1996. Crossroads' allowance for loan losses at December 31, 1997 and 1996
amounted to 1.01% of outstanding net loans.
The following table presents the composition of Crossroads' loan portfolio,
both in dollars and in percentages of the total portfolio, at the end of each
of the past two years.
TABLE 2
LOANS BY TYPE
<TABLE>
<CAPTION>
DECEMBER 31
-----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Commercial, Financial and Agricultural...................... $11,534 $ 7,524
Real Estate--Construction................................... 4,971 6,850
Real Estate--Mortgage
Mortgage Loans Held for Sale.............................. 0 0
Other Mortgage............................................ 21,866 16,310
Loans to Individuals........................................ 8,188 6,898
------- -------
Total Loans............................................. 46,559 37,582
Allowance for Loan Losses................................... (466) (376)
------- -------
Total Net Loans......................................... $46,093 $37,206
======= =======
Percentage of Total Portfolio:
Commercial, Financial and Agricultural...................... 25.0% 20.2%
Real Estate--Construction................................... 10.8% 18.4%
Real Estate--Mortgage
Mortgage Loans Held for Sale.............................. 0.0% 0.0%
Other Mortgage............................................ 47.5% 43.8%
Loans to Individuals........................................ 17.8% 18.5%
------- -------
Total Loans............................................. 101.0% 101.0%
Allowance for Loan Losses................................... (1.0)% (1.0)%
------- -------
Total Net Loans......................................... 100.0% 100.0%
======= =======
</TABLE>
85
<PAGE>
The following table presents the Bank's loan maturities and certain interest
sensitivity data as of December 31, 1997. Loans may be periodically renewed
with principal reductions and appropriate interest rate adjustments.
TABLE 3
LOAN MATURITY DISTRIBUTION AD INTEREST SENSITIVITY
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Maturity:
One year or less............................................... $27,187
After One year through five years.............................. 18,804
After five years............................................... 568
-------
$46,559
=======
Rate Sensitivity:
Predetermined interest rates................................... $38,361
Floating or adjustable interest rates.......................... 8,198
-------
Total........................................................ $46,559
=======
</TABLE>
INVESTMENT SECURITIES
The investment securities portfolio is another major interest earning asset
and consists largely of obligations of the U.S. Government and its' agencies.
All investments are classified as available for sale and are therefore carried
at fair value. The investment portfolio provides the company with a source of
liquidity and is a resource used to help balance interest rate risk and credit
risk related to the loan portfolio. Investments amounted to $10.2 million, or
13.9% of total assets at December 31, 1997, down from $14.1 million, or 20.2%
of total assets at December 31, 1996. The decrease in investment portfolio
size relative to the balance sheet reflects the shift in earning assets into
the loan portfolio during 1997 to meet the increased loan demand resulting in
part from the company's expansion into the Warner Robins market in the fourth
quarter of 1996.
The average 1997 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 5.8%, compared to 5.76% for 1996. The
stability of the bond yields over this time frame indicates a reasonably
stable interest rate environment in the bond markets. During 1997, the
investment securities portfolio, excluding unrealized gains and losses,
represented 17.5% of average earning assets and 15.85 of average total assets.
During 1996, the portfolio averaged 29.3% of average earning assets and 26.6%
of average total assets.
86
<PAGE>
The following table presents the carrying values of investment securities
held by Crossroads at December 31, 1997 and 1996.
TABLE 4
INVESTMENT SECURITIES
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
1997 COST GAINS LOSSES VALUE
---- --------- ---------- ---------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Treasuries......................... 505 $ 1 0 506
U. S. Government Agencies
Other................................. 8,487 2 (14) 8,475
Mortgage-Backed....................... 946 11 0 957
State, County & Municipal............... 100 0 0 100
Other Investments....................... 210 0 0 210
------ --- --- ------
10,248 14 (14) 10,248
====== === === ======
U. S. Treasuries........................ 507 (4) 503
U. S. Government Agencies
Other................................. 11,984 1 (40) 11,945
Mortgage-Backed....................... 1,506 0 (12) 1,494
State, County & Municipal............... 0 0 0 0
Other Investments....................... 170 0 0 170
------ --- --- ------
14,167 1 (56) 14,112
====== === === ======
</TABLE>
The following table illustrates the contractual maturities and weighted
average yields of investment securities held at December 31, 1997. 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.
TABLE 5
MATURITIES OF INVESTMENT SECURITIES AND AVERAGE YIELDS
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE
YEAR BUT YEARS BUT
WITHIN WITHIN WITHIN AFTER
NE YEAR FIVE YEARS TEN YEARS TEN YEARS
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT
------ ------- ---------- ---------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
U.S. Government and agency........... 5,991 2,491 499 0
Mortgage-backed...................... 0 957 0 0
State, County and Municipal.......... 0 100 0 0
Other................................ 0 0 0 0
----- ----- --- ---
Total.............................. 5,991 3,548 499 0
</TABLE>
The above maturity distribution does not include Crossroads' investment in
FHLB stock.
<TABLE>
<CAPTION>
WEIGHTED AVERAGE YIELD* YIELD YIELD YIELD YIELD
----------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
U.S. Government and agency....................... 5.54% 6.05% 6.54% 0.00%
Mortgage-backed.................................. 0.00 6.61 0.00 0.00
State, County and Municipal...................... 0.00 4.10 0.00 0.00
Other............................................ 0 0 0 0
---- ---- ---- ----
Total.......................................... 5.54% 6.15% 6.54% 0.00%
==== ==== ==== ====
</TABLE>
- --------
* Yield on tax exempt securities have not been calculated on a tax equivalent
basis.
87
<PAGE>
As of December 31, 1997, 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
Crossroads holds additional earning assets in overnight Federal Funds Sold.
These balances amounted to $8.8 million and $10.7 million as of December 31,
1997 and 1996, 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 experienced moderate growth in 1997, increasing 4.7% from $63.9
million at December 31, 1996 to $66.9 million at December 31, 1997. During
1997, 16.2% of average deposits were held in non-interest bearing checking
accounts, 25.5% were in low yield interest-bearing transaction and savings
accounts, and 58.3% were in time certificates with higher yields. Comparable
average deposit mix percentages during 1996 were 15.9%, 24.3% and 59.8%,
respectively.
The average cost of total deposits, including non-interest checking
accounts, during 1997 was 4.84%, decreasing slightly from 4.98% in 1996. The
slight decrease in 1997 average deposits cost resulted from a moderate
increase in noninterest and low cost deposits.
Crossroads' total interest expense on deposits and borrowed funds as a
percentage of average earning assets amounted to 4.11% during 1997, down from
4.16% during 1996. The small reduction in the average cost of funds during
1997 reflects the shift in deposit mix to noninterest and low cost deposits.
The following table presents the average amount outstanding and the average
rate paid on deposits by Crossroads for the years 1997 and 1996.
TABLE 6
AVERAGE DEPOSITS
<TABLE>
<CAPTION>
1997 1996
--------------- ---------------
AVERAGE AVERAGE AVERAGE AVERAGE
AMOUNT RATE AMOUNT RATE
------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Noninterest-bearing Demand Deposits............. $ 9,511 0.00% $ 7,578 0.00%
Interest-bearing Demand and Savings............. 14,980 2.96% 11,594 3.01%
Time Deposits................................... 34,180 3.67% 28,466 5.79%
------- ---- ------- ----
$58,671 4.84% $47,638 4.98%
======= ==== ======= ====
</TABLE>
The table below presents the maturities of time deposits as of December 31,
1997. 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 7
MATURITY DISTRIBUTION OF TIME DEPOSITS
<TABLE>
<CAPTION>
TIME DEPOSITS TIME DEPOSITS
$100,000 LESS THAN
OR GREATER $100,000 TOTAL
------------- ------------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
As of December 31:
Three Months or Less...................... $1,537 $ 6,482 $ 8,019
Over Three Months through Twelve Months... 3,482 15,555 $19,037
Over Twelve Months........................ 1,139 5,305 $ 6,444
------ ------- -------
$6,158 $27,342 $33,500
====== ======= =======
</TABLE>
88
<PAGE>
OTHER LIABILITIES
Other liabilities averaged $0.45 million at December 31, 1997 and $0.43
million at December 31, 1996, consisting of interest payable on deposits,
federal income taxes payable and other accrued but unpaid expenses.
LIQUIDITY
Crossroads, 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, 1997, all investment securities were
held as available for sale, and $6.0 million of these bonds mature within a
one year period. The Bank from time to time invests in short term CDs at other
banks, and generally maintains a net sold position in overnight federal funds.
Management continually monitors the relationship of loans to deposits as it
relates to the company's liquidity posture. The Bank had ratios of loans to
deposits of 69.6%, 58.8% and 62.6% at December 31, 1997, 1996, and 1995,
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.
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
Crossroads in the future without any material adverse impact on operating
results.
CAPITAL RESOURCES AND DIVIDENDS
Crossroads has always placed great emphasis on maintaining a strong capital
base and continues to exceed all minimum capital requirements. Crossroads'
equity capital of $5.9 million at December 31, 1997 amounts to 8.0% of total
assets, compared to 7.3% at December 31, 1996. On average, the equity capital
was 8.5% of assets during 1997, compared to 9.1% for 1996.
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 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
89
<PAGE>
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%.
Crossroads' capital ratios under these guidelines as of December 31, 1997 and
1996 are well above the levels for a well capitalized bank as shown in the
following table.
TABLE 8
CAPITAL RATIOS(A)
<TABLE>
<CAPTION>
1997 1996
------ ------
(IN
THOUSANDS)
<S> <C> <C> <C>
As of December 31:
Total Tier 1 Capital.............................. 5,853 5,122
Total Risk Based Capital.......................... 6,319 5,498
Total Net Risk Weighted Assets.................... 54,568 46,475
<CAPTION>
MINIMUM
REQUIREMENT
-----------
<S> <C> <C> <C>
Total Risk Based Capital Ratio...................... 8.0% 11.6% 11.8%
Tier 1 Capital Ratio................................ 4.0% 10.7% 11.0%
Leverage Ratio...................................... 4.0% 8.5% 7.3%
</TABLE>
- --------
(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".
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, 1997, 1996 AND 1995
Crossroads' net income was approximately $804,000, $751,000, and $608,000
for 1997, 1996 and 1995, respectively. Earnings per common and common
equivalent share amounted to $2.75 in 1997, $2.54 in 1996, and $2.05 in 1995.
The company's return on average assets amounted to 1.24% for 1997, 1.42% for
1996, and 1.28% for 1995. The return on average equity was 14.56%, 15.54%, and
14.52%, 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. Crossroads' average net interest rate margin was
4.61% in 1997 and 4.59% in 1996. The 1997 net interest income total at
$2,694,000 was up 21.6% from 1996, when it amounted to $2,216,000. This
increase can be attributed to the aforementioned loan growth, coupled with a
shift in deposit mix to lower cost deposits. Average interest earning assets
rose by 22.2% in 1997 over 1996. A build up of average balances in the higher
yielding loan portfolio and a decline in the lower yielding bond portfolio
produced a more profitable mix during 1997. Loans represented 67.5% of the
average balance sheet in 1997, up from 66.7% in 1996. Investment securities
and federal funds sold, combined, for these same time periods were 22.5% and
24.3% of average earning assets, respectively.
Net interest income increased by approximately $174,000 from 1995 to 1996.
Essentially all of this increase is attributed to the moderate balance sheet
growth during 1996. The net interest margin over this period remained somewhat
stable at 4.59% in 1996 from 4.68% in 1995. This minor decline is partly
attributable to the average loan portfolio, which exhibited an overall growth
of 11.6% over the previous year, however, declined slightly as a percentage of
total average assets,--66.6% in 1996 compared to 66.7% in 1995. Assets also
shifted into less profitable securities and overnight federal funds.
90
<PAGE>
The following table summarizes average balance sheets, interest and yield
information for the years ended December 31, 1997 and 1996.
TABLE 9
AVERAGE BALANCE SHEETS, INTEREST AND YIELDS
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
AVERAGE INCOME/ YIELDS/ AVERAGE INCOME/ YIELDS/
BALANCES EXPENSE RATES BALANCES EXPENSE RATES
-------- ------- ------- -------- ------- -------
($ IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-earning Assets
Loans, Net of Unearned
Income..................... $43,868 $4,266 9.72% $35,358 $3,504 9.91%
Investment Securities
Taxable.................... 6,493 380 5.85% 7,291 420 5.76%
Tax-exempt................. 17 1 5.88% 0 0 0.00%
Total Investment
Securities............... 6,510 380 5.84% 7,291 420 5.76%
Interest-bearing Deposits in
Other Banks................ 0 0 0.00% 11 2 18.18%
Funds Sold................. 8,088 452 5.59% 5,576 295 5.29%
------- ------ ------- ------
Total Interest-earning
Assets................... 58,466 5,098 8.72% 48,236 4,221 8.75%
------- ------ ------- ------
Noninterest-earning Assets
Cash........................ 3,229 2,503
Allowance for Loan Losses... (408) (340)
Unrealized Loss on Available
for Sale Securities........ (60) (105)
Other Assets................ 3,785 2,743
------- -------
Total Noninterest-earning
Assets................... 6,546 4,801
------- -------
Total Assets.............. $65,012 $53,037
======= =======
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing Liabilities
Interest-bearing Deposits
Interest-bearing Demand and
Savings................... $14,980 $ 444 2.96% $11,594 $ 349 3.01%
Other Time................. 34,180 1,937 5.67% 28,466 1,647 5.79%
------- ------ ------- ------
Total Interest-bearing
Deposits................. 49,160 2,381 4.84% 40,060 1,996 4.98%
------- ------ ------- ------
Other interest-bearing
Liabilities
Debt........................ 369 23 6.23% 140 9 6.43%
Funds Purchased and
Securities Under Agreement
to Repurchase.............. 0 0 0.00% 0 0 0.00%
------- ------ ------- ------
Total Other Interest-
bearing Liabilities...... 369 23 6.23% 140 9 6.43%
------- ------ ------- ------
Total Interest-bearing
Liabilities.............. 49,529 2,404 4.85% 40,200 2,005 4.99%
------- ------ ------- ------
Noninterest-bearing
Liabilities and
Stockholders' Equity
Demand Deposits............. 9,511 7,578
Other Liabilities........... 451 426
Stockholders' Equity........ 5,521 4,833
------- -------
Total Noninterest-bearing
Liabilities and
Stockholders' Equity..... 15,483 12,837
------- -------
Total Liabilities and
Stockholders' Equity..... $65,012 $53,037
======= =======
Interest Rate Spread......... 3.87% 3.76%
==== =====
Net Interest Income.......... $2,694 $2,216
====== ======
Net Interest Margin.......... 4.61% 4.59%
==== =====
</TABLE>
- --------
(1) The average balance of loans includes the average balance of nonaccrual
loans. Income on such loans is recognized and recorded on the cash basis.
91
<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
1997 compared to the year 1996 and the year 1996 compared to the year 1995.
TABLE 10
RATE/VOLUME ANALYSIS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 COMPARED TO 1996
--------------------------
CHANGE DUE TO (A)
--------------------------
NET
VOLUME RATE CHANGE
------- ------- -------
<S> <C> <C> <C>
INTEREST INCOME
Loans, Net--Taxable...................................................... $ 843 $ (81) $ 762
Investment Securities....................................................
Taxable.............................................................. (46) 6 (40)
Tax-exempt........................................................... 0 1 1
Interest earning Deposits in Other Banks................................. (2) 0 (2)
Federal Funds Sold....................................................... 133 24 157
------- ------- -------
TOTAL INTEREST INCOME.................................................. 928 (50) 878
------- ------- -------
INTEREST EXPENSE
Interest bearing Demand and Savings Deposits............................. 102 (7) 95
Time Deposits............................................................ 331 (41) 290
Federal funds purchased.................................................. 0 0 0
Other Debt............................................................... 15 (1) 14
------- ------- -------
TOTAL INTEREST EXPENSE................................................. 448 (49) 399
------- ------- -------
NET INTEREST INCOME.................................................... $ 480 $ (1) $ 479
- --------------------------------------------------
======= ======= =======
<CAPTION>
1996 COMPARED TO 1995
----------------------------
CHANGE DUE TO (A)
----------------------------
NET
VOLUME RATE CHANGE
--------- -------- ---------
<S> <C> <C> <C>
INTEREST INCOME
Loans, Net--Taxable...................................................... $ 360 $ 37 $ 397
Investment Securities.................................................... 0
Taxable.............................................................. (20) (4) (24)
Tax-exempt........................................................... 0 0 0
Interest earning Deposits in Other Banks................................. (5) 1 (4)
Federal Funds Sold....................................................... 77 (31) 46
--------- -------- ---------
TOTAL INTEREST INCOME.................................................. 412 3 415
--------- -------- ---------
INTEREST EXPENSE
Interest bearing Demand and Savings Deposits............................. (58) 7 (51)
Time Deposits............................................................ 287 10 297
Federal funds purchased.................................................. (5) 0 (5)
Other Debt............................................................... (2) 2 0
--------- -------- ---------
TOTAL INTEREST EXPENSE................................................. 222 19 241
--------- -------- ---------
NET INTEREST INCOME.................................................... $ 190 $ (16) $ 174
- --------------------------------------------------
========= ======== =========
</TABLE>
- --------
(a) Changes in net interest income for the periods, based on either changes in
average balances or changes in average rates for interest earning assets
and interest-bearing liabilities, are shown on this table. During each
year there are numerous and simultaneous balance and rate changes;
therefore, it is not possible to precisely allocate the changes between
balances and rates. For the purpose of this table, changes that are not
exclusively due to balance changes or rate changes have been attributed to
rates.
INTEREST RATE RISK MANAGEMENT
The management of interest rate risk is the primary goal of Crossroads'
asset/liability management function. Crossroads 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.
92
<PAGE>
The following table reflects the gap positions of Crossroads' consolidated
balance sheet as of December 31, 1997 at various repricing intervals. This gap
analysis indicates that Crossroads was moderately liability sensitive over a
one year time horizon at December 31, 1997, with a cumulative one year gap of
(2.5%). 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 Crossroads' interest rate
risk position.
TABLE 11
INTEREST RATE SENSITIVITY
<TABLE>
<CAPTION>
OVER 3 OVER 1 YEAR
0 UP TO 3 UP TO 12 UP TO OVER 5
MONTHS MONTHS 5 YEARS YEARS
--------- -------- ----------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
AMOUNTS MATURING OR REPRICING:
EARNING ASSETS:
Investment securities (a)............. $ 5,990 $ 0 $ 3,548 $ 499
Loans, net of unearned income......... 17,030 10,157 18,804 568
Other earning assets.................. 8,795 0 0 0
------- ------- ------- -------
Interest sensitive assets........... 31,815 10,157 22,352 1,067
------- ------- ------- -------
INTEREST-BEARING LIABILITIES:
Interest-bearing Demand Deposits...... 14,736 0 0 0
Savings............................... 1,761
Certificates, Less than $100,000...... 6,482 15,555 5,305
Certificates, $100,000 and Over....... 1,537 3,482 1,139
Other borrowings...................... 76
------- ------- ------- -------
Interest sensitive liabilities...... 24,592 19,037 6,444 0
------- ------- ------- -------
Interest sensitivity gap............ $ 7,223 $(8,880) $15,908 $ 1,067
======= ======= ======= =======
Cumulative interest sensitivity
gap................................ $ 7,223 $(1,657) $14,251 $15,318
======= ======= ======= =======
Cumulative interest sensitivity gap
as a percentage of total interest
sensitive assets................... 11.0% (2.5)% 21.8% 23.4%
======= ======= ======= =======
Cumulative interest sensitive assets
as a percentage of cumulative
interest sensitive liabilities..... 129.4% 96.2 % 128.5% 130.6%
======= ======= ======= =======
</TABLE>
- --------
(a) Excludes the effect of SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities".
PROVISION FOR LOAN LOSSES
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. During routine examinations of banks,
the Federal Deposit Insurance Corporation (FDIC) and the Georgia Department of
Banking and Finance 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.
Management determines the adequacy of the allowance through a combination of
factors including loan officer assessments of the individual credits, current
economic conditions, loan loss experience, regulatory guidelines and current
levels of nonperforming loans. Crossroads expensed $133,000 in 1997, $63,000
in 1996 and $110,000 in 1995 for loan loss provisions. The allowance for loan
losses on December 31, 1997 was 1.01% of outstanding loans, compared to 1.01%
and 1.00% as of December 31, 1996 and 1995. Management believes
93
<PAGE>
that the $466,000 balance in the allowance for loan losses at December 31,
1997 is 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, Crossroads 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. The change did not have a
material impact on the financial statements. Impaired loans are loans for
which principal and interest are unlikely to be collected in accordance with
the original loan terms and, generally represent loans delinquent in excess of
90 days which have been placed on nonaccrual status and for which collateral
values are less than outstanding principal and interest. Small balance,
homogeneous loans are excluded from impaired loans. When a loan becomes
impaired, management calculates the impairment based on the present value of
expected future cash flows discounted at the loan's effective interest rate.
If the loan is collateral dependent, the fair value of the collateral is used
to measure the amount of impairment. The amount of impairment and any
subsequent changes are recorded as an adjustment to the reserve for loan
losses. When management considers a loan, or a portion thereof, as
uncollectible, it is charged against the allowance for loan losses.
The following table summarizes loans charged off, recoveries of loans
previously charged off and additions to the allowance which have been charged
to operating expense for the periods indicated. The Company has no lease
financing or foreign loans.
TABLE 12
ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Average Amount of Loans Outstanding...................... $43,868 $35,358
Balance of Reserve for Possible Loan Losses at Beginning
of Period............................................... $ 376 $ 323
Charge-offs:
Commercial, financial and agricultural................. 12 2
Real Estate............................................ 13 0
Consumer............................................... 62 16
------- -------
Total Charge-offs.................................... 87 18
------- -------
Recoveries:
Commercial, financial and agricultural................. 2 0
Real Estate............................................ 3 0
Consumer............................................... 39 8
------- -------
Total Recoveries..................................... 44 8
------- -------
Net loans charged off during the year.................... 43 10
------- -------
Provision for Loan Losses................................ 133 63
------- -------
Allowance for loan losses at end of year................. $ 466 $ 376
======= =======
Allowance for loan losses to year end Net Loans.......... 1.01% 1.01%
======= =======
Ratio of Net Charge-offs to Average Loans................ 0.10% 0.03%
======= =======
</TABLE>
94
<PAGE>
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 past two years.
TABLE 13
ALLOCATION OF ALLOWANCE FOR LOAN LOSSES
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
1997 1996
----------- -----------
RESERVE % * RESERVE % *
------- --- ------- ---
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at end of period applicable to:
Commercial, financial and agricultural.............. $149 25% $102 20%
Real estate--construction........................... 61 11 68 18
Real estate--mortgage............................... 93 47 90 44
Real estate--other.................................. 126 -- 71 --
Loans to individuals................................ 37 17 45 18
---- --- ---- ---
Total allowance for loan losses................... $466 100% $376 100%
==== === ==== ===
</TABLE>
- --------
* Loan balance in each category expressed as a percentage of total year-end
loans.
ASSET QUALITY
Nonperforming assets consist of nonaccrual and certain past due loans, loans
restructured due to debtor's 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. There were no provisions
for estimated losses recognized or recorded at December 31, 1997.
Nonperforming assets at December 31, 1997 amounted to approximately
$781,000, or 1.06% of total assets, up from approximately $549,000, or 0.78%
of total assets at December 31, 1996.
TABLE 14
NONPERFORMING ASSETS
<TABLE>
<CAPTION>
YEAR ENDING
DECEMBER 31,
----------------
1997 1996
------- -------
(IN THOUSANDS)
<S> <C> <C>
Loans accounted for on a nonaccrual basis................... 150 226
Installment loans and term loans contractually past due
ninety days or more as to interest or principal payments
and still accruing......................................... 30 8
Loans, the terms of which have been renegotiated to provide
a reduction or deferral of interest or principal balance
because of deterioration in the financial position of the
borrower................................................... 0 0
Loans now current about which there are serious doubts as to
the ability of the borrower to comply with present loan
repayment terms............................................ 0 0
Foreclosed assets........................................... 601 315
------- -------
Total nonperforming assets.................................. 781 549
======= =======
</TABLE>
95
<PAGE>
At December 31, 1997, 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 1997 totaled $791,000, up 16.7% from $678,000 in 1996.
Sixty percent of the increase, or $68,000, is attributed to growth related
increases in service charges on deposit accounts, which rose by 27.6% over the
previous year.
Noninterest income of $678,000 in 1996 represented a 25.4% increase from
$506,000 recorded in 1995. Again, this increase is attributable to an increase
in fee income, with service charges on deposits amounting to $246,000
representing 24.8% of the total increase in noninterest income.
NONINTEREST EXPENSES
Noninterest expenses were $2,110,000 for the year 1997, up 25.9% from
$1,676,000 in 1996. Almost 54% of the increase is attributed to higher costs
of salaries and benefits resulting from the company's expansion into Warner
Robins in the fourth quarter of 1996.
Salaries and benefits increased by $285,000, or 35.0%. Occupancy costs rose
by $74,000, or 30.1%, due to a full year of expenses for operating the
additional middle Georgia offices. All other overhead expenses increased by
$76,000, or 12.3%, due principally to volume and growth related increases.
Noninterest expenses in 1996 were $1,676,000, up 17.5% over 1995 noninterest
expenses of $1,491,000. Salaries and benefits expense increased by $73,000 or
9.8%, while occupancy costs rose by 24.6% in 1996 due to the costs of the new
branch location.
INCOME TAXES
Income tax expense in 1997 amounted to $438,000, or an effective rate of
35.3%, on the year's pre-tax earnings. Income tax expense in 1996 was
$404,000, equating to a 35.0% effective tax rate. This effective rate is down
slightly from 35.8%, or $339,000 in 1995. See Note 7 to Crossroads'
consolidated financial statements for a detailed analysis of income taxes.
INFLATION
Inflation impacts the financial condition and operating results of
Crossroads. 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. Crossroads
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 rat risk. Prices for banking products and
services are continually reviewed in relation to current costs, and overhead
cost cutting is an ongoing task.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statements of Financial Accounting Standards (SFAS) No. 130 "Reporting
Comprehensive Income". This statement established standards for
96
<PAGE>
reporting and displaying comprehensive income and its components in a full set
of general-purpose financial statements. This is effective for fiscal years
beginning after December 15, 1997. Crossroads does not expect any material
changes to its current reporting format in response to this statement.
Also, in June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information", and is effective for fiscal years
beginning after December 15, 1997. This statement establishes standards for
reporting operating segments by public business enterprises in annual
financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports to
shareholders. The adoption of this statement will have no effect on the
financial statements of the Company.
YEAR 2000 COMPUTER ISSUE
Crossroads has developed preliminary plans to address the possible exposures
related to the impact on its financial, informational and operational systems
of the Year 2000. Crossroads currently processes inhouse. However, major data
processing changes are not anticipated for their current system when
considering the proposed merger which should be effected prior to Year 2000.
Other equipment is being identified and vendors are being contacted. While
there may be some expenses incurred during the next two years, it is not
expected to have a material effect on the company's consolidated financial
statements.
97
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CERTAIN REGULATORY CONSIDERATIONS
The following discussion sets forth the material elements of the regulatory
framework applicable to banks, and bank holding companies and provides certain
specific information related to SNB and Crossroads.
GENERAL
SNB and Crossroads are each bank holding companies registered with the
Federal Reserve and the Georgia Department under the BHCA and the Georgia
BHCA. As such, SNB and Crossroads are both subject to the supervision,
examination and reporting requirements of the BHCA and the regulations of the
Federal Reserve and the Georgia BHCA.
The BHCA requires every bank holding company to obtain the prior approval of
the Federal Reserve before: (i) it may acquire direct or indirect ownership or
control of any voting shares of any bank if, after such acquisition, the bank
holding company will directly or indirectly own or control more than 5% of the
voting shares of the bank; (ii) it or any of its subsidiaries, other than a
bank, may acquire all or substantially all of the assets of any bank; or (iii)
it may merge or consolidate with any other bank holding company.
The BHCA further provides that the Federal Reserve may not approve any
transaction that would result in a monopoly or would be in furtherance of any
combination or conspiracy to monopolize or attempt to monopolize the business
of banking in any section of the United States, or the effect of which may be
substantially to lessen competition or to tend to create a monopoly in any
section of the country, or that in any other manner would be in restraint of
trade, unless the anticompetitive effects of the proposed transaction are
clearly outweighed by the public interest in meeting the convenience and needs
of the communities to be served. The Federal Reserve is also required to
consider the financial and managerial resources and future prospects of the
bank holding companies and banks concerned and the convenience and needs of
the community to be served. Consideration of financial resources generally
focuses on capital adequacy, which is discussed below.
The BHCA, as amended by the interstate banking provisions of the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Banking Act"), which became effective on September 29, 1995, repealed the
prior statutory restrictions on interstate acquisitions of banks by bank
holding companies, such that SNB, Crossroads, and any other bank holding
company located in Georgia may now acquire a bank located in any other state,
and any bank holding company located outside Georgia may lawfully acquire any
Georgia-based bank, regardless of state law to the contrary, in either case
subject to certain deposit-percentage, aging requirements, and other
restrictions. The Interstate Banking Act also generally provides that, after
June 1, 1997, national and state-chartered banks may branch interstate through
acquisitions of banks in other states.
In response to the Interstate Banking Act, the Georgia General Assembly
adopted the Georgia Interstate Banking Act which was effective on July 1,
1995. The Georgia Interstate Banking Act provides that (i) interstate
acquisitions by institutions located in Georgia will be permitted in states
which also allow national interstate acquisitions, and (ii) interstate
acquisitions of institutions located in Georgia will be permitted by
institutions located in states which allow national interstate acquisitions.
Additionally, on January 26, 1996, the Georgia General Assembly adopted the
Georgia Interstate Branching Act which permits Georgia-based banks and bank
holding companies owning or acquiring banks outside of Georgia and all non-
Georgia banks and bank holding companies owning or acquiring banks in Georgia
the right to merge any lawfully acquired bank into an interstate branch
network. The Georgia Interstate Branching Act also allows banks to establish
de novo branches on a limited basis beginning July 1, 1996. Beginning July 1,
1998, the number of de novo branches which may be established will no longer
be limited.
The BHCA generally prohibits a bank holding company from engaging in
activities other than banking or managing or controlling banks or other
permissible subsidiaries and from acquiring or retaining direct or indirect
control of any company engaged in any activities other than those activities
determined by the Federal Reserve
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to be so closely related to banking or managing or controlling banks as to be
a proper incident thereto. In determining whether a particular activity is
permissible, the Federal Reserve must consider whether the performance of such
an activity reasonably can be expected to produce benefits to the public, such
as greater convenience, increased competition, or gains in efficiency, that
outweigh possible adverse effects, such as undue concentration of resources,
decreased or unfair competition, conflicts of interest, or unsound banking
practices. For example, factoring accounts receivable, acquiring or servicing
loans, leasing personal property, conducting discount securities brokerage
activities, performing certain data processing services, acting as agent or
broker in selling credit life insurance and certain other types of insurance
in connection with credit transactions, and performing certain insurance
underwriting activities all have been determined by the Federal Reserve to be
permissible activities of bank holding companies. The BHCA does not place
territorial limitations on permissible non-banking activities of bank holding
companies. Despite prior approval, the Federal Reserve has the power to order
a bank holding company or its subsidiaries to terminate any activity or to
terminate its ownership or control of any subsidiary when it has reasonable
cause to believe that continuation of such activity or such ownership or
control constitutes a serious risk to the financial safety, soundness, or
stability of any bank subsidiary of that bank holding company.
The bank subsidiaries of SNB and Crossroads are members of the Federal
Deposit Insurance Corporation (the "FDIC"), and as such, their deposits are
insured by the FDIC to the maximum extent provided by law. Each such
subsidiary is also subject to numerous state and federal statutes and
regulations that affect its business, activities, and operations, and each is
supervised and examined by one or more state or federal bank regulatory
agencies.
Crossroads Bank is subject to regulation, supervision, and examination by
the FDIC and the Georgia Department. The Bank is subject to regulation,
supervision, and examination by the Office of the Comptroller of the Currency.
The banking regulator for both Crossroads Bank and the Bank, as well as the
Georgia Department in the case of Crossroads Bank, regularly examine the
operations of Crossroads Bank and the Bank and are given authority to approve
or disapprove mergers, consolidations, the establishment of branches, and
similar corporate actions. The federal banking regulators and the Georgia
Department also have the power to prevent the continuance or development of
unsafe or unsound banking practices or other violations of law.
PAYMENT OF DIVIDENDS
SNB and Crossroads are legal entities separate and distinct from their
banking and other subsidiaries. The principal sources of cash flow of SNB,
including cash flow to pay dividends to its shareholders, are dividends from
the Bank. The principal source of cash flow to Crossroads, including cash flow
to pay dividends to its shareholders, is dividends from Crossroads Bank. There
are statutory and regulatory limitations on the payment of dividends by the
Bank to SNB and by Crossroads Bank to Crossroads, respectively, as well as by
SNB and Crossroads to their shareholders.
If, in the opinion of the federal banking regulators, a depository
institution under its jurisdiction is engaged in or is about to engage in an
unsafe or unsound practice (which, depending on the financial condition of the
depository institution, could include the payment of dividends), such
authority may require, after notice and hearing, that such institution cease
and desist from such practice. The federal banking agencies have indicated
that paying dividends that deplete a depository institution's capital base to
an inadequate level would be an unsafe and unsound banking practice. Under the
Federal Deposit Insurance Corporation Improvement Act of 1991 ("FDICIA"), a
depository institution may not pay any dividend if payment would cause it to
become undercapitalized or if it already is undercapitalized. See "--Prompt
Corrective Action." Moreover, the federal agencies have issued policy
statements that provide that bank holding companies and insured banks should
generally only pay dividends out of current operating earnings.
At December 31, 1997, under dividend restrictions imposed under federal and
state laws, the Bank, without obtaining governmental approvals, could declare
aggregate dividends to SNB of approximately $3,931,987. At December 31, 1997,
retained earnings available from Crossroads Bank to pay dividends totaled
approximately $402,222.
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The payment of dividends by SNB and Crossroads and their respective
subsidiaries may also be affected or limited by other factors, such as the
requirement to maintain adequate capital above regulatory guidelines.
CAPITAL ADEQUACY
SNB and Crossroads and their respective banks are required to comply with
the capital adequacy standards established by the Federal Reserve and the
appropriate federal banking regulator in the case of their banking
subsidiaries. There are two basic measures of capital adequacy for bank
holding companies that have been promulgated by the Federal Reserve: a risk-
based measure and a leverage measure. All applicable capital standards must be
satisfied for a bank holding company to be considered in compliance.
The risk-based capital standards are designed to make regulatory capital
requirements more sensitive to differences in risk profile among banks and
bank holding companies, to account for off-balance-sheet exposure, and to
minimize disincentives for holding liquid assets. Assets and off-balance-sheet
items are assigned to broad risk categories, each with appropriate weights.
The resulting capital ratios represent capital as a percentage of total risk-
weighted assets and off-balance-sheet items.
The minimum guideline for the ratio (the "Total Risk-Based Capital Ratio")
of total capital ("Total Capital") to risk-weighted assets (including certain
off-balance-sheet items, such as standby letters of credit) is 8%. At least
half of Total Capital must be comprised of common stock, minority interests in
the equity accounts of consolidated subsidiaries and noncumulative perpetual
preferred stock, less goodwill and certain other intangible assets ("Tier 1
Capital"). The remainder may consist of subordinated debt, other preferred
stock, and a limited amount of loan loss reserves ("Tier 2 Capital"). At
December 31, 1997, SNB's consolidated Total Risk-Based Capital Ratio and its
Tier 1 Risk-Based Capital Ratio (i.e., the ratio of Tier 1 Capital to risk-
weighted assets) were 16.2% and 14.9%, respectively. At December 31, 1997,
Crossroads' unconsolidated Total Risk-Based Capital Ratio and its Tier 1 Risk-
Based Capital Ratio (i.e., the ratio of Tier 1 Capital to risk weighted
assets) were 11.6% and 10.7%, respectively.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
ratio (the "Leverage Ratio") of Tier 1 Capital to average assets, less
goodwill and certain other intangible assets, of 3% for bank holding companies
that meet certain specified criteria, including those having the highest
regulatory rating. All other bank holding companies generally are required to
maintain a Leverage Ratio of at least 3%, plus an additional cushion of 100 to
200 basis points. SNB's Leverage Ratio at December 31, 1997 was 11.7%.
Crossroads' Leverage Ratio at December 31, 1997 was 8.5%. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions
substantially above the minimum supervisory levels without significant
reliance on intangible assets. Furthermore, the Federal Reserve has indicated
that it will consider a "tangible Tier 1 Capital Leverage Ratio" (deducting
all intangibles) and other indicia of capital strength in evaluating proposals
for expansion or new activities.
The Bank and Crossroads Bank are subject to risk-based and leverage capital
requirements adopted by their respective federal banking regulators, which are
substantially similar to those adopted by the Federal Reserve for bank holding
companies.
Each of the subsidiary depository institutions of SNB and Crossroads was in
compliance with applicable minimum capital requirements as of December 31,
1997. Neither SNB nor Crossroads has been advised by any federal banking
agency of any specific minimum capital ratio requirement applicable to it or
its subsidiary depository institutions.
Failure to meet capital guidelines could subject a bank to a variety of
enforcement remedies, including issuance of a capital directive, the
termination of deposit insurance by the FDIC, a prohibition on the taking of
brokered deposits, and certain other restrictions on its business. As
described below, substantial additional restrictions can be imposed upon FDIC-
insured depository institutions that fail to meet applicable capital
requirements. See "--Prompt Corrective Action."
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The federal bank regulators continue to indicate their desire to raise
capital requirements applicable to banking organizations beyond their current
levels. In this regard, the Federal Reserve and the FDIC have, pursuant to
FDICIA, amended the risk-based capital standards so as to calculate the change
in an institution's net economic value attributable to increases and decreases
in market interest rates and to require banks with excessive interest rate
risk exposure to hold additional amounts of capital against such exposures.
SUPPORT OF SUBSIDIARY INSTITUTIONS
Under Federal Reserve policy, SNB and Crossroads are expected to act as a
source of financial strength for, and to commit resources to support, each of
their banking subsidiaries. This support may be required at times when, absent
such Federal Reserve policy, SNB and Crossroads may not be inclined to provide
it. In addition, any capital loans by a bank holding company to any of its
banking subsidiaries are subordinate in right of payment to deposits and to
certain other indebtedness of such banks. In the event of a bank holding
company's bankruptcy, any commitment by the bank holding company to a federal
bank regulatory agency to maintain the capital of a banking subsidiary will be
assumed by the bankruptcy trustee and entitled to a priority of payment.
Under the Federal Deposit Insurance Act ("FDIA"), a depository institution
insured by the FDIC can be held liable for any loss incurred by, or reasonably
expected to be incurred by, the FDIC after August 9, 1989, in connection with
(i) the default of a commonly controlled FDIC-insured depository institution
or (ii) any assistance provided by the FDIC to any commonly controlled FDIC-
insured depository institution "in danger of default." "Default" is defined
generally as the appointment of a conservator or receiver, and "in danger of
default" is defined generally as the existence of certain conditions
indicating that a default is likely to occur in the absence of regulatory
assistance. The FDIC's claim for damages is superior to claims of shareholders
of the insured depository institution or its holding company, but is
subordinate to claims of depositors, secured creditors, and holders of
subordinated debt (other than affiliates) of the commonly controlled insured
depository institution. As a result, any loss suffered by the FDIC in respect
of any of the subsidiaries of SNB would likely result in assertion of the
cross-guarantee provisions, the assessment of such estimated losses against
the depository institution's banking or thrift affiliates, and a potential
loss of SNB's investment in such other subsidiary depository institutions.
PROMPT CORRECTIVE ACTION
FDICIA establishes a system of prompt corrective action to resolve the
problems of undercapitalized institutions. Under this system, which became
effective in December 1992, the federal banking regulators are required to
establish five capital categories (well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized, and critically
undercapitalized) and to take certain mandatory supervisory actions, and are
authorized to take other discretionary actions, with respect to institutions
in the three undercapitalized categories, the severity of which will depend
upon the capital category in which the institution is placed. Generally,
subject to a narrow exception, FDICIA requires the banking regulator to
appoint a receiver or conservator for an institution that is critically
undercapitalized. The federal banking agencies have specified by regulation
the relevant capital level for each category.
