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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: September 30, 1996
Alabama National BanCorporation
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(Exact Name of Registrant as Specified in its Charter)
Delaware
-------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-25160 63-1114426
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(Commission File Number) I.R.S. Employer Identification No.
1927 First Avenue North
Birmingham, Alabama 35203
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(Address of Principal Executive Offices)
(205) 583-3600
--------------------------------
(Registrant's Telephone Number, Including Area Code)
Page 1 of 190 Pages
Index to Exhibits
on Page 7
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Effective September 30, 1996 ("Effective Date") upon the filing of a
Certificate of Merger with the Delaware Secretary of State and the filing of
Articles of Merger with the Alabama Secretary of State, FIRSTBANC Holding
Company, Inc., an Alabama bank holding company with approximately $35 million
in total assets ("FIRSTBANC") was merged with and into Alabama National
BanCorporation ("ANB") pursuant to that certain Agreement and Plan of Merger
dated as of June 10, 1996 ("Merger Agreement"), resulting in (i) the
stockholders of FIRSTBANC becoming stockholders of ANB and (ii) ANB becoming
the sole stockholder of FIRSTBANC's wholly-owned subsidiary, First Bank of
Baldwin County, a state nonmember bank ("FBBC"). The financial statements of
ANB and FIRSTBANC as well as pro forma combined financial statements of ANB and
FIRSTBANC are included in the FIRSTBANC Proxy Statement and ANB Offering
Memorandum and have been incorporated into this report by reference. See Item
7 below.
The Merger Agreement generally provided, among other things, for the
merger of FIRSTBANC with and into ANB ("Merger"), pursuant to which each share
of the 42,782 shares of FIRSTBANC common stock was converted into the right to
receive 7.12917 shares of ANB Common Stock or a total of 305,000 shares of ANB
Common Stock.
The Merger Agreement was approved by the Federal Reserve Board on
August 21, 1996. On August 28, 1996, FIRSTBANC mailed to each of its
stockholders the FIRSTBANC Proxy Statement and ANB Offering Memorandum ("Proxy
Statement and Offering Memorandum") describing the Merger and the Merger
Agreement and soliciting proxies from FIRSTBANC's stockholders to vote on the
Merger Agreement. No proxies were solicited from ANB's stockholders as the
Delaware General Corporation Act did not require ANB to obtain the approval of
its stockholders for the Merger since the number of shares of ANB Common Stock
to be issued pursuant to the Merger does not exceed 20% of the currently issued
and outstanding shares of ANB Common Stock. The stockholders of FIRSTBANC
approved the Merger Agreement at their special stockholders' meeting held on
September 19, 1996.
ANB relied on the exemptions from registration provided by Section
3(b) and Section 4(2) of the Securities Act of 1933 and Regulation D
promulgated thereunder in the issuance of the shares in the Merger.
Accordingly, each holder of FIRSTBANC common stock will not be able to sell or
otherwise transfer the ANB Common Stock received in the Merger unless the
shares are transferred in a transaction that complies with the registration
requirements of the federal and state securities laws or is exempt from such
registration requirements. Further, each of the officers and directors of
FIRSTBANC may be an affiliate of FIRSTBANC under Rule 145 under the Securities
Act of 1933 and the ANB Common Stock issued pursuant to the Merger are
"restricted securities" as such term is defined in Rule 144 under the
Securities Act of 1933.
The Merger Agreement, however, provides that ANB shall register the
ANB Common Stock issued pursuant to the Merger as soon as practicable after the
filing of ANB's first Quarterly
2
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Report on Form 10-Q filed after the Merger or the first publication of earnings
of ANB that includes not less than 30 days of combined operations of ANB and
FIRSTBANC.
ANB Common Stock is currently traded on the NASDAQ/NMS under the
trading symbol "ALAB".
The terms of the Merger Agreement and a description of the ANB Common
Stock to be issued are described on pages 3-23 of the Proxy Statement and
Offering Memorandum and a copy of the Merger Agreement is included as Exhibit A
to the Proxy Statement and Offering Memorandum, all of which are incorporated
by reference pursuant to Rule 12b-23 of the SEC.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS Page
(a) Financial Statements of businesses acquired *
The following financial statements are included in the Proxy Statement and
Offering Memorandum and are incorporated herein by this reference pursuant to
Rule 12b-23 of the SEC.
FIRSTBANC HOLDING COMPANY, INC.
Unaudited Interim Condensed Consolidated Financial Statements at June
30, 1996, and for the six months ended June 30, 1995 and 1994:
Interim Condensed Consolidated Balance Sheet at June 30, 1996
Interim Condensed Consolidated Statements of Income for the
Six Months Ended June 30, 1996 and 1995
Interim Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1995 and 1996
Notes to Interim Condensed Consolidated Financial Statements
Consolidated Financial Statements at December 31, 1995 and 1994, and
for the two years then ended:
Report of S.W. Chiepalich, Independent Auditor
Consolidated Balance Sheets at December 31, 1995 and 1994
3
<PAGE> 4
Consolidated Statements of Income for the years ended December
31, 1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994
Notes to Consolidated Financial Statements
ALABAMA NATIONAL BANCORPORATION
The following financial statements have been incorporated by reference
from the Quarterly Report on Form 10-Q of Alabama National BanCorporation which
accompanies this Proxy Statement:
Unaudited Consolidated Financial Statements of Alabama National
BanCorporation and Subsidiaries at December 31, 1995 and June 30,
1996, and for the three months ended June 30, 1995 and 1996 and for
the six months ended June 30, 1995 and 1996
Consolidated Statement of Condition (Unaudited) at June 30,
1996 and December 31, 1995
Consolidated Statements of Income (Unaudited) for the three
months ended June 30, 1996 and 1995
Consolidated Statements of Income (Unaudited) for the six
months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flow (Unaudited) for the six
months ended June 30, 1996 and 1995
Notes to the Unaudited Consolidated Financial Statements
The following financial statements have been incorporated by reference
from the Annual Report on Form 10-K of Alabama National BanCorporation which
accompanies this Proxy Statement:
Consolidated Financial Statements of Alabama National BanCorporation
and Subsidiaries at December 31, 1995 and 1994 and for the three years
ended December 31, 1995
4
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Report of Ernst & Young, LLP, Independent Auditors
Report of Coopers & Lybrand L.L.P., Independent Accountants
Consolidated Statements of Condition at December 31, 1995 and
1994
Consolidated Statements of Income for the years ended December
31, 1995, 1994 and 1993
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
(b) The following ProForma Financial Statements are included in
the Proxy Statement and Offering Memorandum at pages indicated below and are
incorporated by reference pursuant to Rule 12b-23 of the SEC.
ProForma Selected Consolidated Financial Data for the years ended
December 31, 1995, 1994 and 1993 and the six months ended June 30,
1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . xi-xii
Unaudited Pro Forma Combined Condensed Statement of Income for the
years ended December 31, 1995, 1994 and 1993 and the six months ended
June 30, 1996 and 1995 . . . . . . . . . . . . . . . . . xiii-xvi
Alabama National BanCorporation and Subsidiaries Condensed ProForma
Combined Financial Information (Unaudited)
Unaudited ProForma Combined Condensed Statement of Condition
as of June 30, 1996 . . . . . . . . . . . . . . . . . . 65
Unaudited ProForma Combined Condensed Statement of Income for
the six months ended June 30, 1996 and for the years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . 66-69
5
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ProForma Comparative Per Share Data . . . . . . . . . . 70
Supplementary Unaudited ProForma Financial Information
ProForma Average Balances, Income and Expenses and
Rates . . . . . . . . . . . . . . . . . . . . . . . 32-33
ProForma Analysis of Changes in Net Interest Income . . 36
ProForma Interest Sensitivity Analysis . . . . . . . 39-40
ProForma Allowance for Loan Losses . . . . . . . . . 43-44
ProForma NonPerforming Assets . . . . . . . . . . . 46-47
ProForma NonInterest Income . . . . . . . . . . . . . . 48
ProForma NonInterest Expense . . . . . . . . . . . . 49-50
ProForma Composition of Loan Portfolio . . . . . . . 51-52
ProForma Investment Securities and ProForma
Available for Sale of Securities . . . . . . . . . . 54-55
ProForma Investment Securities Maturity
Distribution and Yields and ProForma Securities
Available for Sale Maturity Distribution and
Yields . . . . . . . . . . . . . . . . . . . . . . . .56-57
ProForma Deposits . . . . . . . . . . . . . . . . . . . 58
6
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(c) Exhibit
(2) Agreement and Plan of Merger by and between FIRSTBANC
and ANB dated as of June 10, 1996, included as
Exhibit A to the Proxy Statement and Offering
Memorandum and incorporated herein pursuant to Rule
12b-32 of the SEC.
(20) Proxy Statement and Offering Memorandum of ANB.
*All page references to financial statements are in reference to their location
in the Proxy Statement and Offering Memorandum of ANB which is found on page 9
of this Report.
[SIGNATURE ON NEXT PAGE]
7
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ALABAMA NATIONAL BANCORPORATION
Date: October 8, 1996 By: /s/ John H. Holcomb, III
--------------------------
John H. Holcomb, III
Chairman of the Board and
Chief Executive Officer
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EXHIBIT 20
FIRSTBANC HOLDING COMPANY, INC.
P. O. Box 769
Robertsdale, Alabama 36567
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
to be held September 19, 1996
To our Stockholders:
A Special Meeting of Stockholders (the "Special Meeting") of FIRSTBANC
Holding Company, Inc. ("FIRSTBANC") will be held at 10:00 a.m. local time on
September 19, 1996, at 22516 Milwaukee Street, Robertsdale, Alabama 36567 for
the following purposes:
1. To consider and act upon a proposal to approve an Agreement and Plan of
Merger between Alabama National BanCorporation ("ANB") and FIRSTBANC dated
as of June 10, 1996 (the "Merger Agreement"). The Merger Agreement
provides for, among other things, the merger of FIRSTBANC with and into ANB
(the "Merger") pursuant to which each share of FIRSTBANC Class A voting
common stock will be converted into the right to receive 7.12917 shares of
ANB common stock. A copy of the Merger Agreement is attached as Exhibit A
to the accompanying Joint Proxy Statement-Prospectus.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
The Board of Directors of FIRSTBANC has set August 23, 1996 as the record
date for the Special Meeting. Only holders of record of shares of FIRSTBANC's
Class A voting common stock at the close of business on the record date will be
entitled to notice of and to vote at the Special Meeting. The stock transfer
books will not be closed.
The Special Meeting may be adjourned from time to time without notice other
than announcement at the meeting or adjournments thereof and any business for
which notice is hereby given may be transacted at any such adjournment.
Details concerning those matters to come before the Special Meeting are
provided in the accompanying Joint Proxy Statement-Prospectus.
By order of the Board of Directors
Secretary
August 28, 1996
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EXHIBIT 20
FIRSTBANC HOLDING COMPANY, INC.
PROXY STATEMENT
----------------------
ALABAMA NATIONAL BANCORPORATION
OFFERING MEMORANDUM
This Proxy Statement-Offering Memorandum ("Proxy Statement") is being
furnished to stockholders of FIRSTBANC Holding Company, Inc. ("FIRSTBANC") in
connection with the solicitation of proxies by the Board of Directors of
FIRSTBANC for use at a Special Meeting of the stockholders of FIRSTBANC to be
held on September 19, 1996, including any adjournments or postponements of the
meeting. At the meeting or any adjournments or postponements thereof the
stockholders of FIRSTBANC will be asked to consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger among FIRSTBANC and Alabama
National BanCorporation ("ANB") dated as of June 10, 1996 (the "Merger
Agreement"). Pursuant to the Merger Agreement FIRSTBANC will be merged with
and into ANB (the "Merger") with ANB surviving the Merger. Upon consummation
of the Merger each share of Class A voting common stock of FIRSTBANC, par value
$0.10 per share ("FIRSTBANC Common Stock"), will be converted into the right to
receive 7.12917 shares of common stock of ANB, par value $1.00 per share ("ANB
Common Stock"). At August 23, 1996, the closing price of a share of ANB Common
Stock on the NASDAQ National Market System was $14.00 per share. The shares of
common stock of FIRSTBANC are not publicly traded. See "THE MERGER" and
"COMPARATIVE MARKET PRICES AND DIVIDENDS."
This Proxy Statement also serves as an Offering Memorandum for ANB for the
issuance of up to 305,000 shares of ANB Common Stock pursuant to the Merger
Agreement. This Proxy Statement and other enclosed documents are first being
mailed to the stockholders of FIRSTBANC on or about August 28, 1996.
SEE "SPECIAL CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY THE STOCKHOLDERS OF FIRSTBANC IN CONNECTION WITH THEIR
CONSIDERATION OF THE MERGER.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF CERTAIN STATES AND
ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND SUCH LAWS. THE SHARES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY
OR ADEQUACY OF THIS OFFERING CIRCULAR. ANY REPRESENTATION TO THE CONTRARY IS
UNLAWFUL.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE FROM DOCUMENTS WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING
EXHIBITS THERETO, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY
REFERENCE INTO THE INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED TO ANY
PERSON, INCLUDING ANY BENEFICIAL OWNER OF FIRSTBANC'S COMMON STOCK, RECEIVING A
COPY OF THIS PROXY STATEMENT, WITHOUT CHARGE, UPON WRITTEN OR ORAL REQUEST AND
BY FIRST CLASS MAIL OR OTHER EQUALLY PROMPT MEANS WITHIN ONE BUSINESS DAY OF
RECEIPT OF SUCH REQUEST. SUCH REQUEST SHOULD BE DIRECTED TO ALABAMA NATIONAL
BANCORPORATION, 1927 FIRST AVENUE NORTH, BIRMINGHAM, ALABAMA 35203, ATTENTION:
FRANK W. WHITEHEAD, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER;
TELEPHONE (205) 583-3600. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS
IN ADVANCE OF THE SPECIAL MEETING OF STOCKHOLDERS TO WHICH THIS PROXY STATEMENT
RELATES, ANY REQUEST SHOULD BE MADE BY SEPTEMBER 12, 1996.
The date of this Proxy Statement is August 28, 1996.
ii
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AVAILABLE INFORMATION
Under the rules and regulations of the Securities and Exchange Commission
(the "SEC") a solicitation of the stockholders of FIRSTBANC to approve the
Merger Agreement constitutes an offering of the Common Stock of ANB to be
issued in connection with the Merger Agreement. This Proxy Statement
constitutes an Offering Memorandum of ANB with respect to such Common Stock.
ANB is subject to the information requirements of the Securities Exchange
Act of 1934 as amended (the "Exchange Act") and in accordance therewith has
filed reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). The reports, proxy statements and other
information filed by ANB pursuant to the information requirements of the
Exchange Act can be inspected and copied at the public reference facility
maintained by the SEC at 450 Fifth Street NW, Washington D.C. 20549 and at the
following regional offices of the SEC: New York Regional Office, 7 World Trade
Center, Suite 1300, New York, New York 10048; Los Angeles Regional Office,
5670 Wilshire Boulevard, 11th Floor, Los Angeles, California 90036-3648; and
Atlanta Regional Office, 3475 Lenox Road NE, Suite 1000, Atlanta, Georgia
30326-1232. Copies of such material can also be obtained from the Public
Reference Section of the Commission, 450 Fifth Street NW, Washington, D.C.
20549 at prescribed rates.
ALL INFORMATION CONTAINED IN THIS PROXY STATEMENT WITH RESPECT TO ANB AND
ITS SUBSIDIARIES WAS SUPPLIED BY ANB AND ALL INFORMATION WITH RESPECT TO
FIRSTBANC AND ITS SUBSIDIARIES WAS SUPPLIED BY FIRSTBANC.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT AND IF GIVEN OR MADE SUCH
INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES OFFERED BY THIS PROXY
STATEMENT OR THE SOLICITATION OF A PROXY TO OR FROM ANY PERSON IN ANY
JURISDICTION WHERE IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN
OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT NOR
ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS PROXY STATEMENT SHALL UNDER
ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF ANB OR FIRSTBANC SINCE THE DATE OF THIS PROXY STATEMENT.
INCORPORATION OF DOCUMENTS BY REFERENCE
This Proxy Statement is accompanied by and incorporates by reference the
following documents previously filed by ANB with the SEC pursuant to the
Exchange Act: (1) ANB's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (without exhibits); and (2) ANB's Quarterly Report on Form
10-Q for the fiscal quarter ended June 30, 1996. This Proxy Statement also
incorporates by reference ANB's Definitive Proxy Statement in connection with
ANB's 1996 Annual Meeting of Stockholders; Current Report on Form 8-K dated
April 25, 1996, as amended July 10, 1996; and ANB's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996.
All documents subsequently filed by ANB pursuant to Sections 13(a), 14 or
15(d) of the Exchange Act prior to the Special Meeting of FIRSTBANC's
stockholders referred to herein shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing thereof. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this Proxy
Statement to the extent that a statement contained herein, or in any other
subsequently filed document that also is or is deemed to be incorporated by
reference herein, modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Proxy Statement.
iii
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TABLE OF CONTENTS
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Page No.
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AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
INCORPORATION OF DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iii
SUMMARY OF PROXY STATEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . vi
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi
SPECIAL CONSIDERATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
Determination of Terms and Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
Restrictions on Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
Growth Through Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xvii
Supervision and Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii
Monetary Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii
Reserve for Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii
Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xviii
Interests of Certain Persons in the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
Restrictions on Resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Alabama National BanCorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
FIRSTBANC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Time and Purpose of the Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Record Date; Voting Rights and Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Solicitation of Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Background of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Approval and Recommendation of the Boards of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Terms of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Exchange of Stock Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Effect on Employee Benefit and Stock Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Interests of Certain Persons in the Transaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Restrictions on Resale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Management of ANB After the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
CERTAIN PROVISIONS OF THE MERGER AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Additional Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Registration Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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<TABLE>
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Failure to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Conditions to the Consummation of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Amendment and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
COMPARATIVE MARKET PRICES AND DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
DESCRIPTION OF ANB CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Certain Anti-Takeover Effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Comparison of Stockholder Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Transfer Agent and Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
FIRSTBANC SELECTED CONSOLIDATED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED) . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
COMPARATIVE PER SHARE DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
BUSINESS OF FIRSTBANC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Lending Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Executive Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
APPRAISAL RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
INDEX TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
EXHIBIT A - MERGER AGREEMENT
EXHIBIT B - APPRAISAL STATUTE
</TABLE>
v
<PAGE> 6
SUMMARY OF PROXY STATEMENT
The following is a summary of certain information contained in this Proxy
Statement. Reference is made to, and this summary is qualified in its entirety
by, the more detailed information contained or incorporated by reference in
this Proxy Statement and the exhibits hereto. Shareholders of FIRSTBANC are
urged to read this Proxy Statement and the exhibits and in particular the
section entitled "SPECIAL CONSIDERATIONS," in their entirety.
THE SPECIAL MEETING ............................. A special meeting of the
Shareholders of FIRSTBANC
Holding Company, Inc.
("FIRSTBANC") will be held at
22516 Milwaukee Street,
Robertsdale, Alabama 35567 on
Thursday, September 19, 1996,
at 10:00 a.m. local time (the
"Special Meeting"). At the
Special Meeting, holders of
the Class A voting common
stock of FIRSTBANC, par value
$0.10 per share ("FIRSTBANC
Common Stock") will consider
and vote upon the approval and
adoption of the Agreement and
Plan of Merger attached as
Exhibit A to this Proxy
Statement (the "Merger
Agreement") providing for the
merger of FIRSTBANC with and
into Alabama National
BanCorporation ("ANB"). The
Shareholders may consider and
vote upon any other matter
that may properly come before
the meeting. See
"INTRODUCTION - TIME AND
PURPOSE OF THE MEETING."
Record Date andVotes Required ................... The record date for the
Special Meeting is August 23,
1996. Approval of the merger
of FIRSTBANC into ANB as
contemplated by the Merger
Agreement (the "Merger") will
require the affirmative vote
of the record holders of
two-thirds (2/3) of the
outstanding shares of
FIRSTBANC Common Stock. As of
the date of this Proxy
Statement, directors and
persons who beneficially own
more than ten percent (10%) of
the outstanding FIRSTBANC
Common Stock owned
beneficially more than ninety
percent (90%) of the shares of
FIRSTBANC Common Stock issued
and outstanding. Such persons
have indicated they will vote
their shares of FIRSTBANC
Common Stock in favor of the
proposal to approve the
Merger. If each of these
shares of FIRSTBANC Common
Stock is in fact voted in
favor of the Merger, the
approval of the Shareholders
of FIRSTBANC is assured. See
"INTRODUCTION - RECORD DATE;
VOTING RIGHTS AND VOTES
REQUIRED."
THE MERGER
Effect of the Merger ............................ At the effective time of the
Merger (the "Effective Time")
each outstanding share of
FIRSTBANC Common Stock
(excluding any shares held by
persons who properly perfect
their appraisal rights) will
be converted into the right to
receive 7.12917 shares of
common stock of ANB, par value
$1.00 per share ("ANB Common
Stock"), or a total of 305,000
shares of ANB Common Stock.
See "THE MERGER - TERMS OF THE
MERGER."
vi
<PAGE> 7
Recommendation of the Board of Directors of
FIRSTBANC and Reasons for the Merger ............ The Board of Directors of
FIRSTBANC believe that the
terms of the Merger are fair
to, and in the best interest
of, the shareholders of
FIRSTBANC and have unanimously
approved the Merger Agreement.
ANB is a bank holding company
with six community banks
located principally in
non-metropolitan areas in
southern and central Alabama,
including Gulf Bank, which is
located in the southern
portion of Baldwin County,
Alabama. The Board of
Directors of FIRSTBANC
understand that ANB intends to
continue to operate FIRSTBANC
and Gulf Bank as community
banks. The Board of Directors
believes that FIRSTBANC
together with Gulf Bank can
develop a larger market share
in Baldwin County, Alabama,
and can more effectively
compete with other banks from
that area for larger customers
and loans. See "BACKGROUND OF
THE MERGER" and "APPROVAL AND
RECOMMENDATION OF THE BOARDS
OF DIRECTORS" under "THE
MERGER."
Conditions to the Merger; Termination .......... The obligations of ANB
and FIRSTBANC to consummate
the Merger are subject to
various conditions, including
without limitation, obtaining
requisite approval of the
shareholders of FIRSTBANC,
obtaining regulatory
approvals, receipt of
opinions of FIRSTBANC's
attorneys and ANB's
accountants in respect of
certain federal income tax
consequences of the Merger,
and receipt of an opinion of
ANB's accountants to the
effect that the Merger
qualifies for
"pooling-of-interests"
accounting treatment. The
obligations of ANB are
further conditioned on
FIRSTBANC's subsidiary, First
Bank of Baldwin County,
having a minimum net worth of
at least $2,745,382
immediately prior to the
Effective Time of the Merger
and to the redemption of all
of FIRSTBANC's outstanding
preferred stock prior to the
Effective Time of the Merger
at a price not exceeding
$55,010. See "CERTAIN
PROVISIONS OF THE MERGER
AGREEMENT - CONDITIONS TO
CONSUMMATION." The Merger
Agreement may be terminated
at any time prior to the
Effective Time (i) by mutual
consent of ANB and FIRSTBANC,
or by either party if the
Board of Governors of the
Federal Reserve System (the
"FRB") shall have denied
approval of the Merger , or
if any other governmental
entity shall have prohibited
the consummation of the
Merger; (ii) the Merger shall
not have been consummated on
or before December 31, 1996;
or (iii) the Merger does not
obtain the requisite approval
of the Shareholders of
FIRSTBANC. ANB may also
terminate the Merger
Agreement if the holders of
in excess of five percent
(5%) of the outstanding
FIRSTBANC Common Stock
properly assert their
appraisal rights and
FIRSTBANC may terminate the
Merger to the extent that a
majority of the disinterested
members of the Board of
Directors determine to enter
into an agreement with
respect to a superior
acquisition proposal
(provided that FIRSTBANC pay
ANB a termination fee equal
vii
<PAGE> 8
to $200,000). See "CERTAIN
PROVISIONS OF THE MERGER
AGREEMENT - TERMINATION."
Regulatory Approvals Required ................... The Merger is subject to
prior approval of the FRB and
the banking authorities of
the State of Alabama. See
"THE MERGER - REGULATORY
APPROVALS."
Federal Income Tax Consequences ................. The Merger is intended
to be a tax free
reorganization so that no
gain or loss would be
recognized by ANB or
FIRSTBANC, and no gain or
loss would be recognized by
the FIRSTBANC shareholders,
except in respect of cash
received for fractional
shares and except for
shareholders exercising
appraisal rights who receive
cash payments. The
consummation of the Merger is
conditioned upon there being
delivered opinions of
FIRSTBANC's counsel dated as
of the closing date to the
effect that the Merger will
constitute a reorganization
within the meaning of 368(a)
of the Internal Revenue Code
of 1986, as amended (the
"Code"). See "THE MERGER -
CERTAIN FEDERAL INCOME TAX
CONSEQUENCES."
Anticipated Accounting Treatment ................ The Merger is expected
to qualify as a
pooling-of-interests for
accounting and financial
reporting purposes. The
receipt of a letter from the
accountants of ANB,
confirming that the Merger
will qualify for
pooling-of-interests
accounting is a condition to
consummation of the Merger.
See "THE MERGER - ACCOUNTING
TREATMENT."
Appraisal Rights ............................... Under Article 13 of the
Alabama Business Corporation
Act (the "Appraisal Statute")
which is presented in its
entirety as Exhibit B to this
Proxy Statement, holders of
FIRSTBANC Common Stock are
entitled to appraisal rights
in connection with the
Merger. A shareholder who
properly exercises his or her
appraisal rights is entitled
to the value of his or her
shares immediately before the
Effective Time of the Merger
(excluding any appreciation
or depreciation in
anticipation of the Merger
unless such inclusion would
be inequitable) plus interest
from the Effective Time at
the average rate paid by
FIRSTBANC on its principal
bank loans. Any demand for
appraisal rights with respect
to the FIRSTBANC Common Stock
must be made and delivered to
FIRSTBANC by the record
holder or the beneficial
holder (as defined in the
Appraisal Statute) prior to
the vote by the holders of
the FIRSTBANC Common Stock on
the Merger at the Special
Meeting. Failure to take any
of the steps required under
the Appraisal Statute on a
timely basis may result in
the loss of appraisal rights.
See "APPRAISAL RIGHTS."
Under Section 262 of the
Delaware General Corporation
Law, holders of ANB Common
Stock are not entitled to
appraisal rights in connection
with the Merger by reason of
the fact that the ANB Common
Stock is listed for trading on
the NASDAQ National Market
System. Accordingly, the only
available
viii
<PAGE> 9
remedy for holders of ANB
Common Stock who desire to
dissent from the terms of the
Merger is to sell their shares
of ANB Common Stock in the
public market.
MARKET PRICE AND DIVIDEND DATA .................. ANB Common Stock has been
listed for trading on the
NASDAQ National Market System
since its initial public
offering on November 11, 1994.
On February 23, 1995, the ANB
board authorized its initial
cash dividend at the rate of
$.20 annually to be paid in
quarterly installments of $.05
each. The quarterly dividends
have been paid at this rate
through the third quarter of
1996. On August 23, 1996, the
Board of Directors of ANB
increased the quarterly cash
dividend to $.09 per share,
payable on October 3, 1996 to
shareholders of record on
September 14, 1996. The high
and low prices of ANB Common
Stock for 1995 and the first
two quarters of 1996 range
from $8 1/4 to $14 3/4 in
1995, and from $12 to $14 1/4
in the first two quarters of
1996. The FIRSTBANC Common
Stock is not publicly traded
and it is not likely that a
public market will develop for
such stock. FIRSTBANC has not
declared any dividends on the
FIRSTBANC Common Stock. See
"COMPARATIVE MARKET PRICES AND
DIVIDENDS."
RESTRICTIONS ON RESALES OF
ANB COMMON STOCK ................................ The shares of ANB Common
Stock to be issued in the
Merger to the holders of the
FIRSTBANC Common Stock will
not be registered under the
Securities Act of 1933 or any
state securities laws.
Accordingly, the shares of
ANB Common Stock received by
the former holders of
FIRSTBANC Common Stock will
be "restricted securities"
under the Securities Act of
1933 and may not be sold or
disposed of for value for a
period of at least two years
after the Effective Time of
the Merger. On the
expiration of said two year
period, the shares of ANB
Common Stock may be sold
under certain restrictions
under Rule 144 and Rule 145
of the SEC. Generally these
restrictions limit the number
of shares that can be sold in
any three month period and
the type of transaction in
which the shares can be sold.
Stock transfer instructions
will be given by ANB to its
transfer agent with respect
to the ANB Common Stock to be
received by the former
holders of FIRSTBANC Common
Stock and an appropriate
legend will be placed on the
certificates for such stock.
ANB has agreed, however, to
register the ANB Common Stock
issued in the Merger so that
it can be sold in open market
transactions prior to the
expiration of the two year
holding period and free of
the restrictions of Rule 144
and Rule 145 of the SEC. See
"SPECIAL CONSIDERATIONS -
RESTRICTIONS ON RESALE,"
"DESCRIPTION OF ANB CAPITAL
STOCK - RESTRICTIONS ON
RESALE," and "CERTAIN
PROVISIONS OF THE MERGER
AGREEMENT - REGISTRATION
COVENANTS."
ix
<PAGE> 10
MANAGEMENT OF ANB AFTER THE MERGER ........... Current directors and
officers of ANB will continue
as directors and officers of
ANB. William D. Montgomery,
Chairman of the Board and a
director of FIRSTBANC, will
be added to the Board of
Directors of ANB.
x
<PAGE> 11
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
The following unaudited pro forma selected consolidated financial data for
the years ended December 31, 1995, 1994 and 1993 and for the six months ended
June 30, 1996 and 1995 are derived from the consolidated financial statements
and other data of ANB and FIRSTBANC giving effect to the proposed Merger.
Consistent with the pooling-of-interests method of accounting, the operations
of FIRSTBANC are included for all periods presented. The pro forma selected
consolidated data should be read in conjunction with the consolidated financial
statements of ANB and FIRSTBANC, including the accompanying notes, included
elsewhere herein. All share and per share data has been adjusted to reflect
the shares to be issued in connection with the Merger with FIRSTBANC. The pro
forma information provided is not necessarily indicative of the actual results
of operations that would have occurred had the combination been effected
January 1, 1993, and are not necessarily indicative of future operations. See
"INDEX TO FINANCIAL STATEMENTS" and "INCORPORATION OF DOCUMENTS BY REFERENCE."
xi
<PAGE> 12
PRO FORMA THREE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
(AMOUNTS IN THOUSANDS, EXCEPT SHARES, RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended
Year Ended December 31, June 30,
--------------------------------------- ----------------------
1993 1994 1995 1995 1996
-------- -------- --------- -------- --------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income ............................................ $ 25,074 $ 29,344 $ 37,967 $ 17,690 $ 32,327
Interest expense ........................................... 10,072 12,093 19,172 8,718 15,334
-------- -------- -------- -------- --------
Net interest income ........................................ 15,002 17,251 18,795 8,972 16,993
Provision for loan losses (benefit of recoveries) .......... (520) 1,279 409 8 209
-------- -------- -------- -------- --------
Net interest income after provision for loan losses
(benefit of recoveries) .................................. 15,522 15,972 18,386 8,964 16,784
Net securities gains (losses) .............................. 85 (17) 3 - 34
Noninterest income ......................................... 5,601 4,542 7,739 2,408 8,085
Noninterest expense ........................................ 15,845 14,247 20,898 8,044 18,145
-------- -------- -------- -------- --------
Income before income taxes ................................. 5,363 6,250 5,230 3,328 6,758
Provision for income taxes ................................. 260 275 354 201 2,391
-------- -------- -------- -------- --------
Income before minority interest in earnings of
consolidated subsidiary .................................. 5,103 5,975 4,876 3,127 4,367
Minority interest in earnings of consolidated
subsidiary ............................................... 236 750 650 442 10
-------- -------- -------- -------- --------
Net income ................................................. $ 4,867 $ 5,225 $ 4,226 $ 2,685 $ 4,357
======== ======== ======== ======== ========
Balance Sheet Data:
Total assets ............................................... $395,985 $426,484 $839,723 $468,830 $827,024
Earning assets ............................................. 368,112 396,541 760,373 435,222 755,576
Securities ................................................. 82,057 86,689 158,266 90,452 157,602
Loans (1) .................................................. 265,965 301,876 553,119 322,588 569,379
Allowance for loan losses .................................. 6,268 5,261 8,909 4,978 9,086
Deposits ................................................... 320,754 348,419 676,536 377,593 674,799
Long-term debt ............................................. 1,065 945 821 897 768
Stockholders' equity ....................................... 24,313 27,474 58,189 28,848 61,394
Weighted Average Shares Outstanding ....................... 2,742 2,834 2,874 2,867 6,684
Per Common Share Data:
Net income (2) ............................................. $ 1.51 $ 1.59 $ 1.17 $ 0.91 $ 0.65
Book value (period-end) ................................... 5.00 6.09 8.94 7.51 9.43
Tangible book value (period-end) ......................... 4.16 5.26 7.77 6.71 8.29
Performance Ratios:
Return on average assets (3) .............................. 1.29% 1.30% 0.89% 1.23% 1.05%
Return on average equity (3) ............................... 21.26 20.31 15.12 19.66 14.56
Net interest margin (4) .................................... 4.28 4.56 4.23 4.36 4.45
Net interest margin (taxable equivalent) (5) ............... 4.35 4.64 4.29 4.45 4.52
Asset Quality Ratios:
Allowance for loan losses to period-end loans .............. 2.36% 1.74% 1.61% 1.54% 1.60%
Allowance for loan losses to period-end
nonperforming loans (6) .................................. 207.96 328.61 384.01 333.20 374.99
Net charge-offs (recoveries) to average loans (3) .......... (0.23) 0.90 (0.04) 0.19 0.01
Nonperforming assets to period-end loans and
foreclosed property (6) .................................. 1.47 0.66 0.53 0.86 0.49
Capital and Liquidity Ratios:
Average equity to average assets ........................... 6.08% 6.39% 5.91% 6.26% 7.23%
Leverage (4.00% required minimum) (7) ...................... 6.45 7.49 6.06 7.07 6.67
Risk-based capital
Tier 1 (4.00% required minumum) (7) ...................... 9.59 10.43 9.01 9.99 9.44
Total (8.00% required minimum) (7) ....................... 10.84 11.68 10.26 11.24 10.69
Average loans to average deposits .......................... 78.25 84.63 82.62 84.88 84.67
</TABLE>
xii
<PAGE> 13
______________________
(1) Loans, net of unearned income, before allowance for loan losses.
(2) Net income per common share is calculated based upon net income as
adjusted for cash dividends paid on preferred stock.
(3) Annualized for the six month periods ended June 30, 1995 and 1996.
(4) Net interest income divided by average earning assets.
(5) Net interest margins have been adjusted to a taxable equivalent basis
utilizing a 34% tax rate on tax-exempt investment income.
(6) Nonperforming loans and nonperforming assets includes loans past due 90
days or more that are still accruing interest.
(7) The required minimum Tier 1 and Total Risk-based capital ratios are 4%
and 8% respectively. The minimum leverage ratio of Tier 1 capital to
total adjusted assets is 3% to 5%.
The following summaries include (1) the condensed statements of income of
Alabama National BanCorporation and Subsidiaries on a historical basis for the
six month period ended June 30, 1996 and for the years ended December 31, 1995,
1994 and 1993 (2) the condensed statements of income of FIRSTBANC Holding
Company, Inc. and Subsidiary on a historical basis for the six month period
ended June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993 (3)
adjustments to give effect to the completed acquisition of FIRSTBANC Holding
Company, Inc. and (4) the pro forma combined condensed statements of income of
Alabama National BanCorporation and Subsidiaries as if such acquisition had
occurred on January 1, 1993.
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
Six Months Ended June 30, 1996
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income .................................... $31,017 $1,310 $ - $32,327
Interest expense ................................... 14,819 515 - 15,334
------- ------ --- -------
Net interest income ................................ 16,198 795 - 16,993
Provision for loan losses .......................... 200 9 - 209
Noninterest income ................................. 7,935 184 - 8,119
Noninterest expense ................................ 17,484 661 - 18,145
------- ------ --- -------
Income before provision for income taxes ........... 6,449 309 - 6,758
Provision for income taxes ......................... 2,301 90 - 2,391
------- ------ --- -------
Income before minority interest in earnings
of consolidated subsidiaries ..................... 4,148 219 - 4,367
Minority interest in earnings of
consolidated subsidaires ......................... 10 - - 10
------- ------ --- -------
Net income ......................................... $ 4,138 $ 219 $ - $ 4,357
======= ====== === =======
Net income per common share ....................... $ 0.65 $ 0.65
======= =======
Weighted average common shares outstanding ......... 6,379 6,684
======= =======
</TABLE>
xiii
<PAGE> 14
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income .................................... $35,430 $2,537 $ - $37,967
Interest expense ................................... 18,152 1,020 - 19,172
------- ------ --- -------
Net interest income ................................ 17,278 1,517 - 18,795
Provision for loan losses .......................... 392 17 - 409
Noninterest income ................................. 7,403 339 - 7,742
Noninterest expense ................................ 19,643 1,255 - 20,898
------- ------ --- -------
Income before provision for income taxes ........... 4,646 584 - 5,230
Provision for income taxes ......................... 195 159 - 354
------- ------ --- -------
Income before minority interest in earnings
of consolidated subsidiaries ..................... 4,451 425 - 4,876
Minority interest in earnings of
consolidated subsidaires ......................... 650 - - 650
------- ------ --- -------
Net income ......................................... 3,801 425 - 4,226
Cash dividends on preferred stock .................. 848 6 - 854
------- ------ --- -------
Net income available for common shares ............. $ 2,953 $ 419 $ - $ 3,372
======= ====== === =======
Net income per common share ........................ $ 1.15 $ 1.17
======= =======
Weighted average common shares outstanding ......... 2,569 2,874
======= =======
</TABLE>
xiv
<PAGE> 15
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
-------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income ......................................... $ 26,966 $ 2,378 $ - $ 29,344
Interest expense ........................................ 11,259 834 - 12,093
-------- ------- --- --------
Net interest income ..................................... 15,707 1,544 - 17,251
Provision for loan losses ............................... 1,230 49 - 1,279
Noninterest income ...................................... 4,206 319 - 4,525
Noninterest expense ..................................... 12,997 1,250 - 14,247
-------- ------- --- --------
Income before provision for income taxes ................ 5,686 564 - 6,250
Provision for income taxes .............................. 86 189 - 275
-------- ------- --- --------
Income before minority interest in earnings
of consolidated subsidiaries .......................... 5,600 375 - 5,975
Minority interest in earnings of
consolidated subsidaires .............................. 750 - - 750
-------- ------- --- --------
Net income .............................................. 4,850 375 - 5,225
Less cash dividends on preferred stock .................. 715 6 - 721
-------- ------- --- --------
Net income available for common shares $ 4,135 $ 369 $ - $ 4,504
======== ======= === ========
Net income per common share ............................. $ 1.64 $ 1.59
======== ========
Weighted average common shares outstanding .............. 2,529 2,834
======== ========
</TABLE>
xv
<PAGE> 16
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Interest income ......................................... $22,800 $2,274 $ - $25,074
Interest expense ........................................ 9,219 853 - 10,072
------- ------ --- -------
Net interest income ..................................... 13,581 1,421 - 15,002
Provision for (benefit of recoveries) loan losses ....... (642) 122 - (520)
Noninterest income ...................................... 5,338 348 - 5,686
Noninterest expense ..................................... 14,593 1,252 - 15,845
------- ------ --- -------
Income before provision for income taxes ................ 4,968 395 - 5,363
Provision for income taxes .............................. 100 160 - 260
------- ------ --- -------
Income before minority interest in earnings
of consolidated subsidiaries .......................... 4,868 235 - 5,103
Minority interest in earnings of
consolidated subsidaires .............................. 236 - - 236
------- ------ --- -------
Net income .............................................. 4,632 235 - 4,867
Less cash dividends on preferred stock .................. 721 6 - 727
------- ------ --- -------
Net income available for common shares $ 3,911 $ 229 $ - $ 4,140
======= ====== === =======
Net income per common share (1) ......................... $ 1.60 $ 1.51
======= =======
Weighted average common shares outstanding .............. 2,437 2,742
======= =======
</TABLE>
xvi
<PAGE> 17
SPECIAL CONSIDERATIONS
Stockholders of FIRSTBANC are urged to carefully consider the following
factors:
DETERMINATION OF TERMS AND EXCHANGE RATIO
The terms of the Merger, including the exchange ratio, were determined by
arms-length negotiations between ANB and FIRSTBANC. ANB and FIRSTBANC
considered the book value, earnings per share, potential market values and the
projected financial performance of the combined company in evaluating the
exchange ratio. No effort was made to determine the going concern or
liquidation values of ANB or FIRSTBANC and the exchange ratio was not based on
the valuation principles applicable in an appraisal proceeding under the
Alabama Business Corporation Act. See "THE MERGER," "BACKGROUND OF THE MERGER"
and "RECOMMENDATION OF THE BOARDS OF DIRECTORS" and "APPRAISAL RIGHTS."