Under the final agency rules implementing the prompt corrective action
provisions, an institution that (i) has a Total Risk-Based Capital Ratio of
10% or greater, a Tier 1 Risk-Based Capital Ratio of 6.0% or greater, and a
Leverage Ratio of 5.0% or greater and (ii) is not subject to any written
agreement, order, capital directive, or prompt corrective action directive
issued by the appropriate federal banking agency is deemed to be well
capitalized. An institution with a Total Risk-Based Capital Ratio of 8.0% or
greater, a Tier 1 Risk-Based Capital Ratio of 4.0% or greater, and a Leverage
Ratio of 4.0% or greater is considered to be adequately capitalized. A
depository institution that has a Total Risk-Based Capital Ratio of less than
8.0%, a Tier 1 Risk-Based Capital Ratio of less than 4.0%, or a Leverage Ratio
of less than 4.0% is considered to be undercapitalized. A depository
institution that has a Total Risk-Based Capital Ratio of less than 6.0%, a
Tier 1 Risk-Based Capital Ratio of less than 3.0%, or a Leverage Ratio of less
than 3.0% is considered to be significantly undercapitalized, and an
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institution that has a tangible equity capital to assets ratio equal to or
less than 2.0% is deemed to be critically undercapitalized. For purposes of
the regulation, the term "tangible equity" includes core capital elements
counted as Tier 1 Capital for purposes of the risk-based capital standards,
plus the amount of outstanding cumulative perpetual preferred stock (including
related surplus), minus intangible assets with certain exceptions. A
depository institution may be deemed to be in a capitalization category that
is lower than is indicated by its actual capital position if it receives an
unsatisfactory examination rating.
An institution that is categorized as undercapitalized, significantly
undercapitalized, or critically undercapitalized is required to submit an
acceptable capital restoration plan to its appropriate federal banking agency.
Under FDICIA, a bank holding company must guarantee that a subsidiary
depository institution meets its capital restoration plan, subject to certain
limitations. The obligation of a controlling holding company under FDICIA to
fund a capital restoration plan is limited to the lesser of 5% of an
undercapitalized subsidiary's assets or the amount required to meet regulatory
capital requirements. An undercapitalized institution is also generally
prohibited from increasing its average total assets, making acquisitions,
establishing any branches, or engaging in any new line of business, except in
accordance with an accepted capital restoration plan or with the approval of
the FDIC. In addition, the appropriate federal banking regulator is given
authority with respect to any undercapitalized depository institution to take
any of the actions it is required to or may take with respect to a
significantly undercapitalized institution as described below if it determines
"that those actions are necessary to carry out the purpose" of FDICIA.
For those institutions that are significantly undercapitalized or
undercapitalized and either fail to submit an acceptable capital restoration
plan or fail to implement an approved capital restoration plan, the
appropriate federal banking agency must require the institution to take one or
more of the following actions: (i) sell enough shares, including voting
shares, to become adequately capitalized; (ii) merge with (or be sold to)
another institution (or holding company), but only if grounds exist for
appointing a conservator or receiver; (iii) restrict certain transactions with
banking affiliates as if the "sister bank" exception to the requirements of
Section 23A of the Federal Reserve Act did not exist; (iv) otherwise restrict
transactions with bank or non-bank affiliates; (v) restrict interest rates
that the institution pays on deposits to "prevailing rates" in the
institution's "region;" (vi) restrict asset growth or reduce total assets;
(vii) alter, reduce, or terminate activities; (viii) hold a new election of
directors; (ix) dismiss any director or senior executive officer who held
office for more than 180 days immediately before the institution became
undercapitalized, provided that in requiring dismissal of a director or senior
executive officer, the regulator must comply with certain procedural
requirements, including the opportunity for an appeal in which the director or
officer will have the burden of proving his or her value to the institution;
(x) employ "qualified" senior executive officers; (xi) cease accepting
deposits from correspondent depository institutions; (xii) divest certain
nondepository affiliates which pose a danger to the institution; or (xiii) be
divested by a parent holding company. In addition, without the prior approval
of the appropriate federal banking regulator, a significantly undercapitalized
institution may not pay any bonus to any senior executive officer or increase
the rate of compensation for such an officer.
At December 31, 1997, the Bank and Crossroads Bank had the requisite capital
levels to qualify as "well capitalized."
FDIC INSURANCE ASSESSMENTS
Pursuant to FDICIA, the FDIC adopted a new risk-based assessment system for
insured depository institutions that takes into account the risks attributable
to different categories and concentrations of assets and liabilities. The new
system, which went into effect on January 1, 1994, assigns an institution to
one of three capital categories: (i) well capitalized; (ii) adequately
capitalized; and (iii) undercapitalized. These three categories are
substantially similar to the prompt corrective action categories described
above, with the "undercapitalized" category including institutions that are
undercapitalized, significantly undercapitalized, and critically
undercapitalized for prompt corrective action purposes. An institution is also
assigned by the FDIC to one of three supervisory subgroups within each capital
group. The supervisory subgroup to which an institution is assigned is based
on a supervisory evaluation provided to the FDIC by the institution's primary
federal
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regulator and information which the FDIC determines to be relevant to the
institution's financial condition and the risk posed to the deposit insurance
funds (which may include, if applicable, information provided by the
institution's state supervisor). An institution's insurance assessment rate is
then determined based on the capital category and supervisory category to
which it is assigned. Under the final risk-based assessment system, as well as
the prior transitional system, there are nine assessment risk classifications
(i.e., combinations of capital groups and supervisory subgroups) to which
different assessment rates are applied. Assessment rates for members of both
the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund
("SAIF") for the first half of 1995, as they had during 1994, ranged from 23
basis points (0.23% of deposits) for an institution in the highest category
(i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of
deposits) for an institution in the lowest category (i.e., "undercapitalized"
and "substantial supervisory concern"). These rates were established for both
funds to achieve a designated ratio of reserves to insured deposits (i.e.,
1.25%) within a specified period of time.
Once the designated ratio for the BIF was reached in May 1995, the FDIC was
authorized to reduce the minimum assessment rate below the 23 basis points and
to set future assessment rates at such levels that would maintain the fund's
reserve ratio at the designated level. In August 1995, the FDIC adopted
regulations reducing the assessment rates for BIF-member banks. Under the
revised schedule, BIF-member banks, starting with the second half of 1995,
were to pay assessments ranging from 4 basis points to 31 basis points, with
an average assessment rate of 4.5 basis points. Refunds with interest were
paid for assessments for the month(s) after the month in which the designated
reserve ratio for the BIF was reached. Subsequently, on November 14, 1995, the
FDIC announced that, beginning in 1997, it would further reduce the deposit
insurance premiums for 92% of all BIF members that are in the highest capital
and supervisory categories to $2,000 per year, regardless of deposit size. At
the same time, the FDIC elected to retain the existing assessment rate range
of 23 to 31 basis points for SAIF members for the foreseeable future given the
undercapitalized nature of that insurance fund.
On September 30, 1996, the President signed the Deposit Insurance Fund Act
of 1996 ("DIFA") which was part of the omnibus spending bill enacted by
Congress at the end of its 1996 session. DIFA mandated that the FDIC impose a
one-time special assessment on the SAIF-assessable deposits of each insured
depository institution at a rate applicable to all such institutions that the
FDIC determined would cause the SAIF to achieve its designated reserve ratio
of 1.25% as of October 1, 1996. The assessment was based on the amount of
SAIF-insured deposits owned by each institution as of March 31, 1995. DIFA
allowed the FDIC to exempt any insured institution that it determined to be
weak from paying the special assessment if the FDIC determined that the
exemption would reduce the risk to the SAIF.
DIFA provides that the FDIC may not set semi-annual assessments with respect
to SAIF or BIF in excess of the amount needed to maintain the 1.25% designated
reserve ratio or, if the reserve ratio is less than the designated reserve
ratio, to increase the reserve ratio to the designated reserve ratio.
On October 10, 1996, the FDIC adopted a final rule governing the payment of
the SAIF special assessment. The FDIC imposed a special assessment in the
amount of 65.7 basis points.
Under the FDIA, insurance of deposits may be terminated by the FDIC upon a
finding that the institution has engaged in unsafe and unsound practices, is
in an unsafe or unsound condition to continue operations, or has violated any
applicable law, regulation, rule, order, or condition imposed by the FDIC.
SAFETY AND SOUNDNESS STANDARDS
The FDIA, as amended by the FDICIA and the Riegle Community Development and
Regulatory Improvement Act of 1994, requires the federal bank regulatory
agencies to prescribe standards, by regulations or guidelines, relating to
internal controls, information systems and internal audit systems, loan
documentation, credit underwriting, interest rate risk exposure, asset growth,
asset quality, earnings, stock valuation and compensation, fees and benefits,
and such other operational and managerial standards as the agencies deem
appropriate. The federal bank regulatory agencies have adopted, effective
August 9, 1995, a set of guidelines
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prescribing safety and soundness standards pursuant to FDICIA, as amended. The
guidelines establish general standards relating to internal controls and
information systems, internal audit systems, loan documentation, credit
underwriting, interest rate exposure, asset growth and compensation and fees
and benefits. In general, the guidelines require, among other things,
appropriate systems and practices to identify and manage the risks and
exposures specified in the guidelines. The guidelines prohibit excessive
compensation as an unsafe and unsound practice and describe compensation as
excessive when the amounts paid are unreasonable or disproportionate to the
services performed by an executive officer, employee, director, or principal
shareholder. In addition, the agencies adopted regulations that authorize, but
do not require, an agency to order an institution that has been given notice
by an agency that it is not satisfying any of such safety and soundness
standards to submit a compliance plan. If, after being so notified, an
institution fails to submit an acceptable compliance plan or fails in any
material respect to implement an acceptable compliance plan, the agency must
issue an order directing action to correct the deficiency and may issue an
order directing other actions of the types to which an undercapitalized
institution is subject under the "prompt corrective action" provisions of
FDICIA. See "--Prompt Corrective Action." If an institution fails to comply
with such an order, the agency may seek to enforce such order in judicial
proceedings and to impose civil money penalties. The federal regulatory
agencies also proposed guidelines for asset quality and earnings standards.
10-KSB ANNUAL REPORT
A copy of SNB's 1997 Annual Report, which contains audited financial
statements and footnote disclosures, is being mailed to each stockholder of
record of SNB together with these proxy materials. UPON WRITTEN REQUEST, A
COPY OF SNB'S MOST RECENT ANNUAL REPORT ON FORM 10-KSB, INCLUDING THE
FINANCIAL STATEMENTS AND THE FINANCIAL STATEMENT SCHEDULES, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION, SHALL BE FURNISHED TO SHAREHOLDERS OF
EITHER SNB OR CROSSROADS, WITHOUT CHARGE, WHO MAKE WRITTEN REQUESTS THEREFOR
TO SNB AT P.O. BOX 4748, MACON, GEORGIA 31208: ATTENTION MICHAEL T. O'DILLON.
COPIES OF EXHIBITS AND BASIC DOCUMENTS FILED WITH THAT REPORT OR REFERENCED
THEREIN WILL BE FURNISHED TO SHAREHOLDERS OF RECORD UPON REQUEST.
EXPERTS
The consolidated financial statements of SNB appearing in this Joint Proxy
Statement/Prospectus have been audited by McNair, McLemore, Middlebrooks &
Co., LLP, independent accountants, to the extent and for the years indicated
in their report appearing elsewhere herein, and are included in reliance upon
such report and upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Crossroads appearing in this Joint Proxy
Statement/Prospectus have been audited by McNair, McLemore, Middlebrooks &
Co., LLP to the extent and for the years indicated in their report appearing
elsewhere herein, and are included in reliance upon such report and upon the
authority of said firm as experts in accounting and auditing.
OPINIONS
The legality of the shares of the SNB Common Stock to be issued in the
Merger will be passed upon by Martin, Snow, Grant & Napier, LLP, Macon,
Georgia. The income tax consequences of the Merger will be passed upon by
Martin, Snow, Grant & Napier, LLP, Macon, Georgia.
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ADDITIONAL PROPOSAL FOR SNB SHAREHOLDERS
PROPOSAL II
AMENDMENT TO ARTICLES OF INCORPORATION--INCREASING NUMBER OF AUTHORIZED
SHARES.
SNB is authorized under its existing Articles of Incorporation to issue
5,000,000 shares of its $1.00 par value common stock, of which 2,297,331
shares were issued and outstanding as of March 27, 1998. It is anticipated
that as a result of the Merger an additional 846,748 shares of the common
stock of SNB will be issued to the present holders of Crossroads' Common
Stock, leaving approximately 1,855,921 authorized but unissued shares of the
common stock of SNB. In addition, there are outstanding options and warrants
to purchase 277,800 shares of SNB Common Stock. The Board of Directors of SNB
has proposed an amendment to its articles of incorporation which will increase
the number of issued and outstanding shares of SNB's Common Stock from
5,000,000 to 10,000,000 in order to permit the issuance of additional shares
of SNB Common Stock in connection with, among other matters, future
acquisitions and the declaration of future stock dividends without the
necessity of obtaining further shareholder approval. There are no present
intentions to issue any of the additional 5,000,000 shares which would be
authorized under the proposed amendment to SNB's articles of incorporation.
The text of the amendment to be voted on by shareholders of SNB is as
follows:
(a) Paragraph 3 of the Articles of Incorporation of the Company is deleted
in its entirety and the following new paragraph 3 is substituted in lieu
thereof:
"3. The Corporation shall have the authority to issue 10,000,000 common
shares with a par value of $1.00 per share."
THE BOARD OF DIRECTORS OF SNB RECOMMENDS A VOTE IN FAVOR OF PROPOSAL II.
PROPOSAL III
AMENDMENT TO ARTICLES OF INCORPORATION--RESTRUCTURING OF BOARD OF DIRECTORS
AND ELECTION OF DIRECTORS.
(a) The articles of incorporation of SNB presently provide for the division
of the Board of Directors into five (5) classes which are as nearly equal in
number as possible, with each director serving for a term of five (5) years
but with staggered terms which ensure that approximately 20% of the directors
stand for election each year.
The Board of Directors of SNB believes that a term of three (3) years for
directors will better serve the interests of SNB's shareholders, and
accordingly has proposed an amendment to the articles of incorporation of SNB
which will provide for the division of the Board of Directors of SNB into
three (3), rather than five (5), classes and which will provide for staggered
terms of three (3), rather than five (5), years each. Under the proposed
amendment, those initial directors in Class I will hold office until the
annual meeting of shareholders in 1999; those initial directors in Class II
will hold office until the annual meeting of shareholders in 2000; and the
initial directors in Class III will hold office until the annual meeting of
shareholders in 2001. Thereafter, the term of all directors shall be for three
(3) years. A director elected to fill a vacancy is elected for the unexpired
term of his predecessor in office. The proposed amendment further provides for
the election of directors by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present;
the current articles of incorporation provide for the election by the
affirmative vote of a majority of the shares represented at the annual
meeting. The Board of Directors believes the proposed change in the voting
requirement for directors is consistent with the practice of most financial
institutions similar to SNB.
The Board of Directors of SNB on March 12, 1998 adopted a resolution
providing that in the event Proposal III(a) is approved, in future elections
at least one (1) director in each class will not be nominated by the Board of
Directors for reelection by the shareholders. That same resolution provides,
effective December 31, 1999, for a
105
<PAGE>
mandatory retirement age for directors at age 75, at which time the director
will serve as director emeritus for a term of five (5) years, with the right
to attend all meetings and receive the same compensation as other board
members until age 80.
The full text of the amendment to be voted on by the shareholders of SNB at
the SNB meeting (proposal III(a)) is as follows:
(b) Paragraph 7 of the Articles of Incorporation of the Company is deleted
in its entirety and the following new paragraph 7 is substituted in lieu
thereof:
"7. The Board of Directors of the corporation shall consist of not less than
five nor more than 25 persons and shall be divided into three classes: Class
I, Class II, and Class III which shall be as nearly equal in number as
possible. The exact number of directors in each class shall be set by the
Board of Directors or resolution of the shareholders adopted at the annual
meeting of shareholders by the affirmative vote of a majority of the shares
represented at the annual meeting. Each director shall serve for a term ending
on the date of the third annual meeting of shareholders following the annual
meeting at which such director was elected; provided, however, that each
initial director in Class I shall hold office until the annual meeting of
shareholders in 1999, each initial director in Class II shall hold office
until the annual meeting in 2000, and each initial director in Class III shall
hold office until the annual meeting of shareholders in 2001. Directors in all
classes shall be elected at the annual meeting of shareholders in 1998. At
each annual shareholders meeting held thereafter, directors shall be chosen
for a term of three years, as the case may be, to succeed those whose terms
expire. Directors are elected by a plurality of the votes cast by the shares
entitled to vote in the election at a meeting at which a quorum is present.
The maximum number of directors may be increased or decreased from time to
time by amendment to this article; provided however, that no decrease in the
number of directors shall have the effect of shortening the term of an
incumbent director. In the event of any increase or decrease in the authorized
number of directors, each director then serving shall continue as a director
of the class of which he is a member until the expiration of his current term,
or his earlier resignation, removal from office for cause or death. Newly
created or eliminated directorships resulting from such increase or decrease
shall be apportioned by the Board among the three classes of directors so as
to maintain such classes as nearly equal as possible; provided however, that
there shall be no additional directors elected by the Board until the next
meeting of shareholders called for the purpose of electing directors. Each
director shall serve until the expiration of his term and his successor is
elected unless he should earlier resign, retire, be disqualified, die or be
removed for cause as provided by law."
THE BOARD OF DIRECTORS OF SNB RECOMMENDS APPROVAL OF PROPOSAL III(A).
(b) In the event the amendment to the articles of incorporation to change
the classification of SNB's Board of Directors is approved, shareholders of
SNB will also vote on the election of the eight (8) initial directors of SNB
at the Meeting. In order to facilitate the restructuring of SNB's Board of
Directors, all current directors of SNB have submitted their resignations as
directors, contingent upon SNB's acceptance of the resignations; the adoption
by the shareholders of SNB of the amendment to the articles of incorporation
restructuring the Board of Directors of SNB into three classes; and the
election of directors by the shareholders of SNB at the Meeting to fill the
eight (8) vacancies created by the resignation of those directors. The
articles of incorporation of SNB provide that the Board of Directors shall
consist of not less than five (5) nor more than twenty-five (25) persons, with
the exact number of directors in each class to be set by the Board of
Directors or resolution of the shareholders adopted at the annual meeting of
shareholders. The Board of Directors has by resolution fixed the number of
directors to be elected at the Meeting to be set at eight (8), with two (2)
members in Class I (term expiring in 1999), three (3) members in Class II
(term expiring in 2000) and three (3) members in Class III (term expiring in
2001).
The Board of Directors has nominated and recommended to shareholders of SNB
that, subject to the amendment of the articles of incorporation of SNB, the
following persons be elected at the Meeting as initial directors of SNB for
the classes indicated:
106
<PAGE>
Alford C. Bridges (Class I); Richard W. White, Jr. (Class I); Robert C. Ham
(Class II); Robert T. Mullis (Class II); Joe E. Timberlake, III (Class II);
Benjamin W. Griffith, III (Class III); Ben G. Porter (Class III) and H.
Averett Walker (Class III).
The Agreement provides that in the event the proposed acquisition of
Crossroads is consummated SNB will nominate and recommend for election to the
Board of Directors of SNB four (4) persons who presently serve as directors of
Crossroads. It is anticipated that in the event Proposal III(a) is adopted and
the acquisition of Crossroads is consummated the Board of Directors of SNB
will by resolution increase the number of directors from eight (8) to twelve
(12), and will fill the four (4) newly created directorships with four (4)
persons who presently serve on the Board of Directors of Crossroads.
In the event Proposal III(a) is not approved by the shareholders of SNB, it
is the intention of the Board of Directors to move for an adjournment of the
Meeting for the purpose of nominating other persons to serve as directors of
SNB under its current articles of incorporation and to solicit proxies for
voting in the election of such directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF PROPOSAL III(B) AND OF
THE ELECTION OF EACH OF THE EIGHT (8) NOMINEES FOR DIRECTORS OF SNB.
PROPOSAL IV
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS.
The Board of Directors of SNB has appointed by the firm of McNair, McLemore
& Middlebrooks & Co., LLP, Macon, Georgia, to continue as independent
accountants of SNB and the Bank for the year ending December 31, 1998 and has
directed that such appointment be submitted to the shareholders of SNB for
ratification at the Meeting. McNair, McLemore & Middlebrooks & Co., LLP has
served as independent accountants of both SNB and the Bank since their
inceptions and is considered by management to be well qualified.
A representative of McNair, McLemore & Middlebrooks & Co., LLP will be
present at the annual meeting, will have an opportunity to make a statement if
he or she so desires, and will be available to respond to appropriate
questions from shareholders.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE RATIFICATION
OF THE APPOINTMENT OF MCNAIR, MCLEMORE & MIDDLEBROOKS & CO., LLP AS
INDEPENDENT ACCOUNTANTS FOR THE YEAR ENDING DECEMBER 31, 1998.
SHAREHOLDER PROPOSALS FOR 1999
From time to time, SNB shareholders may present proposals which may be
proper subjects for inclusion in SNB's proxy statement for consideration at
its annual meeting of shareholders. To be considered for inclusion,
shareholder proposals must be submitted on a timely basis. Proposals for SNB's
annual meeting must be received by SNB no later than , and any such
proposals, as well as any questions related thereto, should be directed to the
secretary of SNB at P.O. Box 4748, 2918 Riverside Drive, Macon, Georgia 31208.
OTHER MATTERS WHICH MAY COME BEFORE THE ANNUAL MEETING
The Board of Directors of SNB knows of no matters other than those referred
to in the accompanying notice of annual meeting of shareholders which may
properly come before the Meeting. However, if any other matters should be
properly presented for consideration and voting at the Meeting or any
adjournments thereof, it is the intention of the persons named as proxies on
the enclosed proxy form to vote the shares represented by all proxy forms in
accordance with their judgment of what is in the best interest of SNB.
107
<PAGE>
By Order of the Board of Directors,
SHIRLEY D. JACKSON
Secretary
Macon, Georgia
May , 1998
108
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SNB BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED
FINANCIAL STATEMENTS (AUDITED):
<TABLE>
<S> <C>
Report of Independent Accountant......................................... F-2
Consolidated Balance Sheets--December 31, 1997 and 1996.................. F-3
Consolidated Statements of Operations for the years ended December 31,
1997, 1996 and 1995..................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995.................................. F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995..................................................... F-6
Notes to Consolidated Financial Statements............................... F-7
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY CONSOLIDATED
FINANCIAL STATEMENTS (AUDITED):
Report of Independent Accountant......................................... F-23
Consolidated Balance Sheets--December 31, 1997 and 1996.................. F-24
Consolidated Statements of Income for the years ended December 31, 1997,
1996 and 1995........................................................... F-25
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1997, 1996 and 1995.................................. F-26
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996 and 1995..................................................... F-27
Notes to Consolidated Financial Statements............................... F-28
</TABLE>
F-1
<PAGE>
[MCNAIR LETTERHEAD]
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, 1997 and 1996 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, 1997. 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 audits 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, 1997 and 1996 and the
results of operations and cash flows for each of the years in the three-year
period ended December 31, 1997 in conformity with generally accepted
accounting principles.
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
Macon, Georgia
January 14, 1998
F-2
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash and Balances Due from Depository Institu-
tions............................................. $ 7,769,572 $ 5,488,508
------------ ------------
Federal Funds Sold................................. 280,000 4,980,000
------------ ------------
Investment Securities.............................. 30,985,417 32,655,569
------------ ------------
Loans.............................................. 99,071,379 86,421,730
Allowance for Loan Losses........................ (1,395,188) (1,383,127)
Unearned Interest and Fees....................... (145,940) (174,978)
------------ ------------
97,530,251 84,863,625
------------ ------------
Premises and Equipment............................. 3,971,334 2,533,931
------------ ------------
Other Real Estate (Net of Allowance of $31,500 and
$6,750 in 1997 and 1996, Respectively)............ 276,334 323,966
------------ ------------
Other Assets....................................... 2,079,834 3,239,884
------------ ------------
Total Assets....................................... $142,892,742 $134,085,483
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-Bearing.............................. $ 24,459,748 $ 20,950,094
Interest-Bearing................................. 97,481,432 92,081,567
------------ ------------
121,941,180 113,031,661
------------ ------------
Borrowed Money
Federal Funds Purchased and Securities Sold Under
Agreement to Repurchase......................... 343,421 --
Demand Notes to U.S. Treasury.................... 670,251 467,945
Other Borrowed Money............................. 1,315,000 3,671,800
------------ ------------
2,328,672 4,139,745
------------ ------------
Other Liabilities.................................. 1,782,915 1,981,625
------------ ------------
Stockholders' Equity
Common Stock, Par Value $1 a Share; Authorized
5,000,000 Shares, Issued 2,123,531 and 1,654,852
Shares as of December 31, 1997 and 1996,
Respectively.................................... 2,123,531 1,654,852
Paid-In Capital.................................. 9,726,094 9,312,662
Retained Earnings................................ 4,920,395 3,948,855
Net Unrealized Gain on Securities Available for
Sale, Net of Tax of $36,037 in 1997 and $8,285
in 1996......................................... 69,955 16,083
------------ ------------
16,839,975 14,932,452
------------ ------------
Total Liabilities and Stockholders' Equity......... $142,892,742 $134,085,483
============ ============
</TABLE>
The accompanying notes are an integral part of these balance sheets.
F-3
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
INTEREST INCOME
Loans, Including Fees.................... $ 9,641,319 $ 8,277,182 $6,382,841
Federal Funds Sold....................... 181,760 112,358 180,038
Deposits with Other Banks................ 1,108 162 1,284
Investment Securities
U. S. Treasury......................... 247,000 309,433 263,889
U. S. Government Agencies.............. 921,257 947,789 770,209
State, County and Municipal............ 522,060 512,013 408,548
Other Investments........................ 45,375 45,233 34,520
----------- ----------- ----------
11,559,879 10,204,170 8,041,329
----------- ----------- ----------
INTEREST EXPENSE
Deposits................................. 4,767,769 4,313,570 3,512,975
Federal Funds Purchased.................. 10,051 12,995 3,693
Demand Notes Issued to the U.S. Trea-
sury.................................... 24,870 23,970 26,538
Other Borrowed Money..................... 138,391 257,341 187,546
----------- ----------- ----------
4,941,081 4,607,876 3,730,752
----------- ----------- ----------
NET INTEREST INCOME........................ 6,618,798 5,596,294 4,310,577
Provision for Loan Losses................ 372,000 257,000 109,143
----------- ----------- ----------
NET INTEREST INCOME AFTER PROVISION FOR
LOAN LOSSES............................... 6,246,798 5,339,294 4,201,434
----------- ----------- ----------
NONINTEREST INCOME
Service Charges on Deposits.............. 985,483 700,074 511,535
Other Service Charges, Commissions and
Fees.................................... 316,249 262,211 179,468
Securities Gains......................... 2,218 24,077 2,637
Gain from Sale of SBA Loans.............. 21,788 50,000 46,142
Other.................................... 70,542 65,129 131,205
----------- ----------- ----------
1,396,280 1,101,491 870,987
----------- ----------- ----------
NONINTEREST EXPENSES
Salaries and Employee Benefits........... 2,511,401 2,143,932 1,488,196
Occupancy and Equipment.................. 718,405 574,982 406,517
Loss on Sale of Premises and Equipment... 78,861 -- 4,282
Office Supplies and Printing............. 162,569 175,633 159,897
Other.................................... 1,583,562 1,217,151 1,061,930
----------- ----------- ----------
5,054,798 4,111,698 3,120,822
----------- ----------- ----------
INCOME BEFORE INCOME TAXES................. 2,588,280 2,329,087 1,951,599
INCOME TAXES............................... 785,344 686,813 560,804
----------- ----------- ----------
NET INCOME................................. $ 1,802,936 $ 1,642,274 $1,390,795
=========== =========== ==========
BASIC EARNINGS PER SHARE................... $ 0.86 $ 0 .96 $ 0.93
=========== =========== ==========
DILUTED EARNINGS PER SHARE................. $ 0.73 $ 0.81 $ 0.80
=========== =========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<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,
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
During 1995 on
Securities Available
for Sale, Net of
Tax.................. 192,448 192,448
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
Exercise of Stock
Warrants............. 49,200 49,200 155,802 205,002
Net Unrealized Loss
During 1996 on
Securities Available
for Sale, Net of
Tax.................. (8,061) (8,061)
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
Issuance of Common
Stock................ 29,708 29,708 371,350 401,058
25% Stock Split
Effected as
Dividend............. 421,553 421,553 (421,895) (342)
Exercise of Stock
Warrants............. 17,418 17,418 42,082 59,500
Net Unrealized Gain
During 1997 on
Securities Available
for Sale, Net of
Tax.................. 53,872 53,872
Cash Dividends........ (409,501) (409,501)
Net Income............ 1,802,936 1,802,936
--------- ---------- ---------- ---------- --------- -----------
Balance, December 31,
1997................... 2,123,531 $2,123,531 $9,726,094 $4,920,395 $ 69,955 $16,839,975
========= ========== ========== ========== ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income.......................... $ 1,802,936 $ 1,642,274 $ 1,390,795
Adjustments to Reconcile Net Income
to Net Cash Provided from Operating
Activities
Depreciation........................ 319,284 237,354 196,592
Amortization and Accretion.......... 143,558 109,578 19,759
Provision for Loan Losses........... 372,000 257,000 109,143
Deferred Income Taxes............... (51,981) (84,456) 14,263
Securities Gains.................... (2,218) (24,077) (2,637)
Gain from Sale of SBA Loans......... (21,788) (50,000) (46,142)
Gain on Sale of Other Real Estate... (31,831) -- (5,632)
Unrealized (Gain) Loss on Other Real
Estate............................. 25,000 -- (34,000)
Loss on Sale of Premises and
Equipment.......................... 78,861 -- 4,282
CHANGE IN
Interest Receivable................ (218,694) (69,380) (474,907)
Prepaid Expenses................... (3,463) (90,945) 2,135
Interest Payable................... (11,069) 73,973 852,485
Accrued Expenses and Accounts
Payable........................... (43,941) 112,996 (338,636)
Other.............................. 1,206,954 (1,021,465) 32,547
------------ ------------ ------------
3,563,608 1,092,852 1,720,047
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from Sale of SBA Loans..... 546,788 982,096 922,840
Investment in SBA Loans............. (700,000) (932,096) (876,698)
Purchase of Investment Securities
Available for Sale................. (9,104,048) (9,177,429) (14,161,045)
Purchase of Investment Securities
Held to Maturity................... -- (1,261,907) (4,517,414)
Proceeds from Disposition of
Investment Securities
Available for Sale.................. 9,779,096 10,374,775 2,454,169
Held to Maturity.................... 1,026,354 1,806,630 715,830
Loans to Customers.................. (13,218,707) (22,048,648) (12,381,647)
Purchase of Software................ (35,183) (190,477) --
Purchase of Premises and Equipment.. (1,849,364) (450,883) (629,401)
Proceeds from Disposal of Premises
and Equipment...................... 13,816 -- 1,600
Other Real Estate................... 409,544 239,539 120,695
------------ ------------ ------------
(13,131,704) (20,658,400) (28,351,071)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Interest-Bearing Customer Deposits.. 5,399,523 13,357,828 24,598,294
Noninterest-Bearing Customer
Deposits........................... 3,509,653 6,705,328 1,161,386
Demand Note to the U.S. Treasury.... 202,306 (465,694) 394,769
Issuance of Common Stock............ 460,558 5,186,114 --
Dividends Paid...................... (409,501) (313,550) (240,000)
Federal Funds Purchased............. 343,421 -- --
Note to the Federal Home Loan Bank.. -- -- 1,425,000
Repayments on Notes to Federal Home
Loan Bank.......................... (2,356,800) (68,800) (12,800)
Mortgage Indebtedness on Other Real
Estate............................. -- -- (6,144)
------------ ------------ ------------
7,149,160 24,401,226 27,320,505
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS.................... (2,418,936) 4,835,678 689,481
CASH AND CASH EQUIVALENTS,
BEGINNING........................... 10,468,508 5,632,830 4,943,349
------------ ------------ ------------
CASH AND CASH EQUIVALENTS, ENDING.... $ 8,049,572 $ 10,468,508 $ 5,632,830
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
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.
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.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement No. 128, Earnings Per Share (SFAS 128). SFAS 128 replaced the
calculation of primary and fully diluted earnings per share (EPS) with basic
and diluted EPS. Unlike primary EPS, basic EPS excludes any dilutive effects
of options, warrants and convertible securities. Diluted EPS is very similar
to fully diluted EPS. All EPS amounts presented have been restated, as
applicable, to conform with the new requirements.
In June 1997, the FASB issued Statement No. 130, Reporting Comprehensive
Income. The new statement is effective for periods beginning after December
15, 1997 and requires that certain additional information be reported in the
financial statements and related notes. SNB Bancshares will adopt SFAS 130 in
the first quarter of 1998.
Also, in June 1997, the Financial Accounting Standards Board issued SFAS
No.131, Disclosure About Segments of an Enterprise and Related Information,
which is effective for fiscal years beginning after December 15, 1997. The
statement establishes standards for reporting operating segments by public
business enterprises in annual financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports to stockholders. The adoption of this statement will have no
effect on the financial statements of the Company.
INVESTMENT SECURITIES
Investment securities are recorded under Statement of Financial Accounting
Standards (SFAS) No. 115, 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, 1997 and 1996. 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.
F-7
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Loans are generally reported at principal amount less unearned interest and
fees. Impaired loans are recorded under 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.
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.
F-8
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
1997 1996
---------- ----------
<S> <C> <C>
Cash on Hand and Cash Items........................... $1,676,535 $1,136,379
Noninterest-Bearing Deposits with Other Banks......... 6,093,037 4,352,129
---------- ----------
$7,769,572 $5,488,508
========== ==========
</TABLE>
As of December 31, 1997, the Bank had no required deposits with the Federal
Reserve.
(3) INVESTMENT SECURITIES
Investment securities as of December 31, 1997 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............... $ 3,515,493 $ 49,421 $ 3,564,914
U.S. Government Agencies
Mortgage Backed........... 2,035,936 14,703 $ (2,345) 2,048,294
Other..................... 14,612,218 24,260 (100,862) 14,535,616
State, County and
Municipal.................. 4,400,128 120,815 4,520,943
Federal Reserve Stock....... 181,200 181,200
Federal Home Loan Bank
Stock...................... 402,100 402,100
----------- -------- --------- -----------
$25,147,075 $209,199 $(103,207) $25,253,067
=========== ======== ========= ===========
SECURITIES HELD TO MATURITY
U.S. Government Agencies
Mortgaged Backed
Other..................... $ 500,000 $ (11) $ 499,989
State, County and
Municipal.................. 5,232,350 $126,348 (2,005) 5,356,693
----------- -------- --------- -----------
$ 5,732,350 $126,348 $ (2,016) $ 5,856,682
=========== ======== ========= ===========
</TABLE>
F-9
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The amortized cost and fair value of investment securities as of December
31, 1997, 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...... $ 3,675,212 $ 3,645,828 $1,570,374 $1,577,520
Due After One Year Through
Five Years.................. 16,804,753 16,839,960 2,346,082 2,401,823
Due After Five Years Through
Ten Years................... 1,642,888 1,711,139 1,513,772 1,569,275
Due After Ten Years.......... 404,986 424,546 302,122 308,064
----------- ----------- ---------- ----------
22,527,839 22,621,473 5,732,350 5,856,682
Mortgage Backed Securities... 2,035,936 2,048,294
Federal Reserve Stock........ 181,200 181,200
Federal Home Loan Bank
Stock....................... 402,100 402,100
----------- ----------- ---------- ----------
$25,147,075 $25,253,067 $5,732,350 $5,856,682
=========== =========== ========== ==========
</TABLE>
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
=========== ======== ========= ===========
SECURITIES HELD TO MATURITY
U.S. Government Agencies
Mortgage 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>
Proceeds from sales of investments in debt securities were $2,396,131 in
1997, $8,306,405 in 1996 and $3,169,999 in 1995. Gross realized gains totaled
$5,050, $37,612 and $7,117 in 1997, 1996 and 1995, respectively. Gross losses
totaled $2,832, $13,535 and $4,480 in 1997, 1996 and 1995, respectively.
Investment securities having a carrying value approximating $5,306,000 and
$4,551,000 as of December 31, 1997 and 1996, respectively, were pledged to
secure public deposits and for other purposes.
F-10
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) LOANS
The composition of loans as of December 31 are:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Loans Secured by Real Estate
Construction and Land Development................ $ 1,970,867 $ 2,864,293
Secured by Farmland (Including Farm Residential
and Other Improvements)......................... 1,086,022 2,337,764
Secured by 1-4 Family Residential Properties..... 30,161,359 25,555,495
Secured by Multifamily (5 or More) Residential
Properties...................................... 198,482 17,530
Secured by Nonfarm Nonresidential Properties..... 34,130,975 31,961,212
Loans to Deposit Institutions...................... 2,150,000 --
Commercial and Industrial Loans (U.S. Addressees).. 19,304,107 15,129,141
Loans to Individuals for Household, Family and
Other Personal Expenditures
Credit Cards and Related Plans................... 495,153 427,437
Other............................................ 9,574,414 8,128,858
----------- -----------
$99,071,379 $86,421,730
=========== ===========
Loans by interest rate type are:
Fixed Rate......................................... $78,561,935 $65,083,381
Variable Rate...................................... 20,509,444 21,338,349
----------- -----------
$99,071,379 $86,421,730
=========== ===========
</TABLE>
Impaired loans included in total loans above as of December 31 are
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Total Investment in Impaired Loans........................ $504,869 $485,744
Less Allowance for Impaired Loan Losses................... 225,000 119,809
-------- --------
Net Investment............................................ $279,869 $365,935
======== ========
Average Investment........................................ $495,307 $425,840
======== ========
</TABLE>
For the year ended December 31, 1997, no income was recorded on the cash
basis on impaired loans. Foregone interest on impaired and other nonperforming
loans approximated $68,500 in 1997, $66,000 in 1996 and $8,000 in 1995.
(5) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses are summarized below for the
years ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Balance, Beginning..................... $1,383,127 $1,127,609 $1,019,613
Provision Charged to Operating
Expenses............................ 372,000 257,000 109,143
Loans Charged Off.................... (598,140) (200,046) (60,191)
Loan Recoveries...................... 238,201 198,564 59,044
---------- ---------- ----------
Balance, Ending........................ $1,395,188 $1,383,127 $1,127,609
========== ========== ==========
</TABLE>
F-11
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The 1997 and 1996 allowance for loan losses presented above include an
allowance for impaired loan losses which was established as of January 1,
1996. Transactions in the allowance for impaired loan losses during 1997 and
1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
-------- ---------
<S> <C> <C>
Balance, Beginning...................................... $119,809 $ 98,447
Provision Charged to Operating Expenses............... 165,000 98,890
Loans Charged Off..................................... (59,809) (77,528)
-------- ---------
Balance, Ending......................................... $225,000 $ 119,809
======== =========
</TABLE>
(6) PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Land............................................... $ 1,080,263 $ 531,411
Building........................................... 1,836,480 1,226,457
Leasehold Improvements............................. 115,610 --
Furniture, Fixtures and Equipment.................. 2,274,096 1,829,521
----------- -----------
5,306,449 3,587,389
Accumulated Depreciation........................... (1,335,115) (1,053,458)
----------- -----------
$ 3,971,334 $ 2,533,931
=========== ===========
</TABLE>
Depreciation charged to operations totaled $319,284 in 1997, $237,354 in
1996 and $196,592 in 1995.
Certain bank facilities are leased under various operating leases. Rental
expense was $100,573 in 1997, $40,175 in 1996 and $-0- in 1995.
Future minimum rental commitments under noncancelable leases are:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- --------
<S> <C>
1998................................................................ $100,000
1999................................................................ 71,136
2000................................................................ 71,556
2001................................................................ 71,556
2002................................................................ 71,556
--------
$385,804
========
</TABLE>
(7) OTHER ASSETS
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 1997, 1996 and 1995.
Accumulated amortization as of December 31, 1997 is $26,333.