RESTRICTIONS ON DIVIDENDS
The principal business operations of ANB and FIRSTBANC are conducted
through their subsidiary banks and thrift institutions (collectively the
"Banks"). Cash available to pay dividends to stockholders of ANB and FIRSTBANC
is derived primarily if not entirely from dividends paid by the Banks. After
the Merger the ability of the Banks to pay dividends to ANB as well as ANB's
ability to pay dividends to its stockholders will be subject to, and limited
by, certain legal and regulatory restrictions. Further, any lenders making
loans to ANB may impose financial covenants that may be more restrictive than
regulatory requirements with respect to the payment of dividends by ANB.
Although ANB has paid a regular quarterly cash dividend since the first quarter
of 1995, there can be no assurance that ANB will continue to pay dividends
after the Merger. See "COMPARISON OF MARKET PRICES AND DIVIDENDS" and
"SUPERVISION AND REGULATION."
GROWTH THROUGH ACQUISITIONS
ANB has historically experienced significant growth through acquisitions.
There are risks associated with any acquisition including but not limited to
incorrectly assessing the asset quality of a particular institution,
encountering greater than anticipated costs of incorporating acquired
businesses into ANB and being unable to profitably deploy funds acquired in an
acquisition. There can be no assurance that the subsidiary financial
institution of FIRSTBANC (the "FBBC") can be profitably integrated on an
immediate basis into ANB. Subsequent to the Merger, ANB anticipates engaging
in additional acquisitions of financial institutions and branch locations;
however there can be no assurance that ANB can continue to grow through
acquisitions. Any acquisition must be approved by regulatory authorities
including the Federal Reserve Board (the "FRB") which regulates bank holding
companies and the Office of Thrift Supervision (the "OTS") which regulates
thrift holding companies. Additionally there are a limited number of
attractive acquisition candidates and ANB may face significant competition from
other institutions seeking to acquire such acquisition candidates.
COMPETITION
The banking business is highly competitive, particularly in the Banks'
market areas. The Banks compete as financial intermediaries with other
commercial banks, savings associations, credit unions, mortgage banking
companies, securities brokerage companies, insurance companies, and money
market mutual funds operating in Alabama and elsewhere. Many of these
competitors have substantially greater resources and lending limits than ANB
and the Banks. Additionally, non- depository institutional competitors are
generally not subject to the extensive regulations applicable to ANB and the
Banks. Commercial banks may acquire financial institutions nationwide,
further increasing competition.
xvii
<PAGE> 18
SUPERVISION AND REGULATION
The banking industry is heavily regulated. Subsequent to the Merger, ANB
and the Banks will be subject to regulation by the FRB, the OTS, the Office of
the Comptroller of the Currency (the "OCC"), the Federal Deposit Insurance
Corporation (the "FDIC"), and the Alabama Banking Department. The success of
ANB and the Banks depends not only on competitive factors but also on state and
federal regulations affecting banks, thrifts, and bank and thrift holding
companies. The regulations are primarily intended to protect depositors, not
stockholders. Recent and proposed changes to the regulation of the financial
institution industry and the ultimate effect of such changes cannot be
predicted. The effects of the implementation of new legislation applicable to
ANB and the Banks, including the Community Development and Regulatory
Improvement Act and the Riegle-Neal Interstate Banking and Branching Efficiency
Act cannot be measured at this time. The enactment of the Federal Deposit
Insurance Corporation Improvement Act of 1991 ("FDICIA") changed the framework
of federal regulation of banks and contains a number of provisions that affect
the operation of banks including the establishment of a system of prompt
corrective action for insured depository institutions and the establishment of
regulatory capital categories for such institutions. Regulations now affecting
ANB and the Banks may be modified at any time and there is no assurance that
such modification will not adversely affect the business of ANB and the Banks.
See "SUPERVISION AND REGULATION."
MONETARY POLICIES
Interest rates are largely dependent on the rate of interest established
from time to time by the FRB for funds made available to financial institutions
by the FRB. During 1994 and 1995, the FRB changed those interest rates several
times. Due to the volatility of such monetary policy there can be no assurance
that the effect of actions by monetary and fiscal authorities will not have an
adverse effect on the deposit levels, net interest margin, loan demand or the
business and earnings of any of the Banks.
RESERVE FOR LOAN LOSSES
Management of the Banks maintains an allowance for loan losses based upon,
among other things, historical experience, an evaluation of economic
conditions, and regular reviews of delinquencies and loan portfolio quality.
Based upon such factors, management makes various assumptions and judgments
about the ultimate collectibility of the respective loan portfolios and
provides an allowance for potential loan losses based upon a percentage of the
outstanding balances and for specific loans when their ultimate collectibility
is considered questionable. Although each of ANB and FIRSTBANC believes that
allowances for loan losses at each of the Banks are adequate, there can be no
assurance that such allowances will prove sufficient to cover future losses.
Future adjustments may be necessary if economic conditions differ or adverse
developments arise with respect to non-performing or performing loans of the
Banks. Material additions to the allowance for loan losses of any of the Banks
would result in a material decrease in ANB's net income and possibly its
capital and could result in its inability to pay dividends, among other adverse
consequences. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF FIRSTBANC - PROVISION AND ALLOWANCE FOR LOAN
LOSSES." See also "INCORPORATION OF DOCUMENTS BY REFERENCE" for documents that
include "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF ANB."
TAX CONSIDERATIONS
It is intended that the Merger will be treated as a reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986 as amended (the
"Code"). FIRSTBANC has received an opinion from Wallace, Jordan, Ratliff &
Brandt LLC to the effect that (1) no gain or loss will be recognized by
FIRSTBANC as a result of the Merger; and (2) except for cash payments made in
lieu of a fractional share interest and for any dissenters' shares, no gain or
loss will be recognized by FIRSTBANC stockholders upon the exchange of shares
of FIRSTBANC Common Stock for ANB Common Stock. See "THE MERGER - FEDERAL
INCOME TAX CONSEQUENCES"
xviii
<PAGE> 19
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER AND OTHER FACTORS, EACH HOLDER OF
FIRSTBANC STOCK IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISOR TO DETERMINE
THE PARTICULAR TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER (INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS).
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and officers of FIRSTBANC have personal interests in the
Merger that may present them with conflicts of interest in connection with the
Merger. The Boards of Directors of ANB and FIRSTBANC are aware of and
considered personal interests disclosed in this Proxy Statement in their
evaluation of the Merger. See "THE MERGER - BACKGROUND OF THE MERGER" and "THE
MERGER - INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION."
RESTRICTIONS ON RESALE
The shares of ANB Common Stock issued to the holders of FIRSTBANC Common
Stock will be issued pursuant to an exemption from the registration
requirements of the Securities Act of 1933 (the "1933 Act") provided by
Sections 3(b) and 4(2) of the 1993 Act and Regulation D promulgated thereunder
by the SEC. Such shares will therefore be "restricted securities," and as
such, cannot be sold or transferred in the absence of registration under the
1933 Act or an available exemption therefrom. Rule 144 of the 1933 Act
provides a "safe harbor" exemption for resale of restricted securities. As
such, the "restricted securities" must be held for a period of at least two
years before they can be sold under this safe harbor exemption and any sale
would be subject to Rule 144's manner of sale and volume limitations.
The Merger Agreement includes various covenants on the part of ANB to
register the ANB Common Stock issued to former shareholders of FIRSTBANC in the
Merger so that such persons can sell their ANB Common Stock in the open market
before the expiration of the two year waiting period under Rule 144. ANB has
agreed to file a registration statement under the 1933 Act and applicable state
securities laws with respect to the ANB Common Stock issued in the Merger as
soon as practicable after filing its first Quarterly Report on Form 10-Q after
the Merger, which report is expected to be filed on or about November 15, 1996.
The filing of the Registration Statement may, however, be delayed in order to
meet the requirements for accounting for the Merger as a "pooling of interests"
transaction as each of ANB and FIRSTBANC have agreed to take no action that
would cause the Merger not to qualify for such treatment. See "THE MERGER -
RESTRICTIONS ON RESALE."
xix
<PAGE> 20
INTRODUCTION
ALABAMA NATIONAL BANCORPORATION
Alabama National BanCorporation ("ANB") is a Delaware bank and thrift
holding company with its principal place of business in Birmingham, Alabama,
and its main office located at 1927 First Avenue North, Birmingham, Alabama
35203 (Telephone Number: (205) 583-3600). ANB is currently the parent of two
national banks, National Bank of Commerce of Birmingham (Birmingham and
Northern Shelby County, Alabama) and First National Bank of Ashland (Ashland,
Alabama); four state member banks, Alabama Exchange Bank (Tuskegee, Alabama),
Bank of Dadeville (Dadeville, Alabama), Gulf Bank (Baldwin County, Alabama),
and Citizens Bank of Talladega (Talladega, Alabama); and one federal savings
bank, St. Clair Federal Savings Bank (St. Clair County, Alabama) (collectively
the "ANB Banks"); one securities brokerage firm, NBC Securities, Inc.
(Birmingham, Alabama); one insurance agency, Ashland Insurance Inc. (Ashland,
Alabama); and two "small loan"/finance companies, Clay County Finance Company,
Inc. (Ashland, Alabama) and Tuskegee Loan Company, Inc. (Tuskegee, Alabama).
ANB has recently applied for approval from the OCC and OTS for the merger of
St. Clair Federal Savings Bank into National Bank of Commerce of Birmingham.
See "INCORPORATION OF DOCUMENTS BY REFERENCE" for documents describing the
business of ANB.
FIRSTBANC
FIRSTBANC Holding Company, Inc. ("FIRSTBANC") is a one bank holding company
for First Bank of Baldwin County, a state nonmember bank. FIRSTBANC's
principal offices are located at 22516 Milwaukee Street, Robertsdale, Alabama
35567 (Telephone Number: (334) 947-7361. FIRSTBANC was incorporated in Alabama
in 1985. See "BUSINESS OF FIRSTBANC" AND "THE MERGER - BACKGROUND AND REASONS
FOR THE MERGER."
TIME AND PURPOSE OF THE MEETING
The FIRSTBANC Special Meeting of Shareholders (the "Special Meeting") will
be held at the principal offices of FIRSTBANC on September 19, 1996 at 10:00
a.m. local time. This Proxy Statement is being furnished to holders of
FIRSTBANC Common Stock in connection with the solicitation of proxies by the
Board of Directors of FIRSTBANC for use at the Special Meeting to consider and
vote upon the approval of the Merger Agreement and the transactions
contemplated thereby and to transact such other business as may properly come
before the Special Meeting or any adjournments or postponements thereof. Each
copy of this Proxy Statement mailed to holders of FIRSTBANC Common Stock is
accompanied by a form of proxy for use at the Special Meeting.
RECORD DATE; VOTING RIGHTS AND VOTE REQUIRED
The Board of Directors of FIRSTBANC has fixed the close of business on
August 23, 1996, as the record date ("the "Record Date") for the determination
of holders of FIRSTBANC Common Stock entitled to receive notice of and to vote
at the Special Meeting. As of the Record Date there were 42,782 shares of
FIRSTBANC Common Stock issued and outstanding. In addition there were issued
and outstanding 5,501 shares of Series 1 Preferred Stock (the "FIRSTBANC
Preferred Stock"). Each share of FIRSTBANC Common Stock issued and outstanding
on the Record Date is entitled to one vote upon each matter properly submitted
at the Special Meeting. The Merger Agreement requires that the FIRSTBANC
Preferred Stock will be redeemed prior to the Merger. Approval of the Merger
Agreement by the stockholders of FIRSTBANC requires the affirmative vote of
two-thirds (2/3) of the outstanding shares of FIRSTBANC Common Stock. See "THE
MERGER - INTEREST OF CERTAIN PERSONS IN THE TRANSACTION."
As of the Record Date directors and persons who beneficially own more than
10% of the outstanding FIRSTBANC Common Stock owned beneficially more than 90%
of the shares of FIRSTBANC Common Stock issued and outstanding on such date,
and such persons have indicated they will vote their shares of FIRSTBANC Common
Stock in favor of the proposal to approve the Merger Agreement. If each of
these shares of FIRSTBANC Common
<PAGE> 21
Stock is in fact voted in favor of the Merger, the approval of the stockholders
of FIRSTBANC is assured. See "THE MERGER - EXPECTED SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ANB AND FIRSTBANC BEFORE AND AFTER
THE MERGER."
VOTING AND REVOCATION OF PROXIES
Shares of FIRSTBANC Common Stock represented by a proxy properly signed and
received at or prior to the Special Meeting, unless subsequently revoked, will
be voted in accordance with the instructions thereon. IF A PROXY IS SIGNED AND
RETURNED WITHOUT INDICATING ANY VOTING INSTRUCTIONS ALL SHARES OF RECORD HELD
BY THE PERSON GRANTING THE PROXY WILL BE VOTED FOR THE PROPOSAL TO APPROVE THE
MERGER AGREEMENT. Any proxy given pursuant to the solicitation may be revoked
by the person giving it at any time before the proxy is voted by (i) filing an
instrument revoking it or (ii) filing a duly executed proxy bearing a later
date with the Secretary of FIRSTBANC at or prior to the Special Meeting or
(iii) voting in person at the Special Meeting. Attendance at the Special
Meeting will not in and of itself constitute a revocation of a proxy.
All written notices of revocation and other communications with respect to
revocation of a proxy should be addressed as follows: FIRSTBANC Holding
Company, Inc., P. O. Box 769, Robertsdale, Alabama 36567, Attention: President.
The Board of Directors of FIRSTBANC is not aware of any business to be
acted upon at the Special Meeting other than as described herein. If however
other matters are properly brought before the Special Meeting for consideration
including among other things consideration of a Motion to Adjourn the Special
Meeting to another time and/or place (including without limitation for the
purposes of soliciting additional proxies), persons appointed as proxies will
have discretion to vote or act thereon according to their best judgment.
SOLICITATION OF PROXIES
In addition to solicitation by mail, directors, officers and employees of
FIRSTBANC who will not be specifically compensated for such services may
solicit proxies from the stockholders of FIRSTBANC personally or by telephone
or telegram or other forms of communication.
Pursuant to the Merger Agreement, each of ANB and FIRSTBANC has agreed to
bear its respective expenses with regard to the solicitation of proxies,
including the mailing.
FIRSTBANC STOCKHOLDERS SHOULD NOT SEND
ANY STOCK CERTIFICATES WITH THEIR PROXIES.
2
<PAGE> 22
THE MERGER
BACKGROUND OF THE MERGER
ANB operates through six community banks located in non-metropolitan areas
in Alabama (the "Community Banks") and National Bank of Commerce ("NBC")
located in the metropolitan area of Birmingham, Alabama. ANB operates its
Community Banks in less competitive, non-metropolitan areas with a
decentralized approach to banking. The Community Banks are located in southern
and central Alabama. ANB has historically pursued a strategy of growth through
acquisitions of traditional community banks or thrifts located outside the
major metropolitan areas, primarily within the State of Alabama. In addition
to price and terms, the factors considered by ANB in determining the
desirability of an acquisition candidate are financial condition, earnings
potential, quality of management, market area, and competitive environment.
One of the Community Banks of ANB, Gulf Bank, serves the southern half of
Baldwin County, Alabama, which is one of the fastest growing counties in
Alabama. Gulf Bank has recently opened a new branch in Gulf Shores and ANB
intends to further expand its presence in the Baldwin County area. The
business of Gulf Bank is principally directed toward attracting customers in
the southern part of Baldwin County.
FIRSTBANC is a single bank holding company for First Bank of Baldwin County
("FBBC") with its principal offices located in the northern part of Baldwin
County, Alabama, in the city of Robertsdale. In early 1996, representatives of
ANB contacted the Chairman of the Board of FIRSTBANC regarding a possible
business combination with ANB because of the advantages presented by having
related banks operating in both the southern and northern portions of Baldwin
County.
The Chairman of FIRSTBANC advised the Board of Directors of FBBC of the
expression of interest of ANB. The Board of Directors of FIRSTBANC and FBBC
were aware of the sales of many banks and bank holding companies along the
Alabama gulf coast and the Florida panhandle. The Boards were also aware that
ANB was a holding company comprised principally of community banks that
operated on a decentralized basis. The Board of FIRSTBANC had previously
adopted a position that FIRSTBANC was not for sale because the operations of
FBBC were profitable, it was in sound financial condition, and it desired to
operate FBBC with the current management team. In spite of this position, the
Boards of Directors of FIRSTBANC and FBBC agreed that the Chairman of
FIRSTBANC, Douglas D. Montgomery, should determine more facts about ANB and its
expression of interest.
On January 8, 1996, Mr. Montgomery conducted initial discussions with
representatives of ANB. He was advised that ANB was interested in FIRSTBANC
because the location of FBBC would compliment the operations of Gulf Bank. Mr.
Montgomery advised ANB that further discussions would be conditioned upon the
current management team and directors of FBBC continuing to be involved in the
operations of FBBC. Mr. Montgomery was advised that this condition was
consistent with ANB's decentralized approach to management of its Community
Banks.
Upon reporting the results of his discussions with ANB, the Boards of
FIRSTBANC and FBBC authorized Mr. Montgomery and the president of FBBC, Ray
Chatfield, to conduct further discussions with ANB regarding the proposed
business combination. On March 25, 1996, representatives of ANB met with
Messrs. Montgomery and Chatfield to discuss the goals and objectives of
FIRSTBANC and ANB to ensure that both banks were compatible and that the
combination would be beneficial to both the shareholders of FIRSTBANC and the
personnel of FBBC. A very brief discussion of pricing indicated that ANB
intended to structure the transaction to minimize dilution to its shareholders.
The next discussions between ANB and FIRSTBANC related to the valuation of
FIRSTBANC. The 1996 budget of FIRSTBANC was reviewed thoroughly and restated
to reflect an optimistic consolidated earnings forecast for FIRSTBANC and its
subsidiary. When the budget and optimistic forecast were compared to and
combined with projected 1996 earnings of ANB, FIRSTBANC determined that the
exchange ratio should range from 7.0 to 7.5 shares of ANB Common Stock for each
share of FIRSTBANC Common Stock. The parties eventually agreed on an
3
<PAGE> 23
exchange ratio of 7.12917 shares of ANB Common Stock for each share of
FIRSTBANC Common Stock. The exchange ratio resulted in a ratio approximately
1.5 of merger consideration to book value based on the book value of FIRSTBANC
at Decemberr 31, 1995 (approximately $2,600,000) and the then current market
price of a share of ANB Common Stock ($13.50). Although the Board of Directors
of FIRSTBANC was aware that other local banks had sold for higher multiples of
book value, the price was deemed to be acceptable because FBBC would be able to
continue to operate with current management in its community and the
shareholders of FIRSTBANC would have ANB Common Stock providing them with
greater liquidity through the ownership of a publicly traded stock and
diversification through ANB's ownership of other banks. As the consideration
to be received by the shareholders of FIRSTBANC will consist solely of ANB
Common Stock, the Board of Directors of FIRSTBANC like ANB considered the
potential dilution in ANB's earnings per share as a substantial factor in the
valuation process. See "COMPARATIVE PER SHARE DATA."
APPROVAL AND RECOMMENDATION OF THE BOARDS OF DIRECTORS
ANB
The ANB Board of Directors (the "ANB Board") has determined that the Merger
and the Merger Agreement (including the exchange ratio) are fair to and in the
best interests of ANB and its stockholders. The ANB Stockholders are not
required to approve the Merger under the General Corporation Law of Delaware
because the shares of ANB Common Stock to be issued in the Merger do not exceed
20% of the currently issued and outstanding shares of ANB.
In reaching its determination the ANB Board considered, without assigning
any special or relative rights, a number of factors including but not limited
to the following:
(1) The ability to obtain more market share in Baldwin County,
Alabama, through the operations of Gulf Bank and FBBC as subsidiaries of
ANB.
(2) The exchange ratio is intended to be non-dilutive to the
shareholders of ANB in earnings per share with minimal dilution in book
value per share based on the pro forma combined historical consolidated
financial statements of ANB and FIRSTBANC for 1995 and the first six months
of 1996.
(3) The ratio of the merger consideration to book value of FIRSTBANC
is reasonable when compared to the prices paid for other banks located in
the area surrounding Baldwin County, Alabama.
FIRSTBANC
The FIRSTBANC Board of Directors (the "FIRSTBANC Board") has approved the
Merger Agreement and determined that the Merger is in the best interests of
FIRSTBANC and its stockholders. In approving the Merger Agreement, the
FIRSTBANC Board considered a number of factors. The material factors
considered by FIRSTBANC were the following:
(1) FBBC will be allowed to continue to operate as a community bank
and the Board of Directors and management of FBBC believe strongly in the
community bank philosophy.
(2) The Merger will enhance the ability of FBBC to develop with Gulf
Bank a larger market share in the Baldwin County area and to compete with
local banks for larger customers and loans.
(3) The Merger will be beneficial to the shareholders of FIRSTBANC by
providing them with stock that is publicly traded and that has a limited
history of paying dividends. But see, "THE MERGER - RESTRICTIONS ON
RESALE."
4
<PAGE> 24
(4) The exchange ratio in the Merger will be fair to the holders of
FIRSTBANC Common Stock from a financial point of view. See "THE MERGER -
BACKGROUND OF THE MERGER."
THE FIRSTBANC BOARD HAS UNANIMOUSLY RECOMMENDED THAT THE MERGER BE APPROVED
BY THE HOLDERS OF FIRSTBANC COMMON STOCK AT THE SPECIAL MEETING.
TERMS OF THE MERGER
At the Effective Time (defined below) of the Merger, FIRSTBANC will merge
with and into ANB with ANB as the surviving legal entity. The Certificate of
Incorporation of ANB and the ByLaws of ANB in effect at the effective time of
the Merger will govern ANB until amended or repealed in accordance with
Delaware law.
At the Effective Time and as a result of the Merger, automatically and
without further action on the part of the parties or holders of FIRSTBANC
Common Stock, each issued and outstanding share of FIRSTBANC Common Stock
(excluding any shares held by persons who properly perfect their appraisal
rights) will be converted into the right to receive 7.12917 shares of ANB
Common Stock or a total of 305,000 shares of ANB Common Stock for the 42,782
shares of FIRSTBANC Common Stock currently issued and outstanding. Each share
of FIRSTBANC Common Stock held in treasury by FIRSTBANC, except those held in a
fiduciary capacity or as a result of debts previously contracted, shall be
canceled and extinguished and no payment shall be made with respect thereto.
No fractional shares of ANB Common Stock will be issued in the Merger.
Instead the Merger Agreement provides that each holder of shares of FIRSTBANC
Common Stock exchanged pursuant to the Merger who would have otherwise been
entitled to receive a fraction of a share of ANB Common Stock (after taking
into account all certificates delivered by such stockholder) will receive in
lieu thereof cash (without interest) in an amount equal to such fractional part
of a share of ANB Common Stock determined by multiplying the fractional
interest by the market value of a share of ANB Common Stock on the last trading
day prior to the Effective Time of the Merger. The fractional share interest
of each holder of FIRSTBANC Common Stock will be aggregated and no holder of
FIRSTBANC Common Stock will receive cash in an amount equal to or greater than
the value of one full share of ANB Common Stock.
ANB Common Stock issued and outstanding immediately prior to the Effective
Time of the Merger will remain issued and outstanding after the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective at such time as the Certificate of Merger
has been accepted by the Secretary of State of the State of Delaware and the
Articles of Merger have been accepted by the Secretary of State of Alabama, or
such later date and time as may be specified in said documents ("Effective
Time"). Unless otherwise agreed to by ANB and FIRSTBANC as regards the Merger,
such filings will be made subject to the terms and conditions of the Merger
Agreement on September 30, 1996. See "CERTAIN PROVISIONS OF THE MERGER
AGREEMENT - CONDITIONS TO THE CONSUMMATION OF THE MERGER."
EXCHANGE OF STOCK CERTIFICATES
After the Effective Time, former holders of FIRSTBANC Common Stock will
have no further equity interest in FIRSTBANC. On and after the Effective Time,
there shall be no transfer on the stock transfer books of FIRSTBANC for the
shares of FIRSTBANC Common Stock, and ANB shall be entitled to treat the
certificates representing FIRSTBANC Common Stock as evidencing ownership of the
number of shares of ANB Common Stock into which the FIRSTBANC Common Stock
represented by each certificate shall have been converted, notwithstanding the
failure on the part of any holder of FIRSTBANC Common Stock to surrender his or
her certificates. If after the Effective Time, certificates representing
FIRSTBANC Common Stock are presented for transfer, they shall be canceled and
exchanged for certificates representing ANB Common Stock at the respective
exchange ratios.
5
<PAGE> 25
As soon as practicable after the Effective Time, AmSouth Bank of Alabama,
as ANB's exchange agent ("Exchange Agent") will mail to each holder of record
of FIRSTBANC Common Stock immediately prior to the Effective Time a form letter
of transmittal and instructions for using that letter of transmittal to effect
the surrender of certificates of FIRSTBANC Common Stock for certificates
representing ANB Common Stock.
FIRSTBANC STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES FOR
EXCHANGE UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL AND INSTRUCTIONS FOR
PERFECTING THE SURRENDER OF THEIR STOCK CERTIFICATES.
After the surrender of FIRSTBANC Common Stock certificates, together with
the letter of transmittal signed by the record owner of the shares of FIRSTBANC
Common Stock represented by such certificate, the Exchange Agent will deliver
(i) a certificate to such stockholder for shares of ANB Common Stock
representing the aggregate number of shares of ANB Common Stock to which such
stockholder is entitled pursuant to the Merger Agreement and (ii) cash for any
fractional shares.
Certificates of ANB Common Stock to be exchanged for the FIRSTBANC Common
Stock will not be delivered except upon surrender of the certificate or
certificates representing FIRSTBANC Common Stock in compliance with
instructions set forth in the notice and letter of transmittal or in the
absence of any notice that any shares represented by undelivered certificates
have been acquired by a bona fide purchaser, upon satisfaction of alternative
conditions relating to proof of loss, taking or destruction, proof of
ownership, and provision of reasonable security or indemnity that may include
the furnishing of a satisfactory indemnity bond. No fractional shares of ANB
Common Stock and no certificates of scrip therefor will be issued in connection
with the Merger. See " - TERMS OF THE MERGER."
Any holder of FIRSTBANC Common Stock who has not surrendered the
certificates representing that holder's shares of FIRSTBANC Common Stock will
not be entitled to receive dividends or other distributions payable to holders
of record of ANB Common Stock on any date after the Effective Time until that
holder physically surrenders such certificates. Upon the subsequent surrender
and exchange of such FIRSTBANC certificates such dividends or other
distributions, WITHOUT INTEREST AND LESS TAXES (IF APPLICABLE), will be
delivered to such holder.
EFFECT ON EMPLOYEE BENEFIT AND STOCK PLANS
ANB maintains a defined benefit plan for employees of its subsidiary,
National Bank of Commerce of Birmingham. ANB plans to continue the defined
benefit plan only for the benefit of such employees unless otherwise required
by law in order to maintain its status as a qualified plan under the Code. If
employees of ANB's other subsidiaries are required to participate, the defined
benefit plan may be terminated.
Both ANB and FIRSTBANC have retirement plans for the benefit of their
employees and the employees of their respective subsidiaries. The ANB plan
provides for matching employer contributions in an amount equal to 100% of the
employee's contributions of the first 2% of compensation deferred, and the
FIRSTBANC plan provides for matching employer contributions in amount of
one-half of the employees' contributions of up to 6% of their total
compensation. It is anticipated that the FIRSTBANC plan will be terminated or
merged into the ANB retirement plan shortly after the Merger.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
Certain directors and officers of ANB and FIRSTBANC have personal interests
in the Merger as described below that may present them with potential conflicts
of interest in connection with the Merger. The Boards of Directors of ANB and
FIRSTBANC are each aware of the conflicts described below and considered them
in addition to other matters described under " - BACKGROUND OF THE MERGER" and
" - RECOMMENDATION OF THE BOARDS OF DIRECTORS."
ANB and FIRSTBANC have agreed that William D. Montgomery, Chairman and a
director of FIRSTBANC, will become a director of ANB. See " - MANAGEMENT OF
ANB AFTER THE MERGER."
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<PAGE> 26
The Merger Agreement includes as a condition to ANB's obligations a
requirement that all of the FIRSTBANC Preferred Stock be redeemed prior to the
Merger. Two of the directors of FIRSTBANC, namely William D. Montgomery and T.
Frank Burt, each currently own beneficially 500 shares of the outstanding
FIRSTBANC Preferred Stock. The holders of FIRSTBANC Preferred Stock currently
beneficially own approximately 64% of the FIRSTBANC Common Stock. The record
owners of the FIRSTBANC Preferred Stock will receive approximately $55,000 at
the rate of $10.00 per share as a result of the Merger. See " - EXPECTED
SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF FIRSTBANC
BEFORE AND AFTER THE MERGER."
Shares of FIRSTBANC Common Stock held by officers and directors of
FIRSTBANC will be converted into shares of ANB Common Stock on the same basis
as shares of FIRSTBANC Common Stock held by other stockholders of FIRSTBANC.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Wallace, Jordan, Ratliff & Brandt, L.L.C. will render an opinion that for
federal income tax purposes the Merger will constitute a reorganization within
the meaning of Section 368 of the Internal Revenue Code of 1986 (the "Code") as
a condition to the Merger. Also Wallace, Jordan, Ratliff & Brandt's opinion
will cover the following additional federal income tax consequences:
(i) No gain or loss will be recognized by FIRSTBANC upon the
transfer of its assets to ANB in exchange for ANB Common Stock and the
assumption of FIRSTBANC's liabilities by ANB (except for income and
deferred gain recognized pursuant to Treasury Regulations issued under
Section 1502 of the Internal Revenue Code).
(ii) No gain or loss will be recognized by a holder of FIRSTBANC
Common Stock who receives solely ANB Common Stock in the Merger in exchange
for such stockholder's shares of FIRSTBANC Common Stock (except with
respect to cash received in lieu of a fractional share interest in ANB
Common Stock).
(iii) The holding period of the ANB Common Stock (including any
fractional share) received by a holder of FIRSTBANC Common Stock in the
Merger will include the holding period of the FIRSTBANC Common Stock
surrendered in exchange therefor provided such FIRSTBANC Common Stock was a
capital asset in the hands of such stockholder at the Effective Time.
In rendering the foregoing opinions Wallace, Jordan, Ratliff & Brandt, L.L.C.
will be entitled to rely on representations by FIRSTBANC as to factual matters.
Tax Consequences to FIRSTBANC Stockholders Who Receive Solely ANB Stock in the
Merger
A holder of FIRSTBANC Common Stock will recognize neither gain nor loss on
the exchange of all his or her shares solely for ANB Common Stock in the
Merger. The tax basis of the ANB Common Stock received in the Merger by such a
FIRSTBANC stockholder will be equal to the stockholder's tax basis for the
FIRSTBANC Common Stock exchanged therefor and such stockholder will include the
period during which the stock surrendered was held in his or her holding period
for the ANB Common Stock received in exchange therefor.
Tax Consequences to FIRSTBANC Stockholders Who Receive Solely Cash in the
Merger
Holders of shares of FIRSTBANC Common Stock who receive cash upon the
exercise of any appraisal rights will be subject to a taxable transaction for
federal income tax purposes. Such a stockholder will recognize gain or loss
measured by the difference between the tax basis for his or her shares and the
amount of cash received (unless the receipt of cash is treated as a dividend as
described below).
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<PAGE> 27
In certain circumstances the receipt of cash by a holder of preferred stock
or common stock of FIRSTBANC could be treated as a dividend (to the extent of
the stockholder's ratable share of applicable earnings and profits) if the
stockholder constructively owns shares of FIRSTBANC Common Stock that are
exchanged for ANB Common Stock in the Merger. Additionally in certain
circumstances, although the application of the law is not entirely clear, the
receipt of solely cash by a FIRSTBANC stockholder could be treated as a
dividend (to the extent of the stockholder's ratable share of applicable
earnings and profits) if the stockholder owns ANB Common Stock actually or
constructively after the Merger. Generally a stockholder constructively owns
stock that is owned by members of the stockholder's family and by certain
controlled or related partnerships, estates, trusts and corporations pursuant
to the constructive ownership rules of Section 318 of the Code as well as any
shares that the stockholder has an option to acquire.
The receipt of solely cash by a FIRSTBANC stockholder in exchange for his
stock will not be treated as a dividend if such exchange or receipt results in
a meaningful reduction or a substantially disproportionate reduction in the
stockholder's ownership interest or results in a complete termination of the
stockholder's interest taking into account in each case the constructive
ownership rules described above. A complete termination of a stockholder's
interest will occur if, after the receipt of cash in exchange for stock, the
stockholder owns no shares of stock in ANB. Thus a stockholder who receives
solely cash for all of the stock actually owned by him will generally qualify
for capital gain treatment under the complete termination test if none of the
shares constructively owned by him are exchanged in the Merger for ANB Common
Stock and the stockholder does not otherwise own actually or constructively any
shares of ANB Common Stock after the Merger. Where the complete termination of
interest test is not satisfied with respect to a particular stockholder
(because for example FIRSTBANC shares owned by a holder of preferred stock are
exchanged for ANB Common Stock in the Merger), that stockholder will
nonetheless generally be entitled to capital gain treatment if the receipt of
cash in exchange for his shares results in a "substantially disproportionate"
reduction or a "meaningful" reduction in his ownership interest.
Although the application of the law is not entirely clear, a stockholder's
reduction in ownership interest should normally be "substantially
disproportionate" and capital gain treatment should normally result if (1) the
stockholder owns less than 50% of the total combined voting power of all
classes of stock immediately after the Merger and (2) the stockholder's
proportionate stock interest in ANB immediately after the Merger is 20% or more
below what his proportionate interest in ANB would have been if he had received
solely ANB Common Stock in the Merger. Even if such reduction in interest would
not amount to 20%, the Internal Revenue Service has indicated in published
rulings that a distribution that results in any actual reduction in interest of
a small minority stockholder in a publicly held corporation will result in a
"meaningful" reduction and will not constitute a dividend if the stockholder
exercises no control with respect to corporate affairs.
THE DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY.
IT DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE MERGER. THE
DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE CODE, EXISTING AND
PROPOSED TREASURY REGULATIONS THEREUNDER AND CURRENT ADMINISTRATIVE RULINGS AND
COURT DECISIONS. ALL OF THE FOREGOING ARE SUBJECT TO CHANGE AND ANY SUCH
CHANGE COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. FIRSTBANC
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC
TAX CONSEQUENCES OF THE MERGER TO THEM INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL AND FOREIGN TAX LAWS.
ACCOUNTING TREATMENT
ANB will account for the Merger as a pooling-of-interests transaction in
accordance with generally accepted accounting principles, which, among other
things, require that the number of shares of FIRSTBANC Common Stock acquired
for cash pursuant to the exercise of dissenters' rights or in lieu of
fractional shares not exceed 10% of the outstanding shares of FIRSTBANC Common
Stock. Under this accounting treatment, assets and liabilities of FIRSTBANC
would be added to those of ANB at their recorded book values, and the
shareholder's equity of the two companies would be combined in ANB's
consolidated balance sheet. Financial statements of ANB issued after the
effective date of the Merger will be restated to reflect the consolidated
operations of ANB and FIRSTBANC as if the Merger had taken place prior to the
periods covered by the financial statements.
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<PAGE> 28
REGULATORY APPROVALS
The Merger is conditioned upon receipt of the regulatory approvals
necessary to consummate the Merger. This approval includes the approval of the
FRB. The FRB approved the Merger on August 21, 1996, but the Merger may not be
consummated until the fifteenth day after the receipt of approval from the FRB.
EXPECTED SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ANB
AND FIRSTBANC BEFORE AND AFTER THE MERGER
ANB
The shares of ANB Common Stock to be issued in the Merger represents less
than 5% of the issued and outstanding shares of ANB Common Stock. Accordingly,
there will be no significant change in the percentage ownership of the
stockholders of ANB.
FIRSTBANC
The following table sets forth the number and percentage of outstanding
shares of FIRSTBANC Common Stock beneficially owned before the Merger and the
pro forma percentage of shares of ANB Common Stock that will be beneficially
owned after the Merger by (i) certain executive officers of FIRSTBANC; (ii)
each director of FIRSTBANC; (iii) all executive officers and directors of
FIRSTBANC as a group; and (iv) each person or entity known by FIRSTBANC to own
more than 5% of the outstanding FIRSTBANC Common Stock.
<TABLE>
<CAPTION>
BEFORE THE MERGER AFTER THE MERGER
----------------- ----------------
NAME OF PRO FORMA PRO FORMA
BENEFICIAL OWNER(1) TITLE SHARES PERCENTAGE(1) SHARES PERCENTAGE(1)
------------------- ----- ------ ------------- ------ -------------
<S> <C> <C> <C> <C> <C>
T. Frank Burt, Jr. Director 3,075 7.2% 21,922 *
Raymond P. Chatfield President 600 1.4% 4,277 *
and Director
Peter W. Field -- 4,991 11.7% 37,081(2) *
Robert C. Field -- 4,991 11.7% 35,581 *
William D. Montgomery Chairman of 4,991 11.7% 35,581 *
the Board and
Director
Charles V. Welden, III -- 5,740 13.4% 40,921 *
William B. Welden, Sr. -- 5,740 13.4% 40,921 *
W. Edgar Welden -- 8,480 19.8% 91,157(2) 1.4%
</TABLE>
*Less than one percent.
(1) The percentage before the Merger is based on 42,782 shares of FIRSTBANC
Common Stock that is currently issued and outstanding, and the percentage
after the Merger is based on 6,505,418 shares of ANB Common Stock which is
the sum of 6,200,418 shares of ANB Common Stock that are currently
outstanding and the 305,000 shares of ANB Common Stock to be issued in the
Merger.
(2) Includes shares of ANB Common Stock beneficially owned by each of those
persons as of July 30, 1996.
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<PAGE> 29
RESTRICTIONS ON RESALE
The ANB Common Stock to be issued in the Merger will not be registered
under the 1933 Act or under applicable state securities laws. ANB is relying
on the exemptions from registration provided by Section 3(b) and Section 4(2)
of the 1933 Act and Regulation D promulgated thereunder in the issuance of its
shares in the Merger. Accordingly, each holder of FIRSTBANC Common Stock will
not be able to sell or otherwise transfer the ANB Common Stock received in the
Merger unless the shares are transferred in a transaction that complies with
the registration requirements of the federal and state securities laws or is
exempt from such registration requirements. Further, each of the officers and
directors of FIRSTBANC may be an affiliate of FIRSTBANC under Rule 145(c) under
the 1933 Act, subject to the limitations on the sale of the ANB Common Stock
imposed by Rule 145(d) under the 1933 Act. Additionally, each director and
affiliate of ANB and FIRSTBANC may not to sell any shares of the ANB Common
Stock until ANB has published financial results covering at least 30 days of
combined operations after the Merger in order to comply with the SEC releases
relating to "pooling of interests" transactions.
The SEC has adopted Rule 144 as a "safe harbor" exemption from registration
with respect to the resale of "restricted securities." The shares of ANB
Common Stock issued pursuant to the Merger will be "restricted securities" as
such term is defined under SEC Rule 144 because they will not be registered
under the 1933 Act. As such, the shares must be held for a period of at least
two years before they can be sold under the exemption provided by Rule 144, in
which case the shares must be sold in accordance with Rule 144's volume of sale
and manner of sale limitations. All shares of ANB Common Stock issued in the
Merger will bear the following legend:
THIS SECURITY IS BEING OFFERED PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT OF 1933 AND APPLICABLE STATE SECURITIES LAWS.
ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED,
OR HYPOTHECATED TO ANY PERSON IN THE ABSENCE OF SUCH REGISTRATION OR A
WRITTEN OPINION OF LEGAL COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH
REGISTRATION IS NOT REQUIRED IN CONNECTION WITH SUCH TRANSFER.
ANB has agreed under certain circumstances to register the shares of ANB Common
Stock issued in the Merger for public resale by the former shareholders of
FIRSTBANC. See "CERTAIN PROVISIONS OF THE MERGER AGREEMENT - REGISTRATION
COVENANTS."
MANAGEMENT OF ANB AFTER THE MERGER
After the Effective Time, the current directors and officers of ANB will
continue as directors of ANB and William D. Montgomery will be added to the
ANB Board of Directors as the nominee of FIRSTBANC. See "INCORPORATION OF
DOCUMENTS BY REFERENCE."
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<PAGE> 30
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of certain provisions of the Merger
Agreement which appears as Exhibit A to this Proxy Statement and is
incorporated herein by reference. Such summary is qualified in its entirety by
reference to the Merger Agreement.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains customary representations and warranties
by ANB and FIRSTBANC relating to, with respect to each of ANB and FIRSTBANC and
their subsidiaries, among other things: (a) organization, standing and similar
corporate matters; (b) subsidiaries; (c) capital structure; (d) the
authorization, execution, delivery, performance and enforceability of the
Merger Agreement and related matters; (e) completeness and accuracy in
accordance with generally accepted accounting principles of the financial
statements for the past three fiscal years and that all financial statements
filed with any federal banking regulator were prepared in material compliance
with the rules and regulations of such regulator; (f) the absence of pending or
threatened material litigation; (g) compliance with applicable laws; (h)
benefit plans and other matters relating to the Employee Retirement Income
Security Act of 1974 as amended and employment matters; (i) filing of tax
returns and payment of taxes; (j) good title to owned real property and that
such real property is free of liens; (k) the validity of each leasehold and
subleasehold interest in leased real property; (l) environmental matters; (m)
material contracts and the absence of defaults under any material contracts;
(n) brokers' fees and expenses; (o) loan portfolio and all documentation
reports relating thereto; (p) the absence of certain material changes or events
since March 31, 1996, relating to the incurrence of material liabilities or
changes or events involving a material adverse change in the business
operations, properties, assets or financial condition which has had or is
reasonably likely to have a material and adverse effect.
CERTAIN PRE-CLOSING COVENANTS
Pursuant to the Merger Agreement, ANB and FIRSTBANC have agreed, until
the Effective Time or until termination of the Merger Agreement, that ANB
(unless given the written consent of FIRSTBANC) and FIRSTBANC (unless given the
written consent of ANB) will and will cause each of their respective
subsidiaries to operate its business only in the usual regular and ordinary
course; use its best efforts to preserve intact its business organization and
maintain its rights and franchises and to take no action which would adversely
affect its ability to obtain any permits or consents necessary to consummate
the Merger; or adversely affect the ability of ANB of FIRSTBANC to perform any
of their respective covenants and agreements under the Merger Agreement.
In addition, FIRSTBANC has agreed that it shall not, and that it shall
not permit its subsidiary, to do, agree, or commit to do any of the following
without the prior written consent of ANB: (a) amend the Articles of
Incorporation or By-laws; (b) issue, sell or otherwise permit to become
outstanding any additional shares of any of their capital stock including
treasury stock or any stock appreciation rights or any option, warrant or
conversion or other right to purchase any such stock or security convertible
into any such stock; (c) repurchase, redeem or otherwise acquire or exchange
any shares of their capital stock or any options, warrants or rights to acquire
or any securities convertible into any shares of their capital stock, other
than the redemption of the FIRSTBANC Preferred Stock; (d) declare or pay any
dividend whether in cash, stock or otherwise; (e) incur any additional debt,
obligation or other obligation for borrowed money except in the ordinary course
of their business consistent with past practices; (f) acquire any direct or
indirect equity interest in any person other than in connection with
foreclosures in the ordinary course of business or in a fiduciary capacity; (g)
adopt any new employee benefit plan or make any material change in or to an
existing employee benefit plan other than as required by law or in the opinion
of counsel to maintain a tax qualified status of any such plan; (h) make any
new loan or advance to any stockholder, director, officer or employee of
FIRSTBANC or its subsidiary, or any member of the immediate family or affiliate
of the foregoing; (i) cancel, without payment in full, or modify any contract
relating to any loan or other obligation receivable from any stockholder,
director, officer or employee of FIRSTBANC or its subsidiary, or any member of
the immediate family or affiliate of the foregoing; (j) enter into any contract
for services or otherwise with any of the stockholders,
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<PAGE> 31
directors, officers or employees of FIRSTBANC or its subsidiary, or any member
of the immediate family or affiliate of the foregoing; (k) settle any action,
suit or proceeding, at law or in equity, for material money damages, or
involving restrictions on their operations; (l) commence any action, suit or
proceeding except in the ordinary course of business and in accordance with
past practice; (m) modify, amend or terminate any material contract or waive,
release, compromise or assign any material rights or claims except in the
ordinary course of business and for fair consideration; (n) make any material
change in any accounting methods or systems of internal accounting controls
except as may be required to conform to changes in regulatory accounting
requirements or generally accepted accounting principles; (o) enter into any
transaction or course of conduct not in the ordinary course of business; or (p)
fail to file timely any report required to be filed with a regulatory agency.
ANB has agreed that it shall not, and shall not permit any of its
subsidiaries to, do, agree or commit to do any of the following without the
prior written consent of FIRSTBANC: fail to timely file any report required
to be filed with regulatory agencies (including the SEC) or take any action
that would cause the ANB Common Stock to cease being traded on NASDAQ.
ADDITIONAL AGREEMENTS
The Merger Agreement contains additional covenants of (i) each party
to afford the officers, employees, accountants, counsel, and other
representatives of the other, reasonable access during the period prior to the
Effective Time to all its properties, books, contracts, commitments and
records; (ii) FIRSTBANC to use all reasonable 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 to consummate and make effective as soon as
practicable the transactions contemplated by the Merger Agreement; (iii) each
party to obtain the prior consent of the other as to the form and substance of
any press releases or other public disclosure materially related to the Merger;
and (iv) each party to use its best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment and treatment as a "tax-free"
reorganization under the Internal Revenue Code.
FIRSTBANC has agreed to call a meeting of its stockholders to vote on
the Merger and to jointly prepare this Proxy Statement with ANB.
REGISTRATION COVENANTS
ANB has agreed with respect to the shares of ANB Common Stock that
have been issued pursuant to the Merger (i) to file a Registration Statement
with the SEC as soon as practicable after the filing of ANB's first Quarterly
Report on Form 10-Q or the first publication of earnings of ANB that includes
not less than 30 days of combined operations of ANB and FIRSTBANC; (ii) to use
its best efforts to cause such Registration Statement to become effective and
to maintain its effectiveness for two years; (iii) to use its best efforts to
register such shares under the securities laws of such states as may be
reasonably required to enable such shares to be sold in the open market through
broker-dealers; (iv) to furnish such documents as may be necessary to enable
the public sale of such shares; and (v) to pay all expenses in connection with
such registration (excluding underwriting discounts and selling commissions).
The registration of the shares of ANB Common Stock issued in the Merger is
subject to the requirement that each former FIRSTBANC shareholder enter into an
agreement with ANB pursuant to which such person agrees to indemnify and hold
ANB harmless for any loss or damage resulting from any misrepresentation or
omission of a material fact in the Registration Statement made in reliance upon
information furnished in writing by such former FIRSTBANC shareholder. ANB
has, in turn, agreed to indemnify and hold the selling stockholders harmless
from any loss or damage resulting from any misrepresentation or omission of a
material fact in the Registration Statement not made in reliance upon
information provided to ANB by the selling stockholder.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors officers or persons
controlling ANB or FIRSTBANC pursuant to the foregoing provisions ANB and
FIRSTBANC have been informed that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act of
1933 and is therefore unenforceable.
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<PAGE> 32
FAILURE TO CLOSE
ANB and FIRSTBANC have expressly agreed to consummate the Merger as
contemplated by the Merger Agreement, upon the completion of all conditions to
closing (See "- CONDITIONS TO CONSUMMATION OF THE MERGER") and not to take any
action reasonably calculated to prevent the closing nor to delay any action
reasonably required to be taken by it to facilitate the closing. However, to
the extent determined in good faith by a majority of the disinterested members
of the Board of Directors of FIRSTBANC in accordance with their fiduciary
obligations and on the advice of FIRSTBANC's outside counsel, FIRSTBANC may, in
response to an unsolicited request therefor, participate in discussions or
negotiations with, or furnish information with respect to, ANB pursuant to a
customary confidentiality agreement to, any person who makes an Acquisition
Proposal. "Acquisition Proposal" means any tender offer or exchange offer, or
any proposal for a merger, acquisition of all of the stock or assets of, or a
business combination involving FIRSTBANC or its subsidiary, or the acquisition
of a substantial equity interest in, or a substantial portion of the assets of
FIRSTBANC or its subsidiary, including a plan of liquidation of FIRSTBANC or
its subsidiary, other than the Merger provided for in the Merger Agreement.
FIRSTBANC may further approve or recommend (and in connection therewith
withdraw or modify its approval or recommendation of the Merger Agreement) a
superior Acquisition Proposal involving FIRSTBANC or its subsidiary and enter
into an agreement with respect to such superior Acquisition Proposal which a
majority of the disinterested members of the Board of Directors of FIRSTBANC
determines, using good faith judgment, to be more favorable to FIRSTBANC
stockholders than the Merger. FIRSTBANC agrees to promptly advise ANB in
writing of any Acquisition Proposal involving FIRSTBANC or its subsidiary or
any inquiry with respect to or which could lead to any such Acquisition
Proposal and identifying the person making such Acquisition Proposal or
inquiry. In the event the Board of Directors of FIRSTBANC shall enter into an
agreement with respect to a superior Acquisition Proposal, FIRSTBANC shall pay
to ANB a termination fee equal to $200,000. See "- TERMINATION."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
The respective obligations of FIRSTBANC and ANB to consummate the
Merger are subject to various conditions unless waived (see "- AMENDMENT AND
WAIVER"), which include the following:
(a) The Merger Agreement shall have been approved by the requisite
vote of the outstanding shares of the capital stock of FIRSTBANC;
(b) All consents necessary for consummation of the Merger and for
the prevention of a default under or termination of any material right,
privilege, permit or contract of ANB, FIRSTBANC or any of their respective
subsidiaries, shall have been obtained and made and shall be in full force and
effect and all waiting periods required by law shall have expired;
(c) All consents, filings and registrations with the applicable
regulatory authorities required for consummation of the Merger shall have been
obtained or made and all waiting periods required by law shall have expired.
See "THE MERGER - REGULATORY APPROVALS."
(d) No court or regulatory authority shall have issued,
promulgated, enforced or entered any law, regulation or order that prohibits,
restricts or makes illegal the consummation of the Merger.
(e) ANB shall have received a letter from Coopers & Lybrand LLP to
the effect that the Merger will qualify for pooling-of-interests accounting
treatment.
(f) FIRSTBANC shall have received an opinion from Wallace, Jordan,
Ratliff & Brandt, L.L.C. regarding certain Federal income tax consequences. The
Merger Agreement also contemplates that Coopers & Lybrand LLP will provide ANB
a satisfactory tax opinion, but that condition has been waived because of the
duplicative nature of the two tax opinions. See "THE MERGER - CERTAIN FEDERAL
INCOME TAX CONSEQUENCES" and "CERTAIN PROVISIONS OF THE MERGER AGREEMENT -
AMENDMENT AND WAIVER."
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<PAGE> 33
ANB's obligation to consummate the Merger is subject to the following
additional conditions:
(a) All representations and warranties in the Merger Agreement of
FIRSTBANC shall be true and correct in all material respects; FIRSTBANC shall
have performed in all material respects any obligations required to be
performed by it under the Merger Agreement and executed any agreements required
to be entered into in connection therewith; and FIRSTBANC shall have delivered
to ANB a certificate dated as of the Effective Time that FIRSTBANC has complied
with the foregoing conditions;
(b) ANB shall have received from FIRSTBANC's counsel an opinion
dated as of the Effective Time that FIRSTBANC is duly organized under the laws
of the State of Alabama and all corporate actions necessary to authorize
execution delivery and performance of the Merger Agreement and the consummation
of the transactions contemplated by the Merger Agreement have been duly and
validly taken by FIRSTBANC;
(c) FIRSTBANC's subsidiary, First Bank of Baldwin County, shall
have a minimum net worth of at least $2,745,382 immediately prior to the
Effective Time of the Merger;
(d) FIRSTBANC shall have redeemed all of its outstanding Preferred
Stock prior to the Effective Time of the Merger at a price not exceeding
$55,010.
FIRSTBANC's obligations to consummate the Merger are subject to the
following additional conditions:
(a) All representations and warranties of ANB in the Merger
Agreement shall be true and correct in all material respects; ANB shall have
performed in all material respects any obligations required to be performed by
it under the Merger Agreement and executed any agreements required to be
entered into in connection therewith; and ANB shall have delivered to FIRSTBANC
a certificate dated as of the Effective Time that ANB has complied with the
foregoing conditions.
(b) FIRSTBANC shall have received from ANB's counsel an opinion
dated as of the Effective Time that ANB is duly organized under the laws of the
State of Delaware and all corporate action necessary to authorize execution
delivery and performance of the Merger Agreement and the consummation of the
transactions contemplated by the Merger Agreement shall have been duly and
validly taken;
TERMINATION
The Merger Agreement may be terminated any time prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of
FIRSTBANC:
(a) By mutual written consent of the Boards of Directors of ANB
and FIRSTBANC;
(b) By either ANB or FIRSTBANC if:
(i) The Effective Time shall not have occurred on or prior to
December 31, 1996 unless the failure of such occurrence shall be due
to the failure of the party seeking to terminate the Merger Agreement
to perform or observe its agreements and conditions set forth in the
Merger Agreement;
(ii) The Merger Agreement is submitted to a vote and not
approved by the requisite vote of the stockholders of FIRSTBANC at a
meeting held for that purpose;
(iii) At any time following the date upon which any
governmental entity has finally denied any application for approval
which is a prerequisite to the Merger.
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<PAGE> 34
(c) By ANB:
(i) Upon written notice to FIRSTBANC if there shall have been
any material breach of any covenant, representation, warranty or other
obligation of FIRSTBANC under the Merger Agreement and such breach
shall not have been remedied within thirty (30) days after receipt by
FIRSTBANC of notice in writing from ANB specifying the nature of such
breach and requesting that it be remedied;
(ii) Upon written notice to FIRSTBANC if there shall have
occurred any material adverse change in the business operations or
financial condition of FIRSTBANC taken as a whole, and such material
adverse change shall have not been remedied within fifteen (15) days
after receipt by FIRSTBANC of notice in writing from ANB specifying
the nature of such material adverse change and requesting that it be
remedied; or
(iii) If the holders of in excess of 5% of the outstanding
FIRSTBANC Common Stock properly assert their appraisal rights.
(d) By FIRSTBANC:
(i) Upon written notice to ANB if there shall have been any
material breach of any covenant, representation, warranty or
obligation of ANB hereunder and such breach shall not have been
remedied within thirty (30) days after receipt by ANB of notice in
writing from FIRSTBANC specifying the nature of such breach and
requesting that it be remedied;
(ii) Upon written notice to ANB if there shall have occurred
any material adverse change in the business operations or financial
condition of ANB taken as a whole, and such a material adverse change
shall not have been remedied within fifteen (15) days after receipt by
ANB of notice in writing from FIRSTBANC specifying the nature of such
material adverse change and requesting that it be remedied; or
(iii) To the extent that a majority of the disinterested
members of the Board of Directors of FIRSTBANC shall determine to
enter into an agreement with respect to a superior Acquisition
Proposal, provided that concurrently with such termination FIRSTBANC
shall pay ANB a termination fee equal to $200,000 which shall serve as
complete satisfaction of all damages, expenses and costs to which ANB
may be entitled to claim from FIRSTBANC or its officers, directors or
stockholders pursuant to the Merger Agreement.
In the event of termination of the Merger Agreement by either ANB or
FIRSTBANC, the Merger Agreement will become void and will have no effect except
under certain specified provisions of the Merger Agreement relating to
confidentiality of information, expenses (See "- EXPENSES"), and the effect of
termination of the Merger Agreement.
AMENDMENT AND WAIVER
Subject to applicable law the Merger Agreement may be amended by a
subsequent writing signed by FIRSTBANC and ANB upon approval of their
respective Boards of Directors.
At any time prior to the Effective Time, ANB or FIRSTBANC by action
taken or authorized by their respective Boards of Directors may, to the extent
legally allowed, extend the time for performance of any obligations of
FIRSTBANC to ANB and any obligation of ANB to FIRSTBANC, waive inaccuracies in
representations and warranties, and waive compliance with any agreements for
their respective benefit contained in the Merger Agreement.
15
<PAGE> 35
ANB may waive the satisfaction of any condition that in the opinion of
its Board of Directors will not have a material adverse effect on its
stockholders. FIRSTBANC may waive the satisfaction of any condition that in
the opinion of its Board of Directors will not have a material adverse effect
on the stockholders of FIRSTBANC. Notwithstanding the foregoing, neither ANB
nor FIRSTBANC will waive the conditions relating to approval by the
stockholders of FIRSTBANC. FIRSTBANC will not waive the requirement that
Wallace, Jordan, Ratliff & Brandt, L.L.C. deliver a favorable opinion as to the
federal income tax consequences with respect to the Merger. ANB will not waive
the requirement that Coopers & Lybrand LLP deliver a favorable opinion as to
the "pooling of interests" accounting treatment for the Merger. See "-
REPRESENTATIONS AND WARRANTIES" and "- CONDITIONS TO THE CONSUMMATION OF THE
MERGER."
EXPENSES
Whether or not the Merger is consummated, all costs and expenses
incurred in connection with the Merger Agreement and any transaction
contemplated thereby, including fees and expenses of financial and other
consultants, investment bankers, accountants and counsel, shall be borne by the
party incurring such expense, except that ANB shall be solely responsible for
cost and expenses of printing and mailing the Proxy Statement.
COMPARATIVE MARKET PRICES AND DIVIDENDS
ANB never paid a cash dividend prior to February 23, 1995, on which
date ANB's Board of Directors authorized an initial cash dividend of $.20
annually to be paid in quarterly installments of $.05. The quarterly dividends
have been paid at this rate through the third quarter of 1996. On August 23,
1996, the Board of Directors of ANB increased the quarterly cash dividend to
$.09 per share, payable on October 3, 1996 to shareholders of record on
September 14, 1996. ANB presently intends to continue to pay a cash dividend.
See "SPECIAL CONSIDERATIONS - RESTRICTIONS ON DIVIDENDS" and "SUPERVISION AND
REGULATION."
FIRSTBANC has never paid a dividend on the FIRSTBANC Common Stock.
FIRSTBANC has paid dividends on the FIRSTBANC Preferred Stock in accordance
with its terms in the amount of $5,501 in each of the years 1992-1995.
There is no established public trading market for the FIRSTBANC Common
Stock. On June 10, 1996, FIRSTBANC had thirteen (13) holders of record of the
FIRSTBANC Common Stock. Such shares are not listed on any exchange or quoted
on any automated quotation system and no institution makes a market in the
stock. FIRSTBANC is not aware of any sales of shares of FIRSTBANC Common
Stock.
ANB Common Stock is traded on the NASDAQ National Market System under
the trading symbol "ALAB." ANB Common Stock was first publicly traded on
November 11, 1994, after completion of ANB's Initial Public Offering. As of
August 9, 1996, there were 266 holders of record of ANB Common Stock. The high
and low prices of ANB Common Stock for the balance of 1994, 1995 and the first
two quarters of 1996 are as follows:
16
<PAGE> 36
QUARTERLY MARKET DATA FOR ANB COMMON STOCK(1)(2)
1994
<TABLE>
<CAPTION>
Period from
November 11 to
December 31
-----------
<S> <C>
High 10 3/4
Low 8 1/2
</TABLE>
1995
<TABLE>
<CAPTION>
First Quarter Second Quarter Third Quarter Fourth Quarter
------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
High 12 1/4 14 1/2 13 14 3/4
Low 8 1/4 11 11 11 3/8
</TABLE>
1996
<TABLE>
<CAPTION>
First Quarter Second Quarter
------------- --------------
<S> <C> <C>
High 14 1/4 13 5/8
Low 12 3/4 12
</TABLE>
(1) The prices shown do not reflect retail mark-ups and mark-downs. All
share prices have been rounded to the nearest one-eighth of one
dollar.
(2) The market makers for the ANB Common Stock as of June 30, 1996, were
J. C. Bradford & Co.; Raymond James & Associates Inc.; Herzog Heine
Geduld Inc.; Keefe Bruyette & Woods Inc.; Legg Mason Wood Walker
Incorporated; The Robinson Humphrey Company Inc.; Sterne Agee & Leach
Inc.; and The Chicago Corporation.
17
<PAGE> 37
DESCRIPTION OF ANB CAPITAL STOCK
GENERAL
The authorized capital stock of ANB currently consists of 10,000,000
shares of ANB Common Stock and 100,000 shares of preferred stock par value
$1.00 per share (the "ANB Preferred Stock"). The following in a summary
description of ANB's capital stock.
COMMON STOCK
Holders of shares of ANB Common Stock are entitled to receive such
dividends as may from time to time be declared by the ANB Board out of funds
legally available therefor. See "COMPARATIVE OF MARKET PRICES AND DIVIDENDS."
Holders of ANB Common Stock are entitled to one vote per share on all matters
on which the holders of ANB Common Stock are entitled to vote and do not have
cumulative voting rights. Holders of ANB Common Stock have no preemptive,
conversion, redemption or sinking fund rights. In the event of a liquidation,
dissolution or winding-up of ANB, holders of ANB Common Stock are entitled to
share equally and ratably in the assets of ANB, if any, remaining after the
payment of all debts and liabilities of ANB and the liquidation preference of
any outstanding ANB Preferred Stock. The outstanding shares of ANB Common
Stock are, and the shares of ANB Common Stock offered by ANB hereby when
issued, will be fully paid and nonassessable. The rights, preferences and
privileges of holders of ANB Common Stock are subject to any class or series of
ANB Preferred Stock that ANB may issue in the future.
PREFERRED STOCK
The ANB Certificate of Incorporation provides that the Board of
Directors is authorized without further action by the holders of the ANB Common
Stock to provide for the issuance of shares of ANB Preferred Stock in one or
more classes or series and to fix the designations, powers, preferences and
relative participating optional and other rights, qualifications limitations
and restrictions thereof, including the dividend rate, conversion rights,
voting rights, redemption price and liquidation preference, and to fix the
number of shares to be included in any such class or series. Any share of ANB
Preferred Stock so issued may rank senior to the ANB Common Stock with respect
to the payment of dividends or amounts upon liquidation, dissolution, or
winding-up, or both. In addition, any such shares of ANB Preferred Stock may
have class or series voting rights. Upon completion of this Merger, ANB will
not have any shares of ANB Preferred Stock outstanding. Issuances of ANB
Preferred Stock while providing ANB with flexibility in connection with general
corporate purposes may, among other things, have an adverse effect on the
rights of holders of ANB Common Stock and in certain circumstances such
issuances could have the effect of decreasing the market price of the ANB
Common Stock. The ANB Board, without stockholder approval, may issue ANB
Preferred Stock with voting or conversion rights which could adversely affect
the voting power of the holders of the ANB Common Stock. ANB has no present
plan to issue any shares of ANB Preferred Stock. See "- COMPARISON OF
STOCKHOLDER RIGHTS."
CERTAIN ANTI-TAKEOVER EFFECTS
The provisions of the ANB Certificate of Incorporation, the ANB
ByLaws, and the Delaware Corporation Law summarized in the following paragraphs
may be deemed to have anti-takeover effects and may delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider to be in
such stockholder's best interest, including those attempts that might result in
a premium over the market price for the shares held by stockholders and may
make removal of management more difficult.
18
<PAGE> 38
Authorized but Unissued Stock
The authorized but unissued shares of ANB Common Stock and ANB
Preferred Stock will be available for future issuance without stockholder
approval. These additional shares may be utilized for a variety of corporate
purposes including future public offerings to raise additional capital,
corporate acquisitions and employee benefit plans. The existence of authorized
but unissued and unreserved ANB Common Stock and ANB Preferred Stock may enable
the Board of Directors to issue shares to persons friendly to current
management which could render more difficult or discourage any attempt to
obtain control of ANB by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of ANB's management.
Limitations on Stockholder Action by Written Consent and Limitations
on Calling Stockholder Meetings.
The ANB Certificate of Incorporation and ANB ByLaws prohibit
stockholder action by written consent in lieu of a meeting and provide that
stockholder action can be taken only at an annual or special meeting of
stockholders. The ANB ByLaws provide that subject to the rights of holders of
any series of ANB Preferred Stock to elect additional directors under specified
circumstances, special meetings of stockholders can be called only by the ANB
Board or the Chairman of the ANB Board. Stockholders will not be permitted to
call a special meeting of stockholders. Such provision may have the effect of
delaying consideration of a stockholder proposal until the next annual meeting
unless a special meeting is called by the ANB Board or the Chairman of the ANB
Board.
Section 203 of the Delaware Corporation Law
Subject to certain exclusions summarized below, Section 203 of the
Delaware Corporation Law ("Section 203") prohibits any "Interested stockholder"
from engaging in a "Business Combination" with a Delaware corporation for three
years following the date such person became an Interested stockholder.
"Interested stockholder" generally includes: (a)(i) any person who is the
beneficial owner of 15% or more of the outstanding voting stock of the
corporation or (ii) any person who is an affiliate or associate of the
corporation and who was the beneficial owner of 15% or more of the outstanding
voting stock of the corporation at any time within three years before the date
on which such person's status as an Interested stockholder is determined; and
(b) the affiliates and associates of such person. Subject to certain
exceptions, a "Business Combination" includes (i) any merger or consolidation
of the corporation or a majority-owned subsidiary of the corporation; (ii) the
sale, lease, exchange, mortgage, pledge, transfer or other disposition of
assets of the corporation or a majority-owned subsidiary of the corporation
having an aggregate market value equal to 10% or more of either the aggregate
market value of all assets of the corporation determined on a consolidated
basis or the aggregate market value of all the outstanding stock of the
corporation; (iii) any transaction that results in the issuance or transfer by
the corporation or a majority-owned subsidiary of the corporation of any stock
of the corporation or the subsidiary to the Interested stockholder except
pursuant to a transaction that effects a pro rata distribution to all
stockholders of the corporation; (iv) any transaction involving the corporation
or a majority-owned subsidiary of the corporation that has the effect of
increasing the proportionate share of the stock of any class or series or
securities convertible into the stock of any class or series of the corporation
or the subsidiary that is owned by the Interested stockholder; and (v) any
receipt by the Interested stockholder of the benefit (except proportionately as
a stockholder) of any loans, advances, guarantees, pledges or other financial
benefits provided by or through the corporation or a majority-owned subsidiary
of the corporation.
Section 203 does not apply to a Business Combination if (i) before a
person became an Interested stockholder, the board of directors of the
corporation approved either the transaction in which the Interested stockholder
became an Interested stockholder or the Business Combination; (ii) upon
consummation of the transaction that resulted in the person becoming an
Interested stockholder, the Interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced (other than certain excluded shares); or (iii) following a
transaction in which the person became an Interested stockholder the Business
Combination is (a) approved by the board of directors of the corporation and
(b) authorized at a regular or special meeting of stockholders (and not by
written consent) by the affirmative vote of the holders of at least two-thirds
of the outstanding voting stock of the corporation not owned by the Interested
stockholder.
19
<PAGE> 39
COMPARISON OF STOCKHOLDER RIGHTS
ANB is a Delaware corporation and FIRSTBANC is an Alabama corporation.
The following is a summary of differences between the rights of stockholders in
Delaware and Alabama corporations. This summary does not purport to be a
definitive discussion of the differences in the corporation laws of Alabama and
Delaware, and is qualified in its entirety by the General Corporation Law of
Delaware, the Alabama Business Corporation Act.
Voting Requirements
Under Alabama law, amendments to the Articles of Incorporation,
mergers or share exchanges, and the sale of substantially all assets outside
the ordinary course of business must be approved by each voting group voting
together and separately as a class. A voting group is defined as a separate
class of stock, whether voting or nonvoting, that is entitled under the
Articles of Incorporation or Alabama law to vote on a matter. All voting
groups entitled to vote separately as a class on a matter constitute a single
voting group. The effect of this provision is that on matters where voting
groups vote separately as a class, the proposal must be approved by the
requisite percentage of each voting group as well as the requisite percentage
of the shares in all voting groups. Assuming FIRSTBANC will redeem its
Preferred Stock prior to the Special Meeting as contemplated by the Merger
Agreement, the FIRSTBANC Common Stock will comprise FIRSTBANC's only voting
group.
In the case of a merger or share exchange, a class of stock will be
considered a voting group entitled to vote separately on the matter if its
shares are to be exchanged for different securities or if the Plan of Merger
contemplates the Articles of Incorporation of the issuer of such securities to
be amended in such a manner as would require voting by separate voting groups.
Unless the Articles of Incorporation specifically provide for a lesser
percentage (but not less than a majority of the outstanding shares entitled to
vote thereon), the approval of a merger or share exchange requires the
affirmative vote of not less than two-thirds (2/3) of the shares in each voting
group entitled to vote on a matter including not less than two-thirds (2/3) of
the shares of all voting groups entitled to vote on the matter voting as a
single voting group. Alabama law further provides that no shareholder vote is
required (i) by the parent if an 80% subsidiary is merged into the parent or
(ii) by the surviving corporation, if the securities to be issued in the merger
comprise less than 20% of the class outstanding immediately prior to the
merger, the shares to be issued are not superior in rights to any class of
outstanding securities of the surviving corporation and the Articles of
Incorporation will not be amended. The Articles of Incorporation of FIRSTBANC
do not provide for a lesser majority for approval of the Merger.
In the case of the sale or other disposition of substantially all
assets outside the ordinary course of business, an Alabama corporation must
obtain the affirmative vote of two-thirds (2/3) of the outstanding shares
unless the Articles of Incorporation require voting by separate voting groups.
The Articles of Incorporation may provide for approval of such a transaction by
a lesser majority so long as it is not less than a majority of the outstanding
shares entitled to vote thereon. The Articles of Incorporation of FIRSTBANC do
not include such a provision.
In the case of certain amendments to the Articles of Incorporation of
an Alabama corporation, a class of stock will be considered a separate voting
group entitled to vote on the matter if the proposed amendment will: (i)
increase or decrease the aggregate number of authorized shares of the class;
(ii) effect an exchange or reclassification of all or part of the shares of the
class into shares of another class; (iii) effect an exchange or
reclassification, or create the right of exchange, of all or part of the shares
of another class into shares of the class; (iv) change the designation, rights,
preferences, or limitations of all or part of the shares of the class; (v)
change the shares of all or part of the class into a different number of shares
of the same class; (vi) create a new class of shares having rights or
preferences with respect to distributions that are prior, superior, or
substantially equal to the shares of the class; (vii) increase the rights,
preferences or number of authorized shares of any class that, after giving
effect to the amendment, have rights or preferences with respect to
distributions that are prior, superior or substantially equal to the shares of
the class; (viii) limit or deny an existing preemptive right of all or part of
the shares of the class; (ix) cancel or otherwise affect rights to
distributions of dividends that have accumulated but not yet been declared on
all or part of the shares of the class; (x) alter or abolish a preferential
right of the class; (xi) create, alter or abolish a right in respect of
redemption,
20
<PAGE> 40
including a provision respecting a sinking fund for the redemption or
repurchase of the class; (xii) alter or abolish a preemptive right of the
holder of shares of the class to acquire shares or other securities; (xiii)
exclude or limit the right of the shares of the class 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; or (xiv) reduce the
number of shares owned by a shareholder to a fraction of a share if the
fractional share so created is to be acquired for cash.
Unless the Articles of Incorporation provide for a greater majority,
the approval of an amendment to the Articles of Incorporation of an Alabama
corporation requires the affirmative vote of a majority of the shares of each
voting group entitled to vote separately on the matter, including a majority of
the shares of all voting groups entitled to vote on the matter voting as a
voting group. The Articles of Incorporation of FIRSTBANC do not provide for a
percentage greater than a majority for approval of an amendment.
Under the Alabama Constitution, the issuance of preferred stock and
the increase in stock or bonded indebtedness requires approval of the
shareholders. The issuance of preferred stock requires approval of the
outstanding shares voting as a single voting group unless the issuance of the
preferred stock comprises an amendment to the Articles of Incorporation
requiring voting by separate voting groups under the Alabama Business
Corporation Act. The Alabama Constitution requires approval of two-thirds
(2/3) of the outstanding shares for the issuance of preferred stock. The
increase in stock or bonded indebtedness of an Alabama corporation requires
approval of persons holding the larger amount in value of the outstanding stock
after 30 days written notice.
By comparison, Delaware law requires only the affirmative vote of a
majority of all outstanding voting shares, and of each class entitled to vote
thereon, to effect a merger, an amendment to the Certificate of Incorporation
and the sale of substantially all assets. Delaware law includes provisions
similar to the Alabama statute that exempt surviving corporations from
obtaining shareholder approval of a merger of a subsidiary into a parent
(except that Delaware requires 90% ownership by the parent) and a merger
involving the issuance of less than 20% of the outstanding stock. Delaware law
does not require classes of shares to vote separately on a merger unless
required by the Certificate of Incorporation. In the case of an amendment to
the Certificate of Incorporation, Delaware law requires the shares of a class
to vote separately on the amendment, whether or not voting or nonvoting shares,
only if the amendment would (a) increase or decrease the authorized number of
shares of such class (unless otherwise provided in the Certificate of
Incorporation); (b) increase or decrease the par value of the shares of such
class; or (c) alter or change the powers, preferences of the shareholders of
such class so as to affect them adversely. ANB currently has no provisions in
its Certificate of Incorporation requiring separate class voting on a merger or
an amendment to its Certificate of Incorporation.
Delaware law has no comparable provisions requiring stockholder
approval for the issuance of preferred stock or bonded indebtedness.
Appraisal Rights
Both Alabama and Delaware law provide rights of appraisal for
stockholders who desire to dissent from the terms of a merger or consolidation.
Alabama also provides appraisal rights for a share exchange, a sale of all or
substantially all of the corporate assets other than in the regular course of
business, and certain amendments to its Articles of Incorporation. In Alabama,
appraisal rights are afforded to a shareholder if an amendment of the Articles
of Incorporation materially and adversely affects such shareholder because it:
(i) alters or abolishes a preferential right; (ii) 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; (iii) alters or abolishes
a preemptive right of the shareholder to acquire shares or other securities;
(iv) excludes or limits the right of the shareholder 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; or (v) reduces the
number of shares owned by such shareholder to a fractional share to be acquired
for cash. Under these statutes, a stockholder who properly dissents from the
terms of a transaction in which he has appraisal rights may demand that the
corporation pay him: (i) in Delaware, the fair value of the shares exclusive of
any element of value arising from the accomplishment or expectation of the
transaction; or (ii) in Alabama, the value of the shares
21
<PAGE> 41
immediately prior to the effectuation of the corporate action on which the vote
was taken, excluding any appreciation or depreciation in anticipation of such
corporate action unless exclusion would be inequitable. The procedures for
perfecting appraisal rights are different for Alabama and Delaware
corporations. For a description of the procedure for holders of FIRSTBANC
Common Stock, see "APPRAISAL RIGHTS."