(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
F-12
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current Federal Expense.......................... $680,481 $576,357 $546,541
Deferred Federal Expense......................... 51,981 84,456 14,263
-------- -------- --------
732,462 660,813 560,804
Current State Tax Expense........................ 52,882 26,000 --
-------- -------- --------
$785,344 $686,813 $560,804
======== ======== ========
</TABLE>
Federal income tax expense of $732,462 in 1997, $660,813 in 1996 and
$560,804 in 1995 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>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Statutory Federal Income Taxes.............. $ 880,015 $ 791,889 $ 663,544
Tax-Exempt Interest....................... (162,632) (160,347) (128,602)
Interest Expense Disallowance............. 23,798 24,469 21,153
Premiums on Officers' Life Insurance...... 1,420 2,621 3,169
Meal and Entertainment Disallowance....... 5,084 3,603 2,212
Other..................................... (15,223) (1,422) (672)
--------- --------- ---------
Actual Federal Income Taxes................. $ 732,462 $ 660,813 $ 560,804
========= ========= =========
</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>
1997 1996
--------- ---------
<S> <C> <C>
Deferred Tax Assets
Allowance for Loan Losses.......................... $ 388,804 $ 321,598
Georgia Occupation and License Tax Credit.......... 53,581 53,581
Other Real Estate Owned Valuation Allowance........ 10,795 2,295
Valuation Allowance for Deferred Tax Assets........ (23,286) (23,286)
--------- ---------
429,894 354,188
--------- ---------
Deferred Tax Liabilities
Premises and Equipment............................. (121,036) (99,852)
Securities Accretion............................... (19,011) (16,470)
--------- ---------
(140,047) (116,322)
--------- ---------
289,847 237,866
Deferred Tax Liability on Unrealized Securities
Gains............................................... (36,037) (8,285)
--------- ---------
Net Deferred Tax Asset............................... $ 253,810 $ 229,581
========= =========
</TABLE>
F-13
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) DEPOSITS
Components of interest-bearing deposits as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Interest-Bearing Demand............................. $28,629,709 $25,062,789
Savings............................................. 4,255,571 4,153,442
Time, $100,000 and Over............................. 15,999,676 13,522,903
Other Time.......................................... 48,596,476 49,342,433
----------- -----------
$97,481,432 $92,081,567
=========== ===========
</TABLE>
The aggregate amount of short-term jumbo certificates of deposit, each with
a minimum denomination of $100,000, was approximately $7,630,000 and
$12,048,000 on December 31, 1997 and 1996, respectively.
As of December 31, 1997, the scheduled maturities of certificates of deposit
are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- -----------
<S> <C>
1998............................................................. $40,510,113
1999............................................................. 13,081,501
2000............................................................. 10,243,481
2001............................................................. 409,200
2002 and Thereafter.............................................. 351,857
-----------
$64,596,152
===========
</TABLE>
(10) FEDERAL FUNDS PURCHASED AND SECURITIES SOLD UNDER AGREEMENT TO REPURCHASE
Securities sold under agreement to repurchase generally mature within 7 to
14 days. Mortgage backed securities sold under repurchase agreements are held
and segregated by the Bank's investment safekeeping agent. Investments are
identified as subject to the repurchase agreement and may be substituted by
the Bank, subject to agreement by the buyer. The agreements, as of December
31, 1997, mature within 7 days.
Information concerning securities sold under agreements to repurchase is
summarized as follows:
<TABLE>
<CAPTION>
1997 1996
-------- -----
<S> <C> <C>
Average Balance During the Year............................. $271,284 $ --
Average Interest Rate During the Year....................... 5.22% --
Maximum Month-End Balance During the Year................... 484,012 --
</TABLE>
Mortgage backed securities underlying the agreements as of December 31 are:
<TABLE>
<CAPTION>
1997 1996
-------- -----
<S> <C> <C>
Carrying Value................................................ $500,144 $ --
Estimated Fair Value.......................................... 501,328 --
</TABLE>
F-14
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(11) OTHER BORROWED MONEY
Other borrowed money is comprised of the following as of December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<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
6.96 percent to 7.93 percent payable under the
principal reducing credit program and the fixed
rate credit program............................... $1,315,000 $3,671,800
========== ==========
</TABLE>
Maturities of borrowed money for each of the next five years and thereafter
are as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ----------
<S> <C>
1998.................................................................. $ 55,000
1999.................................................................. 55,000
2000.................................................................. 935,000
2001.................................................................. --
2002.................................................................. --
Thereafter............................................................ 270,000
----------
$1,315,000
==========
</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
$185,436 in 1997, $167,890 in 1996 and $160,452 in 1995.
(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 $759,300 as of December 31, 1997 and $201,800 as of December 31,
1996. Unfulfilled loan commitments as of December 31, 1997 and 1996
approximated $16,366,000 and $13,215,000, respectively. No losses are
anticipated as a result of commitments and contingencies.
(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 449,700 with an adjusted exercise price of $3.33 per share.
F-15
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 $8.60, as adjusted for stock splits,
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............................................. 449,700 62,500
Canceled............................................ -- --
Exercised........................................... 79,350 --
------- ------
Outstanding, December 31, 1997...................... 370,350 62,500
======= ======
Eligible to be Exercised, December 31, 1997......... 370,350 12,500
======= ======
</TABLE>
(15) INTEREST INCOME AND EXPENSE
Interest income of $522,299, $471,608 and $394,240 from state, county and
municipal bonds was exempt from regular income taxes in 1997, 1996 and 1995,
respectively.
Interest on deposits includes interest expense on time certificates of
$100,000 or more totaling $1,025,297, $886,601 and $726,041 for the years
ended December 31, 1997, 1996 and 1995, respectively.
(16) SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for the following were made during the years ended December
31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Interest Expense.......................... $4,952,149 $4,533,903 $2,878,203
========== ========== ==========
Income Taxes.............................. $ 888,400 $ 721,000 $ 553,400
========== ========== ==========
Noncash investing activities for the years ended December 31 are as follows:
Acquisitions of Real Estate Through
Foreclosure.............................. $ 355,081 $ 200,531 $ 257,224
========== ========== ==========
</TABLE>
(17) EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 (Statement 128), Earnings per Share.
Statement 128 establishes standards for computing and presenting earnings per
share ("EPS") and supersedes Accounting Principles Board Opinion No. 15 ("APB
15") and its related interpretations. It replaces the presentation of primary
EPS with a presentation of basic EPS, which excludes dilution, and requires
dual presentation of basic and diluted EPS for all entities with complex
capital structures. Diluted EPS is computed similarly to fully diluted EPS
pursuant to APB 15. Statement 128 is effective for periods ending after
December 15, 1997, including interim periods, and will require restatement of
F-16
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
all prior period EPS data presented with earlier application not permitted.
The following presents earnings per share for the years ended December 31,
1997, 1996 and 1995 under the requirements of Statement 128:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
BASIC EARNINGS PER SHARE
Net Income Per Common Share................. $ 0.86 $ 0.96 $ 0.93
Weighted Average Common Shares.............. 2,105,449 1,704,289 1,500,000
DILUTED EARNINGS PER SHARE
Net Income Per Common Share................. 0.73 0.81 0.80
Weighted Average Common Shares.............. 2,461,860 2,022,147 1,730,334
</TABLE>
All share and per share data have been restated to reflect a 25 percent
stock split occurring on September 25, 1997, a 100 percent stock split
occurring on June 1, 1996 and a 20 percent stock split occurring on March 20,
1995. All stock splits were effected in the form of dividends.
In October 1996, 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. continues 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.
(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 $3,182,795
as of December 31, 1997 and $2,227,190 as of December 31, 1996. 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>
1997 1996
----------- -----------
<S> <C> <C>
BALANCE, BEGINNING................................. $ 2,227,190 $ 2,544,857
New Loans........................................ 4,462,525 1,840,377
Repayments....................................... (3,506,920) (2,158,044)
----------- -----------
BALANCE, ENDING.................................... $ 3,182,795 $ 2,227,190
=========== ===========
</TABLE>
F-17
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(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, 1997 and 1996 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>
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash................................................... $ 2,535,406 $ 4,388,241
Accounts Receivable--Other........................... 11,621 31,118
Investment in Loans.................................. 2,150,000 --
Interest Receivable on Loans......................... 40,444 --
Unamortized Organization Costs....................... 14,178 22,280
Investment in Subsidiary, at Equity.................. 12,245,079 10,514,772
Income Tax Benefit................................... -- 9,626
----------- -----------
Total Assets....................................... $16,996,728 $14,966,037
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities
Federal Income Tax Payable........................... $ 124,130 $ --
State Income Tax Payable............................. 18,600 24,000
Other................................................ 14,023 9,585
----------- -----------
156,753 33,585
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, Par Value $1 a Share; Authorized
5,000,000 Shares, Issued and Outstanding 2,123,531
and 1,654,852 Shares, Respectively.................. 2,123,531 1,654,852
Paid-In Capital...................................... 9,726,094 9,312,662
Retained Earnings.................................... 4,920,395 3,948,855
Net Unrealized Gain on Securities Available for Sale,
Net of Tax.......................................... 69,955 16,083
----------- -----------
Total Stockholders' Equity......................... 16,839,975 14,932,452
----------- -----------
Total Liabilities and Stockholders' Equity......... $16,996,728 $14,966,037
=========== ===========
</TABLE>
F-18
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SNB BANCSHARES, INC. (PARENT ONLY)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Income
Dividends from Subsidiary............................... $ 409,501 $ 313,550
Interest.............................................. 60,680 --
---------- ----------
470,181 313,550
---------- ----------
Expense
Amortization of Organization Costs.................... 8,103 8,103
Other................................................. 102,577 50,984
---------- ----------
110,680 59,087
---------- ----------
Income Before Taxes and Equity in Undistributed Earnings
of Subsidiary.......................................... 359,501 254,463
Income Tax Benefit.................................... 17,000 20,091
---------- ----------
Income Before Equity in Undistributed Earnings of
Subsidiary............................................. 376,501 274,554
Equity in Undistributed Earnings of Subsidiary........ 1,426,435 1,367,720
---------- ----------
Net Income.......................................... $1,802,936 $1,642,274
========== ==========
</TABLE>
F-19
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
SNB BANCSHARES, INC. (PARENT ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
---------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net Income.......................................... $1,802,936 $ 1,642,274
Adjustments to Reconcile Net Income to Net Cash
Provided from Operating Activities
Amortization...................................... 8,103 8,103
Equity in Undistributed Earnings of Subsidiary.... (1,426,435) (1,367,720)
Increase in Other................................. 111,846 (3,624)
---------- -----------
496,450 279,033
---------- -----------
Cash Flows from Investing Activities
Investment in Loans................................. (2,150,000) -
Capital Infusion in Subsidiary...................... (250,000) (800,000)
---------- -----------
(2,400,000) (800,000)
---------- -----------
Cash Flows from Financing Activities
Dividends Paid...................................... (409,843) (313,550)
Issuance of Common Stock............................ 460,558 5,186,114
---------- -----------
50,715 4,872,564
---------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents.. (1,852,835) 4,351,597
Cash and Cash Equivalents, Beginning.................. 4,388,241 36,644
---------- -----------
Cash and Cash Equivalents, Ending................. $2,535,406 $ 4,388,241
========== ===========
</TABLE>
(20) STOCK SPLITS EFFECTED AS DIVIDENDS
On September 25, 1997, the board of directors approved a 25 percent stock
split to be effected in the form of a dividend. On May 23, 1996, a two-for-one
stock split was 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.
(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.
F-20
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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 are as follows:
<TABLE>
<CAPTION>
1997 1996
------------------- -------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Cash and Short-Term
Investments...................... $ 8,050 $ 8,050 $ 10,468 $ 10,468
Investment Securities Available
for Sale........................ 25,253 25,253 25,882 25,882
Investment Securities Held to
Maturity........................ 5,732 5,856 6,773 6,873
Loans............................ 99,071 101,311 84,864 85,460
LIABILITIES
Deposits......................... 121,941 122,604 113,032 113,971
Borrowed Money................... 2,329 2,329 4,140 4,195
UNRECOGNIZED FINANCIAL INSTRUMENTS
Standby Letters of Credit........ 759 202
Unfulfilled Loan Commitments..... 16,366 13,215
</TABLE>
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,
F-21
<PAGE>
SNB BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
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, 1997, 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.
<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, 1997
Total Capital to Risk-
Weighted Assets....... $16,071,349 16.17% $ 7,953,000 8.00% $ 9,941,000 10.00%
Tier I Capital to Risk-
Weighted Assets....... 14,827,000 14.91 3,976,000 4.00 5,965,000 6.00
Tier I Capital to
Average Assets........ 14,827,000 10.92 5,430,000 4.00 6,788,000 5.00
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
</TABLE>
(23) RECLASSIFICATIONS
Certain reclassifications have been made in the 1996 and 1995 financial
statements to conform to the 1997 presentation.
(24) SUBSEQUENT EVENTS
On January 29, 1998, the Company entered into an Agreement and Plan of
Merger with Crossroads Bancshares, Inc. ("Crossroads"), pursuant to which
Crossroads will be merged with and will become a wholly-owned subsidiary of
the Company. Pending approval by stockholders and regulatory authorities,
Crossroads stockholders will receive 2.9 shares of the common stock of the
Company, in a business combination accounted for as a pooling of interests.
Historical financial information presented in future reports will be restated
to include Crossroads.
F-22
<PAGE>
MCNAIR, MCLEMORE, MIDDLEBROOKS & CO., LLP
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP INCLUDING A PROFESSIONAL CORPORATION
[MCNAIR LETTERHEAD]
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Crossroads Bancshares, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Crossroads
Bancshares, Inc. and Subsidiary as of December 31, 1997 and 1996 and the
related consolidated statements of income, changes in stockholders' equity and
cash flows for each of the years in the three-year period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Crossroads
Bancshares, Inc. and Subsidiary as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1997 in conformity with generally
accepted accounting principles.
[ART]
McNair, McLemore, Middlebrooks &
Co., LLP
Perry, Georgia
February 20, 1998
F-23
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
DECEMBER 31
ASSETS
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Cash and Due from Banks.............................. $ 4,503,497 $ 4,421,664
----------- -----------
Interest-Bearing Deposits with Other Bank............ -- 11,650
----------- -----------
Federal Funds Sold................................... 8,795,000 10,680,000
----------- -----------
Investment Securities................................ 10,247,846 14,111,821
----------- -----------
Loans................................................ 46,559,024 37,582,067
Allowance for Loan Losses.......................... (465,799) (376,449)
----------- -----------
46,093,225 37,205,618
----------- -----------
Premises and Equipment............................... 2,103,264 2,178,952
----------- -----------
Other Real Estate.................................... 601,308 315,033
----------- -----------
Other Assets......................................... 1,224,357 1,051,609
----------- -----------
Total Assets......................................... $73,568,497 $69,976,347
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-Bearing................................ $16,922,665 $16,643,224
Interest-Bearing................................... 49,997,483 47,224,185
----------- -----------
66,920,148 63,867,409
----------- -----------
Borrowed Money
Demand Notes to U.S. Treasury...................... 75,466 138,974
----------- -----------
Obligation Under Capital Lease....................... 244,050 --
----------- -----------
Other Liabilities.................................... 418,420 838,819
----------- -----------
Stockholders' Equity
Common Stock, Par Value $10 a Share; Authorized
5,000,000 Shares; Issued 301,682 Shares;
Outstanding 291,982 Shares for 1997 and 1996...... 3,016,820 3,016,820
Retained Earnings.................................. 3,042,203 2,296,156
----------- -----------
6,059,023 5,312,976
Treasury Stock at Cost, 9,700 Shares for 1997 and
1996.............................................. (148,632) (148,632)
Unrealized Gain (Loss) on Securities Available for
Sale, Net of $11 Tax and $22,133 Tax Benefit in
1997 and 1996, Respectively....................... 22 (33,199)
----------- -----------
Total Stockholders' Equity........................... 5,910,413 5,131,145
----------- -----------
Total Liabilities and Stockholders' Equity........... $73,568,497 $69,976,347
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-24
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Interest Income
Commercial Loans, Including Fees........... $2,466,055 $2,081,156 $1,948,339
Installment Loans, Including Fees.......... 1,799,228 1,420,447 1,153,255
Federal Funds Sold......................... 452,232 295,695 249,356
Investment Securities
U. S. Treasury........................... 29,431 29,550 13,869
U. S. Government Agencies................ 349,381 390,095 429,749
Municipal................................ 706
Other Investments.......................... 1,124 4,269 11,564
---------- ---------- ----------
5,098,157 4,221,212 3,806,132
---------- ---------- ----------
Interest Expense
Deposits................................... 2,380,866 1,996,204 1,750,279
Other...................................... 22,806 9,056 14,099
---------- ---------- ----------
2,403,672 2,005,260 1,764,378
---------- ---------- ----------
Net Interest Income.......................... 2,694,485 2,215,952 2,041,754
Provision for Loan Losses.................. 133,000 63,000 110,456
---------- ---------- ----------
Net Interest Income After Provision for Loan
Losses...................................... 2,561,485 2,152,952 1,931,298
Noninterest Income........................... 790,740 678,165 506,166
Noninterest Expenses......................... 2,110,269 1,675,894 1,491,270
---------- ---------- ----------
Income Before Income Taxes................... 1,241,956 1,155,223 946,194
Income Taxes................................. 437,513 404,260 338,660
---------- ---------- ----------
Net Income................................... $ 804,443 $ 750,963 $ 607,534
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-25
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
NET UNREALIZED
GAIN (LOSS)
ON SECURITIES
COMMON RETAINED TREASURY AVAILABLE
STOCK EARNINGS STOCK FOR SALE TOTAL
---------- ---------- --------- -------------- ----------
<S> <C> <C> <C> <C> <C>
Balance, December 31,
1994................... $3,016,820 $1,056,751 $ (32,778) $(201,509) $3,839,284
Net Income............ 607,534 607,534
Dividends Paid........ (59,796) (59,796)
Purchase of Treasury
Stock................ (32,600) (32,600)
Net Unrealized Gain on
Securities Available
for Sale, Net of
Tax.................. 180,424 180,424
---------- ---------- --------- --------- ----------
Balance, December 31,
1995................... 3,016,820 1,604,489 (65,378) (21,085) 4,534,846
Net Income............ 750,963 750,963
Dividends Paid........ (59,296) (59,296)
Purchase of Treasury
Stock................ (83,254) (83,254)
Net Unrealized Loss on
Securities Available
for Sale, Net of
Tax.................. (12,114) (12,114)
---------- ---------- --------- --------- ----------
Balance, December 31,
1996................... 3,016,820 2,296,156 (148,632) (33,199) 5,131,145
Net Income............ 804,443 804,443
Dividends Paid........ (58,396) (58,396)
Net Unrealized Gain on
Securities Available
for Sale, Net of
Tax.................. 33,221 33,221
---------- ---------- --------- --------- ----------
Balance, December 31,
1997................... $3,016,820 $3,042,203 $(148,632) $ 22 $5,910,413
========== ========== ========= ========= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-26
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
------------ ----------- ------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income.......................... $ 804,443 $ 750,963 $ 607,534
Adjustments to Reconcile Net
Income to Net Cash Provided from
Operating Activities
Depreciation.................... 133,852 98,547 87,141
Amortization--Other............. 4,021 5,792 5,792
Provision for Loan Losses....... 133,000 63,000 110,456
Deferred Income Tax (Benefit)... (25,134) (67,386) 22,948
(Amortization) Accretion--
Investment Securities.......... (9,211) 5,200 5,713
Net Realized Gains on Investment
Securities..................... (1,394) (2,858)
Gain on Disposal of Premises and
Equipment...................... (8,184)
(Gain) Loss on Disposal of Other
Real Estate.................... 13,200 (14,101)
Change In
Prepaid Expenses.............. (41,688) 4,798 6,081
Interest Receivable........... (95,291) 57,408 (224,906)
Miscellaneous Assets.......... (24,080) 2,893 50,259
Interest Payable.............. 30,755 15,867 8,253
Miscellaneous Liabilities..... (183,327) 169,478 48,381
------------ ----------- ------------
739,146 1,092,459 716,610
------------ ----------- ------------
Cash Flows (to) Investing Activities
Proceeds from Sales and Maturities
of Investment Securities........... 18,551,730 7,797,538 3,455,487
Purchases of Investment Securities.. (14,621,785) (8,505,828) (10,144,519)
Loans............................... (9,020,607) (5,241,926) (2,703,322)
Purchase of Premises and Equipment.. (58,164) (942,708) (49,182)
Proceeds from Disposal of Premises
and Equipment...................... 3,600 8,184
Other Real Estate................... (299,475)
------------ ----------- ------------
(5,448,301) (6,889,324) (9,433,352)
------------ ----------- ------------
Cash Flows from Financing Activities
Demand, Interest-Bearing Demand and
Savings Accounts................... 3,630,378 4,740,106 885,433
Time Deposits....................... (577,639) 7,401,449 4,851,740
Other Borrowed Money................ (24,000)
Demand Notes to the U.S. Treasury... (63,508) 63,891 (53,190)
Treasury Stock...................... (83,254) (32,600)
Cash Value of Life Insurance........ (12,720) (12,559) (8,468)
Dividend Paid....................... (58,396) (59,296) (59,796)
Principal Payment on Obligation
Under Capital Lease................ (23,777)
------------ ----------- ------------
2,894,338 12,026,337 5,583,119
------------ ----------- ------------
Net Increase (Decrease) in Cash and
Cash Equivalents..................... (1,814,817) 6,229,472 (3,133,623)
Cash and Cash Equivalents--Beginning.. 15,113,314 8,883,842 12,017,465
------------ ----------- ------------
Cash and Cash Equivalents--Ending..... $ 13,298,497 $15,113,314 $ 8,883,842
============ =========== ============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-27
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS
Crossroads Bancshares, Inc. (the Company) is a bank holding company whose
principal activity is the ownership and management of its wholly-owned
subsidiary, Crossroads Bank of Georgia, Inc. (the Bank). The Bank generates
commercial (including agricultural), mortgage and consumer loans and receives
deposits from customers located primarily in Perry, Warner Robins, Georgia and
the surrounding areas. The Bank operates under a state bank charter and
provides full banking services. As a state bank, the Bank is subject to
regulation by the Georgia Department of Banking and Finance and the Federal
Deposit Insurance Corporation.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of Crossroads
Bancshares, Inc. and its wholly-owned subsidiary, Crossroads Bank of Georgia,
Inc. All significant intercompany transactions and balances have been
eliminated in consolidation. The accounting and reporting policies of the
Company conform to generally accepted accounting principles and practices
utilized in the commercial banking industry.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results and financial position could differ from
those estimates.
Material estimates that are susceptible to significant change in the near
term include the determination of the allowance for loan losses, the valuation
of real estate acquired by foreclosure or in satisfaction of loans and the
valuation of deferred tax assets.
INVESTMENT SECURITIES
The Bank's investments in securities are classified and accounted for as
follows:
Securities Available for Sale-Securities which are not classified as
securities to be held to maturity are reported at fair market value.
Unrealized holding gains and losses, net of tax, on securities available for
sale are reported as a separate component of stockholders' equity until
realized. Gains and losses on the sale of securities available for sale are
determined using the specific-identification method. The amortization of
premiums and the accretion of discounts are recognized in interest income
using the interest method over the period to maturity.
The Bank has no securities which are classified as trading or held to
maturity.
LOANS
Loans are generally reported at principal amount less unearned interest and
fees. Impaired loans are recorded under 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. Generally, interest payments received
on impaired loans are applied to principal. Upon receipt of all loan
principal, additional payments are recognized as interest income on the cash
basis.
F-28
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Other nonaccrual loans are loans for which payments of principal and
interest are considered doubtful of collection under original terms but whose
collateral values equal or exceed outstanding principal and interest.
INTEREST INCOME ON LOANS
Interest on loans is accrued and credited to income based on principal
amount and loan terms.
ALLOWANCE FOR LOAN LOSSES
The allowance method is used in providing for loan losses. Accordingly, all
loan losses decrease and all recoveries increase the allowance for loan
losses. The provision for loan losses charged to operating expense is based on
past experience and other factors which, in management's judgment, deserve
current recognition in estimating possible loan losses. Other factors
considered by management include growth and composition of the loan portfolio,
the relationship of the allowance for loan losses to outstanding loans and
economic conditions.
An allowance for loan losses is maintained for all impaired loans.
Provisions are made for impaired loans based upon expected future cash flows
or estimated net realizable value of collateral. Upon determination that
impaired loans are wholly or partially uncollectible, the uncollectible
portion is charged off.
ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Management believes the allowance for possible loan losses is adequate.
While management uses available information to recognize losses on loans,
future reductions in the carrying amount of loans may be necessary based on
changes in economic conditions. In addition, regulatory agencies, as an
integral part of their examination process, periodically review the estimated
losses on loans. Such agencies may require the Bank to recognize additional
losses based on their judgments about information available to them at the
time of their examination.
PREMISES AND EQUIPMENT
Bank premises and equipment are recorded at acquisition cost net of
accumulated depreciation. Depreciation is provided over the estimated useful
lives of the respective assets on the straight-line basis. Expenditures for
major renewals and betterments are capitalized and those for maintenance and
repairs are expensed 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.
CASH FLOWS
Cash and cash equivalents include cash and due from banks, interest-bearing
deposits with other banks and federal funds sold.
Cash payments for the following were made during the years ended December
31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Interest Expense............................ $2,372,916 $1,991,340 $1,756,125
========== ========== ==========
Income Taxes................................ $ 700,841 $ 303,232 $ 263,173
========== ========== ==========
</TABLE>
OTHER REAL ESTATE
Other real estate represents real estate no longer utilized in bank
operations or acquired through foreclosure and is initially recorded at the
lower of cost or estimated market value at the date of acquisition. A
provision for
F-29
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
estimated losses is recorded if a subsequent decline in value occurs.
Management believes the recorded value of other real estate approximated its
market value for all years presented.
(2) INVESTMENT SECURITIES
The carrying amount of securities available for sale and their approximate
fair values are as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
DECEMBER 31, 1997
U. S. Treasury............. $ 504,815 $ 655 $ 505,470
U. S. Government Agencies
Mortgage Backed........... 945,925 10,799 956,724
Other...................... 8,487,274 2,332 $(13,606) 8,476,000
Municipal.................. 100,000 (148) 99,852
Federal Home Loan Bank
Stock..................... 209,800 209,800
----------- ------- -------- -----------
$10,247,814 $13,786 $(13,754) $10,247,846
=========== ======= ======== ===========
DECEMBER 31, 1996
U. S. Treasury............. $ 506,633 $ (3,508) $ 503,125
U. S. Government Agencies
Mortgage Backed........... 1,505,739 (12,368) 1,493,371
Other...................... 11,984,381 $ 987 (40,443) 11,944,925
Federal Home Loan Bank
Stock..................... 170,400 170,400
----------- ------- -------- -----------
$14,167,153 $ 987 $(56,319) $14,111,821
=========== ======= ======== ===========
</TABLE>
The amortized cost and fair value of investment securities as of December
31, 1997, by contractual maturity, are shown below. Expected maturities may
differ from contractual maturities because issuers have the right to call or
prepay obligations with or without prepayment penalties.
<TABLE>
<CAPTION>
AMORTIZED FAIR
COST VALUE
----------- -----------
<S> <C> <C>
Due in One Year or Less............................. $ 5,990,750 $ 5,990,490
Due After One Year Through Five Years............... 3,543,114 3,548,440
Due After Five Years Through Ten Years.............. 504,150 499,116
----------- -----------
10,038,014 10,038,046
Federal Home Loan Bank Stock........................ 209,800 209,800
----------- -----------
$10,247,814 $10,247,846
=========== ===========
</TABLE>
Investment securities having a book value of $8,672,435 and $9,621,991 as of
December 31, 1997 and 1996, respectively, were pledged to secure public and
trust deposits and for other purposes required or permitted by law.
Proceeds from sales and maturities of investments in debt securities were
$18,551,730 in 1997, $7,797,538 in 1996 and $3,455,487 in 1995. Gross realized
gains totaled $1,394, $0 and $2,858 in 1997, 1996 and 1995, respectively.
Gross realized losses totaled $0 in each year presented.
F-30
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) LOANS
Loans by type as of December 31 are:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Loans Secured by Real Estate
Construction and Land Development................ $ 4,971,221 $ 6,849,749
Secured by Farmland (Including Farm Residential
and Other Improvements)......................... 1,765,171 865,159
Secured by 1-4 Family Residential Properties..... 9,342,894 8,996,855
Secured by Multi-family Residential Properties... 162,989 37,805
Secured by Nonfarm Residential Properties........ 12,360,010 7,276,135
Commercial and Industrial Loans.................... 9,768,827 6,657,907
Loans to Finance Agricultural Production and Other
Loans to Farmers.................................. 3,575,130 2,658,358
Loans to Individuals for Household, Family and
Other Personal Expenditures 59,394
Credit Cards and Related Plans...................
Other............................................ 4,553,388 4,240,099
----------- -----------
$46,559,024 $37,582,067
=========== ===========
</TABLE>
Impaired loans included in total loans as of December 31, are summarized as
follows:
<TABLE>
<CAPTION>
1997 1996
-------- -------
<S> <C> <C>
Total Investment in Impaired Loans........................ $140,648 $34,702
Allowance for Impaired Loan Losses...................... (69,556) (24,713)
-------- -------
Net Investment............................................ $ 71,092 $ 9,989
======== =======
Average Investment........................................ $112,569 $39,000
======== =======
</TABLE>
For the years ended December 31, 1997 and 1996, income recorded on the cash
basis on impaired loans totaled $1,801 and $8,879, respectively. Foregone
interest on impaired loans and other nonperforming loans totaled $16,002,
$34,023 and $3,383 in 1997, 1996 and 1995, respectively.
(4) ALLOWANCE FOR LOAN LOSSES
Transactions in the allowance for loan losses are summarized as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- ---------
<S> <C> <C> <C>
BALANCE-BEGINNING............................. $376,449 $323,676 $ 382,044
Provision Charged to Operating Expense...... 133,000 63,000 110,456
Loan Losses................................. (90,222) (17,875) (183,720)
Recoveries.................................. 46,572 7,648 14,896
-------- -------- ---------
BALANCE-ENDING................................ $465,799 $376,449 $ 323,676
======== ======== =========
</TABLE>
F-31
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The 1997 and 1996 allowance for loan losses includes an allowance for
impaired loan losses which was established as of January 1, 1995. Transactions
in the allowance for impaired loan losses were as follows:
<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
BALANCE-BEGINNING.......................................... $24,713 $26,869
Provision Charged to Operating Expense................... 30,000 --
Loans Charged Off........................................ (4,935) (2,456)
Recoveries............................................... 19,778 300
------- -------
BALANCE-ENDING............................................. $69,556 $24,713
======= =======
</TABLE>
(5) PREMISES AND EQUIPMENT
Premises and equipment are comprised of the following as of December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Land................................................. $ 498,509 $ 498,509
Buildings............................................ 1,528,074 1,522,358
Furniture, Fixtures and Equipment.................... 824,819 772,371
---------- ----------
2,851,402 2,793,238
Accumulated Depreciation............................. (748,138) (614,286)
---------- ----------
$2,103,264 $2,178,952
========== ==========
</TABLE>
Depreciation charged to operations totaled $133,852 in 1997, $98,547 in 1996
and $87,141 in 1995.
(6) OTHER ASSETS
Other assets consist of the following as of December 31:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Accrued Interest...................................... $ 751,541 $ 656,250
Prepaid Income Taxes.................................. 13,243
Prepaid Expenses...................................... 63,015 34,570
Deferred Income Tax Benefit........................... 138,546 135,556
Unamortized Organization Costs........................ 4,021
Cash Value of Life Insurance.......................... 192,220 179,500
Other................................................. 65,792 41,712
---------- ----------
$1,224,357 $1,051,609
========== ==========
</TABLE>
Organization costs totaling $28,952 incurred with formation of the parent
company are being amortized to operations over 60 months using the straight-
line method. Amortization expense totaled $4,021, $5,792 and $5,792 for 1997,
1996 and 1995, respectively. The costs were fully amortized as of December 31,
1997.
F-32
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) INCOME TAXES
The Company and the Bank file a consolidated income tax return. The
consolidated provision for income taxes for the years ended December 31
consists of the following:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Current........................................ $462,647 $471,646 $315,712
Deferred Tax (Benefit)......................... (25,134) (67,386) 22,948
-------- -------- --------
$437,513 $404,260 $338,660
======== ======== ========
</TABLE>
The net deferred taxes in the accompanying consolidated balance sheets as of
December 31 include the following amounts of deferred tax assets and
liabilities:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Deferred Tax Asset........................... $211,234 $174,797 $115,345
Deferred Tax Liability....................... (72,677) (61,374) (69,308)
-------- -------- --------
138,557 113,423 46,037
Deferred Tax Asset (Liability) on Unrealized
Securities Gains and Losses................. (11) 22,133 14,057
-------- -------- --------
Net Deferred Tax Asset....................... $138,546 $135,556 $ 60,094
======== ======== ========
</TABLE>
(7) INCOME TAXES (CONTINUED)
The sources of timing differences and the net change in deferred income tax
asset for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
(INCREASE) DECREASE IN NET DEFERRED TAX ASSET
Provision for Loan Losses................... $(33,064) $(39,032) $ 2,774
Depreciation Expense........................ 11,303 (7,934) 7,699
Deferred Compensation....................... (5,862) (5,426) (6,486)
Interest on Nonaccrual Loans................ 7,208 (12,256) 1,241
Other....................................... (4,719) (2,738) 17,720
-------- -------- --------
(25,134) (67,386) 22,948
Deferred Income Tax Effect of Unrealized
Gains and Losses on Securities Available
for Sale................................... 22,144 (8,076) 109,448
-------- -------- --------
$ (2,990) $(75,462) $132,396
======== ======== ========
</TABLE>
Income tax expense computed at statutory rates on income before income taxes
differs from actual income tax expense due to permanent immaterial differences
between book and tax accounting.
(8) DEPOSITS
Components of interest-bearing deposits as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Interest-Bearing Demand............................. $14,736,238 $11,695,276
Savings............................................. 1,760,861 1,450,886
Time, $100,000 and Over............................. 6,158,780 6,355,991
Other Time.......................................... 27,341,604 27,722,032
----------- -----------
$49,997,483 $47,224,185
=========== ===========
</TABLE>
F-33
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(9) OBLIGATION UNDER CAPITAL LEASE
The Bank leases equipment with a lease term through January 30, 2002. The
obligation under this capital lease has been recorded in the accompanying
consolidated financial statements at the present value of future minimum lease
payments, discounted at an interest rate of 5.25 percent. Capitalized cost of
$267,917 less accumulated depreciation is included in premises and equipment on
the consolidated balance sheets.
Future minimum lease payments under this capital lease and the net present
value of these payments as of December 31, 1997 are as follows:
<TABLE>
<S> <C>
1998............................................................... $ 61,620
1999............................................................... 61,620
2000............................................................... 61,620
2001............................................................... 61,620
2002............................................................... 30,810
--------
Total Future Minimum Lease Payments................................ 277,290
Amount Representing Interest....................................... 33,240
--------
Present Value of Future Minimum Lease Payments..................... $244,050
========
</TABLE>
(10) OTHER LIABILITIES
Components of other liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Interest Payable.......................................... $308,123 $277,368
Income Taxes Payable...................................... 224,951
Deferred Compensation Payable............................. 73,139 58,483
Accounts Payable.......................................... 6,248 247,324
Accrued Expenses.......................................... 17,393 7,119
Other..................................................... 13,517 23,574
-------- --------
$418,420 $838,819
======== ========
</TABLE>
(11) NONINTEREST INCOME
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Service Charges on Deposits..................... $313,332 $245,703 $202,980
Other Service Charges, Commissions and Fees..... 462,565 394,159 276,689
Securities Gains................................ 1,394 2,858
Gain (Loss) on Disposal of Other Real Estate.... (13,200) 14,101
Dividends....................................... 13,929 11,643 1,926
Increase in Cash Value of Life Insurance........ 12,720 12,559 21,713
-------- -------- --------
$790,740 $678,165 $506,166
======== ======== ========
</TABLE>
F-34
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(12) NONINTEREST EXPENSES
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Salaries.................................... $ 898,347 $ 664,684 $ 603,294
Employee Benefits........................... 200,306 149,072 137,523
Occupancy................................... 317,567 244,058 195,805
Other....................................... 694,049 618,080 554,648
---------- ---------- ----------
$2,110,269 $1,675,894 $1,491,270
========== ========== ==========
</TABLE>
(13) RELATED PARTY TRANSACTIONS
The Bank has direct and indirect loans outstanding to certain officers,
directors and related interests which totaled $1,585,739 and $2,107,842 as of
December 31, 1997, and 1996, respectively. 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>
<S> <C>
BALANCE, BEGINNING............................................... $2,107,842
New Loans...................................................... 436,914
Repayments..................................................... (959,017)
----------
BALANCE, ENDING.................................................. $1,585,739
==========
</TABLE>
(14) NONCASH FINANCING AND INVESTING ACTIVITIES
Noncash financing and investing activities for the years ended December 31
are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- ------- -------
<S> <C> <C> <C>
Financed Sales of Other Real Estate................ $439,562 $44,555 $47,530
======== ======= =======
</TABLE>
(15) DEFERRED COMPENSATION PLAN
During 1993, the Bank adopted a deferred compensation plan under which
certain of its officers could elect to defer, until termination, retirement,
death or unforeseeable emergency a portion of their current compensation. This
plan is created in accordance with Internal Revenue Code Section 457. The Bank
pays interest on such deferrals at a rate that is determined annually. The
participants are general creditors of the Bank with respect to amounts
deferred and interest additions. As of December 31, 1997, 1996 and 1995, the
Bank's liability under this plan totaled $73,139, $58,483 and $44,917,
respectively.
(16) CONCENTRATIONS OF CREDIT
The Bank's loans, commitments and standby letters of credit have been
granted primarily to customers in the middle Georgia area. Accordingly, the
ultimate collectibility of these loans is largely dependent upon economic
conditions in this area. The concentrations of credit by type of loan are set
forth in Note 3. The distribution of commitments to extend credit approximates
the distribution of loans outstanding. Standby letters of credit were granted
primarily to commercial borrowers. The Bank, as a matter of policy, does not
extend credit in excess of regulatory limits to any single borrower or group
of related borrowers.
F-35
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(17) FINANCIAL INFORMATION OF CROSSROADS BANCSHARES, INC. (PARENT ONLY)
Crossroads Bancshares, Inc. (the parent company) was formed on August 18,
1992 as a one-bank holding company from Crossroads Bank of Georgia, Inc. The
parent company's balance sheets as of December 31, 1997 and 1996 and the
related statements of income, retained earnings and cash flows for each of the
years in the three-year period ended December 31, 1997 are as follows:
CROSSROADS BANCSHARES, INC. (PARENT ONLY)
BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
ASSETS
Cash................................................... $ 54,528 $ 1,755
Investment in Subsidiary, at Equity.................... 5,853,200 5,121,605
Other Assets........................................... 2,685 7,785
---------- ----------
Total Assets........................................... $5,910,413 $5,131,145
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities............................................ $ -- $ --
---------- ----------
Stockholders' Equity
Common Stock, Par Value $10; Authorized 5,000,000
Shares; Issued 301,682 Shares; Outstanding 291,982
Shares for 1997 and 1996............................ 3,016,820 3,016,820
Retained Earnings.................................... 3,042,203 2,296,156
---------- ----------
6,059,023 5,312,976
Treasury Stock at Cost, 9,700 Shares for 1997 and
1996.................................................. (148,632) (148,632)
Net Unrealized Gain (Loss) on Investment Securities.... 22 (33,199)
---------- ----------
5,910,413 5,131,145
---------- ----------
Total Liabilities and Stockholders' Equity............. $5,910,413 $5,131,145
========== ==========
</TABLE>
F-36
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROSSROADS BANCSHARES, INC. (PARENT ONLY)
STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Income
Dividend from Subsidiary................ $ 110,500 $ 160,500 $ 107,500
Interest................................ 49
---------- ---------- ----------
110,549 160,500 107,500
Expense
Interest................................ 1,498 2,467
Amortization of Organization Costs...... 4,021 5,792 5,792
Other................................... 3,144 2,684 1,015
---------- ---------- ----------
7,165 9,974 9,274
Income Before Income Taxes and Equity in
Undistributed Earnings of Subsidiary..... 103,384 150,526 98,226
Income Tax Benefit...................... 2,685 3,764 3,500
---------- ---------- ----------
Income Before Equity in Undistributed
Earnings of Subsidiary................... 106,069 154,290 101,726
Equity in Undistributed Earnings of
Subsidiary............................. 698,374 596,673 505,808
---------- ---------- ----------
Net Income................................ 804,443 750,963 607,534
Dividends Paid............................ (58,396) (59,296) (59,796)
Retained Earnings--Beginning.............. 2,296,156 1,604,489 1,056,751
---------- ---------- ----------
Retained Earnings--Ending................. $3,042,203 $2,296,156 $1,604,489
========== ========== ==========
</TABLE>
F-37
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
CROSSROADS BANCSHARES, INC. (PARENT ONLY)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net Income................................ $ 804,443 $ 750,963 $ 607,534
Adjustments to Reconcile Net Income to Net
Cash Provided from Operating Activities
Amortization............................ 4,021 5,792 5,792
Equity in Undistributed Earnings of
Subsidiary............................. (698,374) (596,673) (505,808)
--------- --------- ---------
Decrease (Increase) in Other............ 1,079 (4,577) (6,732)
--------- --------- ---------
111,169 155,505 100,786
Cash Flows to Financing Activities
Treasury Stock.......................... (83,254) (32,600)
Dividends Paid.......................... (58,396) (59,296) (59,796)
Principal Payment on Other Borrowed
Money.................................. (24,000)
--------- --------- ---------
(58,396) (166,550) (92,396)
--------- --------- ---------
Increase (Decrease) in Cash and Cash
Equivalents.............................. 52,773 (11,045) 8,390
Cash and Cash Equivalents-Beginning....... 1,755 12,800 4,410
--------- --------- ---------
Cash and Cash Equivalents-Ending.......... $ 54,528 $ 1,755 $ 12,800
========= ========= =========
</TABLE>
(18) COMMITMENTS AND CONTINGENCIES
The Bank is a party to financial instruments with off-balance sheet risk to
meet the financing needs of its customers. These financial instruments include
commitments to extend credit and standby letters of credit. These instruments
involve, to varying degrees, elements of credit risk in excess of the amount
recognized in the consolidated financial statements.
The Bank's exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to extend credit and
standby letters of credit is represented by the contractual amount of these
instruments. The Bank uses the same credit policies in making commitments and
conditional obligations as it does for on-balance sheet instruments.
<TABLE>
<CAPTION>
CONTRACT AMOUNT
--------------------------------
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Financial Instruments Whose Contract Amounts
Represent Credit Risk
Commitments to Extend Credit................ $8,492,651 $8,120,464 $5,482,596
Standby Letters of Credit................... 357,138 550,012 671,257
</TABLE>
Since many of these instruments are expected to expire without being drawn
upon, the total contract amounts do not necessarily represent future cash
requirements.
F-38
<PAGE>
CROSSROADS BANCSHARES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(19) 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 Bank is subject to various regulatory capital requirements administered
by banking agencies. Failure to meet minimum capital requirements can initiate
certain mandatory, and possibly additional discretionary, actions by
regulators, that if undertaken, could have a direct material effect on the
Bank's financial statements. Under the regulatory capital adequacy guidelines
and the regulatory framework for prompt corrective action, the Bank must meet
specific capital guidelines that involve quantitative measures of the Bank's
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting practices. The Bank's capital amounts and classification
under the prompt corrective action guidelines are also subject to qualitative
judgments by the regulators about components, risk weightings and other
factors.
Quantitative measures established by regulation to ensure capital adequacy
require the Bank to maintain minimum amounts and ratios of total risk-based
capital; Tier 1 capital to risk weighted assets and of Tier I capital to
adjusted total assets. Management believes, as of December 31, 1997, the Bank
meets all capital adequacy requirements to which it is subject and is
classified as well capitalized under the regularoty 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.
The Bank's actual and required capital amounts and ratios are as follows:
<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, 1997
Total Risk-Based Capital
to Risk-Weighted
Assets................. $6,319,000 11.58% $ 4,365,000 8.00% $ 5,457,000 10.00%
Tier I Capital to Risk-
Weighted Assets........ 5,853,000 10.72 2,184,000 4.00 3,276,000 6.00
Tier I Capital to
Adjusted Total Assets.. 5,853,000 8.54 2,741,000 4.00 3,427,000 5.00
As of December 31, 1996
Total Risked Based
Capital to Risk-
Weighted Assets........ 5,498,000 11.83 3,718,000 8.00 4,648,000 10.00
Tier I Capital to Risk-
Weighted Assets........ 5,122,000 10.96 1,869,000 4.00 2,804,000 6.00
Tier I Capital to
Adjusted Total Assets.. 5,122,000 7.32 2,799,000 4.00 3,499,000 5.00
</TABLE>
(20) SUBSEQUENT EVENTS
Subsequent to December 31, 1997, the Company declared a dividend of $.20 per
common share to stockholders of record as of February 13, 1998. This dividend
is payable March 1, 1998 and totals $58,396.
On January 29, 1998, the Company entered into an Agreement and Plan of
Merger with SNB Bancshares, Inc. ("SNB"), pursuant to which the Company will
be merged with and become a wholly-owned subsidiary of SNB. Pending approval
by stockholders and regulatory authorities, Crossroads Bancshares, Inc.'s
stockholders will receive 2.9 shares of common stock of SNB, in a business
combination accounted for as a pooling of interest.
F-39
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF REORGANIZATION
----------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
SNB BANCSHARES, INC.
AND
CROSSROADS BANCSHARES, INC.
AS OF JANUARY 29, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
Preamble.................................................................. 1
ARTICLE 1 TERMS OF MERGER................................................ 1
1.1 Merger......................................................... 1
1.2 Time and Place of Closing...................................... 1
1.3 Effective Time................................................. 1
ARTICLE 2 ARTICLES, BYLAWS, MANAGEMENT................................... 2
2.1 Articles of Incorporation...................................... 2
2.2 Bylaws......................................................... 2
2.3 Directors and Officers......................................... 2
ARTICLE 3 MANNER OF CONVERTING AND EXCHANGING SHARES..................... 2
3.1 Conversion of Shares........................................... 2
3.2 Exchange of Shares............................................. 3
3.3 Anti-Dilution Provisions....................................... 3
3.4 Shares Held by CROSSROADS or SNB............................... 3
3.5 CROSSROADS Bank................................................ 3
3.6 Rights of Former CROSSROADS Shareholders....................... 3
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF CROSSROADS................... 4
4.1 Organization, Standing and Power............................... 4
4.2 Authority; No Breach........................................... 4
4.3 Capital Stock.................................................. 5
4.4 CROSSROADS Subsidiaries........................................ 5
4.5 Financial Statements........................................... 5
4.6 Absence of Undisclosed Liabilities............................. 6
4.7 Absence of Certain Changes or Events........................... 6
4.8 Tax Matters.................................................... 6
4.9 CROSSROADS Allowance for Possible Loan Losses.................. 7
4.10 Assets......................................................... 7
4.11 Environmental Matters.......................................... 7
4.12 Compliance with Laws........................................... 8
4.13 Labor Relations................................................ 8
4.14 Employee Benefit Plans......................................... 8
4.15 Material Contracts............................................. 10
4.16 Legal Proceedings.............................................. 10
4.17 Reports........................................................ 10
4.18 Statements True and Correct.................................... 10
4.19 Accounting, Tax and Regulatory Matters......................... 11
4.20 Charter Provisions............................................. 11
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF SNB.......................... 11
5.1 Organization, Standing and Power............................... 11
5.2 Authority; No Breach........................................... 11
5.3 Capital Stock.................................................. 12
5.4 SNB Subsidiaries............................................... 12
5.5 Financial Statements........................................... 12
5.6 Absence of Undisclosed Liabilities............................. 13
5.7 Absence of Certain Changes or Events........................... 13
5.8 Tax Matters.................................................... 13
</TABLE>
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5.9 SNB Allowance for Possible Loan Losses...................... 13
5.10 Assets...................................................... 14
5.11 Environmental Matters....................................... 14
5.12 Compliance with Laws........................................ 15
5.13 Labor Relations............................................. 15
5.14 Employee Benefit Plans...................................... 15
5.15 Legal Proceedings........................................... 16
5.16 Reports..................................................... 16
5.17 Statements True and Correct................................. 17
5.18 Accounting, Tax and Regulatory Matters...................... 17
5.19 Charter Provisions.......................................... 17
ARTICLE 6 CONDUCT OF BUSINESS PENDING CONSUMMATION.................... 17
6.1 Affirmative Covenants of CROSSROADS......................... 17
6.2 Negative Covenants of CROSSROADS............................ 18
6.3 Covenants of SNB............................................ 19
6.4 Adverse Changes in Condition................................ 19
6.5 Reports..................................................... 19
6.6 Pooling..................................................... 19
ARTICLE 7 ADDITIONAL AGREEMENTS....................................... 20
Registration Statement; Proxy Statement; Shareholder
7.1 Approval.................................................... 20
7.2 Listing..................................................... 20
7.3 Applications................................................ 20
7.4 Filings with State Offices.................................. 20
7.5 Agreement as to Efforts to Consummate....................... 20
7.6 Investigation and Confidentiality........................... 20
7.7 Press Releases.............................................. 21
7.8 No Solicitation............................................. 21
7.9 Tax Treatment............................................... 22
7.10 Agreement of Affiliates..................................... 22
7.11 Employee Benefits and Contracts............................. 23
7.12 Large Deposits.............................................. 23
7.13 Indemnification............................................. 23
7.14 Irrevocable Proxies......................................... 23
7.15 Post Closing Understanding.................................. 23
ARTICLE 8 CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE........... 24
8.1 Conditions to Obligations of Each Party..................... 24
8.2 Conditions to Obligations of SNB............................ 24
8.3 Conditions to Obligations of CROSSROADS..................... 25
ARTICLE 9 TERMINATION................................................. 26
9.1 Termination................................................. 26
9.2 Effect of Termination....................................... 27
ARTICLE 10 MISCELLANEOUS............................................... 27
10.1 Definitions................................................. 27
10.2 Expenses.................................................... 32
10.3 Brokers and Finders......................................... 32
10.4 Entire Agreement............................................ 32
10.5 Amendments.................................................. 32
10.6 Waivers..................................................... 32
</TABLE>
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10.7 Assignment...................................................... 33
10.8 Notices......................................................... 33
10.9 Governing Law................................................... 33
10.10 Counterparts.................................................... 33
10.11 Captions........................................................ 33
10.12 Enforcement of Agreement........................................ 33
10.13 Severability.................................................... 34
10.14 Survival........................................................ 34
</TABLE>
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LIST OF EXHIBITS
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<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
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<C> <S>
Form of agreement of affiliates of Crossroads Bancshares, Inc.
1. ((S) 7.10).
Matters as to which Walker, Hulbert, Gray & Byrd will opine
2. ((S) 8.2(d)).
Matters as to which Martin, Snow, Grant & Napier will opine
3. ((S) 8.3(d)).
4. Irrevocable Proxy ((S) 7.14).
</TABLE>
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<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is made and entered into
as of January 29, 1998, by and between CROSSROADS BANCSHARES, INC.
("CROSSROADS"), a corporation organized and existing under the laws of the
State of Georgia, with its principal office located in Perry, Georgia, and SNB
BANCSHARES, INC. ("SNB"), a corporation organized and existing under the laws
of the State of Georgia, with its principal office located in Macon, Georgia.
PREAMBLE
Certain terms used in this Agreement are defined in Section 10.1 hereof.
The Boards of Directors of CROSSROADS and SNB are of the opinion that the
transactions described herein are in the best interests of CROSSROADS and SNB
and their respective shareholders. This Agreement provides for the combination
of CROSSROADS with SNB pursuant to the merger of CROSSROADS with and into SNB,
as a result of which the outstanding shares of the capital stock of CROSSROADS
shall be converted into the right to receive shares of common stock of SNB
(except as provided herein), and the shareholders of CROSSROADS shall become
shareholders of SNB (except as provided herein). The transactions described in
this Agreement are subject to the approvals of the shareholders of CROSSROADS,
the Board of Governors of the Federal Reserve System, the Georgia Department
of Banking and Finance and the satisfaction of certain other conditions
described in this Agreement. It is the intention of the parties to this
Agreement that the Merger for federal income tax purposes shall qualify as a
"reorganization" within the meaning of Section 368(a) of the Internal Revenue
Code.
NOW, THEREFORE, in consideration of the above and the mutual warranties,
representations, covenants and agreements set forth herein, the parties agree
as follows:
ARTICLE 1
TERMS OF MERGER
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
Effective Time, CROSSROADS shall be merged with and into SNB in accordance
with the provisions of Section 14-2-1101 of the GBCC and with the effect
provided in Section 14-2-1106 of the GBCC (the "Merger"). SNB shall be the
Surviving Corporation resulting from the Merger. The Merger shall be
consummated pursuant to the terms of this Agreement, which has been approved
and adopted by the respective Boards of Directors of CROSSROADS and SNB.
1.2 Time and Place of Closing. The Closing shall take place at 10:00 a.m. on
the date that the Effective Time occurs or at such other time as the Parties,
acting through their chief executive officers or chief financial officers, may
mutually agree (the "Closing Date"). The place of Closing shall be at the main
office of Crossroads Bank, Perry, Georgia, or such other place as may be
mutually agreed upon by the Parties.
1.3 Effective Time. The Merger and other transactions contemplated by this
Agreement shall become effective on the date and at the time the Articles of
Merger reflecting the Merger shall become effective with the Secretary of
State of the State of Georgia (the "Effective Time"). Subject to the terms and
conditions hereof, unless otherwise mutually agreed upon in writing by the
chief executive officers of each Party, the Parties shall use their reasonable
efforts to cause the Effective Time to occur on (a) the last business day of
the month in which occurs the last to occur of (i) the effective date
(including expiration of any applicable waiting period) of the last required
Consent of any Regulatory Authority having authority over and approving or
exempting the Merger and (ii) the date on which the shareholders of CROSSROADS
approve this Agreement to the extent such approval is required by applicable
Law; or (b) such later date as may be mutually agreed upon in writing by the
chief executive officer or chief financial officer of each Party.
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ARTICLE 2
ARTICLES, BYLAWS, MANAGEMENT
2.1 Articles of Incorporation. The Articles of Incorporation of SNB in
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until otherwise amended or
repealed.
2.2 Bylaws. The Bylaws of SNB in effect immediately prior to the Effective
Time shall be the Bylaws of the Surviving Corporation until otherwise amended
or repealed.
2.3 Directors and Officers. The directors of SNB in office immediately prior
to the Effective Time shall serve as the directors of the Surviving
Corporation from and after the Effective Time in accordance with the Bylaws of
the Surviving Corporation. The officers of SNB in office immediately prior to
the Effective Time, together with such additional persons as may thereafter be
elected, shall serve as the officers of SNB from and after the Effective Time
in accordance with the Bylaws of SNB. The directors and officers of CROSSROADS
Bank immediately prior to the Effective Time shall serve as the initial
directors and officers of CROSSROADS Bank from and after the Effective Time in
accordance with the Bylaws of CROSSROADS Bank. SNB agrees to designate four
(4) of the existing Directors of CROSSROADS selected by SNB as Directors of
SNB to the extent permitted and to nominate and recommend the election of said
four (4) Directors for election as Directors by the shareholders of the
surviving company.
ARTICLE 3
MANNER OF CONVERTING AND EXCHANGING SHARES
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of SNB and CROSSROADS shall be converted as
follows:
(a) Each share of SNB Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and
after the Effective Time.
(b) Each Outstanding CROSSROADS Share shall auto-matically be converted
at the Effective Time into the right to receive that number of shares of
SNB Common Stock (plus cash in lieu of fractional shares pursuant to
subsection (d) below, if applicable) equal to (i) 846,748 divided by (ii)
the aggregate number of Outstanding CROSSROADS Shares (the "Exchange
Ratio"); provided, however, if the number of shares of Crossroads
outstanding at closing is 291,982 shares the Exchange Ratio shall be 2.9.
(c) In accordance with the provisions of this Section 3.1, each
CROSSROADS shareholder who does not dissent shall receive the number of
shares (or such fraction of a share, subject to subsection (d) below) of
SNB Common Stock that shall be equal to (i) the Exchange Ratio multiplied
by (ii) the aggregate number of Outstanding CROSSROADS Shares such
shareholder holds as of the Effective Time (the "Merger Consideration").
(d) Notwithstanding any other provision of this Agreement, each holder of
shares of CROSSROADS Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of SNB
Common Stock (after taking into account all certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an
amount equal to such fractional part of a share of SNB Common Stock
multiplied by $18.00. No such holder will be entitled to dividends, voting
rights, or any other rights as a shareholder in respect of any fractional
shares.
(e) Each share of the CROSSROADS Common Stock that is not an Outstanding
CROSSROADS Share as of the Effective Time shall be canceled without
consideration therefor.
(f) Outstanding CROSSROADS Shares held by CROSSROADS shareholders who,
prior to the Effective Time, have met the requirements of Article 13 of the
GBCC with respect to shareholders
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dissenting from the Merger shall not be converted in the Merger. All such
shares shall be canceled and the holders thereof shall thereafter have only
such rights as are granted to dissenting shareholders under Article 13 of
the GBCC; provided, however, that if any such shareholder fails to perfect
his or her rights as a dissenting shareholder with respect to his or her
Outstanding CROSSROADS Shares in accordance with Article 13 of the GBCC,
such shares held by such shareholder shall, upon the happening of that
event, be treated the same as all other holders of CROSSROADS Common Stock
who have not dissented as to the Merger.
3.2 Exchange of Shares. Promptly following the Effective Time, SNB or a
commercial bank or trust company selected by SNB (the "Exchange Agent"), shall
send to each holder of Outstanding CROSSROADS Shares immediately prior to the
Effective Time a form of letter of transmittal (the "Letter of Transmittal")
for use in exchanging certificates previously evidencing shares of CROSSROADS
Common Stock ("Old Certificates"). The Letter of Transmittal will contain
instructions with respect to the surrender of Old Certificates and the
distribution of any cash and certificates representing SNB Common Stock, which
certificates shall be deposited with the Exchange Agent by SNB as of the
Effective Time. If any certificates for shares of SNB Common Stock are to be
issued in a name other than that for which an Old Certificate surrendered or
exchanged is issued, the Old Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer and the person requesting
such exchange shall affix any requisite stock transfer tax stamps to the Old
Certificate surrendered or provide funds for their purchase or establish to
the satisfaction of the Exchange Agent that such taxes are not payable. Unless
and until Old Certificates or evidence that such certificates have been lost,
stolen or destroyed (accompanied by such security or indemnity as shall be
requested by CROSSROADS) are presented to the Exchange Agent, the holder
thereof shall not be entitled to the consideration to be paid in exchange
therefor pursuant to the Merger, to any dividends payable on any SNB Common
Stock to which he or she is entitled, or to exercise any rights as a
shareholder of SNB Common Stock. Subject to applicable law and to the extent
that the same has not yet been paid to a public official pursuant to
applicable abandoned property laws, upon surrender of his or her Old
Certificates, the holder thereof shall be paid the consideration to which he
or she is entitled. All such property, if held by the Exchange Agent for
payment or delivery to the holders of unsurrendered Old Certificates and
unclaimed at the end of one (1) year from the Effective Time, shall at such
time be paid or redelivered by the Exchange Agent to SNB, and after such time
any holder of an Old Certificate who has not surrendered such certificate
shall, subject to applicable laws and to the extent that the same has not yet
been paid to a public official pursuant to applicable abandoned property laws,
look as a general creditor only to SNB for payment or delivery of such
property. In no event will any holder of CROSSROADS Common Stock exchanged in
the Merger be entitled to receive any interest on any amounts held by the
Exchange Agent or SNB.
3.3 Anti-Dilution Provisions. In the event SNB changes the number of shares
of SNB Common Stock issued and outstanding prior to the Effective Time as a
result of a stock split, stock dividend or similar recapitalization with
respect to such stock and the record date therefor (in the case of a stock
dividend) or the effective date therefor (in the case of a stock split or
similar recapitalization) shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted.
3.4 Shares Held by CROSSROADS or SNB. Each of the shares of CROSSROADS
Common Stock held by any CROSSROADS Company or by any SNB Company, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted, shall be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.5 CROSSROADS Bank. After consummation of the Merger, CROSSROADS Bank shall
be operated as a subsidiary of SNB.
3.6 Rights of Former CROSSROADS Shareholders. At the Effective Time, the
stock transfer books of CROSSROADS shall be closed as to holders of CROSSROADS
Common Stock immediately prior to the Effective Time and no transfer of
CROSSROADS Common Stock by any such holder shall thereafter be made or
recognized. Until surrendered for exchange in accordance with the provisions
of Section 3.2 of this Agreement, each Old Certificate (other than shares to
be canceled pursuant to Sections 3.l(d) and (f) of this
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Agreement) shall from and after the Effective Time represent for all purposes
only the right to receive the consideration provided in Section 3.1 of this
Agreement in exchange therefor. To the extent permitted by Law, former
shareholders of record of CROSSROADS shall be entitled to vote after the
Effective Time at any meeting of shareholders of SNB the number of whole
shares of SNB Common Stock into which their respective shares of CROSSROADS
Common Stock are converted, regardless of whether such holders have exchanged
their certificates representing CROSSROADS Common Stock for certificates
representing SNB Common Stock in accordance with the provisions of this
Agreement. Whenever a dividend or other distribution is declared by SNB on the
SNB Common Stock, the record date for which is at or after the Effective Time,
the declaration shall include dividends or other distributions on all shares
issuable pursuant to this Agreement, but no dividend or other distribution
payable to the holders of record of SNB Common Stock as of any time subsequent
to the Effective Time shall be delivered to the holder of any certificate
representing shares of CROSSROADS Common Stock issued and outstanding at the
Effective Time until such holder surrenders such certificate for exchange as
provided in Section 3.2 of this Agreement. However, upon surrender of such
CROSSROADS Common Stock certificate, both the SNB Common Stock certificate
(together with all such undelivered dividends or other distributions without
interest) and any undelivered cash payments to be paid for fractional share
interests (without interest) shall be delivered and paid with respect to each
share represented by such certificate.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF CROSSROADS
CROSSROADS hereby represents and warrants to SNB as follows:
4.1 Organization, Standing and Power. CROSSROADS is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of Georgia, and is duly registered as a bank holding company under the BHC
Act. CROSSROADS has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets. CROSSROADS is duly
qualified or licensed to transact business as a foreign corporation in good
standing in the States of the United States and foreign jurisdictions where
the character of its assets or the nature or conduct of its business requires
it to be so qualified or licensed, except for such jurisdictions in which the
failure to be so qualified or licensed is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CROSSROADS.
4.2 Authority; No Breach. (a) CROSSROADS has the corporate power and
authority necessary to execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect thereof on the
part of CROSSROADS, subject to the approval of this Agreement by the holders
of sixty percent (60%) of the outstanding CROSSROADS Common Stock. Subject to
such requisite shareholder approval, this Agreement represents a legal, valid
and binding obligation of CROSSROADS, enforceable against CROSSROADS in
accordance with its terms (except in all cases as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar Laws affecting the enforcement of creditors' rights generally and
except that the availability of the equitable remedy of specific performance
or injunctive relief is subject to the discretion of the court before which
any proceeding may be brought).
(b) Neither the execution and delivery of this Agreement by CROSSROADS, nor
the consummation by CROSSROADS of the transactions contemplated hereby, nor
compliance by CROSSROADS with any of the provisions hereof, will (i) conflict
with or result in a breach of any provision of CROSSROADS'S Articles of
Incorporation or Bylaws, or (ii) constitute or result in a Default under, or
require any Consent pursuant to, or result in the creation of any Lien on any
Asset of any CROSSROADS Company under, any Contract or Permit of any
CROSSROADS Company, where such Default or Lien, or any failure to obtain such
Consent, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CROSSROADS, or,
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(iii) subject to receipt of the requisite approvals referred to in Section
8.1(b) of this Agreement, violate any Law or Order applicable to any
CROSSROADS Company or any of their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate Laws, and other than Consents
required from Regulatory Authorities, and other than notices to or filings
with the IRS or the Pension Benefit Guaranty Corporation with respect to any
employee benefit plans, and other than Consents, filings or notifications
which, if not obtained or made, are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CROSSROADS, no
notice to, filing with, or Consent of any public body or authority is
necessary for the consummation by CROSSROADS of the Merger and the other
transactions contemplated in this Agreement.
4.3 Capital Stock. (a) The authorized capital stock of CROSSROADS consists
of 5,000,000 shares of CROSSROADS Common Stock, of which 291,982 shares are
issued and outstanding as of the date of this Agreement. All of the issued and
outstanding shares of capital stock of CROSSROADS are duly and validly issued
and outstanding and are fully paid and nonassessable under the GBCC. None of
the outstanding shares of capital stock of CROSSROADS has been issued in
violation of any preemptive rights of the current or past shareholders of
CROSSROADS.
(b) There are no other shares of capital stock or other equity securities of
CROSSROADS outstanding and no outstanding options, warrants, scrip, rights to
subscribe to, calls, or commitments of any character whatsoever relating to,
or securities or rights convertible into or exchangeable for, shares of the
capital stock of CROSSROADS or contracts, commitments, understandings, or
arrangements by which CROSSROADS is or may be bound to issue additional shares
of its capital stock or options, warrants, or rights to purchase or acquire
any additional shares of its capital stock.
4.4 CROSSROADS Subsidiaries. CROSSROADS has Previously Disclosed all of the
CROSSROADS Subsidiaries as of the date of this Agreement. CROSSROADS owns all
of the issued and outstanding shares of capital stock of Crossroads Bank of
Georgia ("Bank"). No equity securities of any CROSSROADS Subsidiary are or may
become required to be issued by reason of any options, warrants, scrip, rights
to subscribe to, calls, or commitments of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares of
the capital stock of any such Subsidiary, and there are no Contracts by which
any Bank is bound to issue additional shares of its capital stock or options,
warrants, or rights to purchase or acquire any additional shares of its
capital stock or by which any CROSSROADS Company is or may be bound to
transfer any shares of the capital stock of any Bank. There are no Contracts
relating to the rights of Bank to vote or to dispose of any shares of the
capital stock of any Bank. All of the shares of capital stock of Bank held by
CROSSROADS are fully paid and nonassessable under the applicable corporation
Law of the jurisdiction in which such Subsidiary is incorporated or organized
and are owned by the CROSSROADS Company free and clear of any Lien. Bank is
duly qualified or licensed to transact business as a foreign corporation in
good standing in the States of the United States and foreign jurisdictions
where the character of its Assets or the nature or conduct of its business
requires it to be so qualified or licensed, except for such jurisdictions in
which the failure to be so qualified or licensed is not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
CROSSROADS. Bank is an insured institution as defined in the Federal Deposit
Insurance Act and is the only subsidiary of CROSSROADS.
4.5 Financial Statements. CROSSROADS has Previously Disclosed, and delivered
to SNB prior to the execution of this Agreement, copies of all CROSSROADS
Financial Statements for periods ended prior to the date hereof and will
deliver to SNB copies of all CROSSROADS Financial Statements prepared
subsequent to the date hereof. The CROSSROADS Financial Statements (as of the
dates thereof and for the periods covered thereby) (a) are or, if dated after
the date of this Agreement, will be in accordance with the books and records
of the CROSSROADS Companies, which are or will be, as the case may be,
complete and correct and which have been or will have been, as the case may
be, maintained in accordance with good business practices, and (b) present or
will present, as the case may be, fairly the consolidated financial position
of the CROSSROADS Companies as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity,
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and cash flows of the CROSSROADS Companies for the periods indicated, in
accordance with GAAP (subject to any exceptions as to consistency specified
therein or as may be indicated in the notes thereto or, in the case of interim
financial statements, to normal recurring year-end adjustments that are not
material).
4.6 Absence of Undisclosed Liabilities. No CROSSROADS Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CROSSROADS, except Liabilities which
are accrued or reserved against in the consolidated balance sheets of
CROSSROADS as of December 31, 1997 included in the CROSSROADS Financial
Statements or reflected in the notes thereto. Except as Previously Disclosed,
no CROSSROADS Company has incurred or paid any Liability since December 31,
1997, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
CROSSROADS.
4.7 Absence of Certain Changes or Events. Since December 31, 1997, (a) there
have been no events, changes or occurrences which have had, or are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
CROSSROADS, and (b) the CROSSROADS Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action
or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of the covenants and
agreements of CROSSROADS provided in Article 7 of this Agreement.
4.8 Tax Matters. (a) All Tax returns required to be filed by or on behalf of
any of the CROSSROADS Companies have been duly filed or requests for
extensions have been timely filed, granted and have not expired for periods
ended on or before December 31, 1996, and on or before the date of the most
recent fiscal year end immediately preceding the Effective Time, except to the
extent that all such failures to file, taken together, are not reasonably
likely to have a Material Adverse Effect on CROSSROADS, and all returns filed
are complete and accurate to the Knowledge of CROSSROADS. All Taxes shown on
filed returns have been paid. As of the date of this Agreement, there is no
audit examination, deficiency, or refund Litigation with respect to any Taxes
that is reasonably likely to result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on CROSSROADS,
except as reserved against in the CROSSROADS Financial Statements delivered
prior to the date of this Agreement. All Taxes and other Liabilities due with
respect to completed and settled examinations or concluded Litigation have
been paid.
(b) None of the CROSSROADS Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due that
is currently in effect, and no unpaid tax deficiency has been asserted in
writing against or with respect to any CROSSROADS Company, which deficiency is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CROSSROADS.
(c) Adequate provision for any Taxes due or to become due for any of the
CROSSROADS Companies for the period or periods through and including the date
of the respective CROSSROADS Financial Statements has been made and is
reflected on such CROSSROADS Financial Statements.
(d) Deferred Taxes of the CROSSROADS Companies have been provided for in
accordance with GAAP.
(e) Each of the CROSSROADS Companies is in compliance with, and its records
contain all information and documents (including, without limitation, properly
completed IRS Forms W-9) necessary to comply with, all applicable information
reporting and Tax withholding requirements under federal, state and local Tax
Laws, and such records identify with specificity all accounts subject to
backup withholding under Section 3406 of the Internal Revenue Code, except for
such instances of noncompliance and such omissions as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
CROSSROADS.
(f) Effective January 1, 1993, CROSSROADS adopted Financial Accounting
Standards Board Statement 109, "Accounting for Income Taxes."
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4.9 CROSSROADS Allowance for Possible Loan Losses. The allowance for
possible loan or credit losses (the "CROSSROADS Allowance") shown on the
consolidated balance sheets of CROSSROADS included in the most recent
CROSSROADS Financial Statements dated prior to the date of this Agreement was,
and the CROSSROADS Allowance shown on the consolidated balance sheets of
CROSSROADS included in the CROSSROADS Financial Statements as of dates
subsequent to the execution of this Agreement will be, maintained in
accordance with, and are in the amounts required by, GAAP and applicable
regulatory requirements or guidelines and are adequate to provide for losses
relating to or inherent in the loan and lease portfolios of the CROSSROADS
Companies, all as of the dates thereof, except where the failure of such
CROSSROADS Allowance to be so maintained is not reasonably likely to have a
Material Adverse Effect on CROSSROADS.
4.10 Assets. The CROSSROADS Companies have good and marketable title, free
and clear of all Liens, to all of their respective Assets. All material
tangible properties used in the businesses of the CROSSROADS Companies are in
good condition, reasonable wear and tear excepted, and are usable in the
ordinary course of business consistent with CROSSROADS's past practices. All
Assets which are material to CROSSROADS's business on a consolidated basis,
held under leases or subleases by any of the CROSSROADS Companies are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the CROSSROADS Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket
bonds in effect as to which any of the CROSSROADS Companies is a named insured
are reasonably sufficient. The Assets of the CROSSROADS Companies include all
assets required to operate the business of the CROSSROADS Companies as
presently conducted.
4.11 Environmental Matters. (a) Each CROSSROADS Company, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
CROSSROADS.
(b) There is no Litigation pending or, to the Knowledge of CROSSROADS,
threatened before any court, governmental agency or authority or other forum
in which any CROSSROADS Company or any of its Participation Facilities has
been or, with respect to threatened Litigation, may be named as a defendant
(i) for alleged noncompliance (including by any predecessor) with any
Environmental Law or (ii) relating to the release into the environment of any
Hazardous Material or oil, whether or not occurring at, on, under or involving
a site owned, leased or operated by any CROSSROADS Company or any of its
Participation Facilities, except for such Litigation pending or, to the
Knowledge of CROSSROADS, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CROSSROADS.
(c) There is no Litigation pending or, to the Knowledge of CROSSROADS,
threatened before any court, governmental agency or board or other forum in
which any of its Loan Properties (or any CROSSROADS Company in respect of such
Loan Property) has been or, with respect to threatened litigation, may be
named as a defendant or potentially responsible party (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any Hazardous Material or
oil, whether or not occurring at, on, under or involving a Loan Property,
except for such Litigation pending or, to the Knowledge of CROSSROADS,
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CROSSROADS.
(d) To the Knowledge of CROSSROADS, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c) above, except such as
is not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CROSSROADS.
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(e) During the period of (i) any CROSSROADS Company's ownership or operation
of any of their respective current properties, (ii) any CROSSROADS Company's
participation in the management of any Participation Facility, or (iii) any
CROSSROADS Company's holding of a security interest in a Loan Property, there
have been no releases of Hazardous Material or oil in, on, under or affecting
any such property, Participation Facility, or to the Knowledge of CROSSROADS
Loan Property, except such as are not reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on CROSSROADS.
(f) Prior to the period of (i) any CROSSROADS Company's ownership or
operation of any of their respective current properties, (ii) any CROSSROADS
Company's participation in the management of any Participation Facility, or
(iii) any CROSSROADS Company's holding of a security interest in a Loan
Property, to the Knowledge of CROSSROADS, there were no releases of Hazardous
Material or oil in, on, under or affecting any such property, Participation
Facility or Loan Property, except such as are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CROSSROADS.
4.12 Compliance with Laws. (a) CROSSROADS is duly registered as a bank
holding company under the BHC Act. Each CROSSROADS Company has in effect all
Permits necessary for it to own, lease or operate its Assets and to carry on
its business as now conducted, except for those Permits the absence of which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CROSSROADS, and there has occurred no Default under
any such Permit, other than Defaults which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on CROSSROADS.
(b) Except as Previously Disclosed, no CROSSROADS Company:
(i) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations which
are not reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on CROSSROADS; and
(ii) has received any notification or communication from any agency or
department of federal, state, or local government or any Regulatory
Authority or the staff thereof (A) asserting that any CROSSROADS Company is
not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CROSSROADS, (B) threatening to revoke any Permits, the
revocation of which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CROSSROADS, or (C) requiring any
CROSSROADS Company to enter into or consent to the issuance of a cease and
desist order, formal agreement, directive, commitment or memorandum of
understanding, or to adopt any Board resolution or similar undertaking,
which restricts materially the conduct of its business, or in any manner
relates to its capital adequacy, its credit or reserve policies, its
management, or the payment of dividends.
4.13 Labor Relations. No CROSSROADS Company is the subject of any Litigation
asserting that it or any other CROSSROADS Company has committed an unfair
labor practice (within the meaning of the National Labor Relations Act or
comparable state law) or seeking to compel it or any other CROSSROADS Company
to bargain with any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute involving any
CROSSROADS Company, pending or, to its Knowledge, threatened or, to its
Knowledge, is there any activity involving any CROSSROADS Company's employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
4.14 Employee Benefit Plans. (a) CROSSROADS has Previously Disclosed, and
delivered or made available to SNB prior to the execution of this Agreement,
copies in each case of all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus, or other incentive plans all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including, without limitation, "employee benefit plans,"
as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by any
CROSSROADS
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Company or Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "CROSSROADS Benefit Plans"). Any of the
CROSSROADS Benefit Plans which is an "employee pension benefit plan," as that
term is defined in Section 3(2) of ERISA, is referred to herein as a
"CROSSROADS ERISA Plan." Each CROSSROADS ERISA Plan which is also a "defined
benefit plan" (as defined in Section 414(j) of the Internal Revenue Code) is
referred to herein as a "CROSSROADS Pension Plan." No CROSSROADS Pension Plan
is or has been a multi-employer plan within the meaning of Section 3(37) of
ERISA.
(b) All CROSSROADS Benefit Plans are in compliance with the applicable terms
of ERISA, the Internal Revenue Code, and any other applicable Laws the breach
or violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CROSSROADS. Each CROSSROADS ERISA Plan
which is intended to be qualified under Section 401(a) of the Internal Revenue
Code has received a favorable determination letter from the IRS, and
CROSSROADS is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. To the Knowledge of CROSSROADS, no
CROSSROADS Company has engaged in a transaction with respect to any CROSSROADS
Benefit Plan that, assuming the taxable period of such transaction expired as
of the date hereof would subject any CROSSROADS Company to a tax or penalty
imposed by either Section 4975 of the Internal Revenue Code or Section 502(i)
of ERISA in amounts which are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CROSSROADS.
(c) No CROSSROADS ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section 302(d)(8)(A)
of ERISA, based on actuarial assumptions set forth for such plan's most recent
actuarial valuation. Since the date of the most recent actuarial valuation,
there has been (i) no material change in the financial position of any
CROSSROADS Pension Plan, (ii) no change in the actuarial assumptions with
respect to any CROSSROADS Pension Plan, and (iii) no increase in benefits
under any CROSSROADS Pension Plan as a result of plan amendments or changes in
applicable law, which is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CROSSROADS or materially adversely
affect the funding status of any such plan. Neither any CROSSROADS Pension
Plan nor any "single-employer plan," within the meaning of Section 4001(a)(15)
of ERISA, currently or formerly maintained by any CROSSROADS Company, or the
single-employer plan of any entity which is considered one employer with
CROSSROADS under Section 4001 of ERISA or Section 414 of the Internal Revenue
Code or Section 302 of ERISA (whether or not waived) (an "ERISA Affiliate")
has an "accumulated funding deficiency" within the meaning of Section 412 of
the Internal Revenue Code or Section 302 of ERISA, which is reasonably likely
to have a Material Adverse Effect on CROSSROADS. No CROSSROADS Company has
provided, or is required to provide, security to a CROSSROADS Pension Plan or
to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(d) Within the six-year period preceding the Effective Time, no Liability
under Subtitle C or D of Title IV or ERISA has been or is expected to be
incurred by any CROSSROADS Company with respect to any ongoing, frozen or
terminated single-employer plan or the single-employer plan of any ERISA
Affiliate, which Liability is reasonably likely to have a Material Adverse
Effect on CROSSROADS. Except as Previously Disclosed, no CROSSROADS Company
has incurred any withdrawal Liability with respect to a multi-employer plan
under Subtitle B of Title TV or ERISA (regardless of whether based on
contributions of an ERISA Affiliate), which Liability is reasonably likely to
have a Material Adverse Effect on CROSSROADS. No notice of a "reportable
event," within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed for
any CROSSROADS Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) No CROSSROADS Company has any obligations for retiree health and life
benefits under any of the CROSSROADS Benefit Plans, and there are no
restrictions on the rights of such CROSSROADS Company to amend or terminate
any such Plan without incurring any Liability thereunder, which Liability is
reasonably likely to have a Material Adverse Effect on CROSSROADS.
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(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation,
golden parachute or otherwise) becoming due to any director or any employee of
any CROSSROADS Company from any CROSSROADS Company under any CROSSROADS
Benefit Plan or otherwise, (ii) increase any benefits otherwise payable under
any CROSSROADS Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any executive
compensation, supplemental retirement, or employment agreement) of employees
and former employees of any CROSSROADS Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded retirement
plans subject to the provisions of Section 412 of the Internal Revenue Code or
Section 302 of ERISA, have been fully reflected on the CROSSROADS Financial
Statements to the extent required by and in accordance with GAAP.
4.15 Material Contracts. Except as Previously Disclosed or otherwise
reflected in the CROSSROADS Financial Statements, none of the CROSSROADS
Companies, nor any of their respective Assets, businesses or operations, is a
party to, or is bound or affected by, or receives benefits under, (a) any
employment, severance, termination, consulting or retirement Contract
providing for aggregate payments to any Person in any calendar year, (b) any
Contract relating to the borrowing of money by any CROSSROADS Company or the
guarantee by any CROSSROADS Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds, fully
secured repurchase agreements, trade payables, and Contracts relating to
borrowings or guarantees made in the ordinary course of business), and (c) any
Contracts between or among CROSSROADS Companies (together with all Contracts
referred to in Sections 4.10 and 4.14(a) of this Agreement, the "CROSSROADS
Contracts"). None of the CROSSROADS Companies is in Default under any
CROSSROADS Contract, other than Defaults which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on
CROSSROADS. All of the indebtedness of any CROSSROADS Company for money
borrowed is prepayable at any time by such CROSSROADS Company without penalty
or premium.