Notice of Stockholder Meetings
Under Delaware and Alabama law, stockholders are generally entitled to
written notice of a stockholders' meeting not less than ten (10) days nor more
than sixty (60) days prior to the meeting, except for meetings to vote on the
merger, consolidation or sale of substantially all of the assets of the
corporation, in which case advance written notice of not less than twenty (20)
days is required under Delaware law. Meetings which are called to vote on the
increase of bonded indebtedness of an Alabama corporation or to vote on an
amendment to increase the capital stock of an Alabama corporation require at
least thirty (30) days advance written notice.
Dividends
The legal ability of the Board of Directors to declare and pay
dividends on the outstanding common stock is different for Alabama and Delaware
corporations. Delaware corporations may pay dividends to the extent of its
surplus (retained earnings and paid in capital) and if no surplus is available,
dividends may be paid to the extent of the net profits of the corporation for
the current and preceding fiscal year, if there is no deficiency in the amount
of capital represented by all outstanding classes of preferred stock.
Alabama, on the other hand, addresses all distributions to
shareholders on the same basis, including without limitation, payment of
dividends; purchase, redemption or the acquisition of shares; a distribution of
indebtedness; or otherwise. Rather than making reference to the surplus of the
corporation as the test for the legality of a distribution, Alabama law tests
the legality of a distribution on the effect it has on the solvency of the
corporation. A distribution may not be made if after giving it effect: (i) the
corporation would not be able to pay its debts as they become due in the
ordinary course of business; or (ii) the corporation's total assets would be
less than the sum of its total liabilities plus (unless the articles of
incorporation permit otherwise) the amount that would be needed, if the
corporation were to be dissolved at the time of distribution, to satisfy
preferential rights that are superior in dissolution to those receiving the
distribution.
Section 203
Section 203 of the Delaware General Corporation Law ("Section 203")
imposes, with certain exceptions, a three year ban on certain transactions and
business combinations between a corporation (or its majority owned
subsidiaries) and a holder of fifteen percent (15%) or more of the
corporation's outstanding voting stock, together with affiliates or associates
thereof. The three year ban does not apply if either the proposed business
combination or the transaction by which the fifteen percent (15%) stockholder
became a fifteen percent (15%) stockholder is approved by the Board of
Directors prior to becoming a fifteen percent (15%) stockholder, owns at least
eighty-five percent (85%) of the outstanding voting stock of the corporation,
without regard to those shares owned by the corporation's officers and
directors or certain employee stock plans, or if approved by the Board of
Directors of the corporation and, at an annual or special meeting, by the
holders of sixty-six and two-thirds percent (66-2/3%) of the outstanding voting
stock of the corporation not owned by the fifteen percent (15%) stockholder.
Section 203 is peculiar to Delaware corporations and does not apply to
Alabama corporations such as FIRSTBANC.
22
<PAGE> 42
Stockholder Consents
Both Alabama and Delaware law, unless otherwise provided in the
Articles or Certificate of Incorporation, allow Stockholders to act without a
meeting or notice of a meeting by written consent. Delaware provides for such
written consent signed by the holders of at least the minimum number of votes
which would be necessary to authorize such action at a meeting of all eligible
stockholders; whereas, Alabama requires unanimous written consent. ANB's
Certificate of Incorporation specifically limits stockholder action to annual
and special meetings, and specifically denies stockholder action by written
consent.
Blank Check Preferred Stock
ANB's Certificate of Incorporation has authorized the issuance of
100,000 shares of preferred stock of which the designations and powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof (collectively, "Characteristics"), may be undetermined until fixed by
resolution or resolutions of the Board of Directors ("Blank Check Preferred
Stock"). The purpose of Blank Check Preferred Stock is to provide the Board of
Directors with financial flexibility to raise additional capital through the
issuance of senior securities and to provide the Board of Directors the ability
to respond to hostile takeover bids. By leaving the Characteristics
undetermined until resolved by the Board of Directors, the Board of Directors
is able to issue one or more classes of customized preferred stock to
individuals or corporations in negotiated transactions at any time in the
future without a vote of the stockholders. Blank Check Preferred Stock also
allows the Board of Directors to react quickly, in the face of a hostile bid,
by issuing preferred stock with Characteristics unfavorable to the hostile
bidder in order to make such an acquisition less economical. Blank Check
Preferred Stock is allowed under Alabama law, but may not be issued without the
affirmative approval of two-thirds (2/3) of the outstanding voting stock. See
"-- VOTING REQUIREMENTS."
Limitation of Liability of Directors
Both Alabama and Delaware law permit the Articles or Certificate of
Incorporation to include a provision which, subject to certain exceptions
described below, eliminates the liability of a director to the stockholders for
monetary damages for any breach of duty as a director. This provision does not
however eliminate liability of such director (i) for violations of his duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or involving intentional misconduct or a knowing violation of
law, (iii) for unlawful dividends and distributions, or (iv) for any
transaction from which the director derived an improper personal benefit. The
Certificate of Incorporation of ANB includes this provision and the Articles of
Incorporation of FIRSTBANC do not include such a provision.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for ANB Common Stock is AmSouth Bank of
Alabama.
23
<PAGE> 43
FIRSTBANC SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data for the years ended
December 31, 1995, 1994 and 1993 and the six months ended June 30, 1996 and
1995 are derived from the consolidated financial statements and other data of
FIRSTBANC. The consolidated financial statements of FIRSTBANC for the six
months ended June 30, 1996 and 1995 are unaudited. The consolidated financial
statements for the years ended December 31, 1993 through 1995 were audited by
S.W. Chiepalich, Certified Public Accountant, independent auditor. The
selected consolidated financial data should be read in conjunction with the
consolidated financial statements of FIRSTBANC, including the accompanying
notes, included elsewhere herein. See "INDEX TO FINANCIAL STATEMENTS."
24
<PAGE> 44
THREE-YEAR SUMMARY OF SELECTED FINANCIAL DATA OF FIRSTBANC
(AMOUNTS IN THOUSANDS, EXCEPT SHARES, RATIOS AND PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- --------------------
1993 1994 1995 1995 1996
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income .................................................. $ 2,274 $ 2,378 $ 2,537 $ 1,236 $ 1,310
Interest expense ................................................. 853 834 1,020 484 515
------- ------- ------- ------- -------
Net interest income .............................................. 1,421 1,544 1,517 752 795
Provision for loan losses ........................................ 122 49 17 8 9
------- ------- ------- ------- -------
Net interest income after provision for loan losses
(benefit of recoveries) ........................................ 1,299 1,495 1,500 744 786
Net securities gains (losses) .................................... 13 (10) 3 0 0
Noninterest income ............................................... 335 329 336 158 184
Noninterest expense .............................................. 1,252 1,250 1,255 619 661
------- ------- ------- ------- -------
Income before income taxes ....................................... 395 564 584 283 309
Provision for income taxes ....................................... 160 189 159 91 90
------- ------- ------- ------- -------
Net income ....................................................... $ 235 $ 375 $ 425 $ 192 $ 219
======= ======= ======= ======= =======
BALANCE SHEET DATA:
Total assets ..................................................... $32,983 $32,772 $33,149 $35,295 $35,111
Earning assets ................................................... 29,881 29,126 29,792 30,134 30,650
Securities ....................................................... 11,935 10,436 10,150 9,981 9,734
Loans (1) ........................................................ 15,797 18,415 19,142 17,603 20,241
Allowance for loan losses ........................................ 212 252 269 262 275
Deposits ......................................................... 29,504 29,283 29,922 32,150 31,422
Short-term debt .................................................. 850 657 9 296 303
Long-term debt ................................................... 704 600 497 561 455
Stockholders' equity ............................................. 1,846 2,105 2,599 2,359 2,790
WEIGHTED AVERAGE SHARES OUTSTANDING ............................. 42,782 42,782 42,782 42,782 42,782
PER COMMON SHARE DATA:
Net income (2) ................................................... $ 5.37 $ 8.64 $ 9.81 $ 4.49 $ 5.12
Book value (period-end) ......................................... 41.87 47.91 59.47 53.85 63.93
Tangible book value (period-end) ............................... 41.87 47.91 59.47 53.85 63.93
PERFORMANCE RATIOS:
Return on average assets (3) .................................... 0.74% 1.13% 1.27% 1.16% 1.29%
Return on average equity (3) ..................................... 13.46 18.61 18.12 17.09 16.25
Net interest margin (4) .......................................... 5.04 5.21 5.09 5.09 5.23
Net interest margin (taxable equivalent) (5) ..................... 5.10 5.36 5.30 5.30 5.47
ASSET QUALITY RATIOS:
Allowance for loan losses to period-end loans .................... 1.34% 1.37% 1.41% 1.49% 1.36%
Allowance for loan losses to period-end
nonperforming loans (6) ........................................ 67.95 161.54 413.85 414.71 509.26
Net charge-offs (recoveries) to average loans (3) ................ 0.80 0.05 0.00 (0.01) 0.03
Nonperforming assets to period-end loans and
foreclosed property (6) ........................................ 1.98 0.85 0.34 0.39 0.27
CAPITAL AND LIQUIDITY RATIOS:
Average equity to average assets ................................. 5.51% 6.07% 7.02% 6.80% 7.93%
Leverage (4.00% required minimum) (7) ............................ 5.56 6.71 7.88 6.82 8.07
Risk-based capital:
Tier 1 (4.00% required minumum) (7) ............................ 9.65 10.66 12.17 11.84 12.99
Total (8.00% required minimum) (7) ............................. 10.76 11.87 13.42 13.09 14.24
Average loans to average deposits ................................ 53.33 56.53 60.17 61.11 64.06
</TABLE>
25
<PAGE> 45
______________________
(1) Loans, net of unearned income, before allowance for loan losses.
(2) Net income per common share is calculated based upon net income as adjusted
for cash dividends paid on preferred stock.
(3) Annualized for the six month periods ended June 30, 1995 and 1996.
(4) Net interest income divided by average earning assets.
(5) Net interest margins have been adjusted to a taxable equivalent basis
utilizing a 34% tax rate on tax-exempt investment income.
(6) Nonperforming loans and nonperforming assets includes loans past due 90
days or more that are still accruing interest.
(7) The required minimum Tier 1 and Total Risk-based capital ratios are 4% and
8%, respectively. The minimum laverage ratio of Tier 1 capital to total
adjusted assets is 3% to 5%.
26
<PAGE> 46
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
BASIS OF PRESENTATION
The following is management's discussion and analysis of the
consolidated financial condition of FIRSTBANC as of June 30, 1996 and the
results of its operations for the six month periods ended June 30, 1996 and
1995 and for the years ended December 31, 1995, 1994, and 1993. This
information should be read in conjunction with FIRSTBANC's consolidated
financial statements and related notes included elsewhere herein.
Unless the context otherwise indicates, references in this management's
discussion to FIRSTBANC and its financial condition and results of operations
are to historical consolidated condition and results of operations of FIRSTBANC
and Subsidiary, and references in this discussion to the pro forma financial
condition and results of operations of ANB are to the pro forma combined
consolidated condition and results of Alabama National BanCorporation and
Subsidiaries, giving effect to the Merger under the pooling-of-interests method
of accounting pursuant to which the results of operations and financial
condition of FIRSTBANC are included for each period presented.
RESULTS OF OPERATIONS
Six months ended June 30, 1996 compared with six months ended June 30,
1995
FIRSTBANC's net income for the six month period ended June 30, 1996
(the "1996 period"), was $219,000, a 14% increase over net income of $192,000
for six months ended June 30, 1995 (the "1995 period"). For the 1996 period,
net income per common share was $5.12 compared with $4.49 for the 1995 period.
The improvement in the 1996 net income was the result of an increase in
net interest margin, an increase in noninterest income less an increase in
noninterest expense.
The return on average assets for FIRSTBANC was 1.29% for the 1996
period, compared to 1.16% for the 1995 period. The return on average
stockholders' equity decreased for the 1996 period to 16.25%, as compared to
17.09% for the 1995 period. Book value and tangible book value at June 30,
1996 per common share was $63.93, and increase of $4.46 from year end 1995.
The largest component of FIRSTBANC's net income is its net interest
income, which is the difference between the interest earned on assets and the
interest paid on deposits and borrowing used to support such assets. The net
interest margin increased to 5.23% for the 1996 period, compared to 5.09% for
the 1995 period.
Year ended December 31, 1995 compared with year ended December 31,
1994
FIRSTBANC's net income increased $50,000 or 13.3% to $425,000 in the
year ended December 31, 1995, from $375,000 in the year ended December 31,
1994. This increase was the result of several factors including an increase
in service fees on deposits, an increase in gain on sales and calls of
investment securities, a reduction in the provision for loan losses and a
reduction in income taxes as a result of increased income from tax exempt
investment securities. Return on average assets during 1995 was 1.27%, compared
to 1.13% in 1994, and return on average equity was 18.12% in 1995, compared to
18.61% in 1994.
Net interest income decreased $28,000, or 1.8%, to $1,517,000 in 1995
from $1,544,000 in 1994 as interest income increased $158,000 and interest
expense increased $186,000. The decrease in net interest was due to a 70 basis
point increase in the cost of funds offset by a 54 basis point increase in the
rate earned on earning assets. Average earning assets increased $141,000 while
interest-bearing liabilities increased $301,000. The net interest spread
decreased from 4.82% in 1994 to 4.66% in 1995. See "--Average Balances,
Income, Expenses and Rates for the years ended December 31, 1995, 1994 and
1993."
27
<PAGE> 47
The provision for loan losses was $17,000 in 1995, a decline of $32,000
from a provision of $49,000 in 1994, as a result of management's assessments
that loan loss experience and asset quality had improved sufficiently to allow
a reduction in the provision. This assessment was based on the level and trend
of the allowance for loan losses as a percentage of period-end loans and
nonperforming loans, the decreasing level of net charge-offs, results of
internal monitoring and indications of continued improvement in the local and
national economies. FIRSTBANC's allowance for loan losses as a percentage of
its period-end loans was 1.41% at December 31, 1995, compared to 1.37% at year
end 1994, and the allowance for loan losses as a percentage of period-end
nonperforming loans was 413.85% at December 31, 1995 compared to 161.54% at
December 31, 1994. FIRSTBANC had no net losses in 1995 compared to net losses
of $9,000 in 1994. The ratio of net charge-offs to average loans was .05% in
1994. See "--Provision and Allowance for Loan Losses."
Noninterest income increased $20,300, or 6.4%, to $339,400 in 1995 from
$319,100 in 1994. The increase resulted from a $8,900 increase in fees charged
on deposits, a $12,700 increase in gain on sales and calls of investment
securities offset by a $1,300 decrease in other noninterest income. See
"--Noninterest Income and Expense -- Noninterest Income."
Noninterest expense increased $5,000, or .4%, to $1,225,000 in 1995
from $1,250,00 in 1994. Salaries and employee benefits increased $34,000,
occupancy expense increased $13,000 and other noninterest expense decreased
$42,000. See "--Noninterest Income and Expense -- Noninterest Expense."
Year ended December 31, 1994 compared with year ended December 31, 1993
FIRSTBANC's net income increased $140,000, or 59.3%, to $375,000 in the
year ended December 31, 1994 from $235,000 in the year ended December 31, 1993.
This increase resulted from an increase in net interest income, a reduction in
the provision for loan losses offset in part by losses on the sale of investment
securities. Return on average assets was 1.13% in 1994, compared to .74% in
1993, and the return on average equity was 18.61% in 1994, compared to 13.46%
in 1993.
Net interest income increased $123,300, or 8.7%, to $1,544,400 in 1994
from $1,421,000 in 1993, as interest income increased $104,400 and interest
expense decreased $18,900. The increase in net interest income was due to an
increase in average earning assets and an increase of 20 basis points in the
net interest spread. The net interest margin increased to 5.21% in 1994 from
5.04% in 1993.
The provision for loan losses was $49,000 in 1994, compared to $122,000
in 1993, as a result of management's assessment that loan loss experience and
asset quality had improved sufficiently to allow a reduction in the provision.
This assessment was based on the level and trend of the allowance for loan
losses as a percentage of period-end loans and nonperforming loans, the low and
decreasing level of net charge-offs during 1993, and indications of improvement
in the local and national economies. Despite the lower provision during 1994,
FIRSTBANC's allowance for loan loses as a percentage of period-end loans was
1.37% at December 31, 1994, compared to 1.34% at year end 1993, and the
allowance for loan losses as a percentage of period-end nonperforming loans was
161.54% at December 31, 1994, compared with 67.95% at year end 1993. FIRSTBANC
had net charge-offs of $9,000 in 1994, resulting in a ratio of net charge-offs
to average loans of .05%, a decrease from .80% in 1993. See "--Provision and
Allowance for Loan Losses."
Noninterest income decreased $29,300, or 8.4%, to $319,100 in 1994 from
$348,400 in 1993. The principal reasons for the decrease was a $22,600
decrease in gain on sales of investment securities and a $10,800 decrease in
other noninterest income.
Noninterest expense decreased $2,100 to $1,250,100 in 1994 from
$1,252,200 in 1993. Salaries and employee benefits increased $32,400, or 5.6%,
to $606,800 in 1994 from $574,400 in 1993. Occupancy expense remained
relatively stable in 1994, compared to 1993. Other noninterest expense
decreased $31,000, or 5.6%, to $527,800 in 1994 from $558,800 in 1993.
28
<PAGE> 48
NET INTEREST INCOME
The largest component of FIRSTBANC's net income is its net interest
income, which is the difference between income earned on assets and interest
paid on deposits and borrowing used to support such assets. Net interest
margin is determined by the rates earned on FIRSTBANC's earning assets and the
rates paid on its interest-bearing liabilities, the relative amounts of earning
assets and interest-bearing liabilities and the degree of mismatch and the
maturity and repricing characteristics of its earning assets and interest-
bearing liabilities. Net interest income divided by average earning assets
represents FIRSTBANC's net interest margin.
Average Balances, Income, Expense and Rates for the Six Months Ended June
30, 1996 and 1995
The following table depicts, on a taxable equivalent basis, for the 1995
and 1996 periods certain information related to FIRSTBANC's average balance
sheet and its average yield on assets and average cost of liabilities. Such
yields are derived by dividing income and expense by the average balance of
corresponding assets or liabilities. Averages are daily averages.
29
<PAGE> 49
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS AND RATES)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------
1995 1996
-----------------------------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
ASSETS: BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans (1) (3) .................................... $18,170 $ 899 9.90% $19,488 $1,010 10.37%
Securities:
Taxable ......................................... 7,834 246 6.28 6,391 185 5.79
Tax exempt ...................................... 2,382 88 7.39 2,910 109 7.49
Funds sold ....................................... 1,138 33 5.80 1,617 43 5.32
------- ------ ------- ------
Total earning assets (2) ..................... 29,524 1,266 8.58 30,406 1,347 8.86
------- ------ ------- ------
Cash and due from banks ............................ 2,026 2,003
Premises and equipment ............................. 1,354 1,345
Other assets ....................................... 376 499
Allowance for loan losses .......................... (258) (273)
------- -------
Total assets ................................ $33,022 $33,980
======= =======
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction accounts ............ $4,013 53 2.64 $4,185 52 2.49
Savings deposits ................................. 9,339 139 2.98 8,620 117 2.71
Time deposits .................................... 10,654 258 4.84 12,114 320 5.28
Other short-term borrowings ...................... 311 8 5.14 190 6 6.32
Long-term debt ................................... 580 26 8.97 476 20 8.40
------- ------ ------- ------
Total interest-bearing liabilities .......... 24,897 484 3.89 25,585 515 4.03
------- ------ ---- ------- ------ ----
Demand deposits .................................... 5,727 5,502
Accrued interest and other liabilities ............. 151 197
Stockholders' equity ............................... 2,247 2,696
------- -------
Total liabilities and stockholders' equity ..... $33,022 $33,980
======= =======
Net interest spread ................................ 4.69% 4.83%
==== ====
Net interest income/margin on
a taxable equivalent basis ....................... 782 5.30% 832 5.47%
==== ====
Tax equivalent adjustment (2)....................... 30 37
------ ------
Net interest income/margin ......................... $ 752 5.09% $ 795 5.23%
====== ==== ====== ====
</TABLE>
- ------------
(1) Average loans include nonaccrual loans and are net of unearned income.
All loans and deposits are domestic.
(2) Taxable equivalent adjustments have been based on an assumed rate of 34
percent and do not give effect to the disallowance for federal income
tax purposes of interest expense related to certain tax exempt assets.
(3) Fees in the amount of $300,000 and $52,000 are included in interest
and fees on loans for the 1995 and 1996 periods, respectively.
30
<PAGE> 50
Average Balances, Income, Expense and Rates for Years Ended 1995, 1994
and 1993.
The following table depicts, on a taxable equivalent basis, for the
periods indicated certain information related to FIRSTBANC's average balance
sheet and its average yields on assets and average costs of liabilities. Such
yields are derived by dividing income or expense by the average balance of the
corresponding assets or liabilities. Averages are daily averages.
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS AND RATES)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1993 1994 1995
---------------------------------------------------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
ASSETS: BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans (1) (3) ............................... $15,320 $1,533 0.01% $16,999 $1,649 9.70% $18,060 $1,836 10.17%
Securities:
Taxable .................................... 10,150 649 6.39 9,642 591 6.13 7,932 492 6.20
Tax exempt ................................. 612 44 7.19 1,834 133 7.25 2,424 183 7.55
Funds sold .................................. 2,097 63 3.00 1,164 50 4.30 1,364 87 6.38
------- ------ ------- ----- ------- ------
Total earning assets (2) ................ 28,179 2,289 8.12 29,639 2,423 8.18 29,780 2,598 8.72
------- ------ ------- ----- ------- ------
Cash and due from banks ....................... 1,919 2,038 2,183
Premises and equipment ........................ 1,413 1,375 1,354
Other assets .................................. 355 368 368
Allowance for loan losses ..................... (193) (230) (260)
------- ------- -------
Total assets ........................... $31,673 $33,190 $33,425
======= ======= =======
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction accounts ....... $3,735 146 3.91 $3,931 149 3.79 $4,054 158 3.90
Savings deposits ............................ 8,934 222 2.48 9,606 223 2.32 9,203 212 2.30
Time deposits ............................... 10,649 429 4.03 10,332 401 3.88 10,973 580 5.29
Other short-term borrowings ................. 309 9 2.91 320 12 3.75 364 19 5.22
Long-term debt .............................. 757 47 6.21 652 49 7.52 548 51 9.31
------- ------ ------- ----- ------- ------
Total interest-bearing liabilities ..... 24,384 853 3.50 24,841 834 3.36 25,142 1,020 4.06
------- ------ ---- ------- ----- ---- ------- ------ ----
Demand deposits ............................... 5,411 6,202 5,785
Accrued interest and other liabilities ........ 132 132 152
Stockholders' equity .......................... 1,746 2,015 2,346
------- ------- -------
Total liabilities and stockholders'
equity ................................. $31,673 $33,190 $33,425
======= ======= =======
Net interest spread ........................... 4.62% 4.82% 4.66%
==== ==== ====
Net interest income/margin on
a taxable equivalent basis .................. 1,436 5.10% 1,589 5.36% 1,578 5.30%
==== ==== ====
Tax equivalent adjustment (2).................. 15 45 61
------ ------ ------
Net interest income/margin .................... $1,421 5.04% $1,544 5.21% $1,517 5.09%
====== ==== ====== ==== ====== ====
</TABLE>
- ---------------
(1) Average loans include nonaccrual loans and are net of unearned income.
All loans and deposits are domestic.
(2) Taxable equivalent adjustments have been based on an assumed rate of 34
percent and do not give effect to the disallowance for federal income
purposes of interest expense related to certain tax exempt assets.
(3) Fees in the amount of $142,000, $133,000 and $98,000 are included in
interest and fees on loans for the 1993, 1994 and 1995, respectively.
31
<PAGE> 51
The following table presents, on a pro forma basis, giving effect for
the Merger, certain information related to ANB's pro forma average balance
sheet and its average yields on assets and average costs of liabilities. Such
yields are derived as described above. Average are daily averages.
PRO FORMA AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS AND RATES)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
-----------------------------------------------------------------
1995 1996
---------------------------- ------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
ASSETS: BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans (1) (3) .................................. $306,686 $14,440 9.42% $555,003 $26,056 9.39%
Securities:
Taxable ....................................... 86,153 2,871 6.66 142,040 4,445 6.26
Tax exempt .................................... 2,382 88 7.39 17,760 727 8.19
Cash balances in other banks ................... - - - 6,733 188 5.58
Funds sold ..................................... 15,578 465 5.97 38,869 1,059 5.45
Trading account securities ..................... 392 13 6.63 3,878 124 6.40
-------- ------- -------- -------
Total earning assets (2) ................... 411,191 17,877 8.70 764,283 32,599 8.53
-------- ------- -------- -------
Cash and due from banks .......................... 15,988 29,268
Premises and equipment ........................... 7,457 20,612
Other assets ..................................... 6,568 22,586
Allowance for loan losses ........................ (5,097) (8,955)
-------- --------
Total assets .............................. $436,107 $827,794
======== ========
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction accounts .......... $32,791 494 3.01 $82,678 1,076 2.60
Savings deposits ............................... 129,038 2,859 4.43 201,539 3,709 3.68
Time deposits .................................. 145,349 4,181 5.75 270,219 7,715 5.71
Funds purchased ................................ 26,261 732 5.57 69,403 1,819 5.24
Other short-term borrowings .................... 12,146 410 6.75 30,138 980 6.50
Long-term debt ................................. 920 42 9.13 794 35 8.82
-------- ------- -------- -------
Total interest-bearing liabilities ........ 346,505 8,718 5.03 654,771 15,334 4.68
-------- ------- ---- -------- ------- ----
Demand deposits .................................. 54,128 101,057
Accrued interest and other liabilities ........... 8,157 12,129
Stockholders' equity ............................. 27,317 59,837
-------- --------
Total liabilities and stockholders' equity ... $436,107 $827,794
======== ========
Net interest spread .............................. 3.67% 3.85%
==== ====
Net interest income/margin on
a taxable equivalent basis ..................... 9,159 4.45% 17,265 4.52%
==== ====
Tax equivalent adjustment (2)..................... 187 272
------ -------
Net interest income/margin ....................... $8,972 4.36% $16,993 4.45%
====== ==== ======= ====
</TABLE>
- ---------------
(1) Average loans include nonaccrual loans and are net of unearned income.
All loans and deposits are domestic.
(2) Taxable equivalent adjustments have been based on an assumed rate of
34 percent and do not give effect to the disallowance for federal
income tax purposes of interest expense related to certain tax exempt
assets.
(3) Fees in the amount of $325,000 and $772,000 are included in interest and
fees on loans for the 1995 and 1996 periods, respectively.
32
<PAGE> 52
PRO FORMA AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(Amounts in thousands, except yields and rates)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------
1993 1994 1995
-----------------------------------------------------------------------------------
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
ASSETS: BALANCE EXPENSE RATE BALANCE EXPENSE RATE BALANCE EXPENSE RATE
------- ------- ---- ------- ------- ---- ------- ------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans (1) (3) ................................ $249,247 $19,219 7.71% $279,180 $23,410 8.39% $318,674 $30,126 9.45%
Securities:
Taxable ..................................... 77,266 5,357 6.93 87,176 5,678 6.51 91,935 6,059 6.59
Tax exempt .................................. 612 44 7.19 1,834 133 7.25 2,509 189 7.53
Cash balances in other banks ................. - - - - - - 3,558 207 5.82
Funds sold ................................... 22,705 666 2.93 9,758 399 4.09 26,037 1,532 5.88
Trading account securities ................... 778 40 5.14 284 15 5.28 1,097 67 6.11
-------- ------- -------- ------- -------- -------
Total earning assets (2) ................. 350,608 25,326 7.22 378,232 29,635 7.84 443,810 38,180 8.60
-------- ------- -------- ------- -------- -------
Cash and due from banks ........................ 17,015 16,396 18,041
Premises and equipment ......................... 6,692 6,749 8,013
Other assets ................................... 8,333 7,183 7,956
Allowance for loan losses ...................... (6,255) (6,043) (5,290)
-------- -------- --------
Total assets ............................ $376,393 $402,517 $472,530
======== ======== ========
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing transaction accounts ........ $35,848 951 2.65 $34,508 949 2.75 $36,427 1,127 3.09
Savings deposits ............................. 142,041 4,407 3.10 133,209 4,723 3.55 129,747 5,483 4.23
Time deposits ................................ 86,769 3,682 4.24 104,916 4,724 4.50 160,916 9,604 5.97
Funds purchased .............................. 19,949 550 2.76 27,893 1,111 3.98 35,921 2,143 5.97
Other short-term borrowings .................. 10,067 400 3.97 10,028 503 5.02 12,994 732 5.63
Long-term debt ............................... 1,123 82 7.30 1,017 83 8.16 882 83 9.41
-------- ------- -------- ------- -------- -------
Total interest-bearing liabilities ...... 295,797 10,072 3.41 311,571 12,093 3.88 376,887 19,172 5.09
-------- ------- ---- -------- ------- ---- -------- ------- ----
Demand deposits ................................ 53,864 57,267 58,614
Accrued interest and other liabilities ......... 3,835 7,956 9,086
Stockholders' equity ........................... 22,897 25,723 27,943
Total liabilities and stockholders' -------- -------- --------
equity .................................. $376,393 $402,517 $472,530
======== ======== ========
Net interest spread ............................ 3.81% 3.96% 3.51%
==== ==== ====
Net interest income/margin on
a taxable equivalent basis ................... 15,254 4.35% 17,542 4.64% 19,008 4.28%
==== ==== ====
Tax equivalent adjustment (2)................... 252 291 213
------- ------- -------
Net interest income/margin ..................... $15,002 4.28% $17,251 4.56% $18,795 4.23%
======= ==== ======= ==== ======= ====
</TABLE>
- ---------------
(1) Average loans include nonaccrual loans and are net of unearned income.
All loans and deposits are domestic.
(2) Taxable equivalent adjustments have been based on an assumed rate of 34
percent and do not give effect to the disallowance for federal income
tax purposes of interest expense related to certain tax exempt assets.
(3) Fees in the amount of $577,000, $674,000 and $760,000 are included in
interest and fees on loans for the 1993, 1994 and 1995, respectively.
33
<PAGE> 53
Analysis of Changes in Net Interest Income
The following table sets forth for FIRSTBANC, on a taxable equivalent
basis, the effect which the varying levels of earnings assets and
interest-bearing liabilities and the applicable rates had on changes in net
interest income for the 1996 period, compared to the 1995 period. In the
following table, changes not solely attributable to volume or rate have been
allocated on a pro rata basis to volume and rate.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Amounts in thousands)
<TABLE>
<CAPTION>
JUNE 30,
--------------------------
1996 COMPARED TO 1995
VARIANCE DUE TO
--------------------------
VOLUME YIELD/RATE TOTAL
------ ---------- -----
EARNING ASSETS:
<S> <C> <C> <C>
Loans ................................................ $67 $44 $ 111
Securities:
Taxable ............................................ (43) (18) (61)
Tax exempt ......................................... 20 1 21
Funds sold ........................................... 12 (2) 10
--- --- -----
Total interest income ........................... 56 25 81
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts ................ 2 (3) (1)
Savings and money market deposits .................... (10) (12) (22)
Time deposits ........................................ 37 25 62
Other short-term borrowings .......................... (3) 1 (2)
Long-term debt ....................................... (4) (2) (6)
--- --- -----
Total interest expense .......................... 22 9 31
--- --- -----
Net interest income on a taxable
equivalent basis .............................. $34 $16 50
--- ---
Taxable equivalent adjustment ........................ (7)
-----
Net interest income .................................. $ 43
=====
</TABLE>
34
<PAGE> 54
The following table sets forth for FIRSTBANC, on a taxable equivalent
basis, the effect which the varying levels of earnings assets and
interest-bearing liabilities and the applicable rates had on changes in net
interest income from 1993 to 1994 and 1994 to 1995. In the following table,
changes not solely attributable to volume or rate have been allocated on a pro
rata basis to volume and rate.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------
1994 COMPARED TO 1993 1995 COMPARED TO 1994
VARIANCE DUE TO VARIANCE DUE TO
--------------------------------------------------------------
VOLUME YIELD/RATE TOTAL VOLUME YIELD/RATE TOTAL
------ ---------- ----- ------ ---------- -------
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans ........................................ $ 164 $(48) $116 $105 $ 82 $187
Securities:
Taxable .................................... (32) (26) (58) (106) 7 (99)
Tax exempt ................................. 89 - 89 44 6 50
Funds sold ................................... (34) 21 (13) 10 27 37
----- ---- ---- ---- ---- ----
Total interest income ................... 187 (53) 134 53 122 175
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts ........ 7 (4) 3 5 4 9
Savings and money market deposits ............ 16 (15) 1 (9) (2) (11)
Time deposits ................................ (13) (15) (28) 26 153 179
Other short-term borrowings .................. - 3 3 2 5 7
Long-term debt ............................... (7) 9 2 (9) 11 2
----- ---- ---- ---- ---- ----
Total interest expense .................. 3 (22) (19) 15 171 186
----- ---- ---- ---- ---- ----
Net interest income on a taxable
equivalent basis ...................... $ 184 $(31) 153 $ 38 $(49) (11)
===== ==== ==== ==== ==== ====
Taxable equivalent adjustment ................ (30) (16)
---- ----
Net interest income .......................... $123 $(27)
==== ====
</TABLE>
35
<PAGE> 55
The following table sets forth, on a taxable equivalent basis, the effect
which the varying levels of earnings assets and interest-bearing liabilities and
the applicable rates had on changes in pro forma net interest income from 1993
to 1994 and 1994 to 1995.
PRO FORMA ANALYSIS OF CHANGES IN NET INTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------
1994 COMPARED TO 1993 1995 COMPARED TO 1994
VARIANCE DUE TO VARIANCE DUE TO
----------------------------------------------------------------
VOLUME YIELD/RATE TOTAL VOLUME YIELD/RATE TOTAL
------ ---------- ----- ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
EARNING ASSETS:
Loans ........................................ $2,414 $1,777 $4,191 $3,519 $3,197 $6,716
Securities:
Taxable .................................... 663 (342) 321 320 61 381
Tax exempt ................................. 89 - 89 50 6 56
Cash balances in other banks ................. - - - 207 - 207
Funds sold ................................... (467) 200 (267) 896 237 1,133
Trading account securities ................... (26) 1 (25) 50 2 52
------ ------ ------ ------ ------ ------
Total interest income ................... 2,673 1,636 4,309 5,042 3,503 8,545
INTEREST-BEARING LIABILITIES:
Interest-bearing transaction accounts ........ (32) 30 (2) 55 123 178
Savings and money market deposits ............ (298) 614 316 (122) 882 760
Time deposits ................................ 817 225 1,042 3,075 1,805 4,880
Funds purchased .............................. 266 295 561 377 655 1,032
Other short-term borrowings .................. (2) 105 103 162 67 229
Long-term debt ............................... (7) 8 1 (12) 12 -
------ ------ ------ ------ ------ ------
Total interest expense .................. 744 1,277 2,021 3,535 3,544 7,079
------ ------ ------ ------ ------ ------
Net interest income on a taxable
equivalent basis ...................... $1,929 $ 359 2,288 $1,507 $ (41) 1,466
====== ====== ====== =====
Taxable equivalent adjustment ................ (39) 78
------ ------
Net interest income .......................... $2,249 $1,544
====== ======
</TABLE>
36
<PAGE> 56
INTEREST SENSITIVITY
FIRSTBANC monitors and manages the repricing and maturity of its assets
and liabilities in order to diminish the potential adverse impact that changes
in interest rates could have on its net interest income. The principal
monitoring technique employed by FIRSTBANC is the measurement of FIRSTBANC's
interest sensitivity "gap," which is the positive or negative dollar difference
between assets and liabilities that are subject to interest rate repricing
within a given period of time. Interest rate sensitivity can be managed by
repricing assets or liabilities, selling securities available for sale,
replacing an asset or liability at maturity or by adjusting the interest rate
during the life of an asset or liability. Managing the amount of assets and
liabilities repricing in the same time intervals helps to hedge the risk and
minimize the impact of rising or falling interest rates on the net interest
income.
FIRSTBANC evaluates interest sensitivity risk and then formulates
guidelines regarding asset generation and repricing, funding sources and
pricing and off-balance sheet commitments in order to decrease interest
sensitivity risk. FIRSTBANC uses computer simulations to measure the net
income effect of various interest scenarios. The modeling reflects interest
rate changes and the related impact on net income over specified periods of
time.
37
<PAGE> 57
Interest Rate Sensitivity at December 31, 1995
The following table illustrates FIRSTBANC's interest rate sensitivity
at December 31, 1995, assuming that relevant assets and liabilities are
collected and paid, respectively, in accordance with their stated maturities.
INTEREST SENSITIVITY ANALYSIS
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-----------------------------------------------------------------------------
AFTER ONE AFTER THREE
THROUGH THROUGH
WITHIN ONE THREE TWELVE WITHIN ONE GREATER THAN
MONTH MONTHS MONTHS YEAR ONE YEAR TOTAL
---------- --------- ----------- ---------- ------------ -------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans (1) .................................... $ 4,301 $ 2,620 $ 3,399 $10,320 $ 8,820 $19,140
Securities .................................. 500 250 2,350 3,100 7,050 10,150
Funds sold ................................... 500 0 0 500 0 500
------- ------- ------- ------- ------- -------
Total earning assets .................... 5,301 2,870 5,749 13,920 15,870 29,790
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand deposits .......................... 5,551 0 0 5,551 0 5,551
Savings deposits ......................... 6,834 0 0 6,834 0 6,834
Time deposits (2) ........................ 1,148 2,792 5,957 9,897 1,827 11,724
Short-term borrowings (3) ................... 9 0 0 9 0 9
Long-term debt .............................. 0 20 60 80 417 497
------- ------- ------- ------- ------- -------
Total interest-bearing liabilities ....... 13,542 2,812 6,017 22,371 2,244 24,615
------- ------- ------- ------- ------- -------
Period gap ...................................... $(8,241) $ 58 $ (268) $(8,451) $13,626
======= ======= ======= ======= =======
Cumulative gap .................................. $(8,241) $(8,183) $(8,451) $(8,451) $ 5,175 $ 5,175
======= ======= ======= ======= ======= =======
Ratio of cumulative gap to total
earning assets ................................ (27.66)% (27.47)% (28.37)% (28.37)% 17.37%
</TABLE>
____________________________
(1) Excludes nonaccrual loans of $2,000.
(2) Excludes matured certificates which have not been redeemed by the customer
and on which no interest is accruing.
(3) Includes treasury tax and loan account of $9,000.
38
<PAGE> 58
Conclusion
FIRSTBANC generally would benefit from increasing market rates of interest
when it has an asset-sensitive gap and generally would benefit from decreasing
market rates of interest when it is liability-sensitive. FIRSTBANC is
liability sensitive over the one month, three through twelve month and one year
time frames. However, FIRSTBANC's gap analysis is not a precise indicator of
of its interest-sensitivity position. The analysis presents only a static
view of the timing of maturities and repricing opportunities, without taking
into consideration that changes in interest rates do not affect all assets and
liabilities equally. For example, rates paid on a substantial portion of core
deposits may change contractually within a relatively short time frame, but
these rates are viewed by management as significantly less interest-sensitive
than market-based rates such as those paid on non-core deposits. Accordingly,
management believes a liability-sensitive gap position is not as indicative of
FIRSTBANC's true interest sensitivity as it would be for an organization which
depends to a greater extent on purchased funds to support earning assets. Net
interest income may be affected by other significant factors in a given
interest rate environment, including changes in the volume and mix of earning
assets and interest-bearing liabilities.
The following table illustrates, on a pro forma basis, giving effect to the
Merger as if it occurred on December 31, 1995, ANB's interest rate sensitivity
at December 31, 1995.
39
<PAGE> 59
PRO FORMA INTEREST SENSITIVITY ANALYSIS
(AMOUNTS IN THOUSANDS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
DECEMBER 31, 1995
-------------------------------------------------------------------------------
AFTER ONE AFTER THREE
THROUGH THROUGH
WITHIN ONE THREE TWELVE WITHIN ONE GREATER THAN
MONTH MONTHS MONTHS YEAR ONE YEAR TOTAL
---------- --------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Earning assets:
Loans (1) .................................... $256,564 $ 47,635 $ 82,439 $ 386,638 $165,236 $ 551,874
Securities (2)................................ 14,165 10,621 8,826 33,612 120,729 154,341
Interest-bearing deposits in
other banks.................................. 11,168 - - 11,168 - 11,168
Funds sold ................................... 37,820 - - 37,820 - 37,820
-------- -------- --------- --------- -------- ---------
Total earning assets .................... 319,717 58,256 91,265 469,238 285,965 755,203
LIABILITIES:
Interest-bearing liabilities:
Interest-bearing deposits:
Demand deposits .......................... 105,524 - - 105,524 - 105,524
Savings deposits ......................... 181,031 - - 181,031 - 181,031
Time deposits (3) ........................ 36,835 50,436 128,741 216,012 61,586 277,598
Funds purchased.............................. 58,921 - - 58,921 - 58,921
Short-term borrowings (4).................... 23,721 - - 23,721 - 23,721
Long-term debt .............................. 1 22 69 92 729 821
-------- -------- --------- --------- -------- ---------
Total interest-bearing liabilities ....... 406,033 50,458 128,810 585,301 62,315 647,616
-------- -------- --------- --------- -------- ---------
Period gap ...................................... $(86,316) $ 7,798 $ (37,545) $(116,063) $223,650
======== ======== ========= ========= ========
Cumulative gap .................................. $(86,316) $(78,518) $(116,063) $(116,063) $107,587 $ 107,587
======== ======== ========= ========= ======== =========
Ratio of cumulative gap to total
earning assets ................................ (11.43)% (10.40)% (15.37)% (15.37)% 14.25%
</TABLE>
__________________________
(1) Excludes nonaccrual loans of $1,245,00.
(2) Excludes investment equity securities of $3,925,000.
(3) Excludes matured certificates which have not been redeemed by the customer
and on which no interest is accruing.
(4) Includes treasury tax and loan account of $2,441,000.
40
<PAGE> 60
PROVISION AND ALLOWANCE FOR LOAN LOSSES
FIRSTBANC has developed policies and procedures for evaluating the overall
quality of its credit portfolio and the timely identification of potential
problem loans. On a quarterly basis, FIRSTBANC's independent external auditor
performs a loan review. Also, a "classified" loan listing is prepared and the
Board of Directors approves the appropriate level of the allowance for loan
losses based on the results of the external loan review, internal monitoring
and analysis of economic conditions in the market. Management's judgment as to
the adequacy of the allowance for loan losses is based upon a number of
assumptions about future events which it believes to be reasonable but which
may or may not be valid. Thus, there can be no assurance that charge-offs in
future periods will not exceed the allowance for loan losses or that additional
increases in the allowance for loan losses will not be required. The adequacy
of the allowance for loan losses and the effectiveness of FIRSTBANC's
monitoring and analysis systems is also reviewed by banking regulators.
Analysis of Allowance for Loan Losses
The following table summarizes certain information with respect to
FIRSTBANC's allowance for loan losses and the composition of charge-offs and
recoveries for each of the last three years and the 1996 period.
41
<PAGE> 61
ALLOWANCE FOR LOAN LOSSES
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
Six months
Year ended December 31, Ended June 30,
----------------------------------- --------------
1993 1994 1995 1996
------- ------- ------- --------------
<S> <C> <C> <C> <C>
Total loans outstanding at end of period, net
of unearned income .................................. $15,797 $18,415 $19,142 $20,241
======= ======= ======= =======
Average amount of loans outstanding, net
of unearned income .................................. $15,320 $16,999 $18,060 $19,488
======= ======= ======= =======
Allowance for loan losses at
beginning of period ................................. $ 212 $ 212 $ 252 $ 269
Charge-offs:
Commercial, financial and agricultural .............. 60 - - -
Real estate - mortgage .............................. 68 5 - -
Consumer ............................................ 5 6 3 7
------- ------- ------- -------
Total charge-offs .............................. 133 11 3 7
------- ------- ------- -------
Recoveries:
Commercial, financial and agricultural .............. 7 1 - -
Real estate - mortgage .............................. 4 - - 2
Consumer ............................................ - 1 3 2
------- ------- ------- -------
Total recoveries ............................... 11 2 3 4
------- ------- ------- -------
Net charge-offs (recoveries) ................... 122 9 - 3
Provision for (benefit of) loan losses ................ 122 49 17 9
------- ------- ------- -------
Allowance for loan losses at
period-end .......................................... $ 212 $ 252 $ 269 $ 275
======= ======= ======= =======
Allowance for loan losses to period-end loans ......... 1.34% 1.37% 1.41% 1.36%
Net charge-offs (recoveries) to average loans (1)...... .80 .05 .00 .03
</TABLE>
_________________
(1) Percentage for the six months ended June 30, 1996 is annualized.
42
<PAGE> 62
Additions to the allowance for loan losses, which are expensed as the
provision for loan losses on FIRSTBANC'S income statement, are made
periodically to maintain the allowance for loan losses at an appropriate level
based on management's analysis of potential risk in the loan portfolio. Loan
losses and recoveries are charged or credited directly to the allowance for
loan losses. The amount of the provision is a function of the levels of loans
outstanding, the level of nonperforming loans, historical loan loss experience,
the amount of loans actually charged against the allowance for loan losses
during a given period and current and anticipated economic conditions. The
provision for loan losses was $9,000 for the 1996 period, compared to $8,000
for the 1995 period. The allowance for loan losses as a percentage of
outstanding loans, net of unearned discount, was 1.36% at June 30, 1996 and
1.41% at December 31, 1995.
The provision for loan losses was $17,000 in 1995, compared to $49,000 in
1994. The decrease in the provision was the result of management's assessment
that, along with the improved economy, loan loss experience, as reflected by no
net charge-offs in 1995 and asset quality, as reflected by the decrease in the
ratio of nonperforming assets to period-end loans from, .85% in 1994 to .34% in
1995, asset quality had improved sufficiently to allow a reduction in the
provision.
The loan portfolio is periodically reviewed to evaluate the outstanding
loans and to measure both the performance of the portfolio and the adequacy of
the allowance for loan losses. This analysis includes a review of delinquency
trends, actual losses and internal credit ratings. Based on this analysis,
management considers the allowance for loan losses at June 30, 1996 to be
adequate to cover possible loan losses in the portfolio as of that date.
However, because of the inherent uncertainty of assumptions made during the
evaluation process, them can be no assurance that loan losses in future periods
will not exceed the allowance for loan losses or that additional allocations to
the allowance will not be required.
Allocation of Allowance
FIRSTBANC historically has not allocated the allowance for loan losses by
loan categories. Real estate loans, including construction loans, constitute
the largest single category of loans, representing approximately 55% of the
loan portfolio at December 31, 1995. Real estate loans historically have had
low rates of loss.
Consumer loans are the second largest category of loans at December 31,
1995. This category also has a low historical loss rate.
Commercial, financial and agricultural loans account for approximately 22%
of the portfolio at December 31, 1995. This category has the highest loss
rate of all categories.
The table below presents certain information with respect to ANB's pro
forma allowance for loan losses and the composition of charge-offs and
recoveries for each of the last three years and the 1996 period.
43
<PAGE> 63
PRO FORMA ALLOWANCE FOR LOAN LOSSES
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
Six months
Year ended December 31, Ended June 30,
---------------------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Total loans outstanding at end of period, net
of unearned income ................................. $265,965 $301,876 $553,119 $569,379
======== ======== ======== ========
Average amount of loans outstanding, net
of unearned income ................................. $249,247 $279,180 $318,674 $555,003
======== ======== ======== ========
Allowance for loan losses at
beginning of period ................................ $ 6,214 $ 6,268 $ 5,261 $ 8,909
Charge-offs:
Commercial, financial and agricultural ............. 498 2,924 1,073 477
Real estate - mortgage ............................. 849 225 221 66
Consumer ........................................... 99 104 132 194
-------- -------- -------- --------
Total charge-offs ............................. 1,446 3,253 1,426 737
-------- -------- -------- --------
Recoveries:
Commercial, financial and agricultural ............. 1,408 429 1,014 557
Real estate - mortgage ............................. 446 119 289 58
Consumer ........................................... 166 192 238 90
-------- -------- -------- --------
Total recoveries .............................. 2,020 740 1,541 705
-------- -------- -------- --------
Net charge-offs (recoveries) ................. (574) 2,513 (115) 32
Provision for (benefit of) loan losses ............... (520) 1,279 409 209
Changes incident to acquisitions ..................... - 227 3,124 -
-------- -------- -------- --------
Allowance for loan losses at
period-end ......................................... $ 6,268 $ 5,261 $ 8,909 $ 9,086
======== ======== ======== ========
Allowance for loan losses to period-end loans ........ 2.36% 1.74% 1.61% 1.60%
Net charge-offs (recoveries) to average loans (1)..... (.23) .90 (.04) .01
</TABLE>
- -------------
(1) Percentage for the six months ended June 30, 1996 is annualized.
44
<PAGE> 64
NONPERFORMING ASSETS
Nonperforming assets are comprised of loans accounted for on a
nonaccrual basis, loans past due 90 days or more and still accruing and loans
in which the terms have been restructured to provide a reduction or deferral of
interest or principal because of a deterioration in the financial position of
the borrower. The following table presents FIRSTBANC's nonperforming assets
for the dates indicated.
NONPERFORMING ASSETS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
At
At December 31, June 30,
----------------------------------- -----------
1993 1994 1995 1996
------ ------ ------- -----------
<S> <C> <C> <C> <C>
Nonaccrual loans ........................................ $ 164 $ - $ 2 $ -
Restructured loans ...................................... 148 156 58 54
Loans past due 90 days or more and still accruing ....... - - 5 -
------ ------- ------- --------
Total nonperforming loans ............................. 312 156 65 54
Other real estate owned ................................. - - - -
------ ------- ------- --------
Total nonperforming assets ............................ $ 312 $ 156 $ 65 $ 54
====== ======= ======= ========
Allowance for loan losses to period-end loans ........... 1.34% 1.37% 1.41% 1.36%
Allowance for loan losses to period-end
nonperforming loans ................................... 67.95 161.54 413.85 509.26
Allowance for loan losses to period-end
nonperforming assets .................................. 67.95 161.54 413.85 59.26
Net losses to average loans (1) ......................... .80 .05 .00 .03
Nonperforming assets to period-end loans
and foreclosed property ............................... 1.98 0.85 0.34 0.27
Nonperforming loans to period-end loans ................. 1.98 0.85 0.34 0.27
</TABLE>
- ----------------
(1) Percentage for the six months ended June 30, 1996 is annualized.
45
<PAGE> 65
At June 30, 1996, nonperforming assets totaled $54,000, a decrease of
$11,000 from December 31, 1995. Nonperforming assets as a percentage of loans
were .27% at June 30, 1996, a decrease from .34% at December 31, 1995. The
allowance for loan losses as a percentage of total loans was 1.36% at June 30,
1996 and 1.41% at December 31, 1995.
Total nonperforming assets decreased $91,000 from year end 1994 to year
end 1995. The principal reason for this decrease was a decrease in
restructured loans. Nonperforming loans were .34% of total loans at December
31, 1995 compared to .85% a year earlier. The allowance for loan losses to
period-end nonperforming assets was 413.85% at December 31, 1995, compared to
161.54% at December 31, 1994. Effective January 1, 1995, FIRSTBANC adopted
Statement of Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan," as amended by Statement of Financial Accounting
Standards No. 118, "Accounting by Creditors for Impairment of a Loan - Income
Recognition and Disclosures." The adoption of these statements did not have a
material impact on FIRSTBANC's nonperforming assets or comparability of
classification of nonperforming assets.
Accrual of interest is discontinued on a loan when management believes,
after considering economic and business conditions and collection efforts, that
the borrower's financial condition is such that the collection of interest is
doubtful. A delinquent loan is generally placed on nonaccrual status when it
becomes 90 days or more past due. When a loan is placed on nonaccrual status,
all interest which has been accrued on the loan but remains unpaid is reversed
and deducted from earnings as a reduction of reported interest income. No
additional interest is accrued on the loan balance until the collection of both
principal and interest becomes reasonably certain. When a problem loan is
finally resolved, there may ultimately be a actual writedown or charge-off of
the principal balance of the loan which would possibly necessitate additional
charges to earnings. For the years 1993 and 1994, respectively, approximately
$17,000 and $2,000 in additional interest income would have been recognized
into earnings if FIRSTBANC's nonaccrual loans had been current in accordance
with their original terms. No interest on nonaccrual loans was actually
included in FIRSTBANC's net income during 1993, 1994 or 1995.
Potential Problem Loans
A potential problem loan is one management has serious doubts as to the
borrower's future performance under the terms of the loan contract. At June
30, 1996, FIRSTBANC had no such loans.
The following table presents, on a pro forma basis, giving effect to the
Merger, ANB's nonperforming assets as of the dates indicated.
46
<PAGE> 66
PRO FORMA NONPERFORMING ASSETS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
At
At December 31, June 30,
------------------------------------ -----------
1993 1994 1995 1996
------- ------- ------- -----------
<S> <C> <C> <C> <C>
Nonaccrual loans ........................................ $ 1,465 $ 1,304 $ 1,245 $ 1,528
Restructured loans ...................................... 1,549 297 949 895
Loans past due 90 days or more and still accruing ....... - - 126 -
------- ------- ------- -------
Total nonperforming loans ............................. 3,014 1,601 2,320 2,423
Other real estate owned ................................. 919 402 625 380
------- ------- ------- -------
Total nonperforming assets ............................ $ 3,933 $ 2,003 $ 2,945 $ 2,803
======= ======= ======= =======
Allowance for loan losses to period-end loans ........... 2.36% 1.74% 1.61% 1.60%
Allowance for loan losses to period-end
nonperforming loans ................................... 207.96 328.61 384.01 374.99
Allowance for loan losses to period-end
nonperforming assets .................................. 158.37 262.66 302.51 324.15
Net losses (recoveries) to average loans (1) ............ (.23) .90 (.04) .01
Nonperforming assets to period-end loans
and foreclosed property ............................... 1.47 .66 .53 .49
Nonperforming loans to period-end loans ................. 1.13 .53 .42 .43
- ----------------
</TABLE>
(1) Percentage for the six months ended June 30, 1996 is annualized.
47
<PAGE> 67
NONINTEREST INCOME AND EXPENSE
Noninterest Income
Noninterest income for the 1996 period was $184,000, compared to
$158,000 for the same period in 1995, an increase of 16.5%. Service charges on
deposits increased $18,000 to $159,000 for the 1996 period. Other noninterest
income was $25,000 for the 1996 period, compared to $17,000 for the 1995 period.
Service charges on deposits for 1995 totaled $317,000, an $8,900
increase over 1994. Securities gains were $3,000 in 1995, compared to a
$10,000 loss in 1994. Other noninterest income decreased $1,000 to $19,000
from 1994 to 1995.
The following table sets forth, for the periods indicated, the
principal components of noninterest income.
NONINTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months
--------------------
Year ended December 31, Ended June30,
----------------------- --------------------
1994 1995 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Service charges on deposit accounts ............... $ 309 $ 317 $ 141 $ 159
Securities gains (losses) ......................... (10) 3 - -
Other ............................................. 20 19 17 25
----- ----- ----- -----
Total noninterest income ........................ $ 319 $ 339 $ 158 $ 184
===== ===== ===== =====
</TABLE>
The following table sets forth, on a pro forma basis, for the periods
indicated, the principal components of noninterest income.
PRO FORMA NONINTEREST INCOME
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months
--------------------
Year ended December 31, Ended June30,
----------------------- --------------------
1994 1995 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Service charges on deposit accounts ............... $1,528 $1,681 $ 830 $1,845
Investment services income ........................ 975 3,934 655 4,141
Trust fees ........................................ 1,128 1,320 576 710
Securities gains (losses) ......................... (17) 3 0 34
Gain on sale of assets ............................ 525 371 160 323
Other ............................................. 386 433 187 1,066
------ ------ ------ ------
Total noninterest income ........................ $4,525 $7,742 $2,408 $8,119
====== ====== ====== ======
</TABLE>
48
<PAGE> 68
Noninterest Expense
Noninterest expense for the 1996 period was $661,000, compared to
$619,000 for the 1995 period, an increase of 6.8%. Salaries and employee
benefits were $355,000 for the 1996 period, compared to $316,000 for the 1995
period, an increase of 12.3%. Occupancy expense decreased to $57,000 for the
1996 period, compared to $58,000 for the 1995 period. Other noninterest
expense increased to $249,000 for the 1996 period, compared to $245,000 for the
1995 period.
Salaries and employee benefits increased $34,000, or 5.6% from 1994 to
1995. Occupancy expense increased $13,000 to $129,000 for 1995 as compared to
$116,000 in 1994. Other noninterest expense decreased $42,000 from 1994 to
1995. The reduction in premium paid to the Federal Deposit Insurance
Corporation was a major factor in this reduction.
The following table sets forth, for the periods indicated, the
principal components of noninterest expense.
NONINTEREST EXPENSE
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months
--------------------
Year ended December 31, Ended June30,
----------------------- --------------------
1994 1995 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Salaries and employee benefits .................... $ 607 $ 641 $ 316 $ 355
Net occupancy expense ............................. 116 129 58 57
Furniture and equipment expense ................... 76 76 36 44
Supplies and printing ............................. 59 64 33 31
Advertising ....................................... 11 14 7 8
Banking assessments ............................... 65 35 37 4
Directors fees .................................... 42 54 23 31
Data processing expenses .......................... 76 82 39 47
Other ............................................. 198 160 70 84
------ ------ ------ ------
Total noninterest expense ....................... $1,250 $1,255 $ 619 $ 661
====== ====== ====== ======
</TABLE>
The following table set forth, on a pro forma basis, for the periods
indicated, the primary components of noninterest expense.
49
<PAGE> 69
PRO FORMA NONINTEREST EXPENSE
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
Six months
--------------------
Year ended December 31, Ended June30,
----------------------- --------------------
1994 1995 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Salaries and employee benefits ...................... $ 8,172 $11,337 $4,425 $11,048
Net occupancy expense ............................... 1,632 1,979 877 1,292
Furniture and equipment expense ..................... 942 818 471 864
Amortization of intangibles ......................... 118 118 59 134
Travel, meetings, seminars and entertainment ........ 201 434 196 179
Advertising ......................................... 336 594 157 294
Banking assessments ................................. 876 500 436 200
Professional fees ................................... 422 1,396 440 808
Onter non-credit losses ............................. 36 1,219 0 0
Other ............................................... 1,512 2,503 983 3,326
------- ------- ------ -------
Total noninterest expense ......................... $14,247 $20,898 $8,044 $18,145
======= ======= ====== =======
</TABLE>
Income tax expense for FIRSTBANC was $90,000 for the 1996 period,
compared to $91,000 for the 1995 period and the effective tax rates were 29.13%
and 32.16%, respectively. The effective tax rates for 1995 and 1994 were 27.22%
and 33.55%, respectively. The lower effective tax rate for 1995 resulted from
increased tax-free income.
50
<PAGE> 70
EARNING ASSETS
Loans
Loans are the largest category of earning assets and typically provide
higher yields than other types of earning assets. Associated with higher yields
are the inherent credit and liquidity risks which management attempts to control
and counter-balance. On June 30, 1996, loans, net of unearned discount were
$20.2 million, or 57.6%, of total assets compared to $19.1 million, or 57.7% of
total assets at December 31, 1995.
Loans averaged $17.0 million in 1994, compared to $18.1 million in
1995, an increase of $1.1 million. At December 31, 1995, total loans, net of
unearned discount were $19.1 million, compared to $18.4 million at year end
1994. During 1995, the commercial, financial and agricultural, real
estate-construction and consumer categories grew while real estate-residential
and real estate-commercial categories were down slightly. The following table
shows the composition of the loan portfolio by category at the dates indicated.
COMPOSITION OF LOAN PORTFOLIO
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------
1993 1994 1995
---------------------------- ----------------------- --------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural ....................... $ 3,305 20.92% $ 3,399 18.46% $ 4,218 22.04%
Real estate:
Construction ....................... 1,083 6.86 1,933 10.50 2,033 10.62
Mortgage - residential ............. 3,662 23.18 4,781 25.96 4,513 23.58
Mortgage - commercial .............. 4,522 28.62 4,219 22.91 3,967 20.72
Mortgage - other ................... 54 0.34 108 0.59 129 0.67
Consumer ............................. 3,154 19.97 3,941 21.40 4,258 22.24
Other ................................ 17 .11 34 .18 24 .13
------- ------ ------- ------ ------- ------
Total gross loans .................. 15,797 100.00% 18,415 100.00% 19,142 100.00%
====== ====== ======
Unearned income ...................... - - -
------- ------- -------
Total loans, net of
unearned income .................. 15,797 18,415 19,142
Allowance for loan losses ............ (212) (252) (269)
------- ------- -------
Total net loans .................... $15,585 $18,163 $18,873
======= ======= =======
</TABLE>
The following table shows the composition of the loan portfolio by
category of loans, on a pro forma basis at the dates indicated.
51
<PAGE> 71
PRO FORMA COMPOSITION OF LOAN PORTFOLIO
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------------------------------------------
1993 1994 1995
---------------------------- ----------------------- --------------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
-------- ---------- -------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Commercial, financial and
agricultural ............................. $ 80,155 30.14% $ 92,641 30.68% $144,014 25.94%
Real estate:
Construction ............................. 14,608 5.49 23,339 7.73 36,050 6.49
Mortgage - residential ................... 53,224 20.01 61,611 20.41 164,190 29.57
Mortgage - commercial .................... 92,637 34.83 100,005 33.12 138,848 25.01
Mortgage - other ......................... 1,251 0.47 537 0.18 3,105 0.56
Consumer ................................... 15,811 5.95 15,368 5.09 50,252 9.05
Other ...................................... 8,279 3.11 8,409 2.79 18,793 3.38
--------- ------ -------- ------ -------- ------
Total gross loans ........................ 265,965 100.01% 301,910 100.00% 555,252 100.00%
====== ====== ======
Unearned income ............................ - (34) (2,133)
--------- -------- --------
Total loans, net of
unearned income ........................ 265,965 301,876 553,119
Allowance for loan losses .................. (6,268) (5,261) (8,909)
--------- -------- --------
Total net loans .......................... $ 259,697 296,615 $544,210
========= ======== ========
</TABLE>
52
<PAGE> 72
The principal component of FIRSTBANC's loan portfolio is real estate
mortgage loans. At year end 1995, this category totaled $8.6 million and
represented 45% of the total loan portfolio, compared to $9.1 million, or
49.5%, of the total loan portfolio at the end of 1994.
In the context of this discussion, a "real estate mortgage loan" is
defined as any loan, other than loans for construction purposes, secured by
real estate, regardless of the purpose of the loan. It is common practice for
financial institutions in FIRSTBANC's market area to obtain a security interest
in real estate whenever possible, in addition to any other available
collateral. This collateral is taken to reinforce the likelihood of ultimate
repayment of the loan and tends to increase the magnitude of the real estate
loan portfolio component.
Residential mortgage loans, which are the largest single category of
FIRSTBANC's loans, totaled $4.5 million at December 31, 1995, compared to $4.8
million at year end 1994, and are 23.6% and 26.0%, respectively, of the total
loan portfolio at those dates. Non-residential mortgage loans, which include
commercial loans and loans secured by multi-family properties and farmland, are
one of the largest categories of FIRSTBANC's loans, totaled $4.0 million, or
20.7%, of the loan portfolio at December 31, 1995, compared to $4.2 million, or
22.9%, at December 31, 1994.
Commercial, financial and agricultural loans increased $819,000, or
24.1% to $4.2 million at December 31, 1995, from $3.4 million at year end 1994.
Consumer loans increased $317,000, or 8.0% to $4.3 million at December
31, 1995 from $3.9 million at year end 1994.
FIRSTBANC's loan portfolio reflects the diversity of its market.
FIRSTBANC loans were made to individuals or businesses in Alabama. FIRSTBANC
does not engage in foreign lending.
The repayment of loans in the loan portfolio as they mature is also a
source of liquidity for FIRSTBANC. The following table set forth FIRSTBANC's
loans maturing within the specific intervals at June 30, 1996.
LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, 1996
-------------------------------------------------------------------
Over one year
One year or less Through five Over five years Total
Years
---------------- ------------- --------------- -----------
<S> <C> <C> <C> <C>
Commercial, financial and agricultural ............ $1,911 $2,013 $ 330 $4,254
Real estate - construction ........................ 1,451 - 140 1,591
Real estate - residential ......................... 1,014 3,866 637 5,517
Real estate - commercial .......................... 770 2,363 891 4,024
Consumer .......................................... 1,088 3,332 431 4,851
<CAPTION>
Predetermined Floating
Rates Rates
--------------- ------------
<S> <C> <C>
Maturing after one year but within five years .............................................. $ 19,304 $1,270
Maturing after five years .................................................................. 1,780 649
-------- ------
$ 21,084 $1,919
======== ======
</TABLE>
The information presented in the above table is based on the
contractual maturities of individual loans, including loans which may be
subject to renewal at their contractual maturity. Renewal of such loans is
subject to review and credit approval, as well as modification of terms of
their maturity. Consequently, management believes this treatment presents
fairly the maturity and repricing structure of the loan portfolio.
53
<PAGE> 73
Securities
Investment securities and securities available for sale decreased
$286,000 from year end 1994 to year end 1995. Total securities averaged $10.4
million in 1995, compared to $11.5 million in 1994. During 1995, the state,
county and municipal portfolio increased $317,000 while the U.S. Treasury and
agencies portfolio decreased $606,000.
The following table sets forth the book value of securities held by
FIRSTBANC at the dates indicated.
INVESTMENT SECURITIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
------------------------
1994 1995
------ ------
<S> <C> <C>
U.S. Treasury ................................................ $ 510 $ -
U.S. Government Agencies ..................................... 5,218 3,002
State and political subdivisions ............................. 2,328 2,645
Other ........................................................ 100 100
------ ------
Total ..................................................... $8,156 $5,747
====== ======
</TABLE>
AVAILABLE FOR SALE SECURITIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
------------------------
1994 1995
------ ------
<S> <C> <C>
U.S. Treasury ................................................ $ 244 $ 757
U.S. Government Agencies ..................................... 1,788 3,395
Other ........................................................ 248 251
------ ------
Total ..................................................... $2,280 $4,403
====== ======
</TABLE>
The following table sets forth the book value of the securities held
by ANB, on a pro forma basis, giving effect to the Merger.
54
<PAGE> 74
PRO FORMA INVESTMENT SECURITIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1995
--------- --------
<S> <C> <C>
U.S. Treasury ................................................... $ 510 $ 968
U.S. Government Agencies ........................................ 39,960 49,735
State and political subdivisions ................................ 2,328 10,791
Other ........................................................... 100 100
------- -------
Total ........................................................ $42,898 $61,594
======= =======
</TABLE>
PRO FORMA AVAILABLE FOR SALE SECURITIES
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31,
-------------------------
1994 1995
--------- --------
<S> <C> <C>
U.S. Treasury ................................................... $ 9,931 $26,199
U.S. Government Agencies ........................................ 31,574 54,633
State and political subdivisions ................................ - 7,262
Other ........................................................... 2,286 4,176
------- -------
Total ........................................................ $43,791 $92,270
======= =======
</TABLE>
The following tables show the scheduled maturities and average yields of
securities held by FIRSTBANC at December 31, 1995.
55
<PAGE> 75
INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------------------
After one but After five but
Within one year Within five years Within ten years After ten years
------------------ -------------------- -------------------- --------------------
Amount Yield (1) Amount Yield (1) Amount Yield (1) Amount Yield (1)
------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Government Agencies .................. $1,752 6.71% $1,000 5.60% $ 250 7.13% $ - -%
State and political subdivisions .......... - - 857 7.98 1,350 7.66 438 8.48
Other ..................................... 100 8.00 - - - - - -
------ ---- ------ ---- ------ ---- ---- ----
Total .................................. $1,852 6.78% $1,857 6.70% $1,600 7.58% $438 8.48%
====== ==== ===== ==== ====== ==== ==== ====
- ------------------
</TABLE>
(1) Computed on a tax-equivalent basis utilizing a 34% tax rate, without giving
effect to the disallowance for federal income tax purposes of interest
related to certain tax-exempt assets.
SECURITIES AVAILABLE FOR SALE MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------------------
After one but After five but
Within one year Within five years Within ten years After ten years
------------------ -------------------- -------------------- --------------------
Amount Yield (1) Amount Yield (1) Amount Yield (1) Amount Yield (1)
------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury ............................. $ 251 5.88% $ 506 5.88% $ - - $ - -%
U.S. Government Agencies .................. - - 2,936 6.02 459 5.09 - -
Other ..................................... 251 6.94 - - - - - -
------ ---- ------ ---- ---- ---- ----- ----
Total .................................. $ 502 6.41% $3,442 6.00% $459 5.09% $ - -
====== ==== ====== ==== ==== ==== ===== ====
</TABLE>
- ------------------
(1) Computed on a tax-equivalent basis utilizing a 34% tax rate, without giving
effect to the disallowance for federal income tax purposes of interest
related to certain tax-exempt assets.
The following tables show the scheduled maturities and average yields of
securities held by ANB, on a pro forma basis, giving effect to the Merger.
56
<PAGE> 76
PRO FORMA INVESTMENT SECURITIES MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------------------
After one but After five but
Within one year Within five years Within ten years After ten years
------------------ -------------------- -------------------- --------------------
Amount Yield (1) Amount Yield (1) Amount Yield (1) Amount Yield (1)
------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury ............................. $ 715 5.86% $ 253 6.01% $ - - $ - -
U.S. Government Agencies .................. 5,004 5.68 8,927 6.16 7,561 6.43 28,243 6.67
State and political subdivisions .......... - - 1,325 7.28 8,193 8.15 1,273 9.21
Other ..................................... 100 8.00 - - - - - -
------ ---- ------- ---- ------- ---- ------- ----
Total .................................. $5,819 5.74% $10,505 6.30% $15,754 7.32% $29,516 6.78%
====== ==== ======= ==== ======= ==== ======= ====
</TABLE>
- ------------------
(1) Computed on a tax-equivalent basis utilizing a 34% tax rate, without giving
effect to the disallowance for federal income tax purposes of interest
related to certain tax-exempt assets.
PRO FORMA SECURITIES AVAILABLE FOR SALE MATURITY DISTRIBUTION AND YIELDS
(AMOUNTS IN THOUSANDS, EXCEPT YIELDS)
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------------------
After one but After five but
Within one year Within five years Within ten years After ten years
------------------ -------------------- -------------------- --------------------
Amount Yield (1) Amount Yield (1) Amount Yield (1) Amount Yield (1)
------------------ -------------------- -------------------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury ............................. $22,282 5.28% $ 3,405 5.49% $ 512 7.46% $ - -
U.S. Government Agencies .................. 1,294 6.70 13,618 6.29 544 5.60 39,177 7.24
State and political subdivisions .......... 337 8.50 5,882 8.36 560 8.10 483 8.67
Other ..................................... 251 6.94 - - - - - -
------- ---- ------- ---- ------ ---- ------- ----
Total (2) ............................... $24,164 5.42% $22,905 6.70% $1,616 7.06% $39,660 7.26%
======= ==== ======= ==== ====== ==== ======= ====
</TABLE>
- ------------------
(1) Computed on a tax-equivalent basis utilizing a 34% tax rate, without giving
effect to the disallowance for federal income tax purposes of interest
related to certain tax-exempt assets.
(2) Excludes $3,925,000 in investment equity securities.
Short-term Investments
Federal funds sold were $675,000 at June 30, 1996, compared to $500,000
at December 31, 1995.
DEPOSITS AND OTHER INTEREST-BEARING LIABILITIES
Average interest-bearing liabilities increased to $25.6 million at June
30, 1996. Average interest-bearing liabilities increased to $25.1 million
during 1995, from $24.8 million during 1994.
Deposits increased $639,000, or 2.2% from December 31, 1994 to December
31, 1995. Deposits are FIRSTBANC's primary source of funding its earning
assets. Non interest-bearing deposits increased $375,000 from year end 1994 to
year end 1995. Interest-bearing demand deposits and savings accounts decreased
$937,000 from December 31, 1994 to December 31, 1995. Certificates of deposit
and other time deposits increased $1.2 million during 1995.
57
<PAGE> 77
The following table sets forth deposits of FIRSTBANC by category on the
dates indicated.
DEPOSITS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------
1993 1994 1995
--------------------- ------------------- -----------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
-------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Demand deposit accounts ...................... $5,393 18.28% $5,437 18.57% $5,812 19.42%
NOW accounts ................................. 5,424 18.38 5,602 19.13 5,652 18.89
Savings and money market accounts ............ 8,309 28.16 7,822 26.71 6,835 22.84
Time deposits less than $100,000 ............. 9,124 30.93 9,029 30.83 10,026 33.51
Time deposits of $100,000 or more ............ 1,254 4.25 1,393 4.76 1,597 5.34
------- ------ ------- ------ ------- ------
Total deposits ............................. $29,504 100.01% $29,283 100.00% $29,922 100.00%
======= ====== ======= ====== ======= ======
</TABLE>
The following table sets forth the deposits of ANB by category, on a pro
forma basis, at the dates indicated.
PRO FORMA DEPOSITS
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------------
1993 1994 1995
--------------------- ------------------- -----------------------
Percent Percent Percent
Amount of Total Amount of Total Amount of Total
-------- -------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Demand deposit accounts ...................... $ 54,538 17.00% $ 59,350 17.03% $112,382 16.61%
NOW accounts ................................. 39,171 12.21 35,149 10.09 105,625 15.61
Savings and money market accounts ............ 134,636 41.98 125,081 35.90 181,032 26.76
Time deposits less than $100,000 ............. 61,898 19.30 98,394 28.24 217,678 32.18
Time deposits of $100,000 or more ............ 30,511 9.51 30,445 8.74 59,819 8.84
-------- ------ -------- ------ -------- ------
Total deposits ............................. $320,754 100.01% $348,419 100.00% $676,536 100.00%
======== ====== ======== ====== ======== ======
</TABLE>
Core deposits, which exclude time deposits of $100,000 or more, provide
a relatively stable funding source for FIRSTBANC's loan portfolio and other
earning assets. FIRSTBANC's core deposits were $28.2 million at December 31,
1995, compared to $27.9 million at year end 1994.
Deposits, and particularly core deposits, have historically been
FIRSTBANC's primary source of funding and have enabled FIRSTBANC to meet
successfully both its short-term and long-term liquidity needs. Management
anticipates that such deposits will continue to be FIRSTBANC's primary source
of funding in the future. FIRSTBANC's loan-to-deposit ratio was 64.0% at
December 31, 1995 and 62.9% at the end of 1994, and the ratio averaged 60.2%
during 1995. The maturity distribution of FIRSTBANC's time deposits over
$100,000 at December 31, 1995 is shown in the following table.
58
<PAGE> 78
MATURITIES OF CERTIFICATES OF DEPOSIT AND OTHER TIME
DEPOSITS OF $100,000 OR MORE
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, 1995
--------------------------------------------------------------------------
After One After Three After Six
Through Through Through After
Within One Three Six Twelve Twelve
Month Months Months Months Months Total
------------ ------------ ------------- -------------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Certificates of deposit of $100,000 or more ...... $ - $535 $402 $300 $ - $ 1,237
Other time deposits of $100,000 or more .......... 360 - - - - 360
---- ---- ---- ---- ----- --------
Total ................................... $360 $535 $402 $300 $ - $ 1,597
==== ==== ==== ==== ===== ========
</TABLE>
Large certificates of deposit customers tend to be extremely sensitive
to interest rate levels, making these deposits less reliable sources of
funding for liquidity planning purposes than core deposits. Some financial
institutions partially fund their balance sheets using large certificates of
deposits obtained through brokers. The broker deposits are generally
expensive and are unreliable as long-term funding sources. Accordingly,
FIRSTBANC does not actively seek broker deposits.
59
<PAGE> 79
Borrowed Funds
Borrowed funds include treasury tax and loan note. The treasury tax
and loan note was $9,000 at December 31, 1995, compared to $657,000 at December
31, 1994. The following table sets forth, for the periods indicated,
information concerning the treasury tax and loan note:
<TABLE>
<CAPTION>
December 31,
------------------------ June 30,
1994 1995 1996
---------- ---------- -----------
<S> <C> <C> <C>
Balance at end of period .................................. $657,000 $ 9,000 $303,000
Average balance outstanding during the period ............. 320,000 364,000 190,000
Maximum outstanding at any month's end .................... 850,000 850,000 850,000
Weighted average interest rate at period end .............. 3.73% 4.86% 4.97%
Weighted average interest rate during period .............. 3.75 5.22 6.32
</TABLE>
FIRSTBANC is obligated $455,000 to an independent bank at June 30,
1996. The common shares in its subsidiary Bank are pledged as security for this
loan. The loan bears interest at the prime rate of the lender and is payable
quarterly over the next five years. It is anticipated that the loan will be paid
by ANB following the Merger.