4.16 Legal Proceedings. Except as Previously Disclosed, there is no
Litigation instituted or pending or, to the Knowledge of CROSSROADS,
threatened (or unasserted but considered probable of assertion and which, if
asserted, would have at least a reasonable probability of an unfavorable
outcome) against any CROSSROADS Company, or against any Asset, interest, or
right of any of them, that is reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on CROSSROADS, nor are there any
Orders of any Regulatory Authorities, other governmental authorities, or
arbitrators outstanding against any CROSSROADS Company, that are reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
CROSSROADS.
4.17 Reports. Except as Previously Disclosed, since January 1, 1994, each
CROSSROADS Company has timely filed all reports and statements, together with
any amendments required to be made with respect thereto, that it was required
to FILE with all Regulatory Authorities. As of their respective dates, each of
such reports and documents, including, without limitation, the financial
statements, exhibits, and schedules thereto, complied in all material respects
with all applicable Laws. As of their respective dates, none of such reports
or documents contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
4.18 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any CROSSROADS Company or any
Affiliate thereof to SNB pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the information supplied or to be supplied
by any CROSSROADS Company or any Affiliate thereof for inclusion in the
Registration Statement to be FILED
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by SNB with the SEC, will, when the Registration Statement becomes effective,
be false or misleading with respect to any material fact, or omit to state any
material fact necessary to make the statements therein not misleading. None of
the information supplied or to be supplied by any CROSSROADS Company or any
Affiliate thereof for inclusion in the Proxy Statement to be mailed to
CROSSROADS'S shareholders in connection with the Shareholders' Meeting, and
any other documents to be filed by any CROSSROADS Company or any Affiliate
thereof with the SEC or any other Regulatory Authority in connection with the
transactions contemplated hereby, will, at the respective time such documents
are filed, and with respect to the Proxy Statement, when first mailed to the
shareholders of CROSSROADS, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or, in the case of the Proxy Statement or any amendment
thereof or supplement thereto, at the time of the Shareholders' Meeting, be
false or misleading with respect to any material fact, or omit to state any
material fact necessary to correct any statement in any earlier communication
with respect to the solicitation of any proxy for the Shareholders' Meeting.
All documents that any CROSSROADS Company or any Affiliate thereof is
responsible for filing with any Regulatory Authority in connection with the
transactions contemplated hereby will comply as to form in all material
respects with the provisions of applicable Law.
4.19 Accounting. Tax and Regulatory Matters. Except as Previously Disclosed,
no CROSSROADS Company or any Affiliate thereof has taken any action or has any
Knowledge of any fact or circumstance that is reasonably likely to (a) prevent
the transactions contemplated hereby, including the Merger, from qualifying as
a reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, or (b) materially impede or delay receipt of any Consents of Regulatory
Authorities referred to in Section 8. 1 (b) of this Agreement or result in the
imposition of a condition or restriction of the type referred to in the second
sentence of such Section. To the Knowledge of CROSSROADS, there exists no
fact, circumstance, or reason why the requisite Consents referred to in
Section 8. 1 (b) of this Agreement cannot be received in a timely manner
without the imposition of any condition or restriction of the type described
in the second sentence of such Section 8.1(b).
4.20 Charter Provisions. Each CROSSROADS Company has taken all action so
that the entering into of this Agreement and the consummation of the Merger
and the other transactions contemplated by this Agreement do not and will not
result in the grant of any rights to any Person under the Articles of
Incorporation, Bylaws or other governing instruments of any CROSSROADS Company
or restrict or impair the ability of SNB to vote, or otherwise to exercise the
rights of a shareholder with respect to, shares of any CROSSROADS Company that
may be acquired or controlled by it.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF SNB
SNB hereby represents and warrants to CROSSROADS as follows:
5.1 Organization, Standing and Power. SNB is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Georgia,
and is duly registered as a bank holding company under the BHC Act. SNB has
the corporate power and authority to carry on its business as now conducted
and to own, lease and operate its Assets. SNB is duly qualified or licensed to
transact business as a foreign corporation in good standing in the States of
the United States and foreign jurisdictions where the character of its Assets
or the nature or conduct of its business requires it to be so qualified or
licensed, except for such jurisdictions in which the failure to be so
qualified or licensed is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SNB.
5.2 Authority; No Breach. (a) SNB has the corporate power and authority
necessary to execute, deliver and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated herein, including the Merger, have been duly and
validly authorized by all necessary corporate action in respect
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thereof on the part of SNB. This Agreement represents a legal, valid and
binding obligation of SNB, enforceable against SNB in accordance with its
terms (except in all cases as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar Laws affecting
the enforcement of creditors' rights generally and except that the
availability of the equitable remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
may be brought).
(b) Neither the execution and delivery of this Agreement by SNB, nor the
consummation by SNB of the transactions contemplated hereby, nor compliance by
SNB with any of the provisions hereof will (i) conflict with or result in a
breach of any provision of SNB's Articles of Incorporation or Bylaws, or (ii)
constitute or result in a Default under, or require any Consent pursuant to,
or result in the creation of any Lien on any Asset of any SNB Company under,
any Contract or Permit of any SNB Company, where such Default or Lien, or any
failure to obtain such Consent, is reasonably likely to have, individually or
in the aggregate, a Material Adverse Effect on SNB, or, (iii) subject to
receipt of the requisite approvals referred to in Section 8. 1 (b) of this
Agreement, violate any Law or Order applicable to any SNB Company or any of
their respective Assets.
(c) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate Laws, and rules of the NASD, and
other than Consents required from Regulatory Authorities, and other than
notices to or filings with the IRS or the Pension Benefit Guaranty Corporation
with respect to any employee benefit plans, and other than Consents, filings
or notifications which, if not obtained or made, are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on SNB, no
notice to, filing with, or Consent of any public body or authority is
necessary for the consummation by SNB of the Merger and the other transactions
contemplated in this Agreement.
5.3 Capital Stock. (a) The authorized capital stock of SNB consists of (i)
5,000,000 shares of SNB Common Stock, of which 2,556,381 shares are issued and
outstanding as of the date of this Agreement (includes shares to be issued
subject to outstanding stock option and warrants). All of the issued and
outstanding shares of SNB Common Stock are, and all of the shares of SNB
Common Stock to be issued in exchange for shares of CROSSROADS Common Stock
upon consummation of the Merger, when issued in accordance with the terms of
this Agreement, will be, duly and validly issued and outstanding and fully
paid and nonassessable under the GBCC. None of the outstanding shares of SNB
Common Stock has been, and none of the shares of SNB Common Stock to be issued
in exchange for shares of CROSSROADS Common Stock upon consummation of the
Merger will be, issued in violation of any preemptive rights of the current or
past shareholders of SNB.
(b) Except as set forth in the total shares in Section 5.3(a) of this
Agreement, or as Previously Disclosed, there are no shares of capital stock or
other equity securities of SNB outstanding and no outstanding options,
warrants, scrip, rights to subscribe to, calls, or commitments of any
character whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of SNB or contracts,
commitments, understandings, or arrangements by which SNB is or may be bound
to issue additional shares of its capital stock or options, warrants, or
rights to purchase or acquire any additional shares of its capital stock.
5.4 SNB Subsidiaries. SNB has no subsidiaries.
5.5 Financial Statements. SNB has Previously Disclosed and delivered to
CROSSROADS prior to the execution of this Agreement copies of all SNB
Financial Statements for periods ended prior to the date hereof and will
deliver to CROSSROADS copies of all SNB Financial Statements prepared
subsequent to the date hereof. The SNB Financial Statements (as of the dates
thereof and for the periods covered thereby) (a) are or, if dated after the
date of this Agreement, will be in accordance with the books and records of
the SNB Companies, which are or will be, as the case may be, complete and
correct and which have been or will have been, as the case may be, maintained
in accordance with good business practices, and (b) present or will present,
as the case may be, fairly the consolidated financial position of the SNB
Companies as of the dates indicated and the consolidated results of
operations, changes in shareholders' equity, and cash flows of the SNB
Companies for the periods indicated, in accordance with GAAP (subject to
exceptions as to consistency specified therein or as may be indicated in the
notes thereto or, in the case of interim financial statements, to normal
recurring year-end adjustments that are not material).
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5.6 Absence of Undisclosed Liabilities. No SNB Company has any Liabilities
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on SNB, except Liabilities which are accrued or
reserved against in the consolidated balance sheets of SNB as of December 31,
1997 included in the SNB Financial Statements or reflected in the notes
thereto. No SNB Company has incurred or paid any Liability since December 31,
1997, except for such Liabilities incurred or paid in the ordinary course of
business consistent with past business practice and which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SNB.
5.7 Absence of Certain Changes or Events. Since March 31, 1997, except as
disclosed in SEC Documents filed by SNB prior to the date of this Agreement,
(a) there have been no events, changes or occurrences which have had, or are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SNB, and (b) the SNB Companies have not taken any action, or
failed to take any action, prior to the date of this Agreement, which action
or failure, if taken after the date of this Agreement, would represent or
result in a material breach or violation of any of the covenants and
agreements of SNB provided in Article 7 of this Agreement.
5.8 Tax Matters. (a) All Tax returns required to be filed by or on behalf of
any of the SNB Companies have been timely filed or requests for extensions
have been timely filed, granted and have not expired for periods ended on or
before December 31, 1996, and on or before the date of the most recent fiscal
year end immediately preceding the Effective Time, except to the extent that
all such failures to file, taken together, are not reasonably likely to have a
Material Adverse Effect on SNB, and all returns filed are complete and
accurate to the Knowledge of SNB. All Taxes shown on filed returns have been
paid. As of the date of this Agreement, there is no audit examination,
deficiency, or refund Litigation with respect to any Taxes that is reasonably
likely to result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on SNB, except as reserved against in the
SNB Financial Statements delivered prior to the date of this Agreement. All
Taxes and other Liabilities due with respect to completed and settled
examinations or concluded Litigation have been paid.
(b) None of the SNB Companies has executed an extension or waiver of any
statute of limitations on the assessment or collection of any Tax due that is
currently in effect, and no unpaid tax deficiency has been asserted in writing
against or with respect to any SNB Company, which deficiency is reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SNB.
(c) Adequate provision for any Taxes due or to become due for any of the SNB
Companies for the period or periods through and including the date of the
respective SNB Financial Statements has been made and is reflected on such SNB
Financial Statements.
(d) Deferred Taxes of the SNB Companies have been provided for in accordance
with GAAP.
(e) Effective January 1, 1993, SNB adopted Financial Accounting Standards
Board Statement 109, "Accounting for Income Taxes."
5.9 SNB Allowance for Possible Loan Losses. The allowance for possible loan
or credit losses (the "SNB Allowance") shown on the consolidated balance
sheets of SNB included in the most recent SNB Financial Statements dated prior
to the date of this Agreement was, and the SNB Allowance shown on the
consolidated balance sheets of SNB included in the SNB Financial Statements as
of dates subsequent to the execution of this Agreement will be, as of the
dates thereof, adequate (within the meaning of GAAP and applicable regulatory
requirements or guidelines) to provide for losses relating to or inherent in
the loan and lease portfolios (including accrued interest receivables) of the
SNB Companies and other extensions of credit (including letters of credit and
commitments to make loans or extend credit) by the SNB Companies as of the
dates thereof except where the failure of such SNB Allowance to be so adequate
is not reasonably likely to have a Material Adverse Effect on SNB.
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5.10 Assets. Except as Previously Disclosed or as disclosed or reserved
against in the SNB Financial Statements, the SNB Companies have good and
marketable title, free and clear of all Liens, to all of their respective
Assets. All material tangible properties used in the businesses of the SNB
Companies are in good condition, reasonable wear and tear excepted, and are
usable in the ordinary course of business consistent with SNB'S past
practices. All Assets which are material to SNB'S business on a consolidated
basis, held under leases or subleases by any of the SNB Companies, are held
under valid Contracts enforceable in accordance with their respective terms
(except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other Laws affecting the enforcement of
creditors' rights generally and except that the availability of the equitable
remedy of specific performance or injunctive relief is subject to the
discretion of the court before which any proceedings may be brought), and each
such Contract is in full force and effect. The policies of fire, theft,
liability, and other insurance maintained with respect to the Assets or
businesses of the SNB Companies provide adequate coverage under current
industry practices against loss or Liability, and the fidelity and blanket
bonds in effect as to which any of the SNB Companies is a named insured are
reasonably sufficient. The Assets of the SNB Companies include all assets
required to operate the business of the SNB Companies as presently conducted.
5.11 Environmental Matters. (a) Each SNB Company, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on SNB.
(b) There is no Litigation pending or, to the Knowledge of SNB, threatened
before any court, governmental agency or authority or other forum in which any
SNB Company or any of its Participation Facilities has been or, with respect
to threatened Litigation, may be named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Law or
(ii) relating to the release into the environment of any Hazardous Material
(as defined below) or oil, whether or not occurring at, on, under or involving
a site owned, leased or operated by any SNB Company or any of its
Participation Facilities, except for such Litigation pending or, to the
Knowledge of SNB, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SNB.
(c) There is no Litigation pending or, to the Knowledge of SNB, threatened
before any court, governmental agency or board or other forum in which any of
its Loan Properties (or any SNB Company in respect of such Loan Property) has
been or, with respect to threatened Litigation, may be named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor), with any Environmental Law or (ii) relating to the release into
the environment of any Hazardous Material or oil, whether or not occurring at,
on, under or involving a Loan Property, except for such Litigation pending or,
to the Knowledge of SNB, threatened that is not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SNB.
(d) To the Knowledge of SNB, there is no reasonable basis for any Litigation
of a type described in subsections (b) or (c) above, except such as is not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SNB.
(e) During the period of (i) any SNB Company's ownership or operation of any
of their respective current properties, (ii) any SNB Company's participation
in the management of any Participation Facility, or (iii) any SNB Company's
holding of a security interest in a Loan Property, there have been no releases
of Hazardous Material or oil in, on, under or affecting such property,
Participation Facility or Loan Property, except such as are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SNB.
(f) Prior to the period of (i) any SNB Company's ownership or operation of
any of their respective current properties, (ii) any SNB Company's
participation in the management of any Participation Facility, or (iii) any
SNB Company's holding of a security interest in a Loan Property, to the
Knowledge of SNB, there were no releases of Hazardous Material or oil in, on,
under or affecting any such property, Participation Facility or Loan Property,
except such as are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SNB.
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5.12 Compliance with Laws. SNB is duly registered as a bank holding company
under the BHC Act. Each SNB Company has in effect all Permits necessary for it
to own, lease or operate its Assets and to carry on its business as now
conducted, except for those Permits the absence of which are not reasonably
likely to have, individually or in the aggregate, a Material Adverse Effect on
SNB, and there has occurred no Default under any such Permit, other than
Defaults which are not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SNB. No SNB Company: (i) is in
violation of any Laws, Orders or Permits applicable to its business or
employees conducting its business, except for violations which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SNB; or (ii) has received any notification or communication
from any agency or department of federal, state, or local government or any
Regulatory Authority or the staff thereof (A) asserting that any SNB Company
is not in compliance with any of the Laws or Orders which such governmental
authority or Regulatory Authority enforces, where such noncompliance is
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SNB, (B) threatening to revoke any Permits, the revocation
of which is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on SNB, or (C) requiring any SNB Company to enter into
or consent to the issuance of a cease and desist order, formal agreement,
directive, commitment or memorandum of understanding, or to adopt any Board
resolution or similar undertaking, which restricts materially the conduct of
its business, or in any manner relates to its capital adequacy, its credit or
reserve policies, its management, or the payment of dividends.
5.13 Labor Relations. No SNB Company is the subject of any Litigation
asserting that it or any other SNB Company has committed an unfair labor
practice (within the meaning of the National Labor Relations Act or comparable
state law) or seeking to compel it or any other SNB Company to bargain with
any labor organization as to wages or conditions of employment, nor is there
any strike or other labor dispute involving any SNB Company, pending or, to
its Knowledge, threatened or, to its Knowledge, is there any activity
involving any SNB Company's employees seeking to certify a collective
bargaining unit or engaging in any other organization activity.
5.14 Employee Benefit Plans. (a) SNB has Previously Disclosed and delivered
or made available to CROSSROADS prior to the execution of this Agreement
copies in each case of all pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus, or other incentive plans, all other written employee programs,
arrangements, or agreements, all medical, vision, dental, or other health
plans, all life insurance plans, and all other employee benefit plans or
fringe benefit plans, including, without limitation, "employee benefit plans,"
as that term is defined in Section 3(3) of ERISA, currently adopted,
maintained by, sponsored in whole or in part by, or contributed to by any SNB
Company or Affiliate thereof for the benefit of employees, retirees,
dependents, spouses, directors, independent contractors, or other
beneficiaries and under which employees, retirees, dependents, spouses,
directors, independent contractors, or other beneficiaries are eligible to
participate (collectively, the "SNB Benefit Plans"). Any of the SNB Benefit
Plans which is an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA, is referred to herein as a "SNB ERISA Plan." Each SNB
ERISA Plan which is also a "defined benefit plan" (as defined in Section
4140)) of the Internal Revenue Code) is referred to herein as a "SNB Pension
Plan." No SNB Pension Plan is or has been a multi-employer plan within the
meaning of Section 3(37) of ERISA.
(b) All SNB Benefit Plans are in compliance with the applicable terms of
ERISA, the Internal Revenue Code, and any other applicable Laws the breach or
violation of which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on SNB. Each SNB ERISA Plan which is
intended to be qualified under Section 401 (a) of the Internal Revenue Code
has received a favorable determination letter from the IRS, and SNB is not
aware of any circumstances likely to result in revocation of any such
favorable determination letter. To the knowledge of SNB, no SNB Company has
engaged in a transaction with respect to any SNB Benefit Plan that, assuming
the taxable period of such transaction expired as of the date hereof would
subject any SNB Company to a tax or penalty imposed by either Section 4975 of
the Internal Revenue Code or Section 502(i) of ERISA in amounts which are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SNB.
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(c) No SNB ERISA Plan which is a defined benefit pension plan has any
"unfunded current liability," as that term is defined in Section
302(d)(8)(A) of ERISA, based on actuarial assumptions set forth for such
plan's most recent actuarial valuation. Since the date of the most recent
actuarial valuation, there has been (i) no material change in the financial
position of any SNB Pension Plan, (ii) no change in the actuarial
assumptions with respect to any SNB Pension Plan, and (iii) no increase in
benefits under any SNB Pension Plan as a result of plan amendments or
changes in applicable Law which is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on SNB or materially
adversely affect the funding status of any such plan. Neither any SNB
Pension Plan nor any "single-employer plan," within the meaning of Section
4001(a)(15) of ERISA, currently or formerly maintained by any SNB Company,
or the single-employer plan of any ERISA Affiliate has an "accumulated
funding deficiency" within the meaning of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, which is reasonably likely to have a
Material Adverse Effect on SNB. No SNB Company has provided, or is required
to provide, security to a SNB Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(d) No Liability under Subtitle C or D of Title IV or ERISA has been or is
expected to be incurred by any SNB Company with respect to any ongoing,
frozen or terminated single-employer plan or the single-employer plan of
any ERISA Affiliate, which Liability is reasonably likely to have a
Material Adverse Effect on SNB. No SNB Company has incurred any withdrawal
Liability with respect to a multi-employer plan under Subtitle B of Title
IV or ERISA (regardless of whether based on contributions of an ERISA
Affiliate), which Liability is reasonably likely to have a Material Adverse
Effect on SNB. No notice of a "reportable event" within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be FILED for any SNB Pension Plan or by
any ERISA Affiliate within the 12-month period ending on the date hereof.
(e) Except as Previously Disclosed, (i) no SNB Company has any obligations
for retiree health and life benefits under any of the SNB Benefit Plans and
(ii) there are no restrictions on the rights of such SNB Company to amend
or terminate any such Plan without incurring any Liability thereunder,
which Liability is reasonably likely to have a Material Adverse Effect on
SNB.
(f) Except as Previously Disclosed, neither the execution and delivery of
this Agreement nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including, without limitation, severance,
unemployment compensation, golden parachute or otherwise) becoming due to
any director or any employee of any SNB Company from any SNB Company under
any SNB Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any SNB Benefit Plan, or (iii) result in any acceleration of
the time of payment or vesting of any such benefit.
(g) The actuarial present values of all accrued deferred compensation
entitlements (including, without limitation, entitlements under any
executive compensation, supplemental retirement, or employment agreement)
of employees and former employees of any SNB Company and their respective
beneficiaries, other than entitlements accrued pursuant to funded
retirement plans subject to the provisions of Section 412 of the Internal
Revenue Code or Section 302 of ERISA, have been fully reflected on the SNB
Financial Statements to the extent required by and in accordance with GAAP.
5.15 Legal Proceedings. There is no Litigation instituted or pending or, to
the Knowledge of SNB, threatened (or unasserted but considered probable of
assertion and which if asserted would have at least a reasonable probability
of an unfavorable outcome) against any SNB Company, or against any Asset,
interest, or right of any of them, that is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on SNB, nor are
there any Orders of any Regulatory Authorities, other governmental
authorities, or arbitrators outstanding against any SNB Company, that are
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SNB.
5.16 Reports. Since January 1, 1994, each SNB Company has timely filed all
reports and statements, together with any amendments required to be made with
respect thereto, that it was required to file with (a) the
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SEC, including, without limitation, Forms 10-K, Forms 10-Q, Forms 8-K, and
proxy statements, (b) other Regulatory Authorities, and (c) any applicable
state securities or banking authorities (except, in the case of state
securities authorities, failures to file which are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on SNB). As
of their respective dates, each of such reports and documents, including,
without limitation, the financial statements, exhibits, and schedules thereto,
complied in all material respects with all applicable Laws. As of its
respective date, none of such reports and documents contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements made therein, in light
of the circumstances under which they were made, not misleading.
5.17 Statements True and Correct. No statement, certificate, instrument or
other writing furnished or to be furnished by any SNB Company or any Affiliate
thereof to CROSSROADS pursuant to this Agreement or any other document,
agreement or instrument referred to herein contains or will contain any untrue
statement of material fact or will omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. None of the information supplied or to be supplied
by any SNB Company or any Affiliate thereof for inclusion in the Registration
Statement to be filed by SNB with the SEC, will, when the Registration
Statement becomes effective, be false or misleading with respect to any
material fact, or omit to state any material fact necessary to make the
statements therein not misleading. None of the information supplied or to be
supplied by any SNB Company or any Affiliate thereof for inclusion in the
Proxy Statement to be mailed to CROSSROADS's shareholders in connection with
the Shareholders' Meeting, and any other documents to be filed by any SNB
Company or any Affiliate thereof with the SEC or any other Regulatory
Authority in connection with the transactions contemplated hereby, will, at
the respective time such documents are filed, and with respect to the Proxy
Statement, when FIRST mailed to the shareholders of CROSSROADS, be false or
misleading with respect to any material fact, or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement or any amendment thereof or supplement thereto, at the time of the
Shareholders' Meeting, be false or misleading with respect to any material
fact, or omit to state any material fact necessary to correct any statement in
any earlier communication with respect to the solicitation of any proxy for
the Shareholders' Meeting. All documents that any SNB Company or any Affiliate
thereof is responsible for filing with any Regulatory Authority in connection
with the transactions contemplated hereby will comply as to form in all
material respects with the provisions of applicable Law.
5.18 Accounting, Tax and Regulatory Matters. No SNB Company or any Affiliate
thereof has taken any action or has any Knowledge of any fact or circumstance
that is reasonably likely to (a) prevent the transactions contemplated hereby,
including the Merger, from qualifying as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code, or (b) materially impede or
delay receipt of any Consents of Regulatory Authorities referred to in Section
8.l(b) of this Agreement or result in the imposition of a condition or
restriction of the type referred to in the second sentence of such Section. To
the Knowledge of SNB, there exists no fact, circumstance, or reason why the
requisite Consents referred to in Section 8.1(b) of this Agreement cannot be
received in a timely manner without the imposition of any condition or
restriction of the type described in the second sentence of such Section
8.1(b).
5.19 Charter Provisions. Each SNB Company has taken all action so that the
entering into of this Agreement and the consummation of the Merger and the
other transactions contemplated by this Agreement do not and will not result
in the grant of any rights to any Person under the Articles of Incorporation,
Bylaws or other governing instruments of any SNB Company or restrict or impair
the ability of any CROSSROADS shareholder to vote, or otherwise to exercise
the rights of a shareholder with respect to, shares of SNB Common Stock that
may be acquired or controlled by it.
ARTICLE 6
CONDUCT OF BUSINESS PENDING CONSUMMATION
6.1 Affirmative Covenants of CROSSROADS. Unless the prior written consent of
SNB shall have been obtained, and except as otherwise contemplated herein,
CROSSROADS shall, and shall cause each of its
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Subsidiaries: (a) to operate its business in the usual, regular, and ordinary
course; (b) to preserve intact its business organization and Assets and
maintain its rights and franchises; (c) to use its reasonable efforts to cause
its representations and warranties to be correct at all times; and (d) to take
no action which would (i) adversely affect the ability of any Party to obtain
any Consents required for the transactions contemplated hereby without
imposition of a condition or restriction of the type referred to in the second
sentence of Section 8.l(b) of this Agreement or (ii) adversely affect in any
material respect the ability of either Party to perform its covenants and
agreements under this Agreement.
6.2 Negative Covenants of CROSSROADS. From the date of this Agreement until
the earlier of the Effective Time or the termination of this Agreement,
CROSSROADS covenants and agrees that it will not do or agree or commit to do,
or permit any of its Subsidiaries to do or agree or commit to do, any of the
following without the prior written consent of the chief executive officer or
chief financial officer of SNB, which consent shall not be unreasonably
withheld:
(a) amend the Articles of Incorporation, Bylaws or other governing
instruments of any CROSSROADS Company; or
(b) incur any additional debt obligation or other obligation for borrowed
money (other than indebtedness of a CROSSROADS Company to another
CROSSROADS Company) (for the CROSSROADS Companies on a consolidated basis)
except in the ordinary course of the business of CROSSROADS Companies
consistent with past practices (which shall include, for CROSSROADS
Subsidiaries that are depository institutions, creation of deposit
liabilities, purchases of federal funds, receipt of Federal Home Loan Bank
advances, and entry into repurchase agreements fully secured by U.S.
government or agency securities), or impose, or suffer the imposition, on
any share of stock held by any CROSSROADS Company of any Lien or permit any
such Lien to exist; or
(c) repurchase, redeem, or otherwise acquire or exchange (other than
exchanges in the ordinary course under employee benefit plans), directly or
indirectly, any shares, or any securities convertible into any shares, of
the capital stock of any CROSSROADS Company, or declare or pay any dividend
or make any other distribution in respect of CROSSROADS'S capital stock,
provided that CROSSROADS shall be permitted to pay a cash dividend recently
declared by it payable on March 1, 1998 to shareholders of record on
February 15, 1998 in the amount of $.20 per share.
(d) except as Previously Disclosed, issue, sell, pledge, encumber,
authorize the issuance of, or enter into any Contract to issue, sell,
pledge, encumber, or authorize the issuance of or otherwise permit to
become outstanding, any additional shares of CROSSROADS Common Stock or any
other capital stock of any CROSSROADS Company, or any stock appreciation
rights, or any option, warrant, conversion, or other right to acquire any
such stock, or any security convertible into any such stock; or
(e) adjust, split, combine or reclassify any capital stock of any
CROSSROADS Company or issue or authorize the issuance of any other
securities in respect of or in substitution for shares of CROSSROADS Common
Stock or sell, lease, mortgage or otherwise dispose of or otherwise
encumber (i) any shares of capital stock of any CROSSROADS Subsidiary
(unless any such shares of stock are sold or otherwise transferred to
another CROSSROADS Company) or (ii) any Asset having a book value in excess
of $50,000 other than in the ordinary course of business for reasonable and
adequate consideration; or
(f) acquire direct or indirect control over any Person, other than in
connection with (i) internal reorganizations or consolidations involving
existing Subsidiaries, (ii) foreclosures in the ordinary course of
business, or (iii) acquisitions of control by a depository institution
Subsidiary in its fiduciary capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any CROSSROADS Company (including such discretionary increases
as may be contemplated by existing employment agreements), except in
accordance with past practice Previously Disclosed or as required by Law;
pay any bonus except to employees in accordance with past practice
Previously Disclosed or the provisions of any applicable program or plan
adopted by its Board of Directors prior to the date of this Agreement;
enter into or amend any severance agreements with officers of any
CROSSROADS Company; or pay any bonus to, or grant any increase in fees or
other increases in compensation or other benefits to, directors of any
CROSSROADS Company; or
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(h) enter into or amend any employment Contract between any CROSSROADS
Company and any Person (unless such amendment is required by Law) that the
CROSSROADS Company does not have the unconditional right to terminate
without Liability (other than Liability for services already rendered), at
any time on or after the Effective Time; or
(i) adopt any new employee benefit plan of any CROSSROADS Company or make
any material change in or to any existing employee benefit plans of any
CROSSROADS Company other than any such change that is required by Law or
that, in the opinion of counsel, is necessary or advisable to maintain the
tax qualified status of any such plan; or
(j) make any significant change in any accounting methods or systems of
internal accounting controls, except as may be appropriate to conform to
changes in regulatory accounting requirements or GAAP; or
(k) commence any Litigation other than in accordance with past practice,
settle any Litigation involving any Liability of any CROSSROADS Company for
money damages in excess of $50,000 or which involves material restrictions
upon the operations of any CROSSROADS Company; or
(l) except in the ordinary course of business, modify, amend or terminate
any material Contract or waive, release, compromise or assign any material
rights or claims.
6.3 Covenants of SNB. From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, SNB covenants and
agrees that it shall continue to conduct its business and the business of its
Subsidiaries in a manner designed in its reasonable judgment, to enhance the
long-term value of the SNB Common Stock and the business prospects of the SNB
Companies and, to the extent consistent therewith, to use all reasonable
efforts to preserve intact the SNB Companies' core businesses and goodwill
with their respective employees and the communities they serve.
6.4 Adverse Changes in Condition. Each Party agrees (a) to give written
notice promptly to the other Party upon becoming aware of the occurrence or
impending occurrence of any event or circumstance relating to it or any of its
Subsidiaries which (i) is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on it or (ii) is reasonably likely to
cause or constitute a material breach of any of its representations,
warranties, or covenants contained herein, and (b) to use its reasonable
efforts to prevent or promptly to remedy the same.
6.5 Reports. Each Party and its Subsidiaries shall file all reports required
to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time and shall deliver to the other Party copies
of all such reports promptly after the same are filed. If financial statements
are contained in any such reports filed with the SEC, such financial
statements will fairly present the consolidated financial position of the
entity filing such statements as of the dates indicated and the consolidated
results of operations, changes in shareholders' equity, and cash flows for the
periods then ended in accordance with GAAP (subject in the case of interim
financial statements to normal recurring year-end adjustments that are not
material). As of their respective dates, such reports filed with the SEC will
comply in all material respects with the Securities Laws and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any financial statements contained in any other reports to another
Regulatory Authority shall be prepared in accordance with Laws applicable to
such reports.
6.6 Pooling. From and after the date of this Agreement, no Party, or any of
its Affiliates, shall knowingly take or fail to take any action, other than
actions which such Party is required to take or abstain from taking pursuant
to this Agreement, which action or failure to act could reasonably be expected
to jeopardize the treatment of the Merger as a "pooling of interests" for
accounting purposes. From and after the date of this Agreement, each of the
Parties shall take all reasonable actions necessary to cause the Merger to be
characterized as a "pooling of interests" for accounting purposes.
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ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 Registration Statement; Proxy Statement; Shareholder Approval. As soon
as practicable after execution of this Agreement, SNB shall file the
Registration Statement with the SEC, and shall use its best efforts to cause
the Registration Statement to become effective under the 1933 Act and take any
action required to be taken under applicable Securities Laws in connection
with the issuance of the shares of SNB Common Stock upon consummation of the
Merger. CROSSROADS shall furnish all information concerning it and the holders
of its capital stock as SNB may reasonably request in connection with such
action. CROSSROADS shall call a Shareholders' Meeting, to be held as soon as
reasonably practicable after the Registration Statement is declared effective
by the SEC, for the purpose of voting upon approval of the Merger and this
Agreement and such other related matters as it deems appropriate. In
connection with the Shareholders' Meeting, (a) SNB shall prepare and file on
CROSSROADS'S behalf a Proxy Statement (which shall be included in the
Registration Statement and which shall include an explanation of the
restrictions on resale with respect to the shares of SNB Common Stock received
by the holders of CROSSROADS Common Stock in the Merger) with the SEC and mail
it to its shareholders, (b) the Parties shall furnish to each other all
information concerning them that they may reasonably request in connection
with such Proxy Statement, (c) the Board of Directors of CROSSROADS shall
recommend to its shareholders that they approve this Agreement, and (d) the
Board of Directors and officers of CROSSROADS shall use their reasonable
efforts to obtain such shareholders' approval.
7.2 Listing. SNB shall use its best efforts to list, prior to the Effective
Time, on the NASDAQ/NMS, the shares of SNB Common Stock to be issued to the
holders of CROSSROADS Common Stock pursuant to the Merger.
7.3 Applications. SNB shall promptly prepare and file, and CROSSROADS shall
cooperate in the preparation and, where appropriate, filing of, applications
with all Regulatory Authorities having jurisdiction over the transactions
contemplated by this Agreement seeking the requisite Consents necessary to
consummate the transactions contemplated by this Agreement.
7.4 Filings with State Offices. Upon the terms and subject to the conditions
of this Agreement, SNB shall execute and file the Articles of Merger with the
Secretary of State of the State of Georgia in connection with the Closing.
7.5 Agreement as to Efforts to Consummate. Subject to the terms and
conditions of this Agreement, each Party agrees to use, and to cause its
Subsidiaries to use, its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper, or
advisable under applicable Laws, as promptly as practicable so as to permit
consummation of the Merger at the earliest possible date and to otherwise
enable consummation of the transactions contemplated hereby and shall
cooperate fully with the other Party hereto to that end (it being understood
that any amendments to the Registration Statement filed by SNB in connection
with the SNB Common Stock to be issued in the Merger or a resolicitation of
proxies as a consequence of an acquisition agreement by SNB or any of its
Subsidiaries shall not violate this covenant), including, without limitation,
using its efforts to lift or rescind any Order adversely affecting its ability
to consummate the transactions contemplated herein and to cause to be
satisfied the conditions referred to in Article 9 of this Agreement. Each
Party shall use, and shall cause each of its Subsidiaries to use, its best
efforts to obtain all Consents necessary or desirable for the consummation of
the transactions contemplated by this Agreement.
7.6 Investigation and Confidentiality. (a) Prior to the Effective Time, each
Party will keep the other Party advised of all material developments relevant
to its business and to consummation of the Merger and shall permit the other
Party to make or cause to be made such investigation of the business and
properties of it and its Subsidiaries and of their respective financial and
legal conditions as the other Party reasonably requests, provided that such
investigation shall be reasonably related to the transactions contemplated
hereby and shall not interfere unnecessarily with normal operations. No
investigation by a Party shall affect the representations and warranties of
the other Party.
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(b) Except as may be required by applicable Law or legal process, and except
for such disclosure to those of its directors, officers, employees and
representatives as may be appropriate or required in connection with the
transactions contemplated hereby, each Party shall hold in confidence all
nonpublic information obtained from the other Party (including work papers and
other material derived therefrom) as a result of this Agreement or in
connection with the transactions contemplated hereby (whether so obtained
before or after the execution hereof) until such time as the Party providing
such information consents to its disclosure or such information becomes
otherwise publicly available. Promptly following any termination of this
Agreement, each of the Parties agrees to use its best efforts to cause its
respective directors, officers, employees and representatives to destroy or
return to the providing party all such nonpublic information (including work
papers and other material retrieved therefrom), including all copies thereof.
Each Party shall, and shall cause its advisers and agents to, maintain the
confidentiality of all confidential information furnished to it by the other
Party concerning its and its Subsidiaries' businesses, operations, and
financial position and shall not use such information for any purpose except
in furtherance of the transactions contemplated by this Agreement. If this
Agreement is terminated prior to the Effective Time, each Party shall promptly
return all documents and copies thereof and all work papers containing
confidential information received from the other Party.
(c) Each Party agrees to give the other Party notice as soon as practicable
after any determination by it of any fact or occurrence relating to the other
Party which it has discovered through the course of its investigation and
which represents, or is reasonably likely to represent, either a material
breach of any representation, warranty, covenant or agreement of the other
Party or which has had or is reasonably likely to have a Material Adverse
Effect on the other Party.
7.7 Press Releases. Prior to the Effective Time, CROSSROADS and SNB shall
consult with each other as to the form and substance of any press release or
other public disclosure materially related to this Agreement or any other
transaction contemplated hereby; provided, however, that nothing in this
Section 7.7 shall be deemed to prohibit any Party from making any disclosure
which its counsel deems necessary or advisable in order to satisfy such
Party's disclosure obligations imposed by Law.
7.8 No Solicitation. (a) CROSSROADS shall not, nor shall it permit any of
its Subsidiaries to, nor shall it authorize or permit any officer, director of
employee of, or any investment banker, attorney or other advisor or
representative of, CROSSROADS or any of its Subsidiaries to, (i) solicit or
initiate, or encourage the submission of, any Takeover Proposal or (ii)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or take any other action to facilitate
any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; provided, however,
that, subject to compliance with subsection (c) below and after receiving the
written opinion of independent outside legal counsel to the effect that the
failure to do so would constitute a breach by the CROSSROADS Board of
Directors of its fiduciary duties to CROSSROADS shareholders under applicable
law, CROSSROADS may, in response to an unsolicited Takeover Proposal that (i)
was not received in violation of this Section 7.8, (ii) is not subject to
financing and (iii) the CROSSROADS Board of Directors determines in good
faith, after receipt of a written opinion of a financial advisor of nationally
recognized reputation to such effect, would result in a transaction more
favorable to CROSSROADS shareholders than the Merger, (A) furnish information
with respect to CROSSROADS to any Person pursuant to a confidentiality
agreement and (B) participate in negotiations regarding such Takeover
Proposal. Without limiting the foregoing, it is understood that any violation
of the restrictions set forth in the immediately preceding sentence by any
executive officer of CROSSROADS or any of its Subsidiaries or any investment
banker, attorney or other advisor or representative of CROSSROADS or any of
its Subsidiaries, whether or not such person is purporting to act on behalf of
CROSSROADS or any of its Subsidiaries or otherwise, shall be deemed to be a
breach of this Section 7.8 by CROSSROADS. For purposes of this Agreement,
"Takeover Proposal" means an inquiry, proposal or acquisition or purchase of a
substantial amount of assets of CROSSROADS or any of its Subsidiaries (other
than investors in the ordinary course of business) or of over 15% of any class
of equity securities of CROSSROADS or any of its Subsidiaries or any tender
offer or exchange offer that if consummated would result in any Person
beneficially owning 15% or more of any class of equity securities of
CROSSROADS or
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any of its Subsidiaries, or any merger, consolidation, business combination,
sale of substantially all assets, recapitalization, liquidation, dissolution
or similar transaction involving CROSSROADS or any of its Subsidiaries other
than the transactions contemplated by this Agreement, or any other transaction
the consummation of which would reasonably be expected to impede, interfere
with, prevent or materially delay the Merger or which would reasonably be
expected to dilute materially the benefits to SNB of the transactions
contemplated hereby.
(b) Except as set forth herein, neither the Board of Directors of CROSSROADS
nor any committee thereof shall (i) withdraw or modify, or propose to withdraw
or modify, in a manner adverse to SNB, the approval or recommendation of such
Board of Directors or any such committee of this Agreement or the Merger, (ii)
approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) enter into any agreement with respect to any Takeover
Proposal. Notwithstanding the foregoing, upon receipt of the written opinion
of independent outside legal counsel to the effect that failure to do so would
constitute a breach of its fiduciary duties to CROSSROADS shareholders under
applicable law, then, prior to the Shareholders' Meeting, the CROSSROADS Board
of Directors may (subject to the terms of this and the following sentences)
approve or recommend (and, in connection therewith, withdraw or modify its
approval or recommendation of this Agreement or the Merger) a Superior
Proposal, or enter into an agreement with respect to a Superior Proposal, in
each case at any time after the second business day following SNB's receipt of
written notice (a "Notice of Superior Proposal") advising SNB that the
CROSSROADS Board of Directors has received a Superior Proposal, specifying the
material terms and conditions of such Superior Proposal and identifying the
Person making such Superior Proposal; provided that CROSSROADS shall not enter
into an agreement with respect to a Superior Proposal unless CROSSROADS shall
have furnished SNB with written notice no later than 12:00 noon one (1) day in
advance of any date that it intends to enter into such agreement. For purposes
of this Agreement, a "Superior Proposal" means any bona fide proposal (not
subject to financing) to acquire, directly or indirectly, for consideration
consisting of cash and/or securities, more than 50% of the shares of
CROSSROADS Common Stock or CROSSROADS Bank then outstanding or all or
substantially all of the assets of CROSSROADS or CROSSROADS Bank and otherwise
on terms that the CROSSROADS Board of Directors determines in its good faith
judgment (after receipt of a written opinion of a financial advisor of
nationally recognized reputation to such effect) to be more favorable to
CROSSROADS shareholders than the Merger.