CAPITAL RESOURCES AND LIQUIDITY MANAGEMENT
Capital Resources
FIRSTBANC's stockholders' equity increased $494,000 from December 31,
1994 to December 31, 1995. The change is shown in the following table:
<TABLE>
<S> <C>
Stockholders' equity - December 31, 1994 ..................................................... $2,105
Net income for the year ended December 31, 1995 .............................................. 425
Decrease in unrealized loss on securities available
for sale, net of tax benefits .............................................................. 75
Dividends on preferred stock ................................................................. (6)
------
Stockholders' equity - December 31, 1995 ..................................................... $2,599
======
</TABLE>
FIRSTBANC's stockholder's equity increased $191,000 from December 31,
1995 to June 30, 1996, as shown below:
<TABLE>
<S> <C>
Stockholders' equity - December 31, 1995 ..................................................... $2,599
Net income for the six months ended June 30, 1996 ............................................ 219
Increase in unrealized loss on securities available
for sale, net of tax benefits .............................................................. (28)
------
Stockholders' equity - June 30, 1996 ......................................................... $2,790
======
</TABLE>
Under the capital guidelines of their regulators, FIRSTBANC and its
subsidiary Bank are currently required to maintain a minimum risk-based total
capital ratio of 8% with at least 4% being Tier 1 capital. Tier 1 capital
consists of common stockholders' equity, qualifying perpetual preferred stock
and minority interests in equity accounts of consolidated subsidiaries, less
goodwill. In addition, under the guidelines, FIRSTBANC and its subsidiary Bank
60
<PAGE> 80
must maintain a minimum Tier 1 leverage ratio of Tier 1 capital to total assets
of at least 3%, but this minimum ratio is typically increased by 100 to 200
basis points for other than the highest rated institutions.
FIRSTBANC exceeded its fully phased-in regulatory capital ratios at
December 31, 1993, 1994, 1995 and at June 30, 1996, as set forth in the
following table:
ANALYSIS OF CAPITAL
(AMOUNTS IN THOUSANDS, EXCEPT PERCENTAGES)
<TABLE>
<CAPTION>
December 31,
----------------------------- June 30,
1993 1994 1995 1996
-------- -------- -------- ---------
<S> <C> <C> <C> <C>
Tier 1 Capital .................................. $ 1,846 $ 2,216 $ 2,635 $ 2,855
Tier 2 Capital .................................. 212 252 269 275
------- ------- ------- -------
Total qualifying capital ...................... $ 2,058 $ 2,468 $ 2,904 $ 3,130
======= ======= ======= =======
Risk-adjusted total assets
(including off-balance sheet
exposures) .................................... $19,123 $20,796 $21,646 $21,974
======= ======= ======= =======
Tier 1 risk-based capital ratio
(4.00% required minimum) ...................... 9.65% 10.66% 12.17% 12.99%
Total risk-based capital ratio
(8.00% required minimum) ...................... 10.76 11.87 13.42 14.24
Tier 1 leverage ratio
(4.00% required minimum) ...................... 5.56 6.71 7.88 8.07
</TABLE>
The subsidiary Bank is required to maintain risk-based and leverage
ratios similar to those for FIRSTBANC. The Bank exceeded these regulatory
capital ratios at June 30, 1996, as set forth in the following table.
<TABLE>
<S> <C>
Tier 1 risk-based capital ratio (4.00% required minimum) ......................................................... 14.77%
Total risk-based capital ratio (8.00% required minimum) .......................................................... 16.02
Tier 1 leverage ratio (4.00% required minimum) ................................................................... 9.25
</TABLE>
Liquidity Management
Liquidity management involves monitoring FIRSTBANC's sources and uses of funds
in order to meet its day-to-day cash flow requirements while maximizing
profits. Liquidity represents the ability of an entity to convert assets into
cash or cash equivalents without significant loss and to raise additional funds
by increasing liabilities. Without proper liquidity management, FIRSTBANC will
not be able to perform the primary function of a financial intermediary and
would, therefore, not be able to meet the needs of the communities it serves.
Increased liquidity in typical interest rate environments often involves
decreasing profits by investing in earning assets with shorter maturities.
Liquidity management is made more complex because different balance sheet
components are subject to varying degrees of management control. For example,
the timing of maturities of the investment portfolio is very predictable and
subject to a high degree of control at the time investment decisions are made.
However, net deposit inflows and outflows are far less predicable and are not
subject to nearly the same degree of control.
61
<PAGE> 81
Assets included in FIRSTBANC's consolidated balance sheets contribute to
liquidity management. Federal funds sold of $675,000 at June 30, 1996 is a
primary source of liquidity. If required in short-term liquidity management,
this asset could be converted to cash immediately. Cash received from
repayment of investment securities and loans provide a constant source of cash
that contributes to liquidity management. Long-term liquidity needs are met
through FIRSTBANC's deposit base (approximately 95.0% of FIRSTBANC's deposits
at December 31, 1995 are considered core deposits), and the repayment of loans
and other investments as they mature. FIRSTBANC is able to manage its
long-term liquidity needs by adjusting the rates it pays on longer-term
deposits and the amount and mix of longer-term investments in its portfolio.
FIRSTBANC, as a stand alone corporation, has more limited access to
liquidity sources than its subsidiary Bank and depends on dividends from its
subsidiary as its primary source of liquidity. FIRSTBANC's liquidity is
diminished by required payments on its outstanding debt. The ability of its
subsidiary Bank to pay dividends is subject to general regulatory restrictions
which may, but are not expected to, have a material negative impact on the
liquidity available to FIRSTBANC.
ACCOUNTING RULE CHANGES
Accounting for Loan Impairments
In May 1993, the FASB issued SFAS 114, and in October 1994, the FASB
issued SFAS 118 which amended SFAS 114. SFAS 114 and 118 provide for the use
of present value accounting to determine the reserve for possible credit losses
on certain loans, including loans that have been modified as part of a troubled
debt restructuring. These statements were adopted by FIRSTBANC effective
January 1, 1995, resulting in no additional provision for loan losses at
January 1, 1995, or during the year ended December 31, 1995.
Accounting for Securities
In May 1993, the FASB issued SFAS 115, "Accounting for Certain
Investments in Debt and Equity Securities." SFAS 115 provides for the
classification of investment securities into the following three categories:
trading, available-for-sale and held-to-maturity. Debt securities that an
enterprise has the intent and ability to hold until maturity are classified as
held-to-maturity and reported at amortized cost. Trading securities and
available-for-sale securities are reported at market value with unrealized
gains and losses on trading securities reported in income and unrealized gains
and losses on available-for-sale securities reported as a net amount in a
separate component of stockholders' equity until realized. FIRSTBANC adopted
SFAS 115 on January 1, 1994. At December 31, 1995, FIRSTBANC held $4.4 million
securities available-for-sale and $5.7 million securities held-to-maturity and
reflected an unrealized loss after tax of $36,000 as a separate component of
stockholders' equity.
Accounting for the Impairment of Long-Lived Assets
In March, 1995, the FASB issued SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
SFAS 121 establishes standards for the identification of long-lived assets,
certain identifiable intangibles and goodwill that may need to be written down
because of an entity's inability to recover the assets' carrying value.
FIRSTBANC adopted SFAS 121 effective January 1, 1996. The adoption of
SFAS 121 did not have a material effect on FIRSTBANC's financial statements.
Accounting for Mortgage Servicing Rights
In May, 1995, the FASB issued SFAS 122, "Accounting for Mortgage
Servicing Rights." FIRSTBANC does not have any mortgage servicing rights.
Accordingly, SFAS 122 will not have an impact on FIRSTBANC's consolidated
financial statements.
IMPACT OF INFLATION
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<PAGE> 82
Unlike most industrial companies, the assets and liabilities of
financial institutions such as FIRSTBANC and its subsidiary are primarily
monetary in nature. Therefore, interest rates have a more significant effect
on FIRSTBANC's performance than do the effects of changes in the general rate of
inflation and change in prices. In addition, interest rates do not necessarily
move in the same direction or in the same magnitude as the prices of goods and
services. Management seeks to manage the relationships between
interest-sensitive assets and liabilities in order to protect against wide
interest rate fluctuations, including those resulting from inflation.
INDUSTRY DEVELOPMENTS
Certain recently enacted and proposed legislation could have an effect
on both the costs of doing business and the competitive factors facing the
financial institutions industry. FIRSTBANC is unable at this time to assess the
impact of this legislation on its financial condition or results of operations.
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<PAGE> 83
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
The following summaries include (i) the condensed consolidated
statement of condition of Alabama National BanCorporation (ANB) and
subsidiaries as of June 30, 1996, and the related condensed consolidated
statements of income on a historical basis for the six-month periods ended June
30, 1996 and 1995 and for each of the three years ended December 31, 1995, (ii)
the condensed statement of condition of FIRSTBANC Holding Company, Inc.
(FIRSTBANC) and subsidiaries as of June 30, 1996, and the related condensed
consolidated statements of income on a historical basis for the six-month
periods ended June 30, 1996 and 1995 and for each of the three years ended
December 31, 1995, (iii) adjustments to give effect to the proposed
pooling-of-interests with ANB and FIRSTBANC, and (iv) the pro forma combined
condensed statements of condition of ANB and subsidiaries and related
statements of income as if such combination had occurred on January 1, 1993.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated financial statements of ANB
and subsidiaries, incorporated by reference herein, and the financial
statements of FIRSTBANC included elsewhere herein. See "INCORPORATION OF
DOCUMENTS BY REFERENCE" and "INDEX TO FINANCIAL STATEMENTS." The pro forma
information provided below is presented for information purposes only and may
not be indicative of future results or the results which would have actually
occurred if the transaction had occurred in the past or which may be obtained
in the future.
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<PAGE> 84
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF CONDITION
JUNE 30, 1996
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Cash and due from banks ............................... $ 32,544 $ 3,062 $ - $ 35,606
Interest-bearing deposits in other banks .............. 951 - - 951
Investment securities ................................. 75,120 4,517 - 79,637
Securities available for sale ......................... 70,935 5,217 - 76,152
Trading securities ................................... 1,813 - - 1,813
Federal funds sold and securities purchased under
agreements to resell ................................ 26,969 675 - 27,644
Loans, net of unearned discount and allowance
for loan losses ..................................... 540,327 19,966 - 560,293
Property, equipment and leasehold improvements, net ... 19,334 1,324 - 20,658
Intangible assets ..................................... 7,407 - - 7,407
Other assets .......................................... 16,513 350 - 16,863
---------- --------- ----------- ----------
Totals ............................................ $ 791,913 $ 35,111 $ - $ 827,024
========== ========= =========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits .............................................. $ 643,377 $ 31,422 $ - $ 674,799
Federal funds purchased and securities sold under
agreements to repurchase ............................ 42,703 - - 42,703
Treasury tax and loan account ......................... 4,275 303 - 4,578
Short-term borrowings ................................. 32,150 - - 32,150
Notes payable and capital lease obligations ........... 313 455 - 768
Accrued expenses and other liabilities ................ 10,491 141 - 10,632
---------- --------- ----------- ----------
Total liabilities ................................. 733,309 32,321 - 765,630
Preferred stock ....................................... - 1 (1) -
Common stock .......................................... 6,567 4 (4) 6,872
305
Additional paid-in capital ............................ 51,923 1,778 (300) 53,401
Retained earnings ..................................... 5,788 1,072 - 6,860
Treasury stock ........................................ (5,023) - - (5,023)
Unearned restricted stock ............................. (232) - - (232)
Unrealized loss on available for sale securities,
net of tax benefit................................... (419) (65) - (484)
---------- --------- ----------- ----------
Total stockholders' equity ........................ 58,604 2,790 - 61,394
---------- --------- ----------- ----------
Total liabilities and stockholders' equity......... $ 791,913 $ 35,111 $ - $ 827,024
========== ========= =========== ==========
</TABLE>
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<PAGE> 85
The following summaries include (1) the condensed statements of income of
Alabama National BanCorporation and Subsidiaries on a historical basis for the
six month period ended June 30, 1996 and for the years ended December 31, 1995,
1994 and 1993 (2) the condensed statements of income of FIRSTBANC Holding
Company, Inc. and Subsidiary on a historical basis for the six month period
ended June 30, 1996 and for the years ended December 31, 1995, 1994 and 1993
(3) adjustments to give effect to the completed acquisition of FIRSTBANC
Holding Company, Inc. and (4) the pro forma combined condensed statements of
income of Alabama National BanCorporation and Subsidiaries as if such
acquisition had occurred on January 1, 1993.
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income ....................................... $ 31,017 $ 1,310 $ - $ 32,327
Interest expense ...................................... 14,819 515 - 15,334
---------- --------- ----------- ----------
Net interest income ................................... 16,198 795 - 16,993
Provision for loan losses ............................. 200 9 - 209
Noninterest income .................................... 7,935 184 - 8,119
Noninterest expense ................................... 17,484 661 - 18,145
---------- --------- ----------- ----------
Income before provision for income taxes .............. 6,449 309 - 6,758
Provision for income taxes ............................ 2,301 90 - 2,391
---------- --------- ----------- ----------
Income before minority interest in earnings
of consolidated subsidiaries ........................ 4,148 219 - 4,367
Minority interest in earnings of
consolidated subsidaires ............................ 10 - - 10
---------- --------- ----------- ----------
Net income ............................................ $ 4,138 $ 219 $ - $ 4,357
========== ========= =========== ==========
Net income per common share .......................... $ .65 $ .65
========== ==========
Weighted average common shares outstanding ............ 6,379 6,684
========== ==========
</TABLE>
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<PAGE> 86
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income ................................................. $ 35,430 $ 2,537 $ - $ 37,967
Interest expense ................................................ 18,152 1,020 - 19,172
---------- --------- ----------- ----------
Net interest income ............................................. 17,278 1,517 - 18,795
Provision for loan losses ....................................... 392 17 - 409
Noninterest income .............................................. 7,403 339 - 7,742
Noninterest expense ............................................. 19,643 1,255 - 20,898
---------- --------- ----------- ----------
Income before provision for income taxes ........................ 4,646 584 - 5,230
Provision for income taxes ...................................... 195 159 - 354
---------- --------- ----------- ----------
Income before minority interest in earnings
of consolidated subsidiaries .................................. 4,451 425 - 4,876
Minority interest in earnings of
consolidated subsidaires ...................................... 650 - - 650
---------- --------- ----------- ----------
Net income ...................................................... 3,801 425 - 4,226
Cash dividends on preferred stock ............................... 848 6 - 854
---------- --------- ----------- ----------
Net income available for common shares .......................... $ 2,953 $ 419 $ - $ 3,372
========== ========= =========== ==========
Net income per common share ..................................... $ 1.15 $ 1.17
========== ==========
Weighted average common shares outstanding ...................... 2,569 2,874
========== ==========
</TABLE>
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<PAGE> 87
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income .............................. $ 26,966 $ 2,378 $ - $ 29,344
Interest expense ............................. 11,259 834 - 12,093
---------- --------- ----------- ----------
Net interest income .......................... 15,707 1,544 - 17,251
Provision for loan losses .................... 1,230 49 - 1,279
Noninterest income ........................... 4,206 319 - 4,525
Noninterest expense .......................... 12,997 1,250 - 14,247
---------- --------- ----------- ----------
Income before provision for income taxes ..... 5,686 564 - 6,250
Provision for income taxes ................... 86 189 - 275
---------- --------- ----------- ----------
Income before minority interest in earnings
of consolidated subsidiaries ............... 5,600 375 - 5,975
Minority interest in earnings of
consolidated subsidaires ................... 750 - - 750
---------- --------- ----------- ----------
Net income ................................... 4,850 375 - 5,225
Less cash dividends on preferred stock ....... 715 6 - 721
---------- --------- ----------- ----------
Net income available for common shares $ 4,135 $ 369 $ - $ 4,504
========== ========= =========== ==========
Net income per common share .................. $ 1.64 $ 1.59
========== ==========
Weighted average common shares outstanding ... 2,529 2,834
========== ==========
</TABLE>
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<PAGE> 88
ALABAMA NATIONAL BANCORPORATION AND SUBSIDIARIES
CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)
The following summaries include (i) the condensed consolidated
statement of condition of Alabama National BanCorporation (ANB) and subsidiaries
as of June 30, 1996, and the related condensed consolidated statements of income
on a historical basis for the six-month periods ended June 30, 1996 and 1995
and for each of the three years ended December 31, 1995, (ii) the condensed
statement of condition of FIRSTBANC Holding Company, Inc. (FIRSTBANC) and
subsidiaries as of June 30, 1996, and the related condensed consolidated
statements of income on a historical basis for the six-month periods ended June
30, 1996 and 1995 and for each of the three years ended December 31, 1995,
(iii) adjustments to give effect to the proposed pooling-of-interests with ANB
and FIRSTBANC, and (iv) the pro forma combined condensed statements of
condition of ANB and subsidiaries and related statements of income as if such
combination had occurred on January 1, 1993.
These pro forma statements should be read in conjunction with the
accompanying notes and the separate consolidated financial statements of ANB
and subsidiaries, incorporated by reference herein, and the financial
statements of FIRSTBANC included elsewhere herein. See "INCORPORATION OF
DOCUMENTS BY REFERENCE" and "INDEX TO FINANCIAL STATEMENTS." The pro forma
information provided below is presented for information purposes only and may
not be indicative of future results or the results which would have actually
occurred if the transaction had occurred in the past or which may be obtained in
the future.
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<PAGE> 89
ALABAMA NATIONAL BANCORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1993
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ANB AND
ADJUSTMENTS FIRSTBANC
INCREASE PRO FORMA
ANB FIRSTBANC (DECREASE) COMBINED
---------- --------- ----------- ----------
<S> <C> <C> <C> <C>
Interest income .............................................. $ 22,800 $ 2,274 $ - $ 25,074
Interest expense ............................................. 9,219 853 - 10,072
---------- --------- ----------- ----------
Net interest income .......................................... 13,581 1,421 - 15,002
Provision for (benefit of recoveries) loan losses ............ (642) 122 - (520)
Noninterest income ........................................... 5,338 348 - 5,686
Noninterest expense .......................................... 14,593 1,252 - 15,845
---------- --------- ----------- ----------
Income before provision for income taxes ..................... 4,968 395 - 5,363
Provision for income taxes ................................... 100 160 - 260
---------- --------- ----------- ----------
Income before minority interest in earnings
of consolidated subsidiaries ............................... 4,868 235 - 5,103
Minority interest in earnings of
consolidated subsidaires ................................... 236 - - 236
---------- --------- ----------- ----------
Net income ................................................... 4,632 235 - 4,867
Less cash dividends on preferred stock ....................... 721 6 - 727
---------- --------- ----------- ----------
Net income available for common shares $ 3,911 $ 229 $ - $ 4,140
========== ========= =========== ==========
Net income per common share (1) .............................. $ 1.60 $ 1.51
========== ==========
Weighted average common shares outstanding ................... 2,437 2,742
========== ==========
</TABLE>
69
<PAGE> 90
COMPARATIVE PER SHARE DATA
The following table sets forth certain comparative per share data
relating to net income and book value on (i) a historical basis for ANB and
FIRSTBANC; (ii) a pro forma combined basis per share of ANB common stock; and
(iii) an equivalent pro forma combined basis per share of FIRSTBANC common
stock. The pro forma information gives effect to the Merger on a pooling of
interests accounting basis and assumes the FIRSTBANC Common Stock is converted
at 7.12917 per share. See "THE MERGER - TERMS OF THE MERGER." The pro forma
data are not necessarily indicative of the results of operations or combined
financial position that would have resulted had the Merger been consummated
during the periods indicated, nor are they 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 and the
unaudited pro forma condensed financial information of FIRSTBANC and ANB,
including the respective notes thereto appearing elsewhere in this Proxy
Statement and the historical financial statements of ANB and notes thereto
incorporated by reference. See "INDEX TO FINANCIAL STATEMENTS," "INCORPORATION
BY REFERENCE" and "CONDENSED PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------------------ ---------------------
1993 1994 1995 1995 1996
----------------- ------------ ----------------- ---------- ----------
(UNAUDITED, EXCEPT ANB AND FIRSTBANC HISTORICAL) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net income per common share:
ANB historical ............................$ 1.60 $ 1.64 $ 1.15 $ .94 $ .65
FIRSTBANC historical ...................... 5.37 8.64 9.81 4.49 5.12
AND and FIRSTBANC pro forma
combined ................................. 1.51 1.59 1.17 .91 .65
FIRSTBANC pro forma
equivalent (1) ........................... 10.77 11.34 8.34 6.49 4.63
Book value per common share:
ANB historical.............................$ 4.91 $ 6.01 $ 8.97 $ 7.50 $ 9.45
FIRSTBANC historical....................... 41.87 47.91 59.47 53.85 63.93
ANB and FIRSTBANC pro forma
combined.................................. 5.00 6.09 8.94 7.51 9.44
FIRSTBANC pro forma
equivalent (1) ........................... 35.65 43.42 63.73 53.54 67.30
</TABLE>
________________
(1) Represents the pro forma combined information multiplied by the assumed
exchange ratio of 7.12917 shares of ANB Common Stock for each share of
FIRSTBANC Common Stock.
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<PAGE> 91
BUSINESS OF FIRSTBANC
FIRSTBANC is an Alabama corporation that operates as a bank holding
company and through its wholly owned subsidiary provides banking and financial
services to consumers and business customers principally in Baldwin County,
Alabama. At June 30, 1996 FIRSTBANC had one subsidiary institution, First Bank
of Baldwin County ("FBBC"), whose principal offices and branches are located in
Baldwin County, Alabama. At June 30, 1996, FIRSTBANC had total consolidated
assets of approximately $35.1 million, total loans of approximately $20.2
million, total deposits of approximately $31.4 million and total shareholders'
equity of approximately $2.8 million.
FBBC focuses on traditional residential mortgage, consumer, commercial
and real estate construction lending to customers in its market area. FBBC
also offers a variety of deposit programs to individuals and small businesses
and other organizations at interest rates generally consistent with local
market conditions. FBBC offers individual retirement accounts, safe deposit
and night depository facilities and additional services such as the sale of
traveler's checks, money orders and cashier's checks.
LENDING ACTIVITIES
General
Through FBBC, FIRSTBANC offers a range of lending services, including
real estate, consumer and commercial loans, to individual and small businesses
and other organizations that are located in or conduct a substantial portion of
their business in FBBC's market area. FIRSTBANC's total loans at June 30, 1996
were approximately $20.2 million, or approximately 57.6% of total assets. The
interest rates charged on loans vary with the degree of risk, maturity and
amount of the loan and are further subject to competitive pressures, money
market rates, availability of funds and government regulations. FIRSTBANC has
no foreign loans or loans for highly leveraged transactions.
Loan Portfolio
REAL ESTATE LOANS. Loans secured by real estate are the
primary component of FIRSTBANC's loan portfolio, constituting approximately $11
million, or 54.9% of total loans, at June 30, 1996. The Bank's predominant
real estate loan is the single family first mortgages, typically structured
with fixed interest rates, based on market conditions. Fixed rate loans
usually have terms of five years, with payments through the date of maturity
generally based on a 14 year amortization schedule. The majority of FBBC's
commercial mortgages are at variable rates, which approximate current market
rates. Construction loans are made on a variable rate basis. Origination fees
are normally charged for all loans secured by real estate.
FBBC originates a small number of residential loans for sale into the
secondary market. Such loans are made in accordance with underwriting
standards set by the purchaser of the loan, normally as the loan-to-value
ratio, interest rate and documentation. FBBC generally collects from the
borrower or purchaser a combination of the origination fee, discount points
and/or service release fee. During 1995, FBBC sold approximately $840,000 in
loans to such purchasers.
FBBC's nonresidential mortgage loans include commercial, industrial
and unimproved real estate loans. FBBC generally requires nonresidential
mortgage loans to have an 80% loan-to-value ratio and usually underwrite their
commercial loans on the basis of the borrower's cash flow and ability to
service the debt from earnings, rather than on the basis of the value of the
collateral. Terms on construction loans are usually less than twelve months,
and FBBC typically requires personal guarantees supported by financial
statements and a review of the guarantor's personal finances.
CONSUMER LOANS. Consumer lending includes installment lending
to individuals in FBBC's market areas and consists of loans to purchase
automobiles, recreational vehicles, mobile homes and appliances. Consumer
loans constituted $4.8 million, or 23.7%, of FIRSTBANC's loan portfolio at June
30, 1996. Consumer loans are
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<PAGE> 92
underwritten based on the borrower's income, current debt level, past credit
history and collateral. Consumer rates are both variable and fixed, with terms
negotiable.
COMMERCIAL, INDUSTRIAL AND AGRICULTURAL LOANS. FBBC makes
loans for commercial purposes in various lines of business. These loans are
typically made on terms up to five years at fixed or variable rates. Most of
the loans with maturities of over one year are written at variable rates. The
loans are secured by accounts receivable, inventory or, in the case of
equipment loans, the financed equipment. FBBC attempts to reduce its credit
risk on commercial loans by limiting the loan-to-value ratio. Historically,
FBBC has loaned up to 80% on loans secured by accounts receivable, 70% on loans
secured by inventory, and up to 80% on loans secured by equipment. FBBC also
makes unsecured commercial loans. Commercial, Industrial and agricultural
loans constituted $4.3 million, or 21.3% of FIRSTBANC's loan portfolio at June
30, 1996. Interest rates are negotiable based upon the borrower's financial
condition, credit history, management stability and collateral.
DEPOSITS
The principal source of funds for FBBC is core deposits, consisting of
demand deposits, interest-bearing transaction accounts, money market accounts,
savings deposits and certificates of deposit. Transaction accounts include
checking and negotiable order of withdrawal (NOW) accounts which customers use
for cash management and which provide FBBC with a source of fee income and
cross-marketing opportunities, as well as a low-cost source of funds. Time and
savings accounts also provide a relatively stable and low-cost source of
funding. The largest source of funds for FBBC are certificates of deposit.
Certificates of deposit in excess of $100,000 are held primarily by customers
in FBBC's market area. FBBC has not historically funded its balance sheet with
brokered certificates of deposit.
Deposit rates are set weekly by senior management of FBBC, subject to
approval by management of FIRSTBANC. Management believes that the rates FBBC
offers are competitive with those offered by other institutions in FBBC's
market area. FIRSTBANC focuses on customer service to attract and retain
deposits.
COMPETITION
FBBC encounters strong competition in making loans, acquiring deposits
and attracting customers for investment services. Competition among financial
institutions is based upon interest rates offered on deposit accounts, interest
rates charged on loans and other credit and service charges, the quality and
scope of the services rendered, the convenience of banking facilities and, in
the case of loans to commercial borrowers, relative lending limits. FBBC
competes with other commercial banks, savings and loan associations, credit
unions, finance companies, mutual funds, insurance companies, brokerage and
investment banking companies, and other financial intermediaries operating in
Alabama and elsewhere. Many of these competitors, some of which are affiliated
with large bank holding companies, have substantially greater resources and
lending limits, and may offer certain services, that FBBC does not currently
provide. In addition, many of FIRSTBANC's non-bank competitors are not subject
to the same extensive federal regulations that govern bank holding companies
and federally insured banks.
In 1986, Alabama adopted legislation that permitted banks and bank
holding companies in certain southern states to acquire banks in Alabama to the
extent that such other states had reciprocal legislation that was applicable to
Alabama banks and bank holding companies. This legislation resulted in the
holding companies of a number of FIRSTBANC's competitor banks in Alabama
growing through the acquisition of out-of-state banks. On September 29, 1995,
interstate banking took effect allowing commercial banks to acquire banks in
any other states, including states which are not in the same region as the
acquiring bank, further increasing competition.
Size gives the larger banks certain advantages in competing for
business from large corporations. These advantages include higher lending
limits and the ability to offer services in other areas of Alabama and the
southeast region. Notwithstanding the Merger, some of FIRSTBANC's competitors
will maintain substantially greater resources and lending limits than ANB (as
surviving corporation in the Merger). Nevertheless, due to the Merger,
management believes it may be able to compete more effectively for the business
of some large corporations. Management also believes that, as a result of
ANB's decentralized community banking strategy and its emphasis on
non-metropolitan markets, FBBC is well positioned to compete successfully in
its market areas. Management believes that FBBC's
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<PAGE> 93
commitment to and involvement in its primary market area, as well as its
commitment to quality and personalized banking services, are factors that
contribute to FBBC's competitiveness.
EMPLOYEES
As of June 30, 1996, FIRSTBANC and FBBC together had approximately 27
full-time employees. None of these employees is a party to a collective
bargaining agreement. FIRSTBANC considers its relations with its employees to
be good.
EXECUTIVE OFFICERS
The Executive Officers of FIRSTBANC serve at the pleasure of the Board
of Directors. Set forth below are the current Executive officers of FIRSTBANC
and a brief explanation of their principal employment during the last five (5)
years:
WILLIAM D. MONTGOMERY - Age 48 - Chairman of the Board. Mr.
Montgomery has served as Chairman of the Board since 1990. He is also Chairman
of the Board of FBBC. Mr. Montgomery is also a partner in the public
accounting firm of Johnson, Montgomery & Associates, P.A.
RAYMOND P. CHATFIELD - Age 56 - President and Chief Executive Officer.
Mr. Chatfield has served as President and Chief Executive Officer of FIRSTBANC
since 1990. He is also President and Chief Executive Officer of FBBC.
KATHRYN M. NOVAK - Age 48 - Secretary and Treasurer. Ms. Novak has
served as Secretary and Treasurer of FIRSTBANC since 1990. Ms. Novak is also
Vice President and Cashier of FBBC.
PROPERTIES
FIRSTBANC, through FBBC, currently operates three banking offices, all
of which are owned by FBBC. FIRSTBANC's principal administrative offices are
located at 22516 Milwaukee Street, Robertsdale, Alabama 36567.
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<PAGE> 94
APPRAISAL RIGHTS
The following provides a discussion of the material provisions of the
law pertaining to appraisal rights under the Alabama Business Corporation Act.
Such discussion is not a complete statement of such law and is qualified in its
entirety by the full text of Article 13 of the Alabama Business Corporation Act
(the "Appraisal Statute") which is presented in its entirety as Exhibit B to
this Proxy Statement. Except as set forth herein, stockholders of ANB and
FIRSTBANC will not be entitled to appraisal rights in connection with the
Merger.
All shares of FIRSTBANC Common Stock are eligible for appraisal
rights. Under the Appraisal Statute, record and beneficial owners of shares of
FIRSTBANC stock who follow the procedures set forth in the Appraisal Statute
will be entitled to appraisal rights. A record shareholder is the person whose
name the shares are registered in the records of the corporation or the
beneficial owner of shares to the extent of rights granted by a nominee
certificate on file with a corporation. A beneficial shareholder is a person
who is a beneficial owner of shares held in a voting trust or by a nominee as
the record shareholder. A record shareholder may assert dissenters' rights in
his or her name and may dissent with respect to less than all of the shares
registered in his or her name only if he or she dissents with respect to all
shares beneficially owned by any one person and he or she notifies the
corporation in writing of the name and address of each person on behalf he or
she asserts dissenters' rights. A beneficial shareholder may assert
dissenters' rights as to shares held on his or her behalf only if he or she
submits to the corporation the record shareholder's written consent to the
dissent not later than the time the beneficial shareholder asserts dissenters'
rights, and he or she does so with respect to all of the shares which he or she
is the beneficial shareholder or over which he or she has the power to direct
the vote. For purposes of this discussion, record shareholders and beneficial
shareholders are referred to collectively as "shareholders" where no
distinction is required.
Under the Appraisal Statute, a shareholder who properly exercises his
or her dissenters' rights is entitled to the fair value of his or her shares
plus accrued interest. Fair value is defined as the value of the shares
immediately before the effectuation of the Merger, excluding any appreciation
or depreciation in anticipation of the Merger, unless such exclusion would be
inequitable. Interest is calculated from the Effective Time until the date of
payment at the average rate paid by FIRSTBANC on its principal bank loans, or
if none, at a rate that is fair and equitable. In order to exercise
dissenters' rights in connection with the Merger, a shareholder must deliver to
FIRSTBANC before the vote is taken at the shareholders' meeting written notice
of his or her intent to demand payment for his or her shares if the proposed
Merger is effectuated, and must not vote his or her shares in favor of the
Merger. A shareholder who does not satisfy this requirement is not entitled to
dissenters' rights.
If the Merger is approved by the FIRSTBANC shareholders, FIRSTBANC or
ANB is required to deliver a written dissenters' notice (the "Dissenters'
Notice") to all shareholders who properly delivered notice of their intent to
demand payment and did not vote in favor of the Merger. The Dissenters' Notice
will be sent no later than ten days after the Effective Time of the Merger and
will (i) state where the Payment Demand (herein defined) must be sent; (ii)
inform such person as to what extent the transfer of his or her shares will be
restricted after the Payment Demand is received; (iii) supply a form for
demanding payment; (iv) set a date by which FIRSTBANC or ANB must receive the
Payment Demand, which date may not be fewer than 30 nor more than 60 days after
the date the Dissenters' Notice is delivered; and (v) be accompanied by a copy
of the Appraisal Statute.
In order to preserve his or her dissenters' rights, a dissenting
shareholder must demand payment in accordance with the terms of the Dissenters'
Notice (the "Payment Demand"). A dissenting shareholder who makes a Payment
Demand may not thereafter withdraw that Payment Demand and accept the terms
offered under the Merger unless FIRSTBANC or ANB shall consent thereto. A
shareholder who does not make a Payment Demand by the date set in the
Dissenters' Notice is not entitled to payment for his or her shares under the
Appraisal Statute.
A dissenting shareholder must, within 20 days after making a Payment
Demand, submit the certificate or certificates representing his or her shares
of FIRSTBANC Common Stock to FIRSTBANC or ANB (if the Merger has been effected)
for notation thereon that a Payment Demand has been made. The failure to
submit his or her shares for notation shall, at the option of FIRSTBANC or ANB
(if the Merger has been effected), terminate the shareholder's rights under the
Appraisal Statute, unless a court of competent jurisdiction, for good and
sufficient cause, shall otherwise direct. FIRSTBANC or ANB shall return to the
dissenting shareholder the certificates for the shares so submitted. If shares
represented by a certificate on which a notation has been made are transferred,
each new certificate issued therefor must bear a similar notation together with
the name of the original dissenting shareholder. A transferee of such shares
acquires by such transfer no rights in FIRSTBANC or ANB other than those which
the original dissenting shareholder had after making the Payment Demand.
74
<PAGE> 95
Upon receipt of a Payment Demand, FIRSTBANC is required before the
Merger or ANB is required at the Effective Time of the Merger, whichever first
occurs, to offer to pay to each shareholder who has made a Payment Demand the
amount it estimates to be the fair value of such shareholder's shares, plus
accrued interest (the "Payment Offer"). The Payment Offer must be in writing
and accompanied by FIRSTBANC's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of the Payment Offer, and income
statement for that year, and the latest available interim financial statements;
a statement of estimate of the fair value of the shares; an explanation of how
interest is calculated; a statement of the shareholder's right to reject the
Payment Offer and demand payment of the fair value (as described below) and a
copy of the Appraisal Statute. Each shareholder who agrees to accept the
Payment Offer in full satisfaction of his or her Payment Demand must surrender
to FIRSTBANC or ANB, as the case may be, the certificate or certificates
representing his or her shares of FIRSTBANC Common Stock in accordance with the
terms of the Dissenters' Notice. Upon receiving the certificates, FIRSTBANC or
ANB, as the case may be, will pay such shareholder the fair value of his or her
shares plus accrued interest as set forth in the offer. Upon receiving
payment, a dissenting shareholder ceases to have any interest in the shares.
Upon receipt of the Payment Offer, a dissenting shareholder may notify
FIRSTBANC or ANB, as the case may be, in writing of his or her own estimate of
the fair value of his or her shares of FIRSTBANC Common Stock and the amount of
interest due, and demand payment of his or her estimate, or in the alternative,
reject the Payment Offer and demand payment of the fair value of his or her
shares and interest due if (i) the dissenter believes that the amount offered
by FIRSTBANC in the Payment Offer is less than the fair value of his or her
shares or that the interest due is incorrectly calculated; (ii) FIRSTBANC or
ANB, as the case may be, fails to make the Payment Offer within 60 days after
the date set for making the Payment Demand; or (iii) FIRSTBANC, having failed
to complete the Merger, does not release transfer restrictions imposed on the
shares within 60 days after the date set for making the Payment Demand. A
dissenting shareholder waives his or her right to demand payment under the
Appraisal Statute unless he or she notifies FIRSTBANC or ANB, as the case may
be, of his or her demand in writing within 30 days after the Payment Offer.
If a dissenting shareholder rightfully submits the estimated value of
his or her shares or rightfully rejects the Payment Offer and demands payment
of the fair value of his or her shares, FIRSTBANC or ANB, as the case may be,
is required to commence a proceeding within 60 days after receiving such demand
and petition the Circuit Court in Baldwin County, Alabama, to determine the
fair value of the shares and accrued interest. If FIRSTBANC or ANB, as the
case may be, does not commence the proceeding within the 60 day period, it is
required to pay each dissenter whose demand remains unsettled the amount
demanded by such dissenting shareholder. FIRSTBANC or ANB, as the case may be,
is required to make all dissenting shareholders whose demands remain unsettled
parties to the proceedings, and all parties must be served with a copy of the
petition. Non-residents of Alabama may be served by registered or certified
mail or by publication as provided in the Alabama Rules of Civil Procedure.
The jurisdiction of the Baldwin County Circuit Court is plenary and exclusive.
The court may appoint one or more persons as appraisers to receive evidence and
to recommend decision on the question of fair value. The appraisers will have
the powers described in the order appointing them or in any amendment to it.
The dissenting shareholders are entitled to the same discovery rights as
parties in any other civil proceeding. Each dissenting shareholder made a
party to the proceeding is entitled to judgment for the amount the court finds
to be the fair value of his or her shares plus accrued interest. In addition,
the court in an appraisal proceeding shall determine all costs of the
proceeding, including compensation and expenses of appraisers appointed by the
court. The court shall assess the costs against FIRSTBANC or ANB, as the case
may be, except that the court may assess costs against all or some of the
dissenters in amounts the court finds equitable, to the extent the court finds
that the dissenters acted arbitrarily, vexatiously or not in good faith in
rejecting the Payment Offer.
The court may also assess reasonable fees and expenses of counsel and
experts for the respective parties in amounts the court finds equitable. Fees
of counsel and experts may be assessed against FIRSTBANC or ANB, as the case
may be, and in favor of the dissenting shareholders if the court finds that
FIRSTBANC or ANB did not substantially comply with the requirements of the
Appraisal Statute. The court may also assess fees and expenses of counsel and
experts against either FIRSTBANC or ANB or the dissenting shareholders, and in
favor of the 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 exercise of appraisal rights. Further, if the court
finds that the service of counsel for any dissenter was of substantial benefit
to the other dissenters similarly situated and that the fees of those services
should not be assessed against FIRSTBANC or ANB, the court may award to those
counsel reasonable fees to be paid out of the amounts awarded to the dissenters
who were benefitted.