(c) In addition to the obligations of CROSSROADS set forth in subsection (b)
above, CROSSROADS shall immediately advise SNB orally and in writing of any
request for information or of any Takeover Proposal, or any inquiry with
respect to or which could lead to any Takeover Proposal, the material terms
and conditions of such request, Takeover Proposal or inquiry, and the identity
of the person making any Takeover Proposal or inquiry. CROSSROADS shall keep
SNB fully informed of the status and details (including amendments or proposed
amendments) of any such request, Takeover Proposal or inquiry.
(d) Nothing contained in this Section 7.8 shall prohibit CROSSROADS from
making any disclosure to CROSSROADS's shareholders if the CROSSROADS Board of
Directors determines in good faith, after receipt of the written advice of
outside counsel to such effect, that it is required to do so in order to
discharge properly its fiduciary duties to shareholders under applicable law;
provided that CROSSROADS does not, except as permitted by subsection (b)
above, withdraw or modify, or propose to withdraw or modify, its position with
respect to the Merger or approve or recommend, or propose to approve or
recommend, a Takeover Proposal.
7.9 Tax Treatment. Each of the Parties undertakes and agrees to use its
reasonable efforts to cause the Merger, and to take no action which would
cause the Merger not, to qualify for treatment as a "reorganization" within
the meaning of Section 368(a) of the Internal Revenue Code for federal income
tax purposes.
7.10 Agreement of Affiliates. CROSSROADS has Previously Disclosed all
Persons whom it reasonably believes are "affiliates" of CROSSROADS for
purposes of Rule 145 under the 1933 Act. CROSSROADS shall use its reasonable
efforts to cause each such Person to deliver to SNB not later than thirty (30)
days after the date of this Agreement, a written agreement, substantially in
the form of Exhibit I hereto, providing that such
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Person will not sell, pledge, transfer, or otherwise dispose of the shares of
CROSSROADS Common Stock held by such Person except as contemplated by such
agreement or by this Agreement and will not sell, pledge, transfer, or
otherwise dispose of the shares of SNB Common Stock to be received by such
Person upon consummation of the Merger except in compliance with applicable
provisions of the 1933 Act and the rules and regulations thereunder.
Regardless of whether each such affiliate has provided the written agreement
referred to in this Section, SNB shall be entitled to place restrictive
legends upon certificates for shares of SNB Common Stock issued to affiliates
of CROSSROADS pursuant to this Agreement to enforce the provisions of this
Section.
7.11 Employee Benefits and Contracts. Following the Effective Time, SNB
shall provide generally to officers and employees of the CROSSROADS Companies
employee benefits under employee benefit plans on terms and conditions which
when taken as a whole are substantially similar to those currently provided by
the SNB Companies to their similarly situated officers and employees, provided
that for a period of twelve (12) months after the Effective Time, SNB shall
provide generally to officers and employees of CROSSROADS Companies severance
benefits in accordance with the policies of either (i) CROSSROADS as
Previously Disclosed, or (ii) SNB, whichever of (i) or (ii) will provide the
greater benefit to the officer or employee. For purposes of participation and
vesting under such employee benefit plans, the service of the employees of the
CROSSROADS Companies prior to the Effective Time shall be treated as service
with a SNB Company participating in such employee benefit plans. SNB also
shall honor in accordance with their terms all employment, severance,
consulting and other compensation Contracts Previously Disclosed to SNB
between any CROSSROADS Company and any current or former director, officer, or
employee thereof and all provisions for vested benefits or other vested
amounts earned or accrued through the Effective Time under the CROSSROADS
Benefit Plans.
7.12 Large Deposits. Prior to the Closing, CROSSROADS will provide SNB and
SNB will furnish to CROSSROADS with a list of all certificates of deposit or
checking, savings or other deposits owned by persons who, to the Knowledge of
the CROSSROADS, had deposits aggregating more than $100,000 and a list of all
certificates of deposit or checking, savings or other deposits owned by
directors and officers of CROSSROADS and the Bank and their affiliates in an
amount aggregating more than $100,000 as of the last day of the calendar month
immediately prior to the Closing.
7.13 Indemnification. SNB agrees that all rights to indemnification and all
limitations of liability existing in favor of the officers and directors of
CROSSROADS and CROSSROADS Bank ("Indemnified Parties") as provided in their
respective articles of incorporation and bylaws as of the date hereof with
respect to matters occurring prior to the Effective Time shall survive the
Merger and shall continue in FULL force and effect, without any amendment
thereto, for a period of not less than six (6) years from the Effective Time;
provided, however, that all rights to any indemnification in respect of any
claim asserted or made within such period shall continue until the final
disposition of such claim.
7.14 Irrevocable Proxies. Concurrent with the execution hereof, CROSSROADS
shall use its best efforts to obtain and deliver to SNB irrevocable proxies in
substantially the form of Exhibit 4 hereto from each member of CROSSROADS's
Executive Officers and from each member of CROSSROADS'S Board of Directors and
their affiliates not later than 30 days after the date of this Agreement.
7.15 Post-Closing Understanding. SNB agrees that CROSSROADS Bank of Georgia
will be maintained as a separately chartered, freestanding banking subsidiary
of SNB managed by its own Board of Directors as of the Effective Time and
until such time as SNB in its business judgment deems a change in such status
warranted. SNB shall, however, be entitled to change the name of CROSSROADS
Bank of Georgia at or after the Effective Time to achieve consistency with the
marketing program of SNB. It is the stated present intention of SNB to involve
William D. Watson, who presently serves as President of CROSSROADS Bank of
Georgia, as the City President of that institution subsequent to the Effective
Time and to maintain Carol A. Bryant, Ronald K. Bell, Ronald J. Baggett and
Ray M. Durham with the resulting organization in a role similar to that now
occupied by them with CROSSROADS Bank of Georgia. SNB agrees that four (4) of
the Directors of CROSSROADS immediately prior to the Effective Time will be
added to the Board of Directors of the resulting holding company as provided
in Section 2.3.
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ARTICLE 8
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
8.1 Conditions to Obligations of Each Party. The respective obligations of
each Party to perform this Agreement and consummate the Merger and the other
transactions contemplated hereby are subject to the satisfaction of the
following conditions, unless waived by both Parties pursuant to Section 10.6
of this Agreement:
(a) Shareholder Approval. The shareholders of CROSSROADS shall have
approved this Agreement, and the consummation of the transactions
contemplated hereby, including the Merger, as and to the extent required by
Law or by the provisions of any governing instruments.
(b) Regulatory Approvals. All Consents of, filings and registrations
with, and notifications to, all Regulatory Authorities required for
consummation of the Merger shall have been obtained or made and shall be in
full force and effect, and all waiting periods required by Law shall have
expired. No Consent obtained from any Regulatory Authority which is
necessary to consummate the transactions contemplated hereby shall be
conditioned or restricted in a manner (including, without limitation,
requirements relating to the raising of additional capital or the
disposition of Assets) which, in the reasonable judgment of the Board of
Directors of either Party, would so materially adversely impact the
economic or business benefits of the transactions contemplated by this
Agreement so as to render inadvisable the consummation of the Merger;
provided, however, that no such condition or restriction shall be deemed to
be materially adverse unless it materially differs from terms and
conditions customarily imposed by any Regulatory Authority in connection
with similar transactions.
(c) Consents and Approvals. Each Party shall have obtained any and all
Consents required for consummation of the Merger (other than those referred
to in Section 8. 1 (b) of this Agreement) or for the preventing of any
Default under any Contract or Permit of such Party which, if not obtained
or made, is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on such Party.
(d) Legal Proceedings. No court or governmental or regulatory authority
of competent jurisdiction shall have enacted, issued, promulgated, enforced
or entered any Law or Order (whether temporary, preliminary or permanent)
or taken any other action which prohibits, materially restricts or makes
illegal consummation of the transactions contemplated by this Agreement.
(e) Registration Statement. The Registration Statement shall be effective
under the 1933 Act, no stop orders suspending the effectiveness of the
Registration Statement shall have been issued, no action, suit, proceeding
or investigation by the SEC to suspend the effectiveness thereof shall have
been initiated and be continuing, and all necessary approvals under all
Securities Laws relating to the issuance or trading of the shares of SNB
Common Stock issuable pursuant to the Merger shall have been received.
(f) NASD Listing. The shares of SNB Common Stock issuable pursuant to the
Merger shall have been approved for listing on the NASDAQ/NMS.
(g) Tax Matters. CROSSROADS shall have received a written opinion of
counsel from Martin, Snow, Grant & Napier, in form reasonably satisfactory
to it, substantially to the effect that for federal income tax purposes (a)
the Merger will constitute a reorganization within the meaning of Section
368(a) of the Internal Revenue Code, and (b) the exchange in the Merger of
CROSSROADS Common Stock for SNB Common Stock will not give rise to gain or
loss to the shareholders of CROSSROADS with respect to such exchange
(except to the extent of any cash received).
8.2 Conditions to Obligations of SNB. The obligations of SNB to perform this
Agreement and consummate the Merger and the other transactions contemplated
hereby are subject to the satisfaction of the following conditions, unless
waived by SNB pursuant to Section 10.6(a) of this Agreement:
(a) Representations and Warranties. The representations and warranties of
CROSSROADS set forth or referred to in this Agreement shall be true and
correct in all respects as of the date of this Agreement and as of the
Effective Time with the same effect as though all such representations and
warranties had been
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made on and as of the Effective Time (provided that representations and
warranties which are confined to a specified date shall speak only as of
such date), except (i) as expressly contemplated by this Agreement, or (ii)
for representations and warranties (other than the representations and
warranties set forth in Section 4.3 of this Agreement, which shall be true
in all respects) the inaccuracies of which relate to matters that are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on CROSSROADS.
(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of CROSSROADS to be performed and complied with
pursuant to this Agreement and the other agreements contemplated hereby
prior to the Effective Time shall have been duly performed and complied
with in all material respects.
(c) Certificates. CROSSROADS shall have delivered to SNB (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer, to the effect that the conditions of its
obligations set forth in Sections 8.2(a) and 8.2(b) of this Agreement have
been satisfied, and (ii) certified copies of resolutions duly adopted by
CROSSROADS'S Board of Directors and shareholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as SNB and its counsel
shall reasonably request.
(d) Opinion of Counsel. CROSSROADS shall have delivered to SNB an opinion
of Walker, Hulbert, Gray & Byrd, counsel to CROSSROADS, dated as of the
Closing Date, covering those matters set forth in Exhibit 2 hereto, which
opinion may be rendered in accordance with the Interpretive Standards on
Legal Opinions to Third Parties in Corporate Transactions promulgated by
the Corporate and Banking Law Section of the State Bar of Georgia (January
1, 1992) (the "Interpretive Standards").
(e) Accountant's Letters. SNB shall have received from McNair, McLemore &
Middlebrooks letters dated not more than five (5) days prior to (i) the
date of the Proxy Statement and (ii) the Effective Time, with respect to
certain financial information regarding CROSSROADS, in form and substance
reasonably satisfactory to SNB, which letters shall be based upon customary
specified procedures undertaken by such firm, and which letter shall
provide, without limitation, (i) that there has been no Material adverse
change in the financial position, business, or results or operations of SNB
since the date of the execution of this Agreement and (ii) that the
transaction may be characterized as a "pooling of interests" for accounting
purposes.
(f) Material Disclosures. CROSSROADS shall have disclosed to SNB all
matters which are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on CROSSROADS.
(g) Dissenting Shareholders. Holders of not more than 5% of the issued
and outstanding shares of CROSSROADS Common Stock shall have perfected
their rights as dissenting shareholders pursuant to Article 13 of the GBCC.
8.3 Conditions to Obligations of CROSSROADS. The obligations of CROSSROADS
to perform this Agreement and consummate the Merger and the other transactions
contemplated hereby are subject to the satisfaction of the following
conditions, unless waived by CROSSROADS pursuant to Section 10.6(b) of this
Agreement:
(a) Representations and Warranties. The representations and warranties of
SNB set forth or referred to in this Agreement shall be true and correct in
all respects as of the date of this Agreement and as of the Effective Time
with the same effect as though all such representations and warranties had
been made on and as of the Effective Time (provided that representations
and warranties which are confined to a specified date shall speak only as
of such date), except (i) as expressly contemplated by this Agreement, or
(ii) for representations and warranties (other than the representations and
warranties set forth in Section 5.3 of this Agreement, which shall be true
in all respects) the inaccuracies of which relate to matters that are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on SNB.
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(b) Performance of Agreements and Covenants. Each and all of the
agreements and covenants of SNB to be performed and complied with pursuant
to this Agreement and the other agreements contemplated hereby prior to the
Effective Time shall have been duly performed and complied with in all
material respects.
(c) Certificates. SNB shall have delivered to CROSSROADS (i) a
certificate, dated as of the Effective Time and signed on its behalf by its
chief executive officer and its chief financial officer, to the effect that
the conditions of its obligations set forth in Section 8.3(a) and 8.3(b) of
this Agreement have been satisfied, and (ii) certified copies of
resolutions duly adopted by SNB'S Board of Directors evidencing the taking
of all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, all in such reasonable detail as CROSSROADS and its
counsel shall reasonably request.
(d) Opinion of Counsel. SNB shall have delivered to CROSSROADS an opinion
of Martin, Snow, Grant & Napier, counsel to SNB, dated as of the Closing
Date, covering those matters set forth in Exhibit 3 hereto, which opinion
may be rendered in accordance with the Interpretive Standards.
ARTICLE 9
TERMINATION
9.1 Termination. Notwithstanding any other provision of this Agreement, and
notwithstanding the approval of this Agreement by the shareholders of
CROSSROADS, this Agreement may be terminated and the Merger abandoned at any
time prior to the Effective Time:
(a) By mutual consent of the Board of Directors of SNB and the Board of
Directors of CROSSROADS; or
(b) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any representation or
warranty contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach and which breach would provide the non-breaching party
the ability to refuse to consummate the Merger under the standard set forth
in Section 8.2(a) of this Agreement in the case of SNB and Section 8.3(a)
of this Agreement in the case of CROSSROADS; or
(c) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event of a material breach by the other Party of any covenant or agreement
contained in this Agreement which cannot be or has not been cured within
(30) days after the giving of written notice to the breaching Party of such
breach; or
(d) By the Board of Directors of either Party (provided that the
terminating Party is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event (i) any Consent of any Regulatory Authority required for consummation
of the Merger and the other transactions contemplated hereby has been
denied by final nonappealable action of such authority or if any action
taken by such authority is not appealed within the time limit for appeal,
or (ii) if the shareholders of CROSSROADS fail to approve this Agreement
and the transactions contemplated hereby as required by the GBCC at the
Shareholders' Meeting where the transactions were presented to such
shareholders for approval and voted upon (assuming, for this purpose, that
SNB votes the proxies granted to it pursuant to Section 7.14 hereof in
favor thereof); or
(e) By the Board of Directors of either Party in the event that the
Merger shall not have been consummated by September 30, 1998, provided the
failure to consummate the Merger on or before such date was not caused by
any breach of this Agreement by the Party electing to terminate pursuant to
this Section 9.1 (e); or
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(f) By the Board of Directors of either Party (provided that the
terminating PARTY is not then in material breach of any representation,
warranty, covenant, or other agreement contained in this Agreement) in the
event that any of the conditions precedent to the obligations of such Party
to consummate the Merger cannot be satisfied or fulfilled by the date
specified in Section 9.1(e) of this Agreement.
(g) By the Board of Directors of CROSSROADS in connection with entering
into a definitive agreement in accordance with Section 7.8(b), provided
that it has complied with all provisions thereof, including the notice
provisions therein, and that it makes simultaneous payment of the Expenses.
9.2 Effect of Termination. In the event of the termination and abandonment
of this Agreement pursuant to Section 9.1 of this Agreement, this Agreement
shall become void and have no effect, except (i) as provided in Sections 10.2
and 10.14, and (ii) a termination pursuant to Section 9.1(b) or (c) of this
Agreement shall entitle the non-breaching Party to all expenses incurred in
connection with the proposed merger contemplated herein to be paid by the
breaching Party, as and for liquidated damages, which shall be sole remedy of
either Party against the other under this Agreement pursuant to O.C.G.A.
(S)13-6-7. The Parties agree that the amount specified as liquidated damages
hereunder represents a good faith and reasonable estimate by the Parties of
the amount of damages that the non-breaching Party would expect to incur in
the event of a default under this Agreement and is not intended as a penalty.
ARTICLE 10
MISCELLANEOUS
10.1 Definitions. Except as otherwise provided herein, the capitalized terms
set forth below (in their singular and plural forms as applicable) shall have
the following meanings:
"Affiliate" of a Person shall mean (a) any other Person directly, or
indirectly through one or more intermediaries, controlling, controlled by or
under Common control with such Person or (b) any officer, director, partner,
employer, or direct or indirect beneficial owner of any 10% or greater equity
or voting interest of such Person.
"Agreement" shall mean this Agreement and Plan of Merger and the Exhibits
delivered pursuant hereto and incorporated herein by reference.
"Articles of Merger" shall mean the Articles of Merger to be executed by SNB
and filed with the Secretary of State of the State of Georgia relating to the
Merger as contemplated by Section 1.3 of this Agreement.
"Assets" of a Person shall mean all of the assets, properties, businesses
and rights of such Person of every kind, nature, character and description,
whether real, personal or mixed, tangible or intangible, accrued or
contingent, or otherwise relating to or utilized in such Person's business,
directly or indirectly, in whole or in part, whether or not carried on the
books and records of such Person, and whether or not owned in the name of such
Person or any Affiliate of such Person and wherever located.
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Closing" shall mean the closing of the transactions contemplated hereby, as
described in Section 1.2 of this Agreement.
"Closing Date" shall have the meaning provided in Section 1.2 of this
Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver, or similar affirmation by any Person pursuant to any
Contract, Law, Order, or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease, obligation,
plan, practice, restriction, understanding or undertaking of any kind or
character, or other document to which any Person is a party or that is binding
on any Person or its capital stock, Assets or business.
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"CROSSROADS Bank" shall mean CROSSROADS Bank of Georgia, a Georgia state-
chartered bank and a CROSSROADS Subsidiary.
"CROSSROADS Benefit Plans" shall have the meaning set forth in Section 5.14
of this Agreement.
"CROSSROADS Common Stock" shall mean the $10.00 par value Common Stock of
CROSSROADS.
"CROSSROADS Companies" shall mean, collectively, CROSSROADS and all
CROSSROADS Subsidiaries.
"CROSSROADS Financial Statements" shall mean (a) the consolidated balance
sheets (including related notes and schedules, if any) of CROSSROADS as of
September 30, 1997, and as of December 31, 1997 and 1996, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
September 30, 1997, and for each of the three fiscal years ended December 31,
1997, 1996 and 1995, as previously furnished by CROSSROADS to SNB, and (b) the
consolidated balance sheets of CROSSROADS (including related notes and
schedules, if any) and related statements of income, changes in shareholders'
equity, and cash flows (including related notes and schedules, if any) with
respect to periods ended subsequent to September 30, 1997.
"CROSSROADS Stock Plans" shall mean the existing stock option and other
stock-based compensation plans of CROSSROADS.
"CROSSROADS Subsidiaries" shall mean the Subsidiaries of CROSSROADS, which
shall include the CROSSROADS Subsidiaries described in Section 4.4 of this
Agreement and any Person acquired as a Subsidiary of CROSSROADS in the future
and owned by CROSSROADS at the Effective Time.
"DEFAULT" shall mean (a) any breach or violation of or default under any
Contract, Order or Permit, (b) any occurrence of any event that with the
passage of time or the giving of notice or both would constitute a breach or
violation of or default under any Contract, Order or Permit, or (c) any
occurrence of any event that with or without the passage of or the giving of
notice would give rise to a right to terminate or revoke., change the current
terms of, or renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit.
"Effective Time" shall mean the date and time at which the Merger becomes
effective as defined in Section 1.3 of this Agreement.
"Environmental Laws" shall mean all Laws which are administered, interpreted
or enforced by the United States Environmental Protection Agency and state and
local agencies with primary jurisdiction over pollution or protection of the
environment.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall have the meaning provided in Section 4.14(c) of this
Agreement.
"ERISA Plan" shall have the meaning provided in Section 4.14 of this
Agreement.
"Exchange Agent" shall have the meaning provided in Section 3.2 of this
Agreement.
"Exchange Ratio" shall have the meaning provided in Section 3.1(b) of this
Agreement.
"Exhibits" 1 through 5, inclusive, shall mean the Exhibits so marked, copies
of which are attached to this Agreement. Such Exhibits are hereby incorporated
by reference herein and made a part hereof and may be referred to in this
Agreement and any other related instrument or document without being attached
hereto.
"Expenses" shall have the meaning provided in Section 10.2 of this
Agreement.
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"GAAP" shall mean generally accepted accounting principles, consistently
applied during the periods involved.
"GBCC" shall mean the Georgia Business Corporation Code.
"Hazardous Material" shall mean any pollutant, contaminant, or hazardous
substance within the meaning of the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. (S) 9601 et
seq., or any similar federal, state or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Interpretive Standards" shall have the meaning provided in Section 8.2(d)
of this Agreement.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" as used with respect to a Person shall mean the Knowledge after
reasonable due inquiry of the Chairman, President, Chief Financial Officer,
Chief Accounting Officer, Chief Credit Officer, or any Senior or Executive
Vice President of such Person.
"Law" shall mean any code, law, ordinance, regulation, reporting or
licensing requirement, rule, or statute applicable to a Person or its Assets,
Liabilities or business, including, without limitation, those promulgated,
interpreted or enforced by any of the Regulatory Authorities.
"Letter of Transmittal" shall have the meaning provided in Section 3.2 of
this Agreement.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including,
without limitation, costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks, and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured, or
otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title retention
or other security arrangement, or any adverse right or interest, charge, or
claim of any nature whatsoever of, on, or with respect to any property or
property interest, other than (i) Liens for current property Taxes not yet due
and payable, (ii) for depository institution Subsidiaries of a Party, pledges
to secure deposits and other Liens incurred in the ordinary course of the
banking business, and (iii) Liens which are not reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action, claim,
complaint, criminal prosecution, demand letter, governmental or other
examination or investigation, hearing, inquiry, administrative or other
proceeding, or notice (written or oral) by any Person alleging potential
Liability or requesting information relating to or affecting a Party, its
business, its Assets (including, without limitation, Contracts related to it),
or the transactions contemplated by this Agreement, but shall not include
regular, periodic examinations of depository institutions and their Affiliates
by Regulatory Authorities.
"Loan Property" shall mean any property owned by the Party in question or by
any of its Subsidiaries or in which such Party or Subsidiary holds a security
interest, and, where required by the context, includes the owner or operator
of such property, but only with respect to such property.
"Material" for purposes of this Agreement shall be determined in light of
the facts and circumstances of the matter in question, provided that any
specific monetary amount stated in this Agreement shall determine materiality
in that instance.
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"Material Adverse Effect" on a Party shall mean an event, change or
occurrence which has a material adverse impact on (a) the financial position,
business, or results of operations of such Party and its Subsidiaries taken as
a whole, or (b) the ability of such Party to perform its obligations under
this Agreement or to consummate the Merger or the other transactions
contemplated by this Agreement, provided that "material adverse impact" shall
not be deemed to include the impact of (x) changes in banking and similar Laws
of general applicability or interpretations thereof by courts or governmental
authorities, (y) changes in generally accepted accounting principles or
regulatory accounting principles generally applicable to banks and their
holding companies, and (z) the Merger and compliance with the provisions of
this Agreement on the operating performance of the Parties.
"Merger" shall mean the merger of CROSSROADS with and into SNB referred to
in Section 1.1 of this Agreement.
"Merger Consideration" shall have the meaning provided in Section 3.1(c) of
this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"NASDAQ/NMS" shall mean the National Market System of the National
Association of Securities Dealers Automated Quotations System.
"1933 Act" shall mean the Securities Act of 1933, as amended.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended.
"Old Certificates" shall have the meaning provided in Section 3.2 of this
Agreement.
"Order" shall mean any administrative decision or award, decree, injunction,
judgment, order, quasi-judicial decision or award, ruling, or writ of any
federal, state, local or foreign or other court, arbitrator, mediator,
tribunal, administrative agency or Regulatory Authority.
"Outstanding CROSSROADS Shares" shall mean all shares of CROSSROADS
outstanding immediately prior to the Effective Time, other than shares held in
CROSSROADS's treasury which shall be canceled without consideration at the
Effective Time.
"Participation Facility" shall mean any facility or property in which the
Party in question or any of its Subsidiaries participates in the management
(including, without limitation, any property or facility held in a joint
venture) and, where required by the context, said term means the owner or
operator of such facility or property, but only with respect to such facility
or property.
"Party" shall mean either CROSSROADS or SNB, and "Parties" shall mean both
CROSSROADS and SNB.
"Permit" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its capital stock,
Assets, Liabilities, or business.
"Person" shall mean a natural person or any legal, commercial or
governmental entity, such as, but not limited to, a corporation, general
partnership, joint venture, limited partnership, limited liability company,
trust, business association, group acting in concert, or any person acting in
a representative capacity.
"Previously Disclosed" shall mean information (a) delivered in writing prior
to the date of this Agreement in the manner and to the Party and counsel
described in Section 10.8 of this Agreement and describing in reasonable
detail the matters contained therein, provided that in the case of
Subsidiaries acquired after the date of this Agreement, such information may
be so delivered by the acquiring Party to the other Party prior to the
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date of such acquisition, or (b) disclosed prior to the date of this Agreement
by SNB to CROSSROADS in an SEC Document delivered to CROSSROADS in which the
specific information has been identified by SNB.
"Proxy Statement" shall mean the proxy statement used by CROSSROADS to
solicit the approval of its shareholders of the transactions contemplated by
this Agreement and shall include the prospectus of SNB relating to shares of
SNB Common Stock to be issued to the shareholders of CROSSROADS.
"Registration Statement" shall mean the Registration Statement on Form S-4,
or other appropriate form, filed with the SEC by SNB under the 1933 Act in
connection with the transactions contemplated by this Agreement.
"Regulatory Authorities" shall mean, collectively, the Federal Trade
Commission, the United States Department of Justice, the Board of the
Governors of the Federal Reserve System, the Office of the Comptroller of the
Currency, the Federal Deposit Insurance Corporation, all state banking and
other regulatory agencies having jurisdiction over the Parties and their
respective Subsidiaries, the NASD, and the SEC.
"SEC Documents" shall mean all reports and registration statements filed, or
required to be FILED, by a Party or any of its Subsidiaries with any
Regulatory Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the Investment
Company Act of 1940, as amended, the Investment Advisors Act of 1940, as
amended, the Trust Indenture Act of 1939, as amended, state blue sky laws, and
the rules and regulations of any Regulatory Authority promulgated thereunder.
"Shareholders' Meeting" shall mean the meeting of the shareholders of
CROSSROADS to be held pursuant to Section 7.1 of this Agreement, including any
adjournment or postponement thereof.
"SNB Allowance" shall have the meaning provided in Section 5.9 of this
Agreement.
"SNB Benefit Plans" shall have the meaning set forth in Section 5.14 of this
Agreement.
"SNB Common Stock" shall mean the $10.00 par value common stock of SNB.
"SNB Companies" shall mean, collectively, SNB and all SNB Subsidiaries.
"SNB Financial Statements" shall mean (i) the consolidated statements of
condition (including related notes and schedules, if any) of SNB as of
September 30, 1997, and as of December 31, 1997 and 1996, and the related
statements of income, changes in shareholders' equity, and cash flows
(including related notes and schedules, if any) for the three months ended
September 30, 1997, and for each of the three years ended December 31, 1997,
1996 and 1995, as filed by SNB in SEC Documents and (ii) the consolidated
statements of condition of SNB (including related notes and schedules, if any)
and related statements of income, changes in shareholders' equity, and cash
flows (including related notes and schedules, if any) included in SEC
Documents FILED with respect to periods ended subsequent to September 30,
1997.
"SNB Stock Plans" shall mean the existing stock option and other stock-based
compensation plans.
"SNB Subsidiaries" shall mean the Subsidiaries of SNB.
"Subsidiaries" shall mean all those corporations, banks, associations, or
other entities of which the entity in question owns or controls 5% or more of
the outstanding equity securities either directly or through an unbroken chain
of entities as to each of which 5% or more of the outstanding equity
securities is owned directly or indirectly by its parent; provided, however,
there shall not be included any such entity acquired through foreclosure or
any such entity the equity securities of which are owned or controlled in a
fiduciary capacity.
"Superior Proposal" shall have the meaning provided in Section 7.8(b) of
this Agreement.
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"Surviving Corporation" shall mean SNB as the surviving corporation
resulting from the Merger.
"Takeover Proposal" shall have the meaning provided in Section 7.8(a) of
this Agreement. "CROSSROADS Allowance" shall have the meaning provided in
Section 4.9 of this Agreement.
"Taxes" shall mean any federal, state, county, local, foreign and other
taxes, assessments, charges, fares, and impositions, including interest and
penalties thereon or with respect thereto.
10.2 Expenses. Each of the Parties shall bear and pay all direct costs and
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including filing, registration and application fees,
printing fees, and fees and expenses of its own financial or other
consultants, investment bankers, accountants, and counsel (the "Expenses"),
except that each of the Parties shall bear and pay one-half of the filing fees
payable in connection with the Registration Statement and the Proxy Statement
and printing costs incurred in connection with the printing of the
Registration Statement and the Proxy Statement.
10.3 Brokers and Finders. Each of the Parties represents and warrants that
neither it nor any of its officers, directors, employees, or Affiliates has
employed any broker or finder or incurred any Liability for any financial
advisory fees, investment bankers' fees, brokerage fees, commissions, or
finders' fees in connection with this Agreement or the transactions
contemplated hereby. In the event of a claim by any broker or finder based
upon its representing or being retained by or allegedly representing or being
retained by CROSSROADS or SNB, each of CROSSROADS and SNB, as the case may be,
agrees to indemnify and hold the other Party harmless of and from any
Liability in respect of any such claim.
10.4 Entire Agreement. Except as otherwise expressly provided herein, this
Agreement (including the documents and instruments referred to herein)
constitutes the entire agreement between the Parties with respect to the
transactions contemplated hereunder and supersedes all prior arrangements or
understandings with respect thereto, written or oral (except, as to Section
8.6(b) of this Agreement, with respect to the Confidentiality Agreements).
Nothing in this Agreement expressed or implied, is intended to confer upon any
Person, other than the Parties or their respective successors, any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
other than as provided in Section 7.13 of this Agreement.
10.5 Amendments. To the extent permitted by Law, this Agreement may be
amended by a subsequent writing signed by each of the Parties upon the
approval of the Boards of Directors of each of the Parties; provided, however,
that after any such approval by the holders of CROSSROADS Common Stock, there
shall be made no amendment decreasing the consideration to be received by
CROSSROADS shareholders without the further approval of such shareholders.
10.6 Waivers. (a) Prior to or at the Effective Time, SNB, acting through its
Board of Directors, chief executive officer or other authorized officer, shall
have the right to waive any Default in the performance of any term of this
Agreement by CROSSROADS, to waive or extend the time for the compliance or
fulfillment by CROSSROADS of any and all of its obligations under this
Agreement, and to waive any or all of the conditions precedent to the
obligations of SNB under this Agreement, except any condition which, if not
satisfied, would result in the violation of any Law. No such waiver shall be
effective unless in writing signed by a duly authorized officer of SNB.
(b) Prior to or at the Effective Time, CROSSROADS, acting through its Board
of Directors, chief executive officer or other authorized officer, shall have
the right to waive any Default in the performance of any term of this
Agreement by SNB, to waive or extend the time for the compliance or
fulfillment by SNB of any and all of its obligations under this Agreement, and
to waive any or all of the conditions precedent to the obligations of
CROSSROADS under this Agreement, except any condition which, if not satisfied,
would result in the violation of any Law. No such waiver shall be effective
unless in writing signed by a duly authorized officer of CROSSROADS.
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(c) The failure of any Party at any time or times to require performance of
any provision hereof shall in no manner affect the right of such Party at a
later time to enforce the same or any other provision of this Agreement. No
waiver of any condition or of the breach of any term contained in this
Agreement in one or more instances shall be deemed to be or construed as a
further or continuing waiver of such condition or breach or a waiver of any
other condition or of the breach of any other term of this Agreement.
10.7 Assignment. Except as expressly contemplated hereby, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any Party hereto (whether by operation of Law or otherwise)
without the prior written consent of the other Party. Subject to the
immediately preceding sentence, this Agreement will be binding upon, inure to
the benefit of, and be enforceable by the Parties and their respective
successors and assigns.
10.8 Notices. All notices or other communications which are required or
permitted hereunder shall be in writing and sufficient if delivered by hand,
by facsimile transmission, by registered or certified mail, postage pre-paid,
or by courier or overnight carrier, to the persons at the addresses set forth
below (or at such other address as may be provided hereunder), and shall be
deemed to have been delivered as of the date so delivered:
SNB: SNB Bancshares, Inc.
P. O. Box 4748
Copy to Counsel: Macon, GA 31208-4748
Attention: H. Averett Walker, President
CROSSROADS:
Martin, Snow, Grant & Napier
Copy to Counsel: P. O. Box 1606
Macon, GA 31202-1606
Attention: Edward J. Harrell
CROSSROADS Bancshares, Inc.
P. O. Box 1308
Perry, GA 31069-1308
Attention: William D. Watson, President
Walker, Hulbert, Gray & Byrd
P. O. Box 1234
Perry, GA 31069-1234
Attention: John D. Christy
10.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the Laws of the State of Georgia, without regard to any
applicable conflicts of Laws, except to the extent that the federal laws of
the United States may apply to the Merger.
10.10 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
10.11 Captions. The captions contained in this Agreement are for reference
purposes only and are not part of this Agreement.
10.12 Enforcement of Agreement. The Parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
was not performed in accordance with its specific terms or was otherwise
breached. It is accordingly agreed that the Parties shall be entitled to an
injunction or injunctions
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to prevent breaches of this Agreement and to enforce specifically the terms
and provisions hereof in any court of the United States or any state having
jurisdiction, this being in addition to any other remedy to which they are
entitled at law or in equity.
10.13 Severability. Any term or provision of this Agreement which is invalid
or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of
this Agreement is so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable.
10.14 Survival. The respective representations, warranties, obligations,
covenants and agreements of the Parties shall not survive the Effective Time
or the termination and abandonment of this Agreement, except that (i) Articles
Two, Three and Ten and Sections 7.6(b), 7.9, 7.11 and 7.13 of this Agreement
shall survive the Effective Time; and (ii) Sections 7.6(b), 7.8(b), 9.2, 10.2
and 10. 14 shall survive the termination and abandonment of this Agreement.
IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.
CROSSROADS BANCSHARES, INC.
/s/ Cullen Talton
By:__________________________________
CULLEN TALTON,
Chairman of the Board of Directors
/s/ William D. Watson
ATTEST:______________________________
WILLIAM D. WATSON,
President
[CORPORATE SEAL]
SNB BANCSHARES, INC.
/s/ H. Averett Walker
By:__________________________________
H. AVERETT WALKER,
President
[CORPORATE SEAL]
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MODIFICATION TO AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN SNB BANCSHARES, INC. AND
CROSSROADS BANCSHARES, INC. AS OF FEBRUARY 12, 1998
WHEREAS, SNB BANCSHARES, INC. ("SNB"), a corporation organized and existing
under the laws of the State of Georgia, and CROSSROADS BANCSHARES, INC.
("Crossroads"), a corporation organized and existing under the laws of the
State of Georgia, collectively, the parties, entered an Agreement and Plan of
Merger ("Agreement") on January 29, 1998;
WHEREAS, Section 10.5 of the Agreement provides that the same may be amended
by a subsequent writing signed by each of the parties upon the approval of the
Boards of Directors of each of the parties; and
WHEREAS, the parties mutually desire to modify the Agreement to impose an
additional condition precedent on the obligation of SNB to perform under the
Agreement, and the Boards of Directors of each of the parties having approved
such modification;
NOW, THEREFORE, in consideration of the above and other good and valuable
consideration, the existence of which is hereby acknowledged, the parties do
hereby modify the Agreement as follows:
1.
Section 8.1 of the Agreement is amended by adding the following sentence to
paragraph (a) of said section:
The shareholders of SNB shall have approved the Merger and issuance of the
SNB common stock pursuant to the Merger, as and to the extent required by law,
by the provisions of any governing instruments or by the rules of the NASDAQ
National Market.
IN WITNESS WHEREOF, each of the parties has caused this modification to be
executed on its behalf and its corporate seal to be hereunto affixed and
attested by its officers as of the day and year first above written.
CROSSROADS BANCSHARES, INC.
/s/ Cullen Talton
By:__________________________________
CULLEN TALTON,
Chairman of the Board of Directors
/s/ William D. Watson
ATTEST:______________________________
WILLIAM D. WATSON,
President
[CORPORATE SEAL]
SNB BANCSHARES, INC.
/s/ H. Averett Walker
By:__________________________________
H. AVERETT WALKER,
President
[CORPORATE SEAL]
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APPENDIX B
TITLE 14, CHAPTER 2, ARTICLE 13 OF THE
GEORGIA BUSINESS CORPORATION CODE
RELATING TO RIGHTS OF DISSENTING SHAREHOLDERS
PART 1. RIGHT TO DISSENT AND OBTAIN PAYMENT FOR SHARES
(S) 14-2-1301. DEFINITIONS.
As used in this article, the term:
a. "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
b. "Corporate Action" means the transaction or other action by the
corporation that creates dissenters' rights under the Code Section 14-2-
1302.
c. "Corporation" means the issuer of shares held by a dissenter before
the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
d. "Dissenter" means a shareholder who is entitled to dissent from
corporate action under Code Section 14-2-1302 and who exercises that right
when and in the manner required by Code Sections 14-2-1320 through 14-2-
1327.
e. "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effectuation of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action.
f. "Interest" means interest from the effective date of the corporate
action until the date of payment, at a rate that is fair and equitable
under all the circumstances.
g. "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of
shares to the extent of the rights granted by a nominee certificate on file
with a corporation.
h. "Shareholder" means the record shareholder or the beneficial
shareholder.
(S) 14-2-1302. RIGHT TO DISSENT.
a. A record shareholder of the corporation is entitled to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
following corporate actions:
(1) Consummation of a plan of merger to which the corporation is a party:
(A) If approval of the shareholders of the corporation is required
for the merger by Code Section 14-2-1103 or the articles of
incorporation and the shareholder is entitled to vote on the merger; or
(B) If the corporation is a subsidiary that is merged with its parent
under Code Section 14-2-1104;
(2) Consummation of a plan of share exchange to which the corporation is
a party as the corporation whose shares will be acquired, if the
shareholder is entitled to vote on the plan;
(3) Consummation of a sale or exchange of all or substantially all of the
property of the corporation if a shareholder vote is required on the sale
or exchange pursuant to Code Section 14-2-1202, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all
or substantially all of the net proceeds of the sale will be distributed to
the shareholders within one year after the date of sale;
(4) An amendment of the articles of incorporation that materially and
adversely affects rights in respect of a dissenter's shares because it:
(A) Alters or abolishes a preferential right of the shares;
(B) Creates, alters, or abolishes a right in respect of redemption,
including a provision respecting a sinking fund for the redemption or
repurchase, of the shares;
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(C) Alters or abolishes a preemptive right of the holder of the
shares to acquire shares or other securities;
(D) Excludes or limits the right of the shares to vote on any matter,
or to cumulate votes, other than a limitation by dilution through
issuance of shares or other securities with similar voting rights;
(E) Reduces the number of shares owned by the shareholder to a
fraction of a share if the fractional share so created is to be
acquired for cash under Code Section 14-2-604; or
(F) Cancels, redeems, or repurchases all or part of the shares of the
class; or
(5) Any corporate action taken pursuant to a shareholder vote to the
extent that Article 9 of this chapter, the articles of incorporation,
bylaws, or a resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain payment for their
shares.
(b) A shareholder entitled to dissent and obtain payment for his shares
under this article may not challenge the corporate action creating his
entitlement unless the corporate action fails to comply with the procedural
requirements of this chapter or the articles of incorporation or bylaws of the
corporation or the vote required to obtain approval of the corporation action
was obtained by fraudulent and deceptive means, regardless of whether the
shareholder has exercised dissenter's rights.
(c) Notwithstanding any other provision of this article, there shall be no
right of dissent in favor of the holder of shares of any class or series
which, at the record date fixed to determine the shareholders entitled to
receive notice of and to vote at a meeting at which a plan of merger or share
exchange or a sale or exchange of property or an amendment of the articles of
incorporation is to be acted on, were either listed on a national securities
exchange or held of record by more than 2,000 shareholders, unless:
(1) In the case of a plan of merger or share exchange, the holders of
shares of the class or series are required under the plan of merger or
share exchange to accept for their shares anything except shares of the
surviving corporation or another publicly held corporation which at the
effective date of the merger or share exchange are either listed on a
national securities exchange or held of record by more than 2,000
shareholders, except for scrip or cash payments in lieu of fractional
shares; or
(2) The articles of incorporation or a resolution of the board of
directors approving the transaction provides otherwise.
(S) 14-2-1303. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
A record shareholder may assert dissenters' rights as to fewer than all the
shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies the
corporation in writing of the name and address of each person on whose behalf
he asserts dissenters' rights. The rights of a partial dissenter under this
Code section are determined as if the shares as to which he dissents and his
other shares were registered in the names of different shareholders.
PART 2. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
(S) 14-2-1320. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, the
meeting notice must state that shareholders are or may be entitled to assert
dissenters' rights under this article and be accompanied by a copy of this
article.
(b) If corporate action creating dissenter's rights under Code Section 14-2-
1302 is taken without a vote of shareholders, the corporation shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenter's notice described in Code Section 14-2-
1322 no later than ten days after the corporate action was taken.
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(S) 14-2-1321. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under Code
Section 14-2-1302 is submitted to a vote at a shareholders' meeting, a record
shareholder who wishes to assert dissenters' rights:
(1) must deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed
action is effectuated; and
(2) must not vote his shares in favor of the proposed action.
(b) A record shareholder who does not satisfy the requirements of subsection
(a) of this Code section is not entitled to payment for his shares under this
article.
(S) 14-2-1322. DISSENTERS' NOTICE.
(a) If proposed corporate action created dissenters' rights under Code
Section 14-2-1302 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirements of Code Section 14-2-1321.
(b) The dissenters' notice must be sent no later than ten days after the
corporate action was taken and must;
(1) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(2) Inform holders of uncertificated shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than 30 nor more than 60 days after the date
the notice required in subsection (a) of this Code section is delivered;
and
(4) Be accompanied by a copy of this article.
(S) 14-2-1323. DUTY TO DEMAND PAYMENT.
(a) A record shareholder sent a dissenters' notice described in Code Section
14-2-1322 must demand payment and deposit his certificates in accordance with
the terms of the notice.
(b) A record shareholder who demands payment and deposits his shares under
subsection (a) of this Code section retains all other rights of a shareholder
until these rights are cancelled or modified by the taking of the proposed
corporate action.
(c) A record shareholder who does not demand payment or deposit his share
certificates where required, each by the date set in the dissenters' notice,
is not entitled to payment for his shares under this article.
(S) 14-2-1324. SHARE RESTRICTIONS.
(a) The corporation may restrict the transfer of uncertificated shares from
the date the demand for their payment is received until the proposed corporate
action is taken or the restrictions released under Code Section 14-2-1326.
(b) The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are
cancelled or modified by the taking of the proposed corporate action.
(S) 14-2-1325. OFFER OF PAYMENT.
(a) Except as provided in Code Section 14-2-1327, within ten days of the
later of the date the proposed corporate action is taken or receipt of a
payment demand, the corporation shall by notice to each dissenter who complied
with Code Section 14-2-1323 offer to pay to such dissenter the amount the
corporation estimates to be the fair value of his or her shares, plus accrued
interest.
B-3
<PAGE>
(b) The offer of payment must be accompanied by:
(1) The corporation's balance sheet as of the end of a fiscal year ending
not more than 16 months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year,
and the latest available interim financial statements, if any;
(2) A statement of the corporation's estimate of the fair value of the
shares;
(3) An explanation of how the interest was calculated;
(4) A statement of the dissenter's right to demand payment under Code
Section 14-2-1327; and
(5) A copy of this article.
(c) If the shareholder accepts the corporation's offer by written notice to
the corporation within 30 days after the corporation's offer or is deemed to
have accepted such offer by failure to respond within said 30 days, payment
for his or her shares shall be made within 60 days after the making of the
offer or the taking of the proposed corporate action, whichever is later.
(S)14-2-1326. FAILURE TO TAKE ACTION.
(a) If the corporation does not take the proposed action within 60 days
after the date set for demanding payment and depositing share certificates,
the corporation shall return the deposited certificates and release the
transfer restrictions imposed on uncertified shares.
(b) If, after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it must send a new
dissenters' notice under Code Section 14-2-1322 and repeat the payment demand
procedure.
(S)14-2-1327. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
(a) A dissenter may notify the corporation in writing of his own estimate of
the fair value of his shares and amount of interest due, and demand payment of
his estimate of the fair value of his shares and interest due, if:
(1) The dissenter believes that the amount offered under Code Section 14-
2-1325 is less than the fair value of his shares or that the interest due
is incorrectly calculated; or
(2) The corporation, having failed to take the proposed action, does not
return the deposited certificates or release the transfer restrictions
imposed on uncertificated shares within 60 days after the date set for
demanding payment.
(b) A dissenter waives his or her right to demand payment under this Code
Section and is deemed to have accepted the corporation's offer unless he or
she notifies the corporation of his or her demand in writing under subsection
(a) of this Code section within 30 days after the corporation offered payment
for his or her shares, as provided in Code Section 14-2-1325.
(c) If the corporation does not offer payment within the time set forth in
subsection (a) of Code Section 14-2-1325:
(1) The shareholder may demand the information required under subsection
(b) of Code Section 14-2-1325, and the corporation shall provide the
information to the shareholder within ten days after receipt of a written
demand for the information; and
(2) The shareholder may at any time, subject to the limitations period of
Code Section 14-2-1332, notify the corporation of his own estimate of the
fair value of his shares and the amount of interest due and demand payment
of his estimate of the fair value of his shares and interest due.
B-4
<PAGE>
PART 3. JUDICIAL APPRAISAL OF SHARES.
(S)14-2-1330. COURT ACTION.
(a) If a demand for payment under Code Section 14-2-1327 remains unsettled,
the corporation shall commence a proceeding within 60 days after receiving the
payment demand and petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the
proceeding within the 60-day period, it shall pay each dissenter whose demand
remains unsettled the amount demanded.
(b) The corporation shall commence the proceeding, which shall be a nonjury
equitable valuation proceeding, in the superior court of the county where a
corporation's registered office is located. If the surviving corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.
(c) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled parties to the proceeding, which
shall have the effect of an action quasi in rem against their shares. The
corporation shall serve a copy of the petition in the proceeding upon each
dissenting shareholder who is a resident of this state in the manner provided
by law for the service of a summons and complaint, and upon each nonresident
dissenting shareholder either by registered or certified mail or by
publication, or in any other manner permitted by law.
(d) The jurisdiction of the court in which the proceeding is commenced under
subsection (b) of this Code section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them or in any amendment to it. Except as
otherwise provided in this chapter, Chapter 11 of Title 9, known as the
"Georgia Civil Practice Act," applies to any proceeding with respect to
dissenters' rights under this chapter.
(e) Each dissenter made a party to the proceeding is entitled to judgment
for the amount which the court finds to be the fair value of his shares, plus
interest to the date of judgment.
(S)14-2-1331. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Code Section 14-2-
1330 shall determine all costs of the proceeding, including the reasonable
compensation and expenses of appraisers appointed by the court, but not
including fees and expenses of attorneys and experts for the respective
parties. The court shall assess the costs against the corporation, except that
the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under Code Section 14-2-1327.
(b) The court may also asses the fees and expenses of attorneys and experts
for the respective parties, in amounts the court finds equitable:
(1) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the
requirements of Code Sections 14-2-1320 through 14-2-1327; or
(2) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses
are assessed acted arbitrarily, vexatiously, or not in good faith with
respect to the rights provided by this article.
(c) If the court finds that the services of attorneys for any dissenter were
of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these attorneys reasonable fees to be paid out of the
amounts awarded the dissenters who were benefited.
(S)14-2-1332. LIMITATION OF ACTIONS.
No action by any dissenter to enforce dissenters' rights shall be brought
more than three years after the corporate action was taken, regardless of
whether notice of the corporate action and of the right to dissent was given
by the corporation in compliance with the provisions of Code Section 14-2-1320
and Code Section 14-2-1322.
B-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Article 8, Part 5 of the Georgia Business Corporation Code provides for
indemnification of directors and officers of corporations. Under the
provisions of O.C.G.A. (S)14-2-852, a director of the Company, to the extent
successful in the defense of any proceeding or claim to which the director is
a party because he or she is a director of the Company, is entitled as a
matter of right to indemnification against reasonable expense, including
attorneys' fees, incurred by him in connection therewith. The Company is
further authorized to indemnify any person who is made a director to a
proceeding because he or she is a director against any liability incurred if
that person acted in a manner he or she believed in good faith to be in, or
not opposed to, the best interests of the corporation and, in the case of any
criminal proceeding, he or she had no reasonable cause to believe his or her
conduct was unlawful. The authority of the Company to indemnify a director is
not applicable in connection with any proceeding brought by or in the right of
the corporation in which the director was adjudged liable to the corporation,
or in connection with any other proceeding in which he or she is adjudged
liable on the basis that personal benefit was improperly received by him.
Indemnification in any action brought by or in the right of the corporation is
limited in any event to reasonable expenses incurred in connection with the
proceeding, and does not include the obligation to pay any judgment,
settlement, penalty or fine.
A determination that a director is entitled to indemnification must be made
by the Board of Directors by majority vote of a quorum consisting of directors
not at the time parties to the proceedings; if a quorum cannot be obtained
then by majority vote of a committee duly designated by the Board of Directors
(in which designation directors who are parties may participate), consisting
solely of two or more directors not at the time parties to the proceedings; by
special legal counsel; or by the shareholders of the corporation, excluding
shares owned by or voted under the control of directors who are at the time
parties to the proceeding. A director of a corporation who is a party to a
legal proceeding may apply to the court for indemnification or advances for
expenses. The court may order indemnification or advances for expenses if it
determines (1) the director is entitled to mandatory indemnification; or (2)
the director is fairly and reasonably entitled to indemnification, even if he
or she has not met the standard conduct set forth in O.C.G.A. (S)14-2-851(a)
or was adjudged liable as described in O.C.G.A. (S)14-2-851(b), in which
latter event, however, his or her indemnification is limited to reasonable
expenses incurred. If the court determines that the director is entitled to
indemnification or advance for expenses under this part, it may also order the
corporation to pay the director's reasonable expenses to obtain court
indemnification or advance for expenses. The articles of incorporation of the
Company also eliminate, as permitted by law, the personal liability of
directors of the Company from monetary damages for breach of duty of care or
other duty as a director, excepting only any liability for misappropriation of
any business opportunity of the corporation, intentional misconduct, and other
specified conduct.
An officer of the Company who is not a director is entitled to mandatory
indemnification and is entitled to apply for court ordered indemnification in
each case to the same extent as is a director of the Company. The Company may
also indemnify and advance expenses to an officer, employee or agent who is
not a director to the extent, consistent with public policy, that may be
provided by its articles of incorporation, bylaws, general or specific action
of its Board of Directors, or contract.
The Company bylaws provide for indemnification of officers and directors
substantially similar to that provided by Article 8, Part 5 of the Georgia
Business Corporations Code. Insofar as indemnification for liabilities arising
under the Securities Act of 1933 (the "Act") may be permitted to directors,
officers and controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the opinion
of the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a director,
officer, or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will,
II-1
<PAGE>
unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The Registrant's articles of incorporation provide that no director of SNB
shall be personally liable to the Registrant or its shareholders for monetary
damages for a breach of the duty of care or any other duty as a director,
except in the case of: (i) wrongful appropriation of any business opportunity
of the Registrant; (ii) actual omissions not in good faith or involving
intentional misconduct or knowing violation of law; (iii) liability for
unlawful distribution; or (iv) any transaction from which the director derived
an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits (See exhibit index immediately preceding the exhibits for the
page number where each exhibit can be found)
<TABLE>
<CAPTION>
NUMBER DESCRIPTION OF EXHIBITS
------ -----------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated January 29, 1998, between
SNB and Crossroads (included as Appendix A to the Joint Proxy
Statement/Prospectus contained herein).
2.2 First Amendment to Agreement and Plan of Reorganization dated February
12, 1998, between SNB and Crossroads (included as Appendix A to the
Joint Proxy Statement/Prospectus contained herein).
3.1 Articles of Incorporation of the Registrant (Incorporated by reference
as Exhibit 3(a) to the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1995).
3.2 Bylaws of the Registrant as amended March 12, 1998.
4.1 Form of Stock Certificate.
5.1 Legal opinion of Martin, Snow, Grant & Napier, LLP.
8.1 Tax opinion of Martin, Snow, Grant & Napier, LLP.
10.1 Employment Agreement with H. Averett Walker (incorporated by reference
as Exhibit 10(a) to the Registration Statement filed on Form SB-2,
Commission File No. 333-11371 on September 8, 1996).
10.2 1996 Incentive Stock Option Plan (incorporated by reference as Exhibit
10(b) to the Registration Statement filed on Form SB-2, Commission File
No. 333-11371 on September 8, 1996).
10.3 Form of Director Warrants issued in connection with formation of
Security National Bank (incorporated by reference as Exhibit 10(c) to
the Registration Statement filed on Form SB-2, Commission File No. 333-
11371 on September 8, 1996.
11.1 Statement of Per Share Earnings.
21.1 Subsidiaries of Registrant.
23.1 Consent of Martin, Snow, Grant & Napier, LLP (included in Exhibits 5.1
and 8.1).
23.2 Consent of McNair, McLemore, Middlebrooks & Co., LLP.
24 Power of Attorney (see signature page to the Registration Statement).
99.1 Form of proxy for SNB Bancshares, Inc.
99.2 Form of proxy for Crossroads Bancshares, Inc.
</TABLE>
II-2
<PAGE>
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of the securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing provisions
(see Item 20), or otherwise, the registrant has been advised that in the
opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of whether such indemnification by it
is against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, without one business day of receipt of
such requests, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the requests.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF MACON, STATE OF
GEORGIA, ON MARCH 31, 1998.
SNB BancShares, Inc.
/s/ H. Averett Walker
_____________________________________
H. AVERETT WALKER CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears on
the signature pages to this Registration Statement constitutes and appoints H.
Averett Walker and Robert C. Ham, and each of them, his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for the undersigned and in his or her name, place, and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits hereto and other documents
in connection herewith with the Securities and Exchange Commission, granting
unto said attorneys-in-fact and agents and each of them, full power and
authority to do so and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ Alford C. Bridges Director March 31, 1998
- -------------------------------------
ALFORD C. BRIDGES
/s/ Joe E. Timberlake, III Director March 31, 1998
- -------------------------------------
JOE E. TIMBERLAKE, III
/s/ Richard W. White, Jr. Director March 31, 1998
- -------------------------------------
RICHARD W. WHITE, JR.
/s/ Robert C. Ham Director March 31, 1998
- -------------------------------------
ROBERT C. HAM
II-4
<PAGE>
SIGNATURE TITLE DATE
/s/ Robert T. Mullis Director March 31, 1998
- -------------------------------------
ROBERT T. MULLIS
Director March 31, 1998
- -------------------------------------
BENJAMIN W. GRIFFITH, III
/s/ Ben G. Porter Director March 31, 1998
- -------------------------------------
BEN G. PORTER
/s/ H. Averett Walker Director, President March 31, 1998
- ------------------------------------- and Chief Executive
H. AVERETT WALKER Officer (Principal
Executive Officer)
/s/ Robert C. Allen Director March 31, 1998
- -------------------------------------
ROBERT C. ALLEN
Director March 31, 1998
- -------------------------------------
WILLIAM P. BROOKS
/s/ Lee R. Greene, Jr. Director March 31, 1998
- -------------------------------------
LEE R. GREENE, JR.
Director March 31, 1998
- -------------------------------------
JAMES W. KINMAN
/s/ Sydney J. Pyles Director March 31, 1998
- -------------------------------------
SYDNEY J. PYLES
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ John F. Rogers, Jr. Director March 31, 1998
- -------------------------------------
JOHN F. ROGERS, JR.
/s/ Charles W. Selby, Sr. Director March 31, 1998
- -------------------------------------
CHARLES W. SELBY, SR.
/s/ Frank M. Shepherd, Jr. Director March 31, 1998
- -------------------------------------
FRANK M. SHEPHERD, JR.
/s/ Chris R. Sheridan, Jr. Director March 31, 1998
- -------------------------------------
CHRIS R. SHERIDAN, JR.
/s/ Frank G. Wall, Jr. Director March 31, 1998
- -------------------------------------
FRANK G. WALL, JR.
/s/ Michael T. O'Dillon Senior Vice March 31, 1998
- ------------------------------------- President,
MICHAEL T. O'DILLON Treasurer And Chief
Financial Officer
(Principal
Financial and
Accounting Officer)
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
------- -----------------------
<C> <S>
2.1 Agreement and Plan of Reorganization dated January 29, 1998, between
SNB and Crossroads (included as Appendix A to the Joint Proxy
Statement/Prospectus contained herein).
2.2 First Amendment to Agreement and Plan of Reorganization dated February
12, 1998, between SNB and Crossroads (included as Appendix A to the
Joint Proxy Statement/Prospectus contained herein).
3.1 Articles of Incorporation of the Registrant (Incorporated by reference
as Exhibit 3(a) to the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1995)
3.2 Bylaws of the Registrant as amended March 12, 1998.
4.1 Form of Stock Certificate.
5.1 Legal opinion of Martin, Snow, Grant & Napier, LLP.
8.1 Tax opinion of Martin, Snow, Grant & Napier, LLP.
10.1 Employment Agreement with H. Averett Walker (incorporated by reference
as Exhibit 10(a) to the Registration Statement filed on Form SB-2,
Commission File No. 333-11371 on September 8, 1996).
10.2 1996 Incentive Stock Option Plan (incorporated by reference as Exhibit
10(b)
to the Registration Statement filed on Form SB-2, Commission File No.
333-11371 on September 8, 1996).
10.3 Form of Director Warrants issued in connection with formation of
Security National Bank (incorporated by reference as Exhibit 10(c) to
the Registration Statement filed on Form SB-2, Commission File No.
333-11371 on September 8, 1996.
11.1 Statement of Per Share Earnings.
21.1 Subsidiaries of Registrant.
23.1 Consent of Martin, Snow, Grant & Napier, LLP (included in Exhibits 5.1
and 8.1).
23.2 Consent of McNair, McLemore, Middlebrooks & Co., LLP.
24 Power of Attorney (see signature page to the Registration Statement).
99.1 Form of proxy for SNB Bancshares, Inc.
99.2 Form of proxy for Crossroads Bancshares, Inc.
</TABLE>
<PAGE>
EXHIBIT 1
AFFILIATE AGREEMENT
-------------------
SNB Bancshares, Inc.
P.O. Box 4748
Macon, GA 31208-4748
Attention: President
Ladies and Gentlemen:
The undersigned is a shareholder and Director of Crossroads Bancshares,
Inc. ("Crossroads"), a corporation organized under the laws of the State of
Georgia and located in Perry, Georgia, and will become a shareholder of SNB
Bancshares, Inc. ("SNB") pursuant to the transactions described in the Agreement
and Plan of Merger, dated as of January 28, 1998 (the "Agreement"), by and
between Crossroads and SNB. Under the terms of the Agreement, Crossroads will be
merged into and with SNB (the "Merger"), and the shares of the $10.00 par value
common stock of Crossroads ("Crossroads Common Stock") will be converted into
and exchanged for shares of the $1.00 par value common stock of SNB ("SNB Common
Stock"). This Affiliate Agreement represents and agreement between the
undersigned and SNB regarding certain rights and obligations of the undersigned
in connection with the shares of SNB to be received by the undersigned as a
result of the Merger.
In consideration of the Merger and the mutual covenants contained
herein, the undersigned and SNB hereby agree as follows:
1. Affiliate Status. The undersigned understands and agrees that as to
----------------
Crossroads the undersigned is an "affiliate" under Rule 145(c) as defined in
Rule 405 of the Rules and Regulations of the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended ("1933 Act"), and the
undersigned anticipates that the undersigned will be such an "affiliate" at the
time of the Merger.
2. Initial Restriction on Disposition. The undersigned agrees that he
----------------------------------
will not sell, transfer, or otherwise dispose of his interests in, or reduce his
risk relative to, any of the shares of SNB Common Stock into which his shares of
Crossroads Common Stock are converted upon consummation of the Merger until such
time as SNB notifies the undersigned that the requirements of SEC Accounting
Series Release Nos. 130 and 135 ("ASR 130 and 135") have been met. The
undersigned understands that ASR 130 and 135 relate to publication of financial
results of post-Merger combined operations of SNB and Crossroads. SNB agrees
that it will publish such results within 45 days after the end of the first
fiscal quarter of SNB containing the required period of post-Merger combined
operations and that it will notify the undersigned promptly following such
publication.
<PAGE>
3. COVENANTS AND WARRANTIES OF UNDERSIGNED. The undersigned
---------------------------------------
represents, warrants and agrees that:
(a) The SNB Common Stock received by the undersigned as a result of
the Merger will be taken for his or her own account and not for others, directly
or indirectly, in whole or in part.
(b) SNB has informed the undersigned that any distribution by the
undersigned of SNB Common Stock has not been registered under the 1933 Act and
that shares of SNB Common Stock received pursuant to the Merger can only be sold
by the undersigned (i) following registration under the 1933 Act, or (ii) in
conformity with the volume and other requirements of Rule 145(d) promulgated by
the SEC as the same now exist or may hereafter be amended, or (iii) to the
extent some other exemption from registration under the 1933 Act might be
available. The undersigned understands that SNB is under no obligation to file
a registration statement with the SEC covering the disposition of the
undersigned's shares of SNB Common Stock.
(c) The undersigned will, and will cause each of the other parties
whose shares are deemed to be beneficially owned by the undersigned pursuant to
Section 8 hereof to, have all shares of Crossroads Common Stock beneficially
owned by the undersigned registered in the name of the undersigned or such
parties, as applicable, prior to the effective date of the merger and not in the
name of any bank, broker-dealer, nominee or clearinghouse.
(d) During the 30 days immediately preceding the Effective Time of
the Merger, the undersigned will not sell, transfer, or otherwise dispose of his
interests in, or reduce his risk relative to, any of the shares of Crossroads
Common Stock beneficially owned by the undersigned as of the record date for
determination of shareholders entitled to vote at the Shareholders' Meeting of
Crossroads held to approve the Merger.
4. RESTRICTIONS ON TRANSFER.
------------------------
(a) The undersigned understands and agrees that stop transfer
instructions with respect to the shares of SNB Common Stock received by the
undersigned pursuant to the Merger will be given to SNB's Transfer Agent and
that there will be placed on the certificates for such shares, or shares issued
in substitution thereof, a legend stating in substance:
"The shares represented by this certificate were issued pursuant
to the business combination which is accounted for as a "pooling
of interests" and may not be sold, nor may the owner thereof
reduce his risks relative thereto in any way, until such time as
SNB Bancshares, Inc. ("SNB") has published the
-2-
<PAGE>
financial results covering at least 30 days of combined
operations after the effective date of the merger through which
the business combination was effected. In addition, the shares
represented by this certificate may not be sold, transferred or
otherwise disposed of except or unless (1) covered by an
effective registration statement under the Securities Act of
1933, as amended, (2) in accordance with (i) Rule 145(d) (in the
case of shares issued to an individual who is not an affiliate
of SNB) or (ii) Rule 144 (in the case of shares issued to an
individual who is an affiliate of SNB) of the Rules and
Regulations of such Act, or (3) in accordance with a legal
opinion satisfactory to counsel for SNB that such sale or
transfer is otherwise exempt from the registration requirements
of such Act."
(b) Such legend will also be placed on any certificate representing
SNB securities issued subsequent to the original issuance of the SNB Common
Stock pursuant to the Merger as a result of any stock dividend, stock split, or
other recapitalization as long as the SNB Common Stock issued to the undersigned
pursuant to the Merger has not been transferred in such manner to justify the
removal of the legend therefrom. In addition, if the provisions of Rules 144 and
145 are amended to eliminate restrictions applicable to the SNB Common Stock
received by the undersigned pursuant to the Merger, or at the expiration of the
restrictive period set forth in Rule 145(d), SNB, upon the request of the
undersigned, will cause the certificates representing the shares of SNB Common
Stock issued to the undersigned in connection with the Merger to be reissued
free of any legend relating to the restrictions set forth in Rules 144 and
145(d) upon receipt by SNB of an opinion of its counsel to the effect that such
legend may be removed.
5. Understanding of Restrictions on Dispositions. The undersigned has
---------------------------------------------
carefully read the Agreement and this Affiliate Agreement and discussed their
requirements and impact upon his or her ability to sell, transfer, or otherwise
dispose of the shares of SNB Common Stock received by the undersigned in
connection with the Merger, to the extent he or she believes necessary, with his
or her counsel or counsel for Crossroads.
6. Filing of Reports by SNB. SNB or any successor company agrees, for
------------------------
a period of three years after the effective date of the Merger, to file on a
timely basis all reports required to be filed by it pursuant to Section 13 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"), so that the
public information provisions of Rule 145(d) promulgated by the SEC as the same
are presently in effect will be available to the undersigned in the
-3-
<PAGE>
event the undersigned desires to transfer any shares of SNB Common Stock issued
to the undersigned pursuant to the Merger.
7. Transfer Under Rule 145(d). If the undersigned desires to sell or
--------------------------
otherwise transfer the shares of SNB Common Stock received by him or her in
connection with the Merger at any time during the restrictive period set forth
in Rule 145(d), the undersigned will provide the necessary representation letter
to the Transfer Agent for SNB Common Stock, together with such additional
information as the Transfer Agent may reasonably request. If SNB's counsel
concludes that such proposed sale or transfer complies with the requirements of
Rule 145(d), SNB shall cause such counsel, at SNB's expense, to provide such
opinions as may be necessary to SNB's Transfer Agent so that the undersigned may
complete the proposed sale or transfer.
8. Acknowledgments. The undersigned recognizes and agrees that the
---------------
foregoing provisions also apply with respect to Crossroads Common Stock held by,
and SNB Common Stock issued in connection with the Merger to, (a) the
undersigned's spouse, (b) any relative of the undersigned or of the
undersigned's spouse who has the same home as the undersigned, (c) any trust or
estate in which the undersigned, the undersigned's spouse, and any such relative
collectively own at least a 10% beneficial interest or of which any of the
foregoing serves as trustee, executor or in any similar capacity, and (d) any
corporation or other organization in which the undersigned, the undersigned's
spouse and any such relative collectively own at least 10% of any class of
equity securities or of the equity interest. The undersigned further recognizes
that, in the event that the undersigned is a director or executive officer of
SNB or becomes a director or executive officer of SNB upon consummation of the
Merger, among other things, any sale of SNB Common Stock by the undersigned
within a period of less than six months following the effective time of the
Merger may subject the undersigned to liability pursuant to Section 16(b) of the
1934 Act.
9. Miscellaneous. This Affiliate Agreement is the complete agreement
-------------
between SNB and the undersigned concerning the subject matter hereof. Any notice
required to be sent to any party hereunder shall be sent by registered or
certified mail, return receipt requested, using the addresses set forth herein
or such other address as shall be furnished in writing by the parties. This
Affiliate Agreement shall be governed by the laws of the State of Georgia.
-4-
<PAGE>
This Affiliate Agreement is executed as of the day of
-----
, 1998.
- ---------------------
Very truly yours,
-----------------------------
-----------------------------
-----------------------------
-----------------------------
-----------------------------
Address
-----------------------------
Telephone No.
AGREED TO AND ACCEPTED as of
,1998
- ----------------------
SNB BANCSHARES, INC.
By:
------------------------
Its:
-------------------
-5-
<PAGE>
EXHIBIT 2
MATTERS AS TO WHICH
WALKER, HULBERT, GRAY & BYRD WILL OPINE
1. Crossroads Bancshares, Inc. is a corporation duly organized,
existing and in good standing under the laws of the State of Georgia with
corporate power and authority (a) to conduct its business as described in the
Proxy Statement and (b) to own and use its Assets.
2. Crossroads Bank of Georgia is a Georgia chartered state bank duly
organized and validly existing under the laws of the State of Georgia with all
requisite power and authority to conduct its business as described in the Proxy
Statement, and to own and use its Assets. The deposits of Crossroads Bank of
Georgia are insured by the Federal Deposit Insurance Corporation to the extent
provided by law.
3. Crossroads Bancshares, Inc.'s authorized shares consist of
10,000,000 shares of Common Stock, $10.00 par value, of which 291,982 shares
were outstanding as of March 27, 1998. The outstanding shares of Crossroads
Bancshares, Inc. Common Stock have been duly authorized and validly issued, were
not issued in violation of any statutory preemptive rights of shareholders, and
are fully paid and nonassessable. To our knowledge, except as Previously
Disclosed, there are no options, subscriptions, warrants, calls, rights or
commitments obligating Crossroads Bancshares, Inc. to issue equity securities or
acquire its equity securities.
4. Crossroads Bancshares, Inc. owns directly or indirectly all the
issued and outstanding shares of the capital stock of Crossroads Bank of
Georgia. To our knowledge, there are no options, subscriptions, warrants, calls,
rights or commitments obligating Crossroads Bank of Georgia to issue equity
securities or acquire its equity securities.
5. The execution and delivery by Crossroads Bancshares, Inc. of the
Agreement do not, and if Crossroads Bancshares, Inc. were now to perform its
obligations under the Agreement such performance would not, result in any
violation of the Articles of Incorporation or Bylaws of Crossroads Bancshares,
Inc. or the Articles of Incorporation or bylaws of Crossroads Bank of Georgia
or, to our knowledge, result in any breach of, or default or acceleration under,
any material Contract or Order to which Crossroads Bancshares, Inc. or
Crossroads Bank of Georgia is a party or by which Crossroads Bancshares, Inc. or
Crossroads Bank of Georgia is bound.
6. Crossroads Bancshares, Inc. has duly authorized the execution and
delivery of the Agreement and all performance by Crossroads Bancshares, Inc.
thereunder and has duly executed and delivered the Agreement.
7. The Agreement is enforceable against Crossroads Bancshares, Inc.
<PAGE>
EXHIBIT 3
MATTERS AS TO WHICH
MARTIN, SNOW, GRANT & NAPIER WILL OPINE
1. SNB Bancshares, Inc. ("SNB") is a corporation duly organized,
existing and in good standing under the laws of the State of Georgia with
corporate power and authority (a) to conduct its business as described in the
Proxy Statement and (b) to own and use its Assets.
2. SNB's authorized shares consist of 5,000,000 shares of Common Stock,
$1.00 par value per share, of which 2,297,331 shares were outstanding as of
March 27, 1998. The outstanding shares of SNB Common Stock have been duly
authorized and validly issued, were not issued in violation of any statutory
preemptive rights of shareholders, and are fully paid and nonassessable. To our
knowledge, except as Previously Disclosed, there are no options, subscriptions,
warrants, calls, rights or commitments obligating SNB to issue equity securities
or acquire its equity securities. The shares of SNB Common Stock to be issued to
the shareholders of SNB upon consummation of the Merger have been registered
under the Securities Act of 1933, as amended, and when issued in accordance with
the Agreement, will be validly issued, fully paid and nonassessable.
3. The execution and delivery by SNB of the Agreement do not, and if
SNB were not to perform its obligations under the Agreement such performance
would not, result in violation of the Articles of Incorporation or Bylaws of SNB
or, to our knowledge result in any breach of, or default or acceleration under,
any material Contract or Order to which SNB is a party or by which SNB is bound.
4. SNB has duly authorized the execution and delivery of the Agreement
and all performance by SNB thereunder and has duly executed and delivered the
Agreement.
5. The Agreement is enforceable against SNB.
<PAGE>
EXHIBIT 3.2
BYLAWS
OF
REGISTRANT
(AS AMENDED)
<PAGE>
AMENDMENT TO BYLAWS OF SNB BANCSHARES, INC.
MARCH 12, 1998
(a) Section 3.3 of Article Three is deleted in its entirety and the
following new Section 3.3 of Article Three is substituted in lieu thereof:
"3.3 Number, Election and Term of Office. The Board of Directors
-----------------------------------
of the Corporation shall consist of not less than three nor more than
25 persons, and shall be elected in classes with staggered terms of
three years as provided in the Articles of Incorporation with the
exact number within such minimum and maximum limits in each class to
be fixed and determined from time to time by resolution of the Board
of Directors or by resolution of the shareholders adopted at the
annual meeting of shareholders by a majority vote of the shareholders
represented at the annual meeting. The Directors shall be elected by a
plurality vote of the shareholders represented at the annual meeting
of shareholders entitled to vote for the election of directors. Each
director shall serve until the expiration of his term and until his
successor is elected and qualified or until his earlier resignation,
retirement, disqualification, death or removal from office for cause."
<PAGE>
BYLAWS
OF
SNB BANCSHARES, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE ONE - OFFICES
Section 1.1 Registered Office
Section 2.1 Other Offices
ARTICLE TWO - SHAREHOLDERS' MEETING
Section 2.1 Place of Meetings
Section 2.2 Annual Meetings
Section 2.3 Substitute Annual Meetings
Section 2.4 Special Meetings
Section 2.5 Notice of Meetings
Section 2.6 Quorum
Section 2.7 Voting of Shares
Section 2.8 Proxies
Section 2.9 Presiding Officer
Section 2.10 Adjournments
ARTICLE THREE - THE BOARD OF DIRECTORS
Section 3.1 General Powers
Section 3.2 Requirements
Section 3.3 Number, Election and Term of Office
Section 3.4 Removal
Section 3.5 Compensation
Section 3.6 Committees of the Board of Directors
Section 3.7 Honorary and Advisory Director
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meetings
Section 4.2 Special Meetings
Section 4.3 Place of Meetings
Section 4.4 Notice of Meetings
Section 4.5 Quorum
Section 4.6 Vote Required for Action
Section 4.7 Action by Directors Without a Meeting
Section 4.8 Secretary to Board
ARTICLE FIVE - NOTICE AND WAIVER
Section 5.1 Procedure
Section 5.2 Waiver
ARTICLE SIX - OFFICERS
Section 6.1 Number
Section 6.2 Election and Term
Section 6.3 Compensation
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
Section 6.4 Removal
Section 6.5 Chairman of the Board
Section 6.6 President
Section 6.7 Officer in Place of President
Section 6.8 Secretary
ARTICLE SEVEN - DIVIDENDS
Section 7.1 Time and Conditions of Declaration
Section 7.2 Share Dividends - Treasury Shares
Section 7.3 Share Dividends - Unissued Shares
Section 7.4 Share Splits
ARTICLE EIGHT - SHARES
Section 8.1 Authorization and Issuance of Shares
Section 8.2 Share Certificates
Section 8.3 Rights of Bank with Respect to
Registered Owners
Section 8.4 Transfer of Shares
Section 8.5 Duty of Bank to Register Transfer
Section 8.6 Lost, Stolen or Destroyed
Certificates
Section 8.7 Fixing of Record Date
Section 8.8 Record Date if None Fixed
ARTICLE NINE - INDEMNIFICATION
Section 9.1 Indemnification
Section 9.2 Payment of Expenses in Advance
Section 9.3 Insurance
Section 9.4 Rights Not Exclusive
ARTICLE TEN - MISCELLANEOUS
Article 10.1 Inspection of Books and Records
Article 10.2 Fiscal Year
Article 10.3 Seal
ARTICLE ELEVEN - AMENDMENTS
Article 11.1 Power to Amend Bylaws
Article 11.2 Conditions
</TABLE>
3
<PAGE>
ARTICLE ONE
OFFICES
1.1 REGISTERED OFFICE. The corporation shall maintain its registered office in
-----------------
Bibb County, Georgia.
1.2 OTHER OFFICES. In addition to its registered office, the corporation also
-------------
may have offices at such other place or places as the board of directors may
from time to time select, or as the business of the corporation may require or
make desirable, subject to the bank holding company laws of this state.
ARTICLE TWO
SHAREHOLDERS' MEETINGS
2.1 PLACE OF MEETINGS. Meetings of the shareholders of the corporation may be
-----------------
held at any place within (or without) the state of Georgia, as set forth in the
notice thereof.
2.2 ANNUAL MEETINGS. The annual meeting of shareholders of the corporation
---------------
shall be held annually on the third Thursday of April, at 6:00 p.m. unless that
day is a legal holiday, and in that event on the next succeeding business day,
for the purpose of electing directors and transacting any and all business that
may properly come before the meeting.
2.3 SUBSTITUTE ANNUAL MEETINGS. If the annual meeting is not held on the day
--------------------------
and time designated in Section 2.2, any business, including the election of
directors, which might properly have been acted upon at that meeting, may be
transacted at any subsequent shareholders' meeting held pursuant to these bylaws
or held pursuant to a court order requiring a substitute annual meeting.
2.4 SPECIAL MEETINGS. Special meetings of shareholders or a special meeting in
----------------
lieu of the annual meeting of shareholders shall be called by the corporation
upon the written request of the holders of 25% or more of all the shares of
capital stock of the corporation entitled to vote in an election of directors.
Special meetings of the shareholders may be called at any time by the president,
chairman of the board, or the board of directors.
2.5 NOTICE OF MEETINGS. Unless waived as contemplated in Section 5.2, or by
------------------
attendance at the meeting, either in person or by proxy, for any purpose other
than to object to the transaction of business, a written or printed notice of
each shareholders' meeting stating the place, day and hour of the meeting shall
be delivered not less than ten (10) days, nor more than fifty (50) days before
the date thereof, either personally, by mail, or by telegram, charges prepaid by
or at the direction of the president, the secretary, or the officer or persons
calling the meeting, to each shareholder of record entitled to vote at such
meeting. In the case
4
<PAGE>
of an annual or substitute annual meeting, the notice of the meeting need not
state the purpose or purposes of the meeting unless the purpose or purposes
constitute a matter which the Georgia Business Corporation Code requires to be
stated in the notice of the meeting. In the case of a special meeting, the
notice of the meeting shall state the general nature of the business to be
transacted.
2.6 QUORUM. At all meetings of the shareholders, the presence in person or by
------
proxy of the holders of more than one-half of the shares outstanding and
entitled to vote shall constitute a quorum. If a quorum is present, a majority
of the shares represented at the meeting and entitled to vote on the subject
matter shall determine any matter coming before the meeting unless a different
vote is required by the Georgia Business Corporation Code, by the Articles of
Incorporation of the corporation or by these bylaws. The shareholders at a
meeting at which a quorum is once present may continue to transact business at
the meeting or by any adjournment thereof, notwithstanding the withdrawal of
enough shareholders to leave less than a quorum. If a meeting cannot be
organized for lack of a quorum, those shareholders present may adjourn the
meeting to such time and place as they may determine. In the case of a meeting
for the election of directors which is twice adjourned for lack of a quorum,
those present at the second of such adjourned meetings, of which notice has been
given in writing to shareholders, shall constitute a quorum for the election of
directors.
2.7 VOTING OF SHARES. Each outstanding share having voting rights shall be
----------------
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. Voting on all matters shall be by voice vote or by show of hands
unless any qualified voter, prior to the voting on may matter, demands vote by
ballot, in which case each ballot shall state the name of the shareholder voting
and the number of shares voted by him, and if such ballot be cast by proxy, it
shall also state the name of such proxy.