75
<PAGE> 96
INDEX TO FINANCIAL STATEMENTS
FIRSTBANC HOLDING COMPANY, INC. AND SUBSIDIARY
Unaudited Interim Condensed Consolidated Financial Statements at June
30, 1996 and for the six months ended June 30, 1995 and 1996
Interim Condensed Consolidated Balance Sheet at June 30, 1996
Interim Condensed Consolidated Statements of Income for the
six months ended June 30, 1995 and 1996
Interim Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1995 and 1996
Notes to Interim Condensed Consolidated Financial Statements
Consolidated Financial Statements at December 31, 1995 and 1994 and
for the two years then ended
Report of S.W. Chiepalich, Independent Auditor
Consolidated Balance Sheets at December 31, 1995 and 1994
Consolidated Statements of Income for the years ended December
31, 1995 and 1994
Consolidated Statements of Changes in Shareholders' Equity for
the years ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the years ended
December 31, 1995 and 1994
Notes to Consolidated Financial Statements
ALABAMA NATIONAL BANCORPORATION
The following financial statements have been incorporated by reference
from the Quarterly Report on Form 10-Q of Alabama National BanCorporation which
accompanies this Proxy Statement:
Unaudited Consolidated Financial Statements of Alabama National
BanCorporation and Subsidiaries at December 31, 1995 and June 30,
1996, and for the three months ended June 30, 1995 and 1996 and for
the six months ended June 30, 1995 and 1996
Consolidated Statement of Condition (Unaudited) at June 30,
1996 and December 31, 1995
Consolidated Statements of Income (Unaudited) for the three
months ended June 30, 1996 and 1995
Consolidated Statements of Income (Unaudited) for the six
months ended June 30, 1996 and 1995
Consolidated Statements of Cash Flow (Unaudited) for the six
months ended June 30, 1996 and 1995
Notes to the Unaudited Consolidated Financial Statements
The following financial statements have been incorporated by reference
from the Annual Report on Form 10-K of Alabama National BanCorporation which
accompanies this Proxy Statement:
Consolidated Financial Statements of Alabama National BanCorporation
and Subsidiaries at December 31, 1995 and 1994 and for the three years
ended December 31, 1995
Report of Ernst & Young, LLP, Independent Auditors
76
<PAGE> 97
Report of Coopers & Lybrand L.L.P., Independent Accountants
Consolidated Statements of Condition at December 31, 1995 and
1994
Consolidated Statements of Income for the years ended December
31, 1995, 1994 and 1993
Consolidated Statements of Changes in Stockholders' Equity for
the years ended December 31, 1995, 1994 and 1993
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993
Notes to Consolidated Financial Statements
77
<PAGE> 98
FIRSTBANC HOLDING COMPANY, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Cash and due from banks ................................................ $ 3,062
Investment securities .................................................. 4,517
Securities available for sale .......................................... 5,217
Federal funds sold ..................................................... 675
Loans, net of unearned discount and allowance for loan losses .......... 19,966
Property and equipment, net ............................................ 1,324
Other assets ........................................................... 350
--------
$ 35,111
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits ............................................................. $ 31,422
Treasury tax and loan account ........................................ 303
Note payable ......................................................... 455
Accrued expenses and other liabilities ............................... 141
--------
32,321
Stockholders' Equity:
Cumulative preferred stock, $.10 par; authorized 7,500 shares;
issued and outstanding 5,501 shares ( $55,000 aggregate
liquidation preferrence) ......................................... 1
Common stock, $.10 par; authorized 50,000 shares;
42,782 shares issued and outstanding............................. 4
Additional paid-in capital ........................................... 1,778
Retained earnings .................................................... 1,072
Unrealized loss on available for sale securities, net of tax benefits (65)
--------
Total stockholders' equity ........................................... 2,790
--------
Totals ............................................................... $ 35,111
========
</TABLE>
See notes to interim condensed consolidated financial statements.
<PAGE> 99
FIRSTBANC HOLDING COMPANY, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Interest income:
Interest and fees on loans ................................................. $ 899 $ 1,010
Interest on investment securities .......................................... 304 257
Interest on federal funds sold ............................................. 33 43
------- --------
1,236 1,310
Interest expense:
Interest on deposits ....................................................... 450 489
Interest on short-term borrowings .......................................... 8 6
Interest on note payable ................................................... 26 20
------- --------
484 515
------- --------
Net interest income .................................................... 752 795
Provision for loan losses ...................................................... 8 9
------- --------
Net interest income after provision for loan losses .................... 744 786
Noninterest income:
Service charges on deposit accounts ........................................ 141 159
Other ...................................................................... 17 25
------- --------
158 184
Noninterest expense:
Salaries and employee benefits ............................................. 316 355
Occupancy expenses ......................................................... 58 57
Other operating expense..................................................... 245 249
------- --------
619 661
------- --------
Income before provision for income taxes ............................... 283 309
Provision for income taxes ..................................................... 91 90
------- --------
Net income ............................................................. $ 192 $ 219
======= ========
Net income per common share ............................................ $ 4.49 $ 5.12
======= ========
Weighted average common shares outstanding ............................. 42,782 42,782
======= ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 100
FIRSTBANK HOLDING COMPANY, INC. AND SUBSIDIARY
INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996
---- ----
<S> <C> <C>
Net cash provided by operating activities ............................. $ 306 $ 321
Cash flows from investing activities:
Purchases of investment securities ................................ (208) (758)
Purchases of available for sale securities ........................ (504) (2,113)
Proceeds from maturities of investment securities ................. 1,240 1,985
Proceeds from maturities of available for sale securities ......... 0 1,250
Net increase in federal funds sold ............................... (2,275) (175)
Net (increase) decrease in loans .................................. 834 (1,102)
Purchases of property and equipment .............................. (36) (12)
------- -------
Net cash used in investing activities ......................... (949) (925)
------- -------
Cash flows from financing activities:
Net increase in deposits .......................................... 2,665 1,500
Increase (decrease) in short-term borrowings ...................... (361) 294
Decrease in note payable ......................................... (39) (42)
------- -------
Net cash provided by financing activities ..................... 2,265 1,752
------- -------
Increase in cash and cash equivalents ......................... 1,622 1,148
Cash and cash equivalents, beginning of period ........................ 2,159 1,914
------- -------
Cash and cash equivalents, end of period .............................. $ 3,781 $ 3,062
======= =======
Supplemental disclosure of cash flow information:
Cash paid for interest ............................................ $ 472 $ 496
======= =======
Cash paid for income taxes ........................................ $ 111 $ 79
======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 101
FIRSTBANC HOLDING COMPANY, INC. AND SUBSIDIARY
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
(Unaudited)
NOTE A - BASIS OF PRESENTATION
All adjustments to the unaudited interim condensed consolidated financial
statements which are, in the opinion of management, necessary for a fair
presentation of the financial position and the results of operations for the
interim periods have been recorded. Such adjustments consisted of normal
recurring items. The interim condensed consolidated financial statements and
notes thereto should be read in conjunction with the consolidated financial
statements and notes for the years ended December 31, 1994 and 1995 included
elsewhere in the Prospectus. Results of operations for the interim periods
are not necessarily indicative of the results which may be expected for the
year.
NOTE B - COMMITMENT AND CONTINGENCIES
FIRSTBANC's subsidiary bank makes loan commitments and incurs contingent
liabilities in the normal course of business which are not reflected in the
interim condensed consolidated statement of condition.
NOTE C - RECENTLY ISSUED PRONOUNCEMENTS
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of,"
("Statement 121") which requires impairment losses to be recorded on long-
lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less
than the assets' carrying amount. Statement 121 also addresses the accounting
for long-lived assets that are expected to be disposed of. FIRSTBANC adopted
Statement 121 effective January 1, 1996. The adoption of Statement 121 did
not have a material effect on the FIRSTBANC's unaudited interim condensed
consolidated financial statements.
In May 1995, the FASB issued Statement of Financial Accounting Standards No.
122 "Accounting for Mortgage Servicing Rights, an Amendment of FASB No. 65,"
("Statement 122"). Statement 122 requires companies that originate mortgage
loans to capitalize the cost of mortgage servicing rights separate from the
cost of originating the loan when a definitive plan to sell those loans and
retain the mortgage servicing rights exist. Prior to the adoption of
Statement 122 only mortgage servicing rights that are purchased from other
parties are capitalized and recorded as an asset. Therefore, Statement 122
eliminates the accounting inconsistencies that existed between mortgage
servicing rights that are derived from loan origination activities and those
acquired through purchase transactions. Statement 122 also requires that
capitalized mortgage servicing rights be assessed for impairment based on the
fair value of those rights. FIRSTBANC does not own any mortgage servicing
rights.
<PAGE> 102
FIRSTBANC HOLDING COMPANY, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
<PAGE> 103
FIRSTBANC HOLDING COMPANY, INC.
DECEMBER 31, 1995 AND 1994
CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent auditor's report 1
Consolidated balance sheets 2
Consolidated statements of income 3
Consolidated statements of changes
in shareholders' equity 4
Consolidated statements of cash flows 5
Notes to the consolidated financial statements 6 - 14
</TABLE>
<PAGE> 104
S.W. CHIEPALICH
CERTIFIED PUBLIC ACCOUNTANT, P.C.
----------
5905 Airport Boulevard
Second Floor
P.O. Box 850335
PH: (334) 344-7042 Mobile, Alabama 36685 FAX: (334) 344-7055
INDEPENDENT AUDITOR'S REPORT
January 15, 1996
Examining Committee
Board of Directors
FirstBanc Holding Company, Inc.
Robertsdale, Alabama
I have audited the accompanying consolidated balance sheets of
FirstBanc Holding Company, Inc. and its subsidiary, First Bank of Baldwin
County, as of December 31, 1995 and 1994, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audits.
I conducted my audits in accordance with generally accepted
auditing standards. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audits provide a reasonable basis
for my opinion.
In my opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial
position of FirstBanc Holding Company, Inc. and its subsidiary, First Bank of
Baldwin County, as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ S.W. Chiepalich
Certified Public Accountant
1
Chartered Bank Auditor
Certified Internal Auditor
Certified Management Accountant
Member American Institute of Certified Public Accountants
<PAGE> 105
FIRSTBANC HOLDING COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
----------- -----------
<S> <C> <C>
CASH AND DUE FROM BANKS $ 1,913,719 $ 2,159,419
FEDERAL FUNDS SOLD 500,000 275,000
INVESTMENT SECURITIES (Note 2)
Available for sale 4,402,637 2,280,031
To be held to maturity 5,747,363 8,155,741
LOANS, less allowance for loan losses of
$268,970 in 1995 and $251,938 in 1994
(Notes 3 and 10) 18,872,696 18,163,454
OFFICE BUILDINGS AND EQUIPMENT, net (Note 4) 1,361,414 1,357,844
OTHER ASSETS (Note 5) 351,305 380,670
----------- -----------
TOTAL ASSETS $33,149,134 $32,772,159
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
DEPOSITS
Demand $ 5,811,827 $ 5,437,167
NOW and money market accounts 9,126,759 10,040,919
Savings 3,259,324 3,382,784
Time ($100,000 and over) 1,596,732 1,392,818
Other time 10,126,865 9,029,733
----------- -----------
Total deposits 29,921,507 29,283,421
OTHER BORROWED FUNDS-Treas. tax & loan note 8,674 657,455
ACCRUED INTEREST AND OTHER LIABILITIES 121,427 125,275
NOTE PAYABLE (Note 6) 496,608 599,516
----------- -----------
TOTAL LIABILITIES 30,548,216 30,665,667
----------- -----------
MINORITY INTEREST 1,800 1,800
----------- -----------
SHAREHOLDERS' EQUITY (Note 9)
Common stock 4,278 4,278
Preferred stock 550 550
Surplus 1,778,244 1,778,244
Unrealized loss on investments (Notes 2 & 9) (36,321) (111,212)
Retained earnings (Note 8) 852,367 432,832
----------- -----------
Total shareholders' equity 2,599,118 2,104,692
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $33,149,134 $32,772,159
=========== ===========
</TABLE>
See independent auditor's report and the notes to the consolidated financial
statements.
2
<PAGE> 106
FIRSTBANC HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans (Note 3) $1,835,900 $1,648,314
Interest on investment securities
U. S. Treasury securities 42,146 50,899
Obligations of other U. S. government
agencies and corporations 424,578 515,574
Obligations of states and political
subdivisions 121,034 88,326
Other investment securities 25,557 24,919
Interest on federal funds sold 87,297 50,179
---------- ----------
Total interest income 2,536,512 2,378,211
---------- ----------
INTEREST EXPENSE
Interest on deposits 968,996 785,298
Interest on note payable 51,112 48,540
---------- ----------
Total interest expense 1,020,108 833,838
---------- ----------
Net interest income 1,516,404 1,544,373
PROVISION FOR LOAN LOSSES (Note 3) 17,000 49,000
---------- ----------
Net interest income after
provision for loan losses 1,499,404 1,495,373
---------- ----------
OTHER INCOME
Service fees 317,444 308,556
Gain (loss) on sale or call of securities 3,083 (9,620)
Other 18,855 20,147
---------- ----------
Total other income 339,382 319,083
---------- ----------
OTHER EXPENSES
Salaries 527,472 502,947
Employee benefits 113,412 103,848
Occupancy expenses, net 128,528 115,582
Other operating expenses 485,356 527,747
---------- ----------
Total other expenses 1,254,768 1,250,124
---------- ----------
INCOME BEFORE INCOME TAXES 584,018 564,332
APPLICABLE INCOME TAXES (Note 7) 158,982 189,309
---------- ----------
NET INCOME $ 425,036 $ 375,023
========== ==========
</TABLE>
See independent auditor's report and the notes to the consolidated financial
statements.
3
<PAGE> 107
FIRSTBANC HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Preferred Stock Common Stock
--------------- -----------------------
Par Par
Shares Value Shares Value
------ ----- ------ -------
<S> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1993 8,501 $ 850 42,782 $ 4,278
NET INCOME FOR THE YEAR - - - -
DIVIDENDS ON PREFERRED STOCK - - - -
CANCELLATION OF TREASURY STOCK (NOTE 14) (3,000) (300) - -
UNREALIZED LOSS ON INVESTMENTS -
net of tax effects (NOTE 2) - - - -
------ ----- ------ -------
BALANCE - DECEMBER 31, 1994 5,501 550 42,782 4,278
NET INCOME FOR THE YEAR - - - -
DIVIDENDS ON PREFERRED STOCK - - - -
UNREALIZED GAIN ON INVESTMENTS -
net of tax effects (NOTE 2) - - - -
------ ----- ------ -------
BALANCE - DECEMBER 31, 1995 5,501 $ 550 42,782 $ 4,278
====== ===== ====== =======
<CAPTION>
Unrealized
Gain or Retained
(Loss) on Earnings Treas.
Surplus Investments (Deficit) Stock Total
----------- ----------- ---------- -------- -----------
<S> <C> <C> <C> <C>
BALANCE - DECEMBER 31, 1993 $ 1,778,944 $ - $ 63,310 $(1,000) $ 1,846,382
NET INCOME FOR THE YEAR - - 375,023 - 375,023
DIVIDENDS ON PREFERRED STOCK - - (5,501) - (5,501)
CANCELLATION OF TREASURY STOCK (NOTE 14) (700) - - 1,000 -
UNREALIZED LOSS ON INVESTMENTS -
net of tax effects (NOTE 2) - (111,212) - - (111,212)
----------- ---------- ---------- ------- -----------
BALANCE - DECEMBER 31, 1994 1,778,244 (111,212) 432,832 - 2,104,692
NET INCOME FOR THE YEAR - - 425,036 - 425,036
DIVIDENDS ON PREFERRED STOCK - - (5,501) - (5,501)
UNREALIZED GAIN ON INVESTMENTS - - 74,891 - - 74,891
net of tax effects (NOTE 2) ----------- ---------- ---------- ------- -----------
BALANCE - DECEMBER 31, 1995 $ 1,778,244 $ (36,321) $ 852,367 $ - $ 2,599,118
=========== ========== ========== ======= ===========
</TABLE>
See independent auditor's report and the notes to the consolidated financial
statements.
4
<PAGE> 108
FIRSTBANC HOLDING COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 425,036 $ 375,023
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 88,312 88,236
Amortization of premiums on
investment securities 33,728 48,450
Accretion of discounts on
investment securities(2,783) (31,336)
Provision for loan losses 17,000 49,000
(Gain) loss on sale of investment securities (3,083) 9,619
(Increase) decrease in other assets
(excluding deferred tax on
unrealized securities loss) (9,214) 114,918
Increase (decrease) in accrued
interest and other liabilities (3,848) 48,826
---------- ----------
Net cash provided by operating activities 545,148 702,736
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in fed. funds sold (225,000) 1,875,000
Proceeds from sale, call, or maturity
of investment securities 3,740,000 4,939,766
Purchase of investment securities (3,368,620) (3,635,843)
Net increase in loans (726,242) (2,627,439)
Capital expenditures (91,882) (49,989)
---------- ----------
Net cash provided (used)
by investing activities (671,744) 501,495
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase (decrease) in deposits 638,086 (220,403)
Increase (decrease) in other borrowed funds (648,781) (192,545)
Holding Company debt principal payments (102,908) (104,689)
Dividends paid on preferred stock (5,501) (5,501)
Payment to reacquire subsidiary preferred stock - (200)
---------- ----------
Net cash provided (used)
by financing activities (119,104) (523,338)
---------- ----------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (245,700) 680,893
CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,159,419 1,478,526
---------- ----------
CASH AND CASH EQUIVALENTS - END OF YEAR $1,913,719 $2,159,419
========== ==========
SUPPLEMENTAL CASH FLOW DISCLOSURES
Interest paid $ 999,988 $ 824,275
========== ==========
Income taxes paid $ 193,244 $ 156,565
========== ==========
</TABLE>
See independent auditor's report and the notes to the consolidated financial
statements.
5
<PAGE> 109
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The accompanying financial statements include the accounts of
FirstBanc Holding Company, Inc., and its subsidiary, First Bank of
Baldwin County. First Bank of Baldwin County is a wholly-owned,
state-chartered, commercial bank which began operations on September
3, 1985. All intercompany balances have been eliminated.
Investment securities
Investment securities which have been designated by management as
available for sale are stated at fair market value. Investments
which are to be held to maturity are stated at cost, adjusted for
amortization of premiums and accretion of discounts, which are
recognized as adjustments to interest income. Gains and losses on
disposition of investment securities are based on the net proceeds
and the adjusted carrying amount of the securities sold, using the
specific identification method.
Loans and allowance for possible loan losses
Loans are stated at the amount of unpaid principal, reduced by
unearned discount and an allowance for loan losses. Unearned
discount on installment loans is recognized as income over the terms
of the loans by the interest method. Interest on other loans is
calculated by using the simple interest method on daily balances of
the principal amount outstanding. The allowance for loan losses is
established through a provision for loan losses charged to expenses.
Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is
unlikely. The allowance is an amount that management believes will
be adequate to absorb possible losses on existing loans that may
become uncollectible, based on evaluations of the collectibility of
loans and prior loan loss experience. The evaluations take into
consideration such factors as changes in the nature and volume of
the loan portfolio, overall portfolio quality, review of specific
problem loans, and current economic conditions that may affect the
borrowers' ability to pay. Accrual of interest is discontinued on a
loan when management believes, after considering economic and
business conditions and collection efforts, that the borrowers'
financial condition is such that collection of interest is doubtful.
Depreciation
Office equipment and buildings are stated at cost less accumulated
depreciation computed principally on the straight-line method over
the assets' estimated useful lives.
Statement of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents are
defined as those amounts included in the balance sheet caption "cash
and due from banks."
6
<PAGE> 110
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Off balance sheet financial instruments
In the ordinary course of business the Bank has entered into
off-balance-sheet financial instruments consisting of commitments to
extend credit, commitments under commercial letters of credit and
standby letters of credit. Such financial instruments are recorded
in the financial statements when they become payable.
Reclassifications
For comparability, certain prior year amounts have been reclassified
to conform with the financial statement presentation used in 1995.
NOTE 2 INVESTMENT SECURITIES
The Company adopted the Financial Accounting Standard Board's
Statement #115, "Accounting for Certain Investments in Debt and
Equity Securities," (FASB #115) in the first quarter of 1994. This
standard requires the segregation, for financial reporting purposes,
of the Company's investment securities into three categories (held
to maturity, available for sale, and trading securities) and the
reporting of securities which are available for sale at fair market
value in the balance sheet. The adoption of FASB #115, and the
accounting changes which resulted therefrom, had no effect on the
Company's 1994 net income.
The amortized cost, gross unrealized gains and losses, and
approximate market values of investment securities which management
has designated as available for sale and those that are to be held
to maturity, are shown below. (There were no trading securities as
of December 31, 1994 or 1995.)
<TABLE>
<CAPTION>
December 31, 1995
-------------------------------------------------------------------------
Gross Gross Approx.
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ------- -------- ----------
<S> <C> <C> <C> <C>
Available for sale
U.S. Treas. securities $ 748,631 $ 8,361 $ - $ 756,992
U.S. Gov't agencies 3,459,039 8,723 (73,367) 3,394,395
Other securities 250,000 1,250 - 251,250
---------- ------- --------- ----------
Total $4,457,670 $18,334 $ (73,367) $4,402,637
========== ======= ========= ==========
Held to maturity
U.S. Gov't agencies $3,002,214 $12,155 $ (9,486) $3,004,883
State and political
subdivisions 2,645,149 29,678 (23,244) 2,651,583
Other securities 100,000 1,438 - 101,438
---------- ------- --------- ----------
Total $5,747,363 $43,271 $ (32,730) $5,757,904
========== ======= ========= ==========
</TABLE>
7
<PAGE> 111
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 2 INVESTMENT SECURITIES (CONTINUED)
<TABLE>
<CAPTION>
December 31, 1994
-------------------------------------------------------------------------
Gross Gross Approx.
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
---------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Available for sale
U.S. Treas. securities $ 250,450 $ - $ (6,232) $ 244,218
U.S. Gov't agencies 1,948,083 - (159,770) 1,788,313
Other securities 250,000 - (2,500) 247,500
---------- ------- --------- ----------
Total $2,448,533 $ - $(168,502) $2,280,031
========== ======= ========= ==========
Held to maturity
U.S. Treas. securities $ 509,976 $ 1,274 $ - $ 511,250
U.S. Gov't agencies 5,217,901 6,745 (79,771) 5,144,875
State and political
subdivisions 2,327,864 1,932 (89,712) 2,240,084
Other securities 100,000 1,938 - 101,938
---------- ------- --------- ----------
Total $8,155,741 $11,889 $(169,483) $7,998,147
========== ======= ========= ==========
</TABLE>
Amortized cost represents the face amount of the security increased or
decrease by unamortized premiums and discounts, respectively. The
difference between amortized cost and the carrying amount of investments as
shown on the balance sheet represents the unrealized gain or loss on
securities which are available for sale.
The amortized cost and estimated market value of securities at December 31,
1995, by contractual maturity, are shown below. (Expected maturities will
differ from contractual maturities because borrowers may have the right to
call or prepay obligations with or without call or prepayment penalties.)
<TABLE>
<CAPTION>
Estimated
Amortized Market
Cost Value
----------- -----------
<S> <C> <C>
Due in one year or less $ 2,352,016 $ 2,359,445
Due after one year through five years 5,313,605 5,300,005
Due after five years through ten years 2,207,289 2,163,500
Due after ten years 332,123 337,591
----------- -----------
Total $10,205,033 $10,160,541
=========== ===========
</TABLE>
At December 31, 1995 and 1994, investment securities with a carrying amount
of $3,968,754 and $2,980,889, respectively, were pledged to secure public
deposits. The market value of such securities was $3,922,280 and
$2,873,083, respectively.
8
<PAGE> 112
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 3 LOANS
At December 31, 1995 and 1994, major classifications of loans are as
follows:
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Commercial $ 4,227,361 $ 2,985,550
Real estate - construction 2,032,820 1,933,000
Real estate - other 8,647,634 9,290,733
Installment - non-real estate 4,233,851 4,206,109
------------ ------------
19,141,666 18,415,392
Allowance for loan losses (268,970) (251,938)
------------ ------------
Net loans $ 18,872,696 $ 18,163,454
============ ============
</TABLE>
Loans on which the accrual of interest had been discontinued or
reduced amounted to $2,363 and $-0- at December 31, 1995 and 1994,
respectively. No interest income on non-accrual loans was received
during 1995 or 1994 after the loans were placed on non-accrual
status.
Changes in the allowance for loan losses for the years ended December
31, 1995 and 1994 were as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Balance - beginning of year $ 251,938 $ 211,537
Provision charged to operations 17,000 49,000
Loans charged off (2,810) (10,807)
Recoveries 2,842 2,208
--------- ---------
Balance - end of year $ 268,970 $ 251,938
========= =========
</TABLE>
NOTE 4 OFFICE BUILDINGS AND EQUIPMENT
Major classifications of these assets are summarized as follows:
<TABLE>
<CAPTION>
December 31,
---------------------------------
1995 1994
----------- -----------
<S> <C> <C>
Land and land improvements $ 424,005 $ 418,740
Buildings and building improvements 1,248,781 1,240,756
Equipment 761,631 694,014
----------- -----------
2,434,417 2,353,510
Less accumulated depreciation 1,073,003 995,666
----------- -----------
Total $ 1,361,414 $ 1,357,844
=========== ===========
</TABLE>
Depreciation expense amounted to $88,312 in 1995 and $88,236 in 1994.
9
<PAGE> 113
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 5 OTHER ASSETS
Other assets consist of the following as of December 31, 1995 and
1994:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Accrued interest receivable
Investments $ 145,827 $ 148,925
Loans 139,918 128,425
--------- ---------
285,745 277,350
Prepaid and other assets 65,560 103,320
--------- ---------
TOTAL $ 351,305 $ 380,670
========= =========
</TABLE>
NOTE 6 NOTE PAYABLE
The note payable in the accompanying balance sheet represents a
July, 1992 loan agreement with First Commercial Bank in Birmingham,
Alabama. The proceeds of this loan agreement were used to retire a
similar loan agreement at another institution. (The proceeds of
that debt were used at the Company's inception in 1985 to purchase
the Company's bank subsidiary.) All of the Bank's outstanding
common shares are pledged as collateral on the current loan
agreement.
The current loan agreement requires, among other things, the
Company's bank subsidiary to maintain an allowance for loan losses
of at least 1% of loans and capital of at least $2,000,000 or 7% of
assets, whichever is greater. As of December 31, 1995 and for the
year then ended, the Company and its bank subsidiary appear to have
been in compliance with all of the loan's provisions.
Based on the loan's floating prime rate (8.5% at December 31, 1995),
the loan is payable as follows:
<TABLE>
<CAPTION>
Year Amount
---- ---------
<S> <C>
1996 $ 88,799
1997 96,591
1998 105,067
1999 114,286
2000 91,865
---------
Total $ 496,608
=========
</TABLE>
10
<PAGE> 114
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 7 INCOME TAXES
The Company files a consolidated federal income tax return. In
accordance with a Tax Allocation Agreement between the Holding
Company and the Bank, the Bank is allowed to pay to the Holding
Company the amount of income taxes which would be payable by the
Bank if it filed a separate income tax return. The Holding Company
is responsible for paying the consolidated tax liability.
The 1995 consolidated provision for income taxes consisted of
$148,911 in federal taxes and $10,071 in state taxes, none of which
were deferred.
The provision for 1995 and 1994 income taxes differs from that
derived by applying the statutory federal rate to income before
income taxes in the accompanying statement of income due to the
following:
<TABLE>
<CAPTION>
1995 1994
-------- --------
<S> <C> <C>
Income taxes based on statutory rate $198,566 $191,873
Effect of tax-exempt income, net of
related non-deductible interest (37,508) (15,532)
Recognition of deferred discount
accretion on investments - 29,717
Limit on tax loan loss provision 7,540 1,943
Deferral of bond disc. accretion - (10,654)
Accelerated depreciation (5,973) (5,325)
Other, net (3,643) (2,713)
-------- --------
Income taxes per statement of income $158,982 $189,309
======== ========
</TABLE>
NOTE 8 REGULATORY MATTERS
Banking regulations allow Bank dividends to be paid only out of Bank
earnings for the current and prior two years. The Bank is also
required to maintain minimum amounts of capital to total "risk
weighted" assets, as defined by banking regulations. At December
31, 1995, the Bank was required to have minimum tier 1 and total
capital ratios of 4% and 8%, respectively. The Bank's actual
ratios at that date were 15% and 16%, respectively.
11
<PAGE> 115
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 9 SHAREHOLDERS' EQUITY
As of December 31, 1995 and 1994, shareholders' equity consisted of
the following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Common stock
Class A - (voting)
50,000 shs. authorized at $.10
par value; 42,782 shs. issued
and outstanding $ 4,278 $ 4,278
Preferred stock - 50,000 total shs.
authorized at $.10 par value
Series I
7,500 shs. authorized; $1 per
sh. annual cumulative dividend
preference and $10 per sh. liq-
uidation preference ($55,010
aggregate); non-convertible
and non-redeemable; 5,501 shs.
issued and outstanding 550 550
Surplus 1,778,244 1,778,244
Unrealized loss on investments,
net of tax effects (36,321) (111,212)
Retained earnings 852,367 432,832
---------- ----------
Total shareholders' equity $2,599,118 $2,104,692
========== ==========
</TABLE>
In March, 1994, the Articles of Incorporation were amended to, among
other things, create preemptive rights which allow existing
shareholders to maintain their existing ownership percentage in the
event additional shares are issued or sold by the Company.
NOTE 10 RELATED PARTY TRANSACTIONS
At December 31, 1995 and 1994, certain officers and directors and
companies in which they have 10 percent or more beneficial
ownership, were indebted to the Bank in the aggregate amount of
$316,718 and $443,981, respectively. A summary of the loan activity
for these related party entities is as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Balance - beginning of year $ 443,981 $ 599,732
New loan advances 255,289 213,914
Repayments (382,552) (369,665)
--------- ---------
Balance - end of year $ 316,718 $ 443,981
========= =========
</TABLE>
Amounts shown as new loan advances and loan repayments include the
respective year-end balances for new officers and directors added
during the year, as well as resignations of officers and directors
during the year.
12
<PAGE> 116
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 11 COMMITMENTS AND CONTINGENCIES
In the normal course of business there are outstanding commitments
and contingent liabilities such as commitments to extend credit,
letters of credit and others which are properly not recorded in the
financial statements. At December 31, 1995 and 1994, commitments to
fund unused lines of credit totaled $1,193,000 and $1,680,000,
respectively. Commitments under standby letters of credit were
$59,900 and $170,700 at December 31, 1995 and 1994, respectively.
Management does not anticipate any losses resulting from these
commitments and contingencies.
NOTE 12 CONCENTRATIONS OF CREDIT
Virtually all of the Bank's loans, commitments, and commercial and
standby letters of credit have been granted to customers in the
Bank's market 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.
Commercial and standby letters of credit were granted primarily to
commercial borrowers. In accordance with Alabama banking
regulation, the Bank does not extend credit to any single borrower
or group of related borrowers in excess of 20% of its capital (i.e.
$619,000 at December 31, 1995).
NOTE 13 EMPLOYEE STOCK OWNERSHIP PLAN
In 1986, the Company adopted an Employee Stock Ownership Plan (ESOP)
in which substantially all employees at least 21 years of age are
eligible to participate. Contributions to the ESOP are made at the
discretion of the Board of Directors. As of December 31, 1995, no
contributions had been made.
NOTE 14 AMENDMENT TO ARTICLES OF INCORPORATION
In March, 1994, the Articles of Incorporation were amended to cancel
certain classes of the Company's stock, create preemptive rights (as
discussed in Note 9) and to require shareholder approval for:
1. the sale of corporate assets having a value in
excess of $50,000
2. the creation of commitments (contracts, leases,
borrowing, employment agreements, etc.) in excess of
$50,000, and
3. the voting of Bank shares owned by the Company.
13
<PAGE> 117
FIRSTBANC HOLDING COMPANY, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 15 RETIREMENT PLAN
In January, 1995, the Bank adopted a 401-K retirement plan. This
defined contribution plan covers all full-time employees who have
attained the age of 21 and performed one year of service. The
Bank's contribution percentage (which is established at the Board's
discretion) was increased, effective January 1, 1996, from 25% to
50% of the amount of each employee's elective contribution (subject
to a 6% cap), which can be up to 15% of their compensation. The
Bank's 1995 contribution to the Plan totalled $3,630. Employees
will become 20% vested in employer contributions after two years and
will vest at the rate of an additional 20% for each year of service
thereafter.
NOTE 16 MINIMUM AUDIT STANDARDS
The Minimum Audit Standards of the State Banking Department of
Alabama have been met for the years ended December 31, 1995 and
1994.
14
<PAGE> 118
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FIRSTBANC HOLDING COMPANY, INC.
AND
ALABAMA NATIONAL BANCORPORATION
Dated as of
JUNE 10, 1996
<PAGE> 119
<TABLE>
<S> <C> <C>
ARTICLE I
TRANSACTIONS AND TERMS OF MERGER . . . . . . . . . . . . . . . . . . .. . . . 1
1.1 Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
TERMS OF MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.1 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2 Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.3 Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3
MANNER OF CONVERTING SHARES . . . . . . . . . . . . . . . . . . . . . . . . 3
3.1 Conversion of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.2 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.3 Shares Held by FHC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.4 Dissenting Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
3.5 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 4
EXCHANGE OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.1 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.2 Rights of Former FHC Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.3 Lost or Stolen Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FHC . . . . . . . . . . . . . . . . . . . 6
5.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.2 Authority; No Breach By Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
5.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4 FHC Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.9 Loan Portfolio; Documentation and Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.10 Assets; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
i
<PAGE> 120
<TABLE>
<S> <C> <C>
5.13 Labor Relations; Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.19 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.20 Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.21 Data Processing Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.23 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
5.24 Administration of Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ANB . . . . . . . . . . . . . . . . . . 17
6.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.2 Authority; No Breach By Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.3 Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.4 ANB Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
6.5 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
6.6 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.9 Allowance for Possible Loan Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.10 Assets; Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.11 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.13 Labor Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.15 Material Contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.16 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.17 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.18 Statements True and Correct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.19 Accounting, Tax and Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.20 Administration of Trust Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION . . . . . . . . . . . . . . . . . . . . . 27
7.1 Covenants of Both Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.2 Covenants of FHC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
7.3 Covenants of ANB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.4 Adverse Changes in Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.5 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
ii
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<TABLE>
<S> <C> <C>
ARTICLE 8
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 29
8.1A Proxy Statement; Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
8.1B Covenants of ANB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
8.1C Covenants of the FHC Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
8.1D Conditions to Indemnification Under Sections 8.1B and 8.1C . . . . . . . . . . . . . . . . . . . . 32
8.2 Applications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Filings with State Offices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.4 Agreement as to Efforts to Consummate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.5 Investigation and Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.6 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.7 Failure to Close . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE . . . . . . . . . . . . . . . . . 34
9.1 Conditions to Obligations of Each Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
9.2 Conditions to Obligations of ANB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Conditions to Obligations of FHC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 10
TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.3 Non-Survival of Representations and Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE 11
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 39
11.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
11.2 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.5 Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.9 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.8 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.11 Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.12 Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
11.13 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
11.14 Singular/Plural; Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
</TABLE>
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EXHIBIT A - MERGER AGREEMENT
<PAGE> 123
[EXECUTION COPY]
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of June 10, 1996 by and between FIRSTBANC HOLDING COMPANY, INC.
("FHC"), a corporation organized and existing under the laws of the State of
Alabama, with its principal office located in Robertsdale, Alabama, and ALABAMA
NATIONAL BANCORPORATION ("ANB"), a corporation organized and existing under the
laws of the State of Delaware, with its principal office located in Birmingham,
Alabama.
PREAMBLE
The Board of directors of FHC and ANB are of the opinion that the
transactions described herein are in the best interests of the parties and
their respective stockholders. This Agreement provides for the merger of FHC
with and into ANB. At the effective time of such merger, the outstanding shares
of the capital stock of FHC shall be converted into the right to receive shares
of the common stock of ANB (except as provided herein). As a result,
stockholders of FHC shall become stockholders of ANB, and ANB shall continue to
conduct the business and operations of FHC. The transactions described in this
Agreement are subject to the approvals of the stockholders of FHC and the Board
of Governors of the Federal Reserve System, and the satisfaction of certain
other conditions described in this Agreement. It is the intention of the
parties to this Agreement that the merger (i) for federal income tax purposes
shall qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code and (ii) for accounting purposes shall qualify for
treatment as a "pooling of interests."
Certain terms used in this Agreement are defined in Section 11.1 of
this Agreement.
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
TRANSACTIONS AND TERMS OF MERGER
1.1 MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, FHC shall be merged with and into ANB in accordance with
the provisions of Section 252 of the DGCL and Article 11 of the ABCA and with
the effect provided in Sections 259 and 261 of the DGCL (the "Merger"). ANB
shall be the Surviving Corporation resulting from the Merger and shall continue
to be governed by the Laws of the State of Delaware. The Merger
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shall be consummated pursuant to the terms of this Agreement, which has been
approved and adopted by the respective Boards of Directors of FHC and ANB.
1.2 TIME AND PLACE OF CLOSING. The Closing will take place at 9:00
A.M. on the date that the Effective Time occurs (or the immediately preceding
day if the Effective Time is earlier than 9:00 A.M.), or at such other time as
the Parties, acting through their chief executive officers or chief financial
officers, may mutually agree. The place of Closing shall be at the offices of
Maynard, Cooper & Gale, P.C., Birmingham, Alabama, or such other place as may
be mutually agreed upon by the Parties.
1.3 EFFECTIVE TIME. The Merger and other transactions provided for in
this Agreement shall become effective on the date and at the time the
Certificate of Merger reflecting the Merger shall be accepted for filing by the
Secretary of State of the State of Delaware (the "Effective Time"). Subject to
the terms and conditions hereof, unless otherwise mutually agreed upon in
writing by the chief executive officers or chief financial officers of each
Party, the Parties shall use their reasonable efforts to cause the Effective
Time to occur on the last business day of the month in which occurs the latter
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 stockholders of FHC approve this Agreement to the extent such
approval is required by applicable Law.
ARTICLE 2
TERMS OF MERGER
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
ANB in effect immediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation immediately following the
Effective Time.
2.2 BYLAWS. The Bylaws of ANB in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation immediately
following the Effective Time, until otherwise amended or repealed.
2.3 DIRECTORS. The directors of the Surviving Corporation from and
after the Effective Time shall consist of the thirteen incumbent directors of
ANB and the following current director of FHC: Doug Montgomery. All such
persons shall serve in accordance with the Bylaws of the Surviving Corporation.
The members of the standing committees of the Board of Directors of the
Surviving Corporation shall be determined by such Board of Directors.
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ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 CONVERSION OF SHARES. Subject to the provisions of this Article
Three, at the Effective Time, by virtue of the Merger and without any action on
the part of the holders thereof, the shares of the constituent corporations
shall be converted as follows:
(A) Each share of ANB Common Stock issued and outstanding immediately
prior to the Effective Time shall remain issued and outstanding from and after
the Effective Time.