2.8 PROXIES. A shareholder entitled to vote pursuant to Section 2.7 may vote
-------
in person or by proxy executed in writing by the shareholder or by his attorney
in fact. A proxy shall not be valid after eleven (11) months from the date of
its execution unless a longer period is expressly stated therein. If the
validity of any proxy is questioned, it must be submitted to the secretary of
the shareholders' meeting for examination or to a proxy officer or committee
appointed by the person presiding at the meeting. The secretary of the meeting
or, if appointed, the proxy officer or committee, shall determine the validity
or invalidity of any proxy submitted and referenced by the secretary in the
minutes of the meeting to the regularity of a proxy shall be received as prima
facie evidence of the facts stated for the purpose of establishing the presence
of a quorum at such meeting and for all other purposes.
5
<PAGE>
2.9 PRESIDING OFFICER. The chairman of the board of directors or, in the
-----------------
absence of a chairman of the board of directors, the president, shall serve as
chairman of every shareholders' meeting unless some other person is elected to
serve as chairman by a majority vote of the shares represented at the meeting.
The chairman may appoint such persons as he deems required to assist with the
meeting.
2.10 ADJOURNMENTS. Any meeting of the shareholders, whether or not a quorum is
------------
present, may be adjourned by the holders of a majority of the voting shares
represented at the meeting to reconvene at a specific time and place. Except as
otherwise provided by Section 2.6, it shall not be necessary to give any notice
of the reconvened meeting or of the business to be transacted, if the time and
place of the reconvened meeting are announced at the meeting which was
adjourned. At any such reconvened meeting, any business may be transacted which
could have been transacted at the meeting which was adjourned.
ARTICLE THREE
THE BOARD OF DIRECTORS
3.1 GENERAL POWERS. The business and affairs of the corporation shall be
--------------
managed by the board of directors. In addition to the powers and authority
expressly conferred upon it by these bylaws, the board of directors may exercise
all such powers of the corporation and do all such lawful acts and things as are
not by these bylaws directed or required to be exercised or done by the
shareholders.
3.2 REQUIREMENTS. Each director of the corporation shall be a natural person
------------
of the age of 18 years or more.
3.3 NUMBER OF DIRECTORS AND TERM OF OFFICE. The Board of Directors of the
--------------------------------------
corporation shall consist of not less than five (5), nor more than twenty-five
(25) persons, and shall be elected in classes with staggered terms of five (5)
years as provided in the Articles of Incorporation with the exact number within
such minimum and maximum limits in each class to be fixed and determined from
time to time by resolution of the Board of Directors, or by resolution of the
shareholders at any annual or special meeting of shareholders. The directors
shall be elected by the affirmative vote of a majority of the shares represented
at the annual meeting of shareholders. Each director, except in the
disqualification, or removal, shall serve until the next succeeding annual
meeting and thereafter until his successor shall have been elected and
qualified.
3.4 REMOVAL. The entire Board of Directors or any individual director may be
-------
removed from office with or without cause by the affirmative vote of the holders
of a majority of the shares entitled to vote at an election of directors. In
addition, the
6
<PAGE>
Board of Directors may remove a director from office if such director is
adjudicated an incompetent by a court, if he is convicted of a felony, or if he
fails to attend regular meetings of the Board of Directors for three (3)
consecutive meetings without having been excused by the Board of Directors.
3.5 COMPENSATION. Directors may receive such compensation for their services
------------
as directors as may from time to time be fixed by vote of the board of
directors. A director may also serve the corporation in a capacity other than
that of director and receive compensation, as determined by the board of
directors, for services rendered in such other capacity.
3.6 COMMITTEES OF THE BOARD OF DIRECTORS. The board of directors, by
------------------------------------
resolution adopted by a majority of the full board of directors, may designate
from among its members an executive committee and one or more other committees,
each consisting of three or more directors. Each committee shall have the
authority of the board of directors in regard to the business of the corporation
to the extent set forth in the resolution establishing such committee.
3.7 HONORARY AND ADVISORY DIRECTORS. The board of directors of the corporation
-------------------------------
also may appoint any individual an Honorary Director, Director Emeritus, or
member of any advisory board established by the board of directors. Any
individual appointed as Honorary Director, Director Emeritus, or member of an
advisory board may be compensated as provided in Section 3.5, but such
individual may not vote at any meeting of the board of directors or be counted
in determining a quorum as provided in Section 4.5 and shall not have any
responsibility or be subject to any liability imposed upon a director, or
otherwise be deemed a director.
ARTICLE FOUR
MEETINGS OF THE BOARD OF DIRECTORS
4.1 REGULAR MEETINGS. An annual organizational meeting of the board of
----------------
directors shall be held on the day of and after the annual meeting of the
shareholders of the corporation. In the event the annual shareholders' meeting
is not held as provided by Sections 2.3 or 2.4, such organizational meeting
shall be held as herein provided for regular meetings. In addition, regular
meetings of the board of directors shall be held on any day fixed by the board
of every month during the calendar year, except during the month in which the
organizational meeting of the board of directors is held; provided, however,
that the board of directors and the president are authorized to cancel any such
regular meetings, excluding the organizational meeting.
4.2 SPECIAL MEETINGS. Special meetings of the board of directors may be called
----------------
by or at the request of the president, chairman of the board, or by any three
directors in office at that time.
7
<PAGE>
4.3 PLACE OF MEETINGS. Directors may hold their meetings at any place within
-----------------
(or without) the state of Georgia as the board of directors may from time to
time establish for regular meetings, or as set forth in the notice of special
meetings, or in the event of a meeting held pursuant to waiver of notice, as set
forth in the waiver.
4.4 NOTICE OF MEETINGS. No notice shall be required for any regularly
------------------
scheduled meeting of the directors of the corporation. Unless waived as
contemplated in Section 5.2, the president or secretary of the corporation, or
any director thereof shall give notice to each director of such special meeting
stating the time, place and purposes of the meeting. Such notice shall be given
by mailing notice of the meeting at least five (5) days before the date of the
meeting, or by telephone, telegram, or personal delivery at least three (3) days
before the date of the meeting. Notice shall be deemed to have been given by
telegram or cablegram at the time notice is filed with the transmitting agency.
Attendance by a director at a meeting shall constitute a waiver of notice of
such meeting, except where a director attends a meeting for the express purpose
of objecting to the transaction of business because the meeting is now lawfully
called.
4.5 QUORUM. At meetings of the board of directors, more than one-half of the
------
directors then in office shall be necessary to constitute a quorum for the
transaction of business.
4.6 VOTE REQUIRED FOR ACTION. Except as otherwise provided in these bylaws, by
------------------------
the corporation's Articles of Incorporation, or by law, the act of a majority of
the directors present at a meeting at which a quorum is present at the time
shall be the act of the board of directors.
4.7 ACTION BY DIRECTORS WITHOUT A MEETING. Any action which may be taken at
-------------------------------------
any meeting of the board of directors, or at any meeting of a committee of
directors may be taken without a meeting if a written consent thereto shall be
signed by all directors or all the members of the committee, as the case may be,
and if such written consent is filed with the minutes of the proceedings of the
board or the committee. Such consent shall have the same force and effect as a
unanimous vote of the board of directors or the committee.
4.8 SECRETARY TO BOARD. The board of directors may appoint a secretary, who
------------------
need not be a member of the board, whose duty it shall be to keep an accurate
record of all meetings of said board.
ARTICLE FIVE
NOTICE AND WAIVER
5.1 PROCEDURE. Whenever these bylaws require notice to be given to any
---------
shareholder or director, the notice shall be given as
8
<PAGE>
prescribed in Sections 2.5 and 4.4, whichever is applicable. Whenever notice is
given to a shareholder or director by mail, the notice shall be sent first class
mail by depositing the same in a post office or letter box in a postage prepaid,
sealed envelope, addressed to the shareholder or director at his last known
address, and such notice shall be deemed to have been given at the time the same
is deposited in the United States mail.
5.2 WAIVER. Whenever any notice is required to be given to any shareholder or
------
director by law, by the Articles of Incorporation, or these bylaws, a waiver
thereof in writing, signed by the director or shareholder entitled to such
notice, or by the proxy of such shareholder, whether before or after the meeting
to which the waiver pertains, shall be deemed equivalent thereto; provided,
however, that no such waiver shall apply by its terms to more than one required
notice.
ARTICLE SIX
OFFICERS
6.1 NUMBER. The officers of the corporation shall consist of a president,
------
secretary and a treasurer. In addition, the board of directors may from time to
time elect or provide for the appointment of such other officers or assistant
officers as it deems necessary for the efficient management of the corporation,
or as shall otherwise be required by law or regulation. Any two or more offices
may be held by the same person, except the offices of president and secretary.
The board of directors shall have the power to establish and specify the duties
for all officers of the corporation.
6.2 ELECTION AND TERM. All officers shall be elected by the board of directors
-----------------
and shall serve at the will of the board of directors and until their successors
have been elected and have qualified, or until their earlier death, resignation,
removal, retirement or disqualification.
6.3 COMPENSATION. The compensation of all officers of the corporation shall be
------------
fixed by the board of directors, or by the executive committee of the board of
directors, if such committee is designated as provided in Section 3.6.
Compensation of all employees who are not officers shall be set by the president
subject to review by the board, at its election.
6.4 REMOVAL. Any officer or agent elected by the board of directors may be
-------
removed by the board of directors with or without any cause whenever in its
judgment the best interests of the corporation will be served thereby without
prejudice to any contract right to such officer.
6.5 CHAIRMAN OF THE BOARD. The board of directors, in its discretion, may
---------------------
elect a chairman of the board of directors who shall preside and act as chairman
at all meetings of the shareholders of the board of directors and who shall
perform such other duties as the board of directors may from time to time
direct.
9
<PAGE>
6.6 VICE-CHAIRMAN OF THE BOARD. The board of directors, in its discretion, may
--------------------------
elect a vice-chairman of the board of directors who shall preside and act as
chairman at all meetings of the shareholders of the board of directors in the
absence of the chairman and who shall perform such other duties as the board of
directors may from time to time direct.
6.7 PRESIDENT. The president shall be the chief executive officer of the
---------
corporation and shall have general control and supervision over the business and
affairs of the corporation. He shall see that all orders and resolutions of the
board of directors are carried into effect. In the absence of a chairman of the
board of directors, the president shall preside and act as chairman of all
meetings of the shareholders and the board of directors. He shall also perform
such other duties as may be delegated to him from time to time by the board of
directors.
6.8 OFFICER IN PLACE OF PRESIDENT. The board of directors may designate an
-----------------------------
officer who shall, in the absence or disability of the president, or at the
direction of the president perform the duties and exercise the powers of the
president.
6.9 SECRETARY. The secretary shall keep accurate records of the acts and
---------
proceedings of all meetings of shareholders, directors and committees of
directors. He shall have authority to give all notices required by law of these
bylaws. He shall be custodian of the corporate books, records, contracts and
other documents. The secretary may affix the corporation's seal to any lawfully
executed documents requiring it and shall sign such instruments as may require
his signature.
ARTICLE SEVEN
DIVIDENDS
7.1 TIME AND CONDITIONS OF DECLARATION. Dividends upon the outstanding shares
----------------------------------
of the corporation may be declared by the board of directors at any regular or
special meeting and paid in cash or property only out of the unreserved and
unrestricted earned surplus of the corporation or out of the unreserved and
unrestricted net earnings of the current fiscal year, computed to the date of
declaration of the dividend, or the next preceding fiscal year.
7.2 SHARE DIVIDENDS - TREASURY SHARES. Dividends may be declared by the board
---------------------------------
of directors and paid in the shares of the corporation out of any treasury
shares that have been reacquired out of the capital funds of the corporation.
10
<PAGE>
7.3 SHARE DIVIDENDS - UNISSUED SHARES. Dividends may be declared by the board
---------------------------------
of directors and paid in the authorized but unissued shares of the corporation
out of any retained earnings of the corporation; provided that such shares shall
be issued at not less than the par value thereof, there shall be transferred to
capital stock at the time such dividend is paid an amount of retained earnings
at least equal to the aggregate par value of the shares to be issued as a
dividend.
7.4 SHARE SPLITS. A split or division of the issued shares of any class into a
------------
greater number of shares of the same class without increasing the capital stock
of the corporation shall not be construed to be a share dividend within the
meaning of this article.
ARTICLE EIGHT
SHARES
8.1 AUTHORIZATION AND ISSUANCE OF SHARES. The par value and the maximum number
------------------------------------
of shares of any class of the corporation which may be issued and outstanding
shall be set forth from time to time in the Articles of Incorporation of the
corporation. The board of directors may increase or decrease the number of
issued and outstanding shares of the corporation within the maximum number of
shares authorized by the Articles of Incorporation and the minimum
capitalization requirements of the Articles of Incorporation or Georgia law.
8.2 SHARE CERTIFICATES. The interest of each shareholder in the corporation
------------------
shall be evidenced by a certificate or certificates representing shares of the
corporation which shall be in such form as the board of directors may from time
to time adopt in accordance with Georgia law. Share certificates shall be
consecutively numbered, shall be in registered form, and shall indicate the date
of issue and all such information shall be entered on the corporation's books.
Each certificate shall be signed by the president or a vice president and the
secretary or an assistant secretary and shall be sealed with the seal of the
corporation or a facsimile thereof; provided, however, that where such
certificate is signed by a transfer agent, or registered by a registrar other
than the corporation itself, or any employee of the corporation, the signatures
of such officers may be facsimiles. In case any officer or officers who shall
have signed or whose facsimile signature shall have been placed upon a share
certificate shall have ceased for any reason to be such officer or officers of
the corporation before such certificate is issued, such certificate may be
issued by the corporation whose facsimile signatures shall have been used
thereon had not ceased to be such officer or officers.
8.3 RIGHTS OF CORPORATION WITH RESPECT TO REGISTERED OWNERS. Prior to due
-------------------------------------------------------
presentation for transfer of registration of its shares, the corporation may
treat the registered owner of the
11
<PAGE>
shares as the person exclusively entitled to vote such shares, to receive any
dividend or other distribution with respect to such shares, and for all other
purposes; and the corporation shall not be bound to recognize any equitable or
other claim to or interest in such shares on the part of any other person,
whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
8.4 TRANSFER OF SHARES. Transfer of shares shall be made upon the stock
------------------
transfer books of the corporation only upon direction of the person named in the
share certificate representing the shares to be transferred, or by an attorney
of such person lawfully constituted in writing; and before a new certificate is
issued, the old certificate shall be surrendered for cancellation or, in the
case of a certificate alleged to have been lost, stolen, or destroyed, the
provisions of Section 8.6 of these bylaws shall have been satisfied.
8.5 DUTY OF CORPORATION TO REGISTER TRANSFER. Notwithstanding any of the
----------------------------------------
provisions of Section 8.4 of these bylaws, the corporation is under a duty to
register the transfers of its shares only if:
(a) The share certificate is endorsed by the appropriate person or
persons; and
(b) Reasonable assurance is given that these endorsements are genuine and
effective; and
(c) The corporation has no duty to inquire into adverse claims or has
discharged any such duty; and
(d) Any applicable law relating to the collection of taxes has been
complied with; and
(e) The transfer is in fact rightful or is a bona fide purchaser.
8.6 LOST, STOLEN, OR DESTROYED CERTIFICATES. Any person claiming a share
---------------------------------------
certificate to be lost, stolen, or destroyed shall make an affidavit or
affirmation of the fact in such manner as the board of directors may require and
shall, if the board of directors so requires, give the corporation a bond of
indemnity in form and amount, and with one or more sureties satisfactory to the
board of directors, as the board of directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen, or destroyed.
8.7 FIXING OF RECORD DATE. For the purpose of determining shareholders
---------------------
entitled to notice of or to vote at any meeting of shareholders or any
adjournment thereof, or entitled to receive payment of any dividend, or in order
to make a determination of shareholders for any other proper purpose, the board
of directors
12
<PAGE>
may fix in advance a date as the record date, such date to be not more than 50
days (and, in the case of a shareholder's meeting, not less than 10 days) prior
to the date on which the particular action, requiring such determination of
shareholders, is to be taken.
8.8 RECORD DATE IF NONE FIXED. If no record date is fixed as provided in
-------------------------
Section 8.7 of these bylaws, then the record date for any determination of
shareholders which may be proper or required by law shall be the date on which
notice is mailed in the case of a shareholders' meeting, or the date on which
the board of directors adopts a resolution declaring a dividend in the case of
payment of a dividend.
ARTICLE NINE
INDEMNIFICATION
9.1 INDEMNIFICATION. Any person, his heirs, executors, or administrators, may
---------------
be indemnified or reimbursed by the corporation for reasonable expense actually
incurred in connection with any action, suit or proceeding, civil or criminal,
to which he shall be made a party by reason of the fact that he is or was a
director, trustee, officer, employee, or agent of the corporation, or that he is
or was serving, at the request of the corporation, trust or other organization
or enterprise; provided, however, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for gross
negligence, willful misconduct or criminal acts in the performance of his duties
to the corporation, or to such other firm, corporation, trust, organization, or
enterprise; and provided further, that no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been in the subject of a compromise settlement, except with the approval of
(i) a court of competent jurisdiction, (ii) the holders of record of a majority
of the outstanding shares of capital stock of the corporation, or (iii) a
majority of the members of the board of directors then holding office, excluding
the votes of any directors who are parties to the same or substantially the same
action, suit or proceeding.
9.2 PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred in defending any action,
------------------------------
suit or proceeding referred to above may be paid by the corporation in advance
of the final disposition of such action, suit or proceeding as authorized by the
board of directors in the specific case upon receipt of an undertaking by or on
behalf of any person who is or was a director, trustee, officer, employee or
agent to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the corporation as provided above.
13
<PAGE>
9.3 INSURANCE. The corporation, upon the affirmative vote of a majority of its
---------
board of directors, may purchase and maintain insurance on behalf of any person
who is or was a director, trustee, officer, employee or agent of the corporation
or is or was serving, at the request of the corporation, as a director, trustee,
officer, employee, or agent of another firm, corporation, trust, or other
organization or enterprise against liability asserted against him and incurred
by him in such capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the foregoing provisions of these bylaws.
9.4 RIGHTS NOT EXCLUSIVE. The foregoing rights of indemnification or
--------------------
reimbursement shall not be exclusive of other rights to which the persons
referred to above, or their heirs, executors, or administrators, may be entitled
as a matter of law, and the corporation may indemnify such persons to the extent
permitted by the Georgia Business Corporation Code, as such laws may be amended
from time to time.
ARTICLE TEN
MISCELLANEOUS
10.1 INSPECTION OF BOOKS AND RECORDS. The board of directors shall have power
-------------------------------
to determine which accounts, books and records of the corporation shall be open
to the inspection of shareholders, except such accounts, books and records that
are specifically open to inspection by law, and the board of directors shall
have power to fix reasonable rules and regulations not in conflict with the
applicable law for the inspection of accounts, books and records which by law or
by determination of the board of directors shall be open to inspection.
10.2 FISCAL YEAR. The fiscal year of the corporation shall be set by resolution
-----------
of the board of directors.
10.3 SEAL. The following is the impression of the seal adopted by the board of
----
directors.
ARTICLE ELEVEN
AMENDMENTS
11.1 POWER TO AMEND BYLAWS. The board of directors shall have power to alter,
---------------------
amend or repeal these bylaws or adopt new bylaws. Notice of any change in the
bylaws during the year shall be given to the stockholders at the annual meeting
and shall be proposed for ratification by a majority vote of the shareholders
represented at the meeting in person or by proxy. If the shareholders fail to
ratify the change in the bylaws, such change shall not be effective after the
shareholders' meeting at which it is proposed for ratification. Any bylaws
adopted by the board of directors may be altered, amended, or repealed, and new
bylaws adopted by the
14
<PAGE>
shareholders. The shareholders may prescribe that any bylaw or bylaws adopted
by them shall not be altered, amended or repealed by the board of directors.
11.2 CONDITIONS. Action taken by the shareholders with respect to bylaws
----------
shall be taken by an affirmative vote of a majority of all shares entitled to
elect directors, and action by the board of directors with respect to bylaws
shall be taken by an affirmative vote of a majority of all directors then
holding office.
The foregoing bylaws were adopted by the board of directors of the corporation
at its organizational meeting held as shown in the minutes to which these bylaws
are annexed, in witness of which the undersigned directors have hereunto
subscribed their signatures.
-----------------------------------
-----------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
------------------------------------
15
<PAGE>
------------------------------------
------------------------------------
16
<PAGE>
EXHIBIT 4
IRREVOCABLE PROXY
This Irrevocable Proxy is given by the undersigned, CULLEN TALTON
("Shareholder"), in favor of SNB Bancshares, Inc., a Georgia corporation
("SNB"), as of the 29th day of January, 1998.
WHEREAS, SNB and Crossroads Bancshares, Inc., a Georgia corporation
("Crossroads"), have entered into an Agreement and Plan of Merger dated as of
January 29, 1998 (the "Merger Agreement") (capitalized terms used but not
defined herein shall have the same meaning assigned to such terms in the Merger
Agreement), pursuant to which SNB proposes to acquire the entire equity interest
in Crossroads by means of a merger (the "Merger") of Crossroads with and into
SNB;
WHEREAS, Shareholder owns, as of the date hereof, shares of
Crossroads Common Stock (the "Existing Shares", together with any shares of
Crossroads Common Stock acquired after the date hereof and prior to the
termination hereof, hereinafter collectively referred to as the "Shares"); and
WHEREAS, SNB has entered into the Merger Agreement in reliance of
Shareholder's agreement to support the Merger, including the granting of
Shareholder's Irrevocable Proxy hereunder.
NOW, THEREFORE, with respect to the Merger Agreement and the
transactions contemplated thereby and in accordance with the GBCC, Shareholder
hereby irrevocably makes, constitutes and appoints SNB to act as Shareholder's
true and lawful proxy and attorney-in-fact in the name and on behalf of
Shareholder, solely for the limited purpose set forth herein, with full power to
appoint a substitute or substitutes solely for the limited purpose set forth
herein. Shareholder further directs SNB, and SNB hereby agrees, to vote all of
the Shares which are entitled to vote at any meeting of the shareholders of
Crossroads (whether annual or special and whether or not an adjourned meeting),
or by written consent in the place and stead of Shareholder, in favor of the
Merger and the Merger Agreement. SNB shall have no right to vote the shares with
respect to any other matter. By giving this proxy, Shareholder hereby revokes
any other proxy granted by Shareholder at any time with respect to the Shares,
and no subsequent proxies will be given with respect thereto by Shareholder. THE
PROXY GRANTED HEREBY IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE. The proxy
granted hereby shall not be terminated by any act of Shareholder or by operation
of law, by lack of appropriate power of authority, or by the occurrence of any
other event or events and shall be binding upon all beneficiaries, heirs at
law, legatees, distributees, successors, assigns and legal representatives of
Shareholder. Shareholder agrees to use all good faith efforts to cause any
record owner of the Shares of which Shareholder is the beneficial owner to
grant to SNB a proxy of the same effect as that contained herein. Shareholder
shall perform such further acts and execute such further documents as may be
required to vest in SNB the sole
<PAGE>
power to vote the Shares during the term of the proxy granted herein. The proxy
granted herein shall expire on the earlier of (i) the date on which SNB and
Shareholder mutually consent in writing to terminate this Irrevocable Proxy,
(ii) the date of the Closing, or (iii) the termination of the Merger Agreement
in accordance with the terms thereof. Notwithstanding anything herein to the
contrary, the proxy granted hereby and power herein conferred upon SNB (or any
substitute or substitutes) may not be exercised prior to the receipt by SNB and
Crossroads of the Consents of the Regulatory Authorities (as contemplated by the
Merger Agreement).
IN WITNESS WHEREOF, Shareholder has executed and delivered this
Irrevocable Proxy as of the date first set forth above.
----------------------------------
CULLEN TALTON
- -------------------------------
Witness
-2-
<PAGE>
<TABLE>
<CAPTION>
----------------------
SHARES OF COMMON STOCK
----------------------
<S> <C>
CERTIFICATE
===========
NO 3654 NUMBER SHARES
3654
SNB BANCSHARES, INC.
For Shares SNB MACON, GEORGIA SNB
Issued to Incorporated Under the Laws of the State of Georgia
_________________________________________
THIS CERTIFIES THAT______________________________________ is the
_________________________________________ registered holder of_____________________________________ Shares
_________________________________________ OF THE COMMON STOCK OF THE CORPORATION
transferable only on the books of the Corporation by the holder hereof in
Dated ______________________________ 19__ person or by Attorney upon surrender of this Certificate properly endorsed.
FROM WHOM TRANSFERRED IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be signed
by its duly authorized officers and its Corporate Seal to be hereunto affixed
this____________________day of _______________A.D. 19_______
_________________________________________
____________________________ ________________________
Dated ______________________________ 19__ Secretary President
NO. ORIGINAL NO. ORIGINAL NO. OF SHARES
CERTIFICATE SHARES TRANSFERRED
_________________________________________
Received CERTIFICATE NO._________________
For ______________________________ Shares
this___________day of____________19______
_________________________________________
_________________________________________
</TABLE>
<PAGE>
For Value Received,____________ hereby sell, assign and transfer
unto____________________________________________________________________________
_____________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint____________________________________________________ attorney to transfer
the said Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated__________________________ 19_______
<PAGE>
EXHIBIT 5.1
LEGAL OPINION OF MARTIN, SNOW, GRANT & NAPIER, LLP
<PAGE>
[LETTERHEAD OF MARTIN, SNOW, GRANT & NAPIER, LLP APPEARS HERE]
March 31, 1998
Board of Directors
Crossroads Bancshares, Inc.
1208 Washington Street
Perry, Georgia 31069
RE: SNB Bancshares, Inc.
Registration Statement on Form S-4
846,748 Shares of Common Stock (the "Registration Statement")
Ladies and Gentlemen:
We have acted as counsel for SNB Bancshares, Inc. (the "Company") in
connection with the proposed public offering of the shares of its Common Stock
covered by the above-described Registration Statement.
In connection therewith, we have examined the following:
(1) The Articles of Incorporation of the Company, certified by the
Secretary of State of the State of Georgia;
(2) The Bylaws of the Company, certified as complete and correct by the
Secretary of the Company;
(3) The minute book of the Company, certified as correct and complete by
the Secretary of the Company;
(4) Certificate of Good Standing with respect to the Company, issued by
the Georgia Secretary of State; and
(5) The Registration Statement (including exhibits thereto).
Based upon such examination and upon examination of such other instruments
and records as we have deemed necessary, we are of the opinion that:
<PAGE>
(A) SNB Bancshares, Inc. ("SNB") is a corporation duly organized, existing
and in good standing under the laws of the State of Georgia with
corporate power and authority (a) to conduct its business as described
in the Proxy Statement and (b) to own and use its Assets.
(B) SNB's authorized shares consist of 5,000,000 shares of Common Stock,
$1.00 par value per share, of which 2,297,331 shares were outstanding
as of March 31, 1998. The outstanding shares of SNB Common Stock have
been duly authorized and validly issued, were not issued in violation
of any statutory preemptive rights of shareholders, and are fully paid
and nonassessable. To our knowledge, except as previously disclosed,
there are no options, subscriptions, warrants, calls, rights or
commitments obligating SNB to issue equity securities or acquire its
equity securities. The shares of SNB Common Stock to be issued to the
shareholders of Crossroads upon consummation of the Merger have been
registered under the Securities Act of 1933, as amended, and when
issued in accordance with the Agreement, will be validly issued, fully
paid and nonassessable.
(C) The execution and delivery by SNB of the agreement do not, and if SNB
were now to perform its obligations under the Agreement such
performance would not, result in any violation of the Articles of
Incorporation or Bylaws of SNB or, to our knowledge, result in any
breach of, or default or acceleration under, any material Contract or
Order to which SNB is a party or by which SNB is bound.
(D) SNB has duly authorized the execution and delivery of the Agreement
and all performance by SNB thereunder and has duly executed and
delivered the Agreement.
(E) The Agreement is enforceable against SNB.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the Proxy Statement/Prospectus. In giving this consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Very truly yours,
MARTIN, SNOW, GRANT & NAPIER, LLP
/s/ John T. McGoldrick, Jr
------------------------------------
JOHN T. McGOLDRICK, JR.
<PAGE>
EXHIBIT 8.1
TAX OPINION OF MARTIN, SNOW, GRANT & NAPIER, LLP
<PAGE>
[LETTERHEAD APPEARS HERE]
March 31, 1998
Crossroads Bancshares, Inc.
1208 Washington Street
Perry, Georgia 31069
RE: AGREEMENT AND PLAN OF MERGER BY AND BETWEEN SNB
BANCSHARES, INC. AND CROSSROADS BANCSHARES, INC.
Gentlemen:
We have been requested as counsel for SNB Bancshares, Inc. ("SNB"), a
business corporation organized under the laws of Georgia, to render our opinion
expressed below in connection with the proposed merger (the "Merger") of
Crossroads Bancshares, Inc. ("Crossroads") with and into SNB Bancshares, Inc.
("SNB"), pursuant to the terms and conditions of that certain Agreement and Plan
of Merger (the "Merger Agreement") by and between SNB and Crossroads described
in that certain Registration Statement on Form S-4 to be filed by SNB (the
"Registration Statement"). Unless otherwise indicated, terms used herein shall
have the same meaning as defined in the Registration Statement.
In rendering our opinion, we have examined the Agreement, applicable law,
regulations, rulings and decisions. Our opinion is based upon our understanding
and belief that the facts set forth in the Registration Statement are true and
correct, and that the representations made in the Agreement are true and
correct.
Based on and in reliance on the foregoing, and provided that the Merger is
consummated in accordance with the Agreement, it is our opinion that:
(1) The Merger of Crossroads into SNB and the issuance of shares of
SNB Stock in connection therewith, as described in the
Acquisition Agreement and the Merger Agreement, will constitute a
tax-free reorganization under Section 368(a)(1)(A) of the
Internal Revenue Code of 1986, as amended.
<PAGE>
(2) No gain or loss will be recognized for Federal income tax
purposes by holders of Crossroads Stock upon the exchange of such
stock solely for SNB Stock as a result of the Merger.
(3) Gain or loss will be recognized pursuant to Section 302 of the
Code by holders of Crossroads Stock upon their receipt of cash in
lieu of fractional shares of SNB Stock and upon their exercise of
dissenters rights.
(4) No gain or loss will be recognized by Crossroads as a result of
the Merger.
(5) The aggregate tax basis of the SNB Stock received by shareholders
of Crossroads pursuant to the Merger will be the same as the
aggregate tax basis of the shares of Crossroads exchanged
therefor, less any portion of such tax basis allocated to shares
of Crossroads Stock for which cash is received in lieu of
fractional shares of SNB Stock.
(6) The holding period of the shares of SNB Stock received by the
shareholders of Crossroads will include the holding period of the
shares of Crossroads Stock exchanged therefor, provided that
Crossroads Stock is held as a capital asset on the date of the
consummation of the Merger.
This letter is solely for your information and use and, except to the
extent that such may be referred to in the Registration Statement, it is not to
be used, circulated, quoted, or referred to for any other purpose or relied upon
by any other person for whatever reason without our prior written consent.
We consent to the filing of this opinion as an exhibit to the Registration
Statement and to the reference to this firm under the caption "legal matters" in
the proxy statement/prospectus. In giving this consent, we do not thereby admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, or the rules and regulations of the
Securities and Exchange Commission thereunder.
Yours very truly,
MARTIN, SNOW, GRANT & NAPIER, LLP
BY:/s/ JOHN T. McGOLDRICK
------------------------------
JOHN T. McGOLDRICK, JR.
<PAGE>
EXHIBIT 11.1
STATEMENT OF PER SHARE EARNINGS
<PAGE>
Computation of Weighted Average Shares:
<TABLE>
<CAPTION>
1997 (A) (B)
# of Shares # of Days Shares x Days
Outstanding Outstanding (A) x (B)
----------- ----------- -------------
<S> <C> <C> <C>
2,068,546 13 26,891,098
2,077,923 27 56,103,921
2,105,681 183 385,339,623
2,107,841 79 166,519,439
2,119,931 41 86,917,171
2,123,531 22 46,717,682
--- -------------
(C) 365 768,488,934(D)
Basic weighted average SNB common shares outstanding
during the period (D) / (C) 2,105,449
SNB Common Shares issuable in connection with assumed
exercise of warrants and options under the
treasury stock method 356,410
-------------
Diluted weighted average SNB common shares outstanding
during the period 2,461,860
</TABLE>
<TABLE>
<CAPTION>
1996 (A) (B)
# of Shares # of Days Shares x Days
Outstanding Outstanding (A) x (B)
----------- ----------- -------------
<S> <C> <C> <C>
1,500,000 58 87,000,000
1,703,500 94 186,129,000
1,703,500 166 282,781,000
1,931,526 28 54,082,735
1,967,526 7 13,772,684
1,970,408 5 9,852,038
2,015,620 7 14,109,340
2,043,065 1 2,043,065
--- -------------
(C) 365 623,769,861(D)
Basic weighted average SNB common shares outstanding
during the period (D) / (C) 1,704,289
SNB Common Shares issuable in connection with assumed
exercise of warrants and options under the
treasury stock method 317,858
-------------
Diluted weighted average SNB common shares outstanding
during the period 2,022,147
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1995 (A) (B)
# of Shares # of Days Shares x Days
Outstanding Outstanding (A) x (B)
----------- ----------- -------------
<S> <C> <C> <C>
1,500,000 365 547,500,000
--- -------------
(C) 365 547,500,000(D)
Basic weighted average SNB common shares outstanding
during the period (D) / (C) 1,500,000
SNB Common Shares issuable in connection with assumed
exercise of warrants and options under the
treasury stock method 230,334
-------------
Diluted weighted average SNB common shares outstanding
during the period 1,730,334
</TABLE>
Computation of Earnings Per Share:
<TABLE>
<CAPTION>
Weighted Average Net Earnings
Shares Income Per Share
---------------- ---------- ---------
<S> <C> <C> <C>
1997
Basic 2,105,449 $1,802,936 $0.86
Diluted 2,461,860 1,802,936 0.73
1996
Basic 1,704,289 $1,642,274 $0.96
Diluted 2,022,147 1,642,274 0.81
1995
Basic 1,500,000 $1,390,795 $0.93
Diluted 1,730,334 1,390,795 0.80
</TABLE>
All share and per share data have been restated to reflect a 25% stock
split occurring September 25, 1997, a 100% stock split occurring on June 1, 1996
and a 20% stock split on March 20, 1995. All stock splits were effected in the
form of dividends.
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF SNB BANCSHARES, INC.
Security National Bank
<PAGE>
CONSENT OF McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated February 20, 1998, accompanying the
consolidated financial statements of Crossroads Bancshares, Inc. and subsidiary
and our report dated January 14, 1998 accompanying the consolidated financial
statements of SNB Bancshares, Inc. and subsidiary, all contained in this
Form S-4 Registration Statement and Prospectus and to the use of our name as it
appears under the caption "Experts."
McNAIR, McLEMORE, MIDDLEBROOKS & CO., LLP
BY: /s/ Ray C. Pearson
-------------------------------------
Ray C. Pearson
<PAGE>
PROXY CARD FOR SNB BANCSHARES, INC.
EXHIBIT 99.1
SNB BANCSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of the Annual
Meeting of Shareholders and Proxy Statement and does hereby appoint Ben G.
Porter, Benjamin W. Griffith, III and Alford C. Bridges and any of them with
full power of substitution, as proxies of the undersigned, to represent the
undersigned and to vote all shares of SNB BANCSHARES, INC. ("SNB") common stock
which the undersigned would be entitled to vote if personally present at the
Annual Meeting of Shareholders of SNB, to be held at the Macon Centreplex, 200
Coliseum Drive, Macon, Georgia 31201 at ______ o'clock __.m. local time, on June
______, 1998 and at any adjournment thereof.
Instead of voting separately as to each proposal, you may vote on all
proposals as a group. To vote on all of the proposals as a group, select one of
the following options:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
If you decide not to vote on the proposals as a group, please vote on each
of the following proposals separately. In the event you vote on the proposals
as a group and also vote separately, your vote for the separate proposals will
prevail to the extent of any conflict.
PROPOSAL I
Proposal to: approve the Agreement and Plan of Merger, dated January 29, 1998,
as amended on February 12, 1998 (the "Agreement"), between SNB and Crossroads
Bancshares, Inc. ("Crossroads") and to approve the merger (the "Merger")
pursuant to which Crossroads will be merged with and into SNB, and in which each
issued and outstanding share of Crossroads common stock will be converted into
the right to receive 2.9 shares of SNB common stock, subject to adjustment in
the event the shares of Crossroads outstanding on the effective date of the
Merger do not number 291,982.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
PROPOSAL II
Proposal to: Amend the Articles of Incorporation of SNB to increase the number
of authorized shares of the Company's common stock from 5,000,000 shares to
10,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
PROPOSAL III
(a) Proposal to: Amend the Articles of Incorporation of SNB to restructure its
Board of Directors by reducing the Board of Directors from five classes to three
classes, and by reducing the term of such directors from five years to three
years.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(b) Proposal to: In the event Proposal III(a) is approved, to elect two (2)
Class I directors to serve for an initial one-year term expiring at the annual
meeting in the year 1999 or until their successors are duly elected and
qualified; to elect three (3) Class II directors to serve for a two-year term
expiring at the annual meeting in 2000, or until their successors are duly
elected and qualified; and to elect three (3) Class III directors to serve for
an initial three-year term expiring at the annual meeting in 2001, or until
their successors are duly elected and qualified.
____________________ ____________________
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the to vote for all nominees
contrary below) listed below.
NOMINEES:
ALFORD C. BRIDGES (CLASS I)
JOE E. TIMBERLAKE, III (CLASS I)
RICHARD W. WHITE, JR. (CLASS II)
ROBERT C. HAM (CLASS II)
ROBERT T. MULLIS (CLASS II)
BENJAMIN W. GRIFFITH, III (CLASS III)
BEN G. PORTER (CLASS III)
H. AVERETT WALKER (CLASS III)
INSTRUCTIONS: TO WITHHOLD YOUR VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST ABOVE.
PROPOSAL IV
Proposal to: Ratify the appointment of McNair, McLemore, Middlebrooks & Co., LLP
as independent accountants of SNB for the year ended December 31, 1998.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
<PAGE>
In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment(s). This
Proxy may be revoked at any time prior to voting hereof.
This proxy, when properly executed, duly returned and not revoked will be
voted. It will be voted in accordance with the directions given by the
undersigned shareholder. If no direction is made, it will be voted in favor of
the Proposals listed on this Proxy.
Signature(s)
_____________________________________________
_____________________________________________
_____________________________________________
Dated: ________________________, 1998
NOTE: Joint owners should each sign. When
signing as attorney, executor, administrator,
trustee or guardian, please give full title
as such. If the signatory is a corporation,
sign the full corporate name by a duly
authorized officer.
<PAGE>
PROXY CARD FOR CROSSROADS BANCHARES, INC.
EXHIBIT 99.2
CROSSROADS BANCSHARES, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby acknowledges receipt of the Notice of the Special
Meeting of Shareholders and Proxy Statement and does hereby appoint Cullen
Talton and William D. Watson and either of them with full power of substitution,
as proxies of the undersigned to represent the undersigned and to vote all
shares of CROSSROADS BANCSHARES, INC. ("Crossroads") common stock which the
undersigned would be entitled to vote if personally present at the Special
Meeting of Shareholders of Crossroads, to be held at the executive offices of
Crossroads, 1208 Washington Street, Perry, Georgia 31069, at _________ o'clock
__.m. local time, on June _____, 1998 and at any adjournment thereof.
PROPOSAL
Proposal to: approve the Agreement and Plan of Merger dated January 29, 1998,
as amended on February 12, 1998 (the "Agreement"), between SNB Bancshares, Inc.
("SNB") and Crossroads and to approve the merger (the "Merger") pursuant to
which Crossroads will be merged with and into SNB, and in which each issued and
outstanding share of Crossroads common stock will be converted into the right to
receive 2.9 shares of SNB common stock, subject to adjustment in the event the
shares of Crossroads outstanding on the effective date of the Merger do not
number 291,982.
[_] FOR [_] AGAINST [_]ABSTAIN
In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment(s). This
Proxy may be revoked at any time prior to voting hereof.
This proxy, when properly executed, duly returned and not revoked will be
voted. It will be voted in accordance with the directions given by the
undersigned shareholder. If no direction is made, it will be voted in favor of
the Proposal listed on this Proxy.
Signature(s)
___________________________________________
___________________________________________
Dated: ________________________, 1998
NOTE: Joint owners should each sign. When
signing as attorney, executor,
administrator, trustee or guardian, please
give full title as such. If the signatory
is a corporation, sign the full corporate
name by a duly authorized officer.