(B) Each share of FHC Common Stock (excluding shares held by any FHC
Company, other than in a fiduciary capacity or as a result of debts previously
contracted, and excluding shares held by stockholders who perfect their
dissenters' rights of appraisal as provided in Section 3.4 of this Agreement)
issued and outstanding at the Effective Time shall cease to be outstanding and
shall be converted into and exchanged for the right to receive 7.12917 shares
of ANB Common Stock (the "Exchange Ratio").
3.2 ANTI-DILUTION PROVISIONS. In the event FHC changes the number of
shares of FHC 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 shall be prior to the
Effective Time, the Exchange Ratio shall be proportionately adjusted. In the
event ANB changes the number of shares of ANB 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 shall be prior to the Effective Time, the Exchange Ratio shall be
proportionately adjusted.
3.3 SHARES HELD BY FHC. Each of the shares of FHC Common Stock held by
any FHC Company, 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.
3.4 DISSENTING STOCKHOLDERS. Any holder of shares of FHC Common Stock
who perfects his dissenters' rights of appraisal in accordance with and as
contemplated by Article 13 of the ABCA shall be entitled to receive the value
of such shares in cash as determined pursuant to such provision of Law;
provided, however, that no such payment shall be made to any dissenting
stockholder unless and until such dissenting stockholder has complied with the
applicable provisions of the ABCA and surrendered to the Surviving Corporation
the certificate or certificates representing the shares for which payment is
being made; provided, further, nothing contained in this Section 3.4 shall in
any way limit the right of ANB to terminate this Agreement and abandon the
Merger under Section 10.1(i). In the event that after the Effective Time a
dissenting stockholder of FHC fails to perfect, or effectively withdraws or
loses, his right to appraisal and of payment for his shares, the Surviving
Corporation shall issue and deliver the consideration to which such holder of
shares of FHC Common Stock is entitled under
3
<PAGE> 126
this Article 3 (without interest) upon surrender by such holder of the
certificate of certificates representing shares of FHC Common Stock held by
him.
3.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Agreement, each holder of shares of FHC Common Stock exchanged pursuant to the
Merger, who would otherwise have been entitled to receive a fraction of a share
of ANB 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 ANB Common Stock multiplied
by the Market Value of one share of ANB Common Stock on the last Trading Day
preceding the Effective Time. No such holder will be entitled to dividends,
voting rights or any other right as a stockholder with respect to any
fractional shares.
ARTICLE 4
EXCHANGE OF SHARES
4.1 EXCHANGE PROCEDURES. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to the former
stockholders of FHC appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of FHC Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of FHC Common Stock (other than shares to
be canceled pursuant to Section 3.3 of this Agreement or as to which
dissenters' rights of appraisal have been perfected as provided in Section 3.4
of this Agreement) issued and outstanding at the Effective Time shall surrender
the certificate or certificates representing such shares to the Exchange Agent
and shall promptly upon surrender thereof receive in exchange therefor the
consideration provided in Section 3.1 of this Agreement, together with all
undelivered dividends or distributions with respect to such shares (without
interest thereon) pursuant to Section 4.2 of this Agreement. To the extent
required by Section 3.5 of this Agreement, each holder of shares of FHC Common
Stock issued and outstanding at the Effective Time also shall receive, upon
surrender of the certificate or certificates representing such shares, cash in
lieu of any fractional share of ANB Common Stock to which such holder may be
otherwise entitled (without interest). The Surviving Corporation shall not be
obligated to deliver the consideration to which any former holder of FHC Common
Stock is entitled as a result of the Merger until such holder surrenders his
certificate or certificates representing the shares of FHC Common Stock for
exchange as provided in this Section 4.1. The certificate or certificates for
FHC Common Stock so surrendered shall be duly endorsed as the Exchange Agent
may require. Any other provision of this Agreement notwithstanding, neither the
Surviving Corporation nor the Exchange Agent shall be liable to a holder of FHC
Common Stock for any amounts paid or property delivered in good faith to a
public official pursuant to any applicable abandoned property Law.
4.2 RIGHTS OF FORMER FHC STOCKHOLDERS. At the Effective Time, the
stock transfer books of FHC shall be closed as to holders of FHC Common Stock
immediately prior to the Effective Time, and no transfer of FHC Common Stock by
any such holder shall thereafter be
4
<PAGE> 127
made or recognized. Until surrendered for exchange in accordance with the
provisions of Section 4.1 of this Agreement, each certificate theretofore
representing shares of FHC Common Stock ("FHC Certificate"), other than shares
to be canceled pursuant to Section 3.3 of this Agreement or as to which
dissenters' rights of appraisal have been perfected as provided in Section 3.4
of this Agreement, shall from and after the Effective Time represent for all
purposes only the right to receive the consideration provided in Sections 3.1
and 3.5 of this Agreement in exchange therefor. To the extent permitted by Law,
former stockholders of record of FHC Common Stock shall be entitled to vote
after the Effective Time at any meeting of Surviving Corporation stockholders
the number of whole shares of ANB Common Stock into which their respective
shares of FHC Common Stock are converted, regardless of whether such holders
have exchanged their FHC Certificates for certificates representing ANB Common
Stock in accordance with the provisions of this Agreement. Whenever a dividend
or other distribution is declared by the Surviving Corporation on the ANB
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. Notwithstanding the preceding sentence,
any person holding any FHC Certificate at or after six (6) months after the
Effective Time (the "Cutoff") shall not be entitled to receive any dividend or
other distribution payable after the Cutoff to holders of ANB Common Stock,
which dividend or other distribution is attributable to such person's ANB
Common Stock represented by said FHC Certificate held after the Cutoff, until
such person surrenders said FHC Certificate for exchange as provided in Section
4.1 of this Agreement. However, upon surrender of such FHC Certificate, both
the ANB 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 FHC Certificate.
4.3 LOST OR STOLEN CERTIFICATES. If any holder of FHC Common Stock
convertible into the right to receive shares of ANB Common Stock is unable to
deliver the FHC Certificate that represents FHC Common Stock, the Exchange
Agent, in the absence of actual notice that any such shares have been acquired
by a bona fide purchaser, shall deliver to such holder the shares of ANB Common
Stock to which the holder is entitled for such shares upon presentation of the
following: (a) evidence to the reasonable satisfaction of ANB that any such FHC
Certificate has been lost, wrongfully taken or destroyed; (b) such security or
indemnity as may be reasonably requested by ANB to indemnify and hold ANB and
the Exchange Agent harmless; and (c) evidence satisfactory to ANB that such
person is the owner of the shares theretofore represented by each FHC
Certificate claimed by the holder to be lost, wrongfully taken or destroyed and
that the holder is the person who would be entitled to present such FHC
Certificate for exchange pursuant to this Agreement.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF FHC
FHC hereby represents and warrants to ANB as follows:
5.1 ORGANIZATION, STANDING AND POWER. FHC is a corporation duly
organized, validly existing and in good standing under the Laws of the State of
Alabama, and has the corporate power and authority to carry on its business as
now conducted and to own, lease and operate its Assets and to incur its
Liabilities . FHC 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 FHC. FHC has delivered to ANB complete and correct copies of its
Articles of Incorporation and Bylaws and the articles of incorporation, bylaws
and other, similar governing instruments of each of its Subsidiaries, in each
case as amended through the date hereof.
5.2 AUTHORITY; NO BREACH BY AGREEMENT.
(A) FHC has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions provided for herein. The execution, delivery and performance of
this Agreement and the consummation of the transactions provided for herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action on the part of FHC, subject to the approval of this Agreement
by the holders of a two-thirds of the outstanding shares of FHC Common Stock.
Subject to such requisite stockholder approval, this Agreement represents a
legal, valid and binding obligation of FHC, enforceable against FHC 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 FHC, nor
the consummation by FHC of the transactions provided for herein, nor compliance
by FHC with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of FHC'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 FHC Company under, any
Contract or Permit of any FHC Company, or, (iii) subject to receipt of the
requisite approvals referred to in Section 9.1(b) of this Agreement, violate
any Law or Order applicable to any FHC Company or any of their respective
Assets.
(C) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and other than
Consents required from Regulatory
6
<PAGE> 129
Authorities, and other than notices to or filings with the Internal Revenue
Service 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 FHC, no notice to, filing
with or Consent of, any public body or authority is necessary for the
consummation by FHC of the Merger and the other transactions contemplated in
this Agreement.
5.3 CAPITAL STOCK.
(A) The authorized capital stock of FHC consists of (i) 50,000 shares
of FHC Common Stock, of which 42,782 shares are issued and outstanding, and
(ii) 50,000 shares of FHC Preferred Stock, of which 7,500 shares have been
designated as Series I, $1.00 per share annual cumulative dividend preference
and $10.00 per share liquidation preference, non-convertible and
non-redeemable, of which 5,501 shares are issued and outstanding. All of the
issued and outstanding shares of capital stock of FHC are duly and validly
issued and outstanding and are fully paid and nonassessable under the ABCA.
None of the outstanding shares of capital stock of FHC has been issued in
violation of any preemptive rights of the current or past stockholders of FHC.
(B) Except as set forth in Section 5.3(a) of this Agreement, there are
no shares of capital stock or other equity securities of FHC 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 FHC or
contracts, commitments, understandings or arrangements by which FHC 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.
FHC has no liability for dividends declared or accrued, but unpaid, with
respect to any of its capital stock.
5.4 FHC SUBSIDIARIES.
(A) The only FHC Subsidiary is First Bank of Baldwin County ("First
Bank"). First Bank is a state non-member bank, duly organized, validly existing
and in good standing under the laws of the State of Alabama and has the
corporate power and authority necessary for it to own, lease and operate its
Assets and to incur its Liabilities and to carry on its Business as now
conducted. Each FHC Subsidiary 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 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 FHC. Each FHC Subsidiary that is a depository institution is
an "insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
(B) The authorized and issued and outstanding capital stock of First
Bank, and the date with respect to which each representation in this subsection
(b) is made with respect to First
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Bank, is set forth on Schedule 5.4. FHC owns all of the issued and outstanding
shares of capital stock of each FHC Subsidiary. No equity securities of any FHC
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 FHC Subsidiary 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 FHC Company
is or may be bound to transfer any shares of the capital stock of any FHC
Subsidiary. There are no Contracts relating to the rights of any FHC Company to
vote or to dispose of any shares of the capital stock of any FHC Subsidiary.
All of the shares of capital stock of each FHC Subsidiary held by a FHC Company
are fully paid and nonassessable under the applicable corporation Law of the
jurisdiction in which such Subsidiary is incorporated and organized and are
owned by the FHC Company free and clear of any Lien. No FHC Subsidiary has any
liability for dividends declared or accrued, but unpaid, with respect to any of
its capital stock.
5.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 5.5 are copies
of all FHC Financial Statements and FHC Call Reports for periods ended prior to
the date hereof, and FHC will deliver to ANB promptly copies of all FHC
Financial Statements and FHC Call Reports prepared subsequent to the date
hereof. The FHC Financial Statements (as of the dates thereof and for the
periods covered thereby) (i) are or, if dated after the date of this Agreement,
will be in accordance with the books and records of the FHC 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 (ii) present or will present, as the case may be, fairly the
consolidated financial position of the FHC Companies as of the dates indicated
and the consolidated results of operations, changes in stockholders' equity and
cash flows of the FHC 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). The FHC Call
Reports have been prepared in material compliance with the rules and
regulations of the respective federal or state banking regulator with which
they were filed.
5.6 ABSENCE OF UNDISCLOSED LIABILITIES. No FHC Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FHC, except Liabilities accrued or
reserved against in the consolidated balance sheets of FHC as of March 31,
1996, included in the FHC Financial Statements or reflected in the notes
thereto. No FHC company has incurred or paid any Liability since March 31,
1996, 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
FHC.
5.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 5.7, since March 31, 1996 (i) there have been no events, changes or
occurrences that have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on
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FHC, and (ii) the FHC 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 FHC provided in
Article Seven of this Agreement.
5.8 TAX MATTERS.
(A) All Tax returns required to be filed by or on behalf of any of the
FHC 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, 1995, and all returns filed are complete and materially accurate.
All Taxes shown as due on filed returns have been paid. There is no audit
examination, deficiency, refund Litigation or matter in controversy with
respect to any Taxes that might result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on FHC, except as
reserved against in the FHC 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 fully paid.
(B) None of the FHC Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(C) Adequate provision for any Taxes due or to become due for any of
the FHC Companies for the period or periods through and including the date of
the respective FHC Financial Statements has been made and is reflected on such
FHC Financial Statements.
(D) Deferred Taxes of the FHC Companies have been provided for in
accordance with GAAP.
5.9 LOAN PORTFOLIO; DOCUMENTATION AND REPORTS.
(A) Except as disclosed in Schedule 5.9, none of the FHC Companies is
a creditor as to any written or oral loan agreement, note or borrowing
arrangement including, without limitation, leases, credit enhancements,
commitments and interest-bearing assets (the "Loans"), other than Loans the
unpaid principal balance of which does not exceed $25,000 per Loan, under the
terms of which the obligor is, as of the date of this Agreement, over 90 days
delinquent in payment of principal or interest or in default of any other
material provisions. Except as otherwise set forth in Schedule 5.9, none of the
FHC Companies is a creditor as to any Loan, including without limitation any
loan guaranty, to any director, executive officer or 10% stockholder thereof,
or to the knowledge of FHC, any Person, corporation or enterprise controlling,
controlled by or under common control of any of the foregoing. All of the Loans
held by any of the FHC Companies were solicited, originated and exist in
material compliance with all applicable FHC loan policies, except for
deviations from such policies that (a) have been approved by current management
of FHC, in the case of Loans with an outstanding principal
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balance that exceeds $25,000 or (b) in the judgment of FHC, will not adversely
effect the ultimate collectibility of such Loan. Except as set forth in
Schedule 5.9, none of the FHC Companies holds any Loans in the original
principal amount in excess of $10,000 that since January 1, 1995 have been
classified by any bank examiner, whether regulatory or internal, as other loans
Specifically Mentioned, Special Mention, Substandard, Doubtful, Loss,
Classified, Criticized, Credit Risk Assets, concerned loans or words of similar
import.
(B) The documentation relating to each Loan made by any FHC Company
and to all security interests, mortgages and other liens with respect to all
collateral for loans is adequate for the enforcement of the material terms of
such Loan, security interest, mortgage or other lien, except for inadequacies
in such documentation which will not, individually or in the aggregate, have a
Material Adverse Effect on FHC.
(C) Each of the FHC Companies has timely filed all material reports,
registrations and statements, together with any amendments required to be made
with respect thereto, that it was required to file since December 31, 1991 with
(i) the FRB, (ii) the FDIC and (iii) any state regulatory authority ("State
Regulator") (collectively "Regulatory Agencies") and all other material reports
and statements required to be filed by it since December 31, 1991, including,
without limitation, any report or statement required to be filed pursuant to
the laws, rules or regulations of the United States, the FRB, the FDIC or any
State Regulator, and has paid all fees and assessments due and payable in
connection therewith. Except as set forth in Schedule 5.9 and as otherwise
provided herein, and except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of the FHC Companies, to the
Knowledge of FHC, no Regulatory Agency has initiated any proceeding or, to the
Knowledge of FHC, investigation into the business or operations of any FHC
Company since December 31, 1991. There is no unresolved violation, criticism or
exception by any Regulatory Agency with respect to any report or statement or
lien or any examinations of any FHC Company.
5.10 ASSETS; INSURANCE. The FHC Companies have good and marketable
title, free and clear of all Liens, to all of their respective Assets. One of
the FHC Companies has good and marketable fee simple title to the real property
described in Schedule 5.10(a) and has an enforceable leasehold interest in the
real property described in Schedule 5.10(b), if any. All tangible properties
used in the businesses of the FHC Companies are in good condition, reasonable
wear and tear excepted, and are usable in the ordinary course of business
consistent with FHC's past practices. All Assets that are material to FHC's
business on a consolidated basis, held under leases or subleases by any of the
FHC 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 and there is not under any such
Contract any Default or claim of Default by FHC or First Bank or, to the
Knowledge of FHC, by any other party to the Contract. The policies of fire,
theft, liability and other insurance maintained with respect to the Assets or
businesses of the
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FHC 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 FHC Companies is a named insured are reasonably sufficient.
Schedule 5.10(c) contains a list of all such policies and bonds maintained by
any of the FHC Companies. The Assets of the FHC Companies include all assets
required to operate the business of the FHC Companies as now conducted.
5.11 ENVIRONMENTAL MATTERS.
(A) To the Knowledge of FHC, each FHC Company, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations that are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FHC.
(B) There is no Litigation pending or, to the Knowledge of FHC,
threatened before any court, governmental agency or authority or other forum in
which any FHC 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 FHC Company or any of its Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FHC.
(C) There is no Litigation pending or, to the Knowledge of FHC,
threatened before any court, governmental agency or board or other forum in
which any of its Loan Properties (or FHC with respect to 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 threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on FHC.
(D) To the Knowledge of FHC, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on FHC.
(E) To the Knowledge of FHC, during the period of (i) any FHC
Company's ownership or operation of any of its respective current properties,
(ii) any FHC Company's participation in the management of any Participation
Facility or (iii) any FHC 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 properties, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FHC. Prior
to the period of (i) any FHC Company's ownership or operation of any of its
respective current properties, (ii) any FHC Company's participation in the
management of any Participation
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Facility, or (iii) any FHC Company's holding of a security interest in a Loan
Property, to the Knowledge of FHC, 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 FHC.
5.12 COMPLIANCE WITH LAWS. FHC is duly registered as a bank holding
company under the BHC Act. Each FHC 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
FHC, and there has occurred no Default under any such Permit. Except as may be
disclosed on Schedule 5.12, none of the FHC Companies:
(A) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations that are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on FHC; or
(B) 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 (i) asserting that any FHC Company is not in compliance with
any of the Laws or Orders that 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 FHC, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on FHC, or
(iii) requiring any FHC 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, that
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; EMPLOYEES.
(A) No FHC Company is the subject of any Litigation asserting that it
or any other FHC 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 FHC 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 FHC Company, pending or threatened, or to its Knowledge,
is there any activity involving any FHC Company's employees seeking to certify
a collective bargaining unit or engaging in any other organization activity.
(B) Schedule 5.13(b) contains a true and complete list showing the
names and current annual salaries of all executive officers of each of the FHC
Companies and lists for each such person the amounts paid, payable or expected
to be paid as salary, bonus payments and other compensation for 1995 and 1996.
Schedule 5.13(b) also sets forth the name and offices held by each officer and
director of each of the FHC Companies.
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5.14 EMPLOYEE BENEFIT PLANS.
(A) Schedule 5.14 lists, and FHC has delivered or made available to
ANB prior to the execution of this Agreement copies of, all pension,
retirement, profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus or other incentive plan, all other
written or unwritten 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 FHC 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 "FHC Benefit Plans"). Any of the FHC 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 "FHC ERISA Plan." No FHC
ERISA Plan is, and no FHC Company has ever maintained or contributed to, a
"defined benefit plan" (as defined in Section 414(j) of the Internal Revenue
Code).
(B) All FHC Benefit Plans and the administration thereof 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
FHC. Each FHC 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 Internal Revenue Service, and FHC is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To the
Knowledge of FHC, no FHC Company has engaged in a transaction with respect to
any FHC Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any FHC 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 FHC. There are no actions,
suits, arbitrations or claims, including any investigations or audits by the
Internal Revenue Service or any other governmental authority, pending (other
than routine claims for benefits) or threatened against, any FHC Benefit Plan
or any FHC Company with regard to any FHC Benefit Plan, any trust which is a
part of any FHC Benefit Plan, any trustee, fiduciary, custodian, administrator
or other person or entity holding or controlling assets of any FHC Benefit
Plan, and no basis to anticipate any such action, suit, arbitration, claim,
investigation or audit exists.
(C) No Liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by any FHC 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 FHC. No FHC Company has incurred any withdrawal Liability
with respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on FHC. No
notice of a "reportable event,"
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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 by any ERISA
Affiliate within the 12-month period ending on the date hereof.
(D) No FHC Company has any obligations for retiree health and life
benefits under any of the FHC Benefit Plans, and there are no restrictions on
the rights of such FHC 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 FHC.
(E) Neither the execution and delivery of this Agreement nor the
consummation of the transactions provided for herein 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 FHC Company from any FHC Company under any FHC Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any FHC Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit, where such payment, increase or acceleration is reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on FHC.
(F) With respect to all FHC Benefit Plans (whether or not subject to
ERISA and whether or not qualified under Section 401(a) of the Internal Revenue
Code), all contributions due (including any contributions to any trust account
or payments due under any insurance policy) previously declared or otherwise
required by law or contract to have been made and any employer contributions
(including any contributions to any trust account or payments due under any
insurance policy) accrued but unpaid as of the date hereof will be paid by the
time required by law or contract. All contributions made or required to be made
under any FHC Benefit Plan have been made and such contributions meet the
requirements for deductibility under the Internal Revenue Code, and all
contributions which are required and which have not been made have been
properly recorded on the books of FHC.
5.15 MATERIAL CONTRACTS. Except as set forth on Schedule 5.15, none of
the FHC Companies, nor any of their respective Assets, businesses or
operations, is a party to, or is bound or affected by, or receives benefits
under, (i) any employment, severance, termination, consulting or retirement
Contract with any Person, (ii) any Contract relating to the borrowing of money
by any FHC Company or the guarantee by any FHC 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 and letters of credit) (iii) any
Contract relating to indemnification or defense of any director, officer or
employee of any of the FHC Companies or any other Person; (iv) any Contract
with any labor union; (v) any Contract relating to the disposition or
acquisition of any interest in any business enterprise; (vi) any Contract
relating to the extension of credit to, provision of services for, sale, lease
or license of Assets to, engagement of services from, or purchase, lease or
license of Assets from, any stockholder, director or officer of any of the FHC
Companies, any member of the immediate family of the foregoing or, to the
Knowledge of FHC, any related interest (as defined in Regulation O promulgated
by the FRB) ("Related Interest") of any of the
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foregoing; (vii) any Contract which limits the freedom of any of the FHC
Companies to compete in any line of business or with any Person; (viii) any
Contract providing a power of attorney or similar authorization given by any of
the FHC Companies, except as issued in the ordinary course of business with
respect to routine matters; and (ix) any Contract (other than deposit
agreements and certificates of deposits issued to customers entered into in the
ordinary course of business and letters of credit) that involves the payment by
any of the FHC Companies of amounts aggregating $5,000 or more in any
twelve-month period (together with all Contracts referred to in Sections 5.10
and 5.14(a) of this Agreement, the "FHC Contracts"). None of the FHC Companies
is in Default under any FHC Contract. All of the indebtedness of any FHC
Company for money borrowed is prepayable at any time by such FHC Company
without penalty or premium.
5.16 LEGAL PROCEEDINGS. Except as set forth on Schedule 5.16, there is
no Litigation instituted or pending, or, to the Knowledge of FHC, 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
FHC 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 FHC, nor are there any Orders of any Regulatory Authorities, other
governmental authorities or arbitrators outstanding against any FHC Company,
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on FHC.
5.17 REPORTS. Since January 1, 1993, or the date of organization if
later, each FHC 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 (i) the SEC, (ii) other Regulatory Authorities, and (iii)
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 FHC).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit 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.
5.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any FHC Company or
any Affiliate thereof to ANB 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 FHC Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to FHC's stockholders in connection with the
Stockholders' Meetings, and any other documents to be filed by a FHC Company or
any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions provided for herein, will, at the respective
time such
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documents are filed, and with respect to the Proxy Statement, when first mailed
to the stockholders of FHC, 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 Stockholders' Meetings 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 Stockholders' Meetings. All
documents that any FHC Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
provided for herein will comply as to form in all material respects with the
provisions of applicable Law.
5.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No FHC Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to
in Section 9.1(b) of this Agreement or result in the imposition of a condition
or restriction of the type referred to in the last sentence of such Section.
5.20 OFFICES. The headquarters of each FHC Company and each other
office, branch or facility maintained and operated by each FHC Company
(including without limitation representative and loan production offices and
operations centers) and the locations thereof are listed on Schedule 5.20.
Except as set forth on Schedule 5.20, none of the FHC Companies maintains any
other office or branch or conducts business at any other location, or has
applied for or received permission to open any additional office or branch or
to operate at any other location.
5.21 DATA PROCESSING SYSTEMS. Except as set forth in Schedule 5.21,
the electronic data processing systems and similar systems utilized in
processing the work of each of the FHC Companies, including both hardware and
software (a) are supplied by a third party provider; (b) satisfactorily perform
the data processing function for which they are presently being used; and (c)
are wholly within the possession and control of one of the FHC Companies or its
third party provider such that physical access to all software, documentation,
passwords, access codes, backups, disks and other data storage devices and
similar items readily can be made accessible to and delivered into the
possession of ANB or ANB's third party provider.
5.23 INTELLECTUAL PROPERTY. One of the FHC Companies owns or possesses
valid and binding licenses and other rights to use without payment all material
patents, copyrights, trade secrets, trade names, service marks and trademarks
used in its business; and none of the FHC Companies has received any notice of
conflict with respect thereto that asserts the rights of others. The FHC
Companies have in all material respects performed all the obligations required
to be performed by them and are not in default in any material respect under
any contract, agreement, arrangement or commitment relating to any of the
foregoing. Schedule 5.23 lists
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all of the trademarks, trade names, licenses and other intellectual property
used to conduct the businesses of the FHC Companies.
5.24 ADMINISTRATION OF TRUST ACCOUNTS. The FHC Companies have properly
administered, in all respects material and which could reasonably be expected
to be material to the business, operations or financial condition of the FHC
Companies, taken as a whole, all accounts for which they act as a fiduciary,
including, but not limited to, accounts for which they serve as a trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents and applicable
state and federal Law, regulation and common Law. None of the FHC Companies nor
any director, officer or employee of the FHC Companies has committed any breach
of trust with respect to any such fiduciary account which will have a Material
Adverse Effect on FHC. The accounting for each such fiduciary account in the
aggregate is true and correct in all material respects and accurately reflects
the assets of such fiduciary accounts in all material respects.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ANB
ANB hereby represents and warrants to FHC as follows:
6.1 ORGANIZATION, STANDING AND POWER. ANB is a corporation duly
organized, validly existing, and in good standing under the Laws of the State
of Delaware, and has the corporate power and authority to carry on its business
as now conducted and to own, lease and operate its Assets and to incur its
Liabilities. ANB 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 ANB. ANB has delivered to FHC complete and correct copies of its
Certificate of Incorporation and Bylaws and the articles of incorporation,
bylaws and other, similar governing instruments of each of its Subsidiaries, in
each case as amended through the date hereof.
6.2 AUTHORITY; NO BREACH BY AGREEMENT.
(A) ANB has the corporate power and authority necessary to execute,
deliver and perform its obligations under this Agreement and to consummate the
transactions provided for herein. The execution, delivery and performance of
this Agreement and the consummation of the transactions provided for herein,
including the Merger, have been duly and validly authorized by all necessary
corporate action on the part of ANB. Subject to such requisite stockholder
approval, this Agreement represents a legal, valid and binding obligation of
ANB, enforceable against ANB in accordance with its terms (except in all cases
as such enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar Laws
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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 ANB, nor
the consummation by ANB of the transactions provided for herein, nor compliance
by ANB with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of ANB's Certificate 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 ANB Company
under, any Contract or Permit of any ANB Company, where failure to obtain such
Consent is reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on ANB, or, (iii) subject to receipt of the requisite
approvals referred to in Section 9.1(b) of this Agreement, violate any Law or
Order applicable to any ANB Company or any of their respective Assets.
(C) Other than in connection or compliance with the provisions of the
Securities Laws, applicable state corporate and securities Laws, and rules of
the NASD, and other than Consents required from Regulatory Authorities, and
other than notices to or filings with the Internal Revenue Service 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 ANB, no notice to, filing with or Consent of, any
public body or authority is necessary for the consummation by ANB of the Merger
and the other transactions contemplated in this Agreement.
6.3 CAPITAL STOCK. The authorized capital stock of ANB consists of (i)
10,000,000 shares of ANB Common Stock, of which 6,200,418 shares are issued and
outstanding, and (ii) 100,000 shares of preferred stock, $1.00 par value per
share, none of which is issued and outstanding. All of the issued and
outstanding shares of ANB Common Stock are, and all of the shares of ANB Common
Stock to be issued in exchange for shares of FHC 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 DGCL. None of the outstanding shares of ANB Common Stock has been,
and none of the shares of ANB Common Stock to be issued in exchange for shares
of FHC Common Stock upon consummation of the Merger will be, issued in
violation of any preemptive rights of the current or past stockholders of ANB.
ANB has granted options to purchase no more than 481,291 shares of ANB Common
Stock under the ANB Stock Plan. On April 25, 1996, the board of directors of
ANB terminated the ANB Stock Plans.
6.4 ANB SUBSIDIARIES.
(A) The ANB Subsidiaries owned directly by ANB are Alabama Exchange
Bank, Citizens Bank of Talladega, St. Clair Federal Savings Bank, Bank of
Dadeville, First National Bank of Ashland, Gulf Bank and National Bank of
Commerce of Birmingham. First National Bank of Ashland and National Bank of
Commerce of Birmingham are national banking
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associations duly organized and validly existing under the Laws of the United
States of America. Each of Alabama Exchange Bank, Citizens Bank of Talladega,
Bank of Dadeville and Gulf Bank is a state member bank of the Federal Reserve
System, duly organized and validly existing under the Laws of the State of
Alabama. St. Clair Federal Savings Bank is a federally-chartered savings
association duly organized and validly existing under the Laws of the United
States. Each ANB Subsidiary is in good standing under the Laws of the
jurisdiction in which it is incorporated or organized, and each ANB Subsidiary
has the corporate power and authority necessary for it to own, lease and
operate its Assets and to incur its Liabilities and to carry on its business as
now conducted. Each ANB Subsidiary 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 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 ANB. Each ANB Subsidiary that is a depository institution is
an "insured institution" as defined in the Federal Deposit Insurance Act and
applicable regulations thereunder.
(B) The authorized and issued and outstanding capital stock of each
ANB Subsidiary owned directly by ANB, and the date with respect to which each
representation in this subsection (b) is made with respect to each ANB
Subsidiary, is set forth on Schedule 6.4(b). ANB or one of its Subsidiaries
owns all of the issued and outstanding shares of capital stock of each ANB
Subsidiary. No equity securities of any ANB 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
ANB Subsidiary 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 ANB Company is or may be bound to transfer any
shares of the capital stock of any ANB Subsidiary. There are no Contracts
relating to the rights of any ANB Company to vote or to dispose of any shares
of the capital stock of any ANB Subsidiary. All of the shares of capital stock
of each ANB Subsidiary held by a ANB Company 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 ANB Company free
and clear of any Lien. No ANB Subsidiary has any liability for dividends
declared or accrued, but unpaid, with respect to any of its capital stock.
6.5 FINANCIAL STATEMENTS. Attached hereto as Schedule 6.5 are copies
of all ANB Financial Statements and ANB Regulatory Reports for periods ended
prior to the date hereof and ANB will deliver to FHC promptly copies of all ANB
Financial Statements and ANB Regulatory Reports prepared subsequent to the date
hereof. The ANB Financial Statements (as of the dates thereof and for the
periods covered thereby) (i) are or, if dated after the date of this Agreement,
will be in accordance with the books and records of the ANB 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 (ii) present or will present, as the case may be, fairly the
consolidated financial position of the ANB Companies as of the dates indicated
and the consolidated and the consolidated results of operations, changes in
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stockholders' equity, and cash flows of the ANB 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). The ANB Regulatory Reports have been prepared in material
compliance with the rules and regulations of the FRB.
6.6 ABSENCE OF UNDISCLOSED LIABILITIES. No ANB Company has any
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on ANB, except Liabilities accrued or
reserved against in the consolidated balance sheets of ANB as of March 31, 1996
included in the ANB Financial Statements or reflected in the notes thereto. No
ANB Company has incurred or paid any Liability since March 31, 1996, 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 ANB.
6.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth on
Schedule 6.7, since March 31, 1996 (i) there have been no events, changes or
occurrences that have had, or are reasonably likely to have, individually or in
the aggregate, a Material Adverse Effect on ANB, and (ii) the ANB 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 ANB provided in Article Seven of this
Agreement.
6.8 TAX MATTERS.
(A) All Tax returns required to be filed by or on behalf of any of the
ANB 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, 1995, and all returns filed are complete and materially accurate.
All Taxes shown as due on filed returns have been paid. There is no audit
examination, deficiency, refund Litigation or matter in controversy with
respect to any Taxes that might result in a determination that would have,
individually or in the aggregate, a Material Adverse Effect on ANB, except as
reserved against in the ANB 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 fully paid.
(B) None of the ANB Companies has executed an extension or waiver of
any statute of limitations on the assessment or collection of any Tax due
(excluding such statutes that relate to years currently under examination by
the Internal Revenue Service or other applicable taxing authorities) that is
currently in effect.
(C) Adequate provision for any Taxes due or to become due for any of
the ANB Companies for the period or periods through and including the date of
the respective ANB Financial Statements has been made and is reflected on such
ANB Financial Statements.
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(D) Deferred Taxes of the ANB Companies have been provided for in
accordance with GAAP.
6.9 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan or credit losses (the "Allowance") shown on the consolidated balance
sheets of ANB included in the most recent ANB Financial Statements dated prior
to the date of this Agreement was, and the Allowance shown on the consolidated
balance sheets of ANB included in the ANB 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 ANB Companies and
other extensions of credit (including letters of credit and commitments to make
loans or extend credit) by the ANB Companies as of the dates thereof, except
where the failure of such Allowance to be so adequate is not reasonably likely
to have a Material Adverse Effect on ANB.
6.10 ASSETS; INSURANCE. The ANB Companies have good and marketable
title, free and clear of all Liens, to all of their respective Assets. All
tangible properties used in the businesses of the ANB Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with ANB's past practices. All Assets which are
material to ANB's business on a consolidated basis, held under leases or
subleases by any of the ANB 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 ANB 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
ANB Companies is a named insured are reasonably sufficient. The Assets of the
ANB Companies include all assets required to operate the business of the ANB
Companies as now conducted.
6.11 ENVIRONMENTAL MATTERS.
(A) To the Knowledge of ANB, each ANB Company, its Participation
Facilities and its Loan Properties are, and have been, in compliance with all
Environmental Laws, except for violations that are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on ANB.
(B) There is no Litigation pending or, to the Knowledge of ANB,
threatened before any court, governmental agency or authority or other forum in
which any ANB 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
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(as defined below) or oil, whether or not occurring at, on, under or involving
a site owned, leased or operated by any ANB Company or any of its Participation
Facilities, except for such Litigation pending or threatened that is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on ANB.
(C) There is no Litigation pending or, to the Knowledge of ANB,
threatened before any court, governmental agency or board or other forum in
which any of its Loan Properties (or ANB 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
threatened that is not reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on ANB.
(D) To the Knowledge of ANB, there is no reasonable basis for any
Litigation of a type described in subsections (b) or (c), except such as is not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on ANB.
(E) To the Knowledge of ANB, during the period of (i) any ANB
Company's ownership or operation of any of its respective current properties,
(ii) any ANB Company's participation in the management of any Participation
Facility or (iii) any ANB 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 properties, except such as are not reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on ANB. Prior
to the period of (i) any ANB Company's ownership or operation of any of its
respective current properties, (ii) any ANB Company's participation in the
management of any Participation Facility, or (iii) any ANB Company's holding of
a security interest in a Loan Property, to the Knowledge of ANB, 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 ANB.
6.12 COMPLIANCE WITH LAWS. ANB is duly registered as a bank and thrift
holding company under the BHC Act and the Home Owner's Loan Act, respectively.
Each ANB 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 ANB, and there
has occurred no Default under any such Permit. Except as may be disclosed on
Schedule 6.12, none of the ANB Companies:
(A) is in violation of any Laws, Orders or Permits applicable to its
business or employees conducting its business, except for violations that are
not reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on ANB; or
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(B) 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 (i) asserting that any ANB Company is not in compliance with
any of the Laws or Orders that 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 ANB, (ii)
threatening to revoke any Permits, the revocation of which is reasonably likely
to have, individually or in the aggregate, a Material Adverse Effect on ANB, or
(iii) requiring any ANB 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, that
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.
6.13 LABOR RELATIONS. No ANB Company is the subject of any Litigation
asserting that it or any other ANB 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 ANB 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 ANB Company, pending or threatened,
or to its Knowledge, is there any activity involving any ANB Company's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
6.14 EMPLOYEE BENEFIT PLANS.
(A) No ANB Pension Plan is or has been a multiemployer plan within the
meaning of Section 3(37) of ERISA.
(B) All ANB Benefit Plans and the administration thereof 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
ANB. Each ANB 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 Internal Revenue Service, and ANB is not aware of any circumstances likely
to result in revocation of any such favorable determination letter. To the
Knowledge of ANB, no ANB Company has engaged in a transaction with respect to
any ANB Benefit Plan that, assuming the taxable period of such transaction
expired as of the date hereof, would subject any ANB 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 ANB. There are no actions,
suits, arbitrations or claims, including any investigations or audits by the
Internal Revenue Service or any other governmental authority, pending (other
than routine claims for benefits) or threatened against, any ANB Benefit Plan
or any ANB Company with regard to any ANB Benefit Plan, any trust which is a
part of any ANB Benefit Plan, any trustee, fiduciary, custodian, administrator
or
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other person or entity holding or controlling assets of any ANB Benefit Plan,
and no basis to anticipate any such action, suit, arbitration, claim,
investigation or audit exists.
(C) No ANB ERISA Plan which is a defined benefit pension plan has any
"unfunded currently liability," as that term is defined in Section 302(d)(8)(A)
of ERISA, and the fair market value of the assets of any such plan exceeds the
plan's "benefit liabilities," as that term is defined in Section 4001(a)(16) of
ERISA, when determined under actuarial factors that would apply if the plan
terminated in accordance with all applicable legal requirements. Since the date
of the most recent actuarial valuation, there has been (i) no material change
in the financial position of any ANB Pension Plan, (ii) no change in the
actuarial assumptions with respect to any ANB Pension Plan, (iii) no increase
in benefits under any ANB 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 ANB or materially adversely
affect the funding status of any such plan. Neither any ANB Pension Plan nor
any "single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any ANB 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 ANB. No ANB
Company has provided, or is required to provide, security to a ANB 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 of ERISA has been
or is expected to be incurred by any ANB 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 ANB. No ANB Company has incurred any withdrawal Liability
with respect to a multiemployer plan under Subtitle B of Title IV of ERISA
(regardless of whether based on contributions of an ERISA Affiliate), which
Liability is reasonably likely to have a Material Adverse Effect on ANB. 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 ANB Pension Plan or by any ERISA Affiliate within the
12-month period ending on the date hereof.
(E) No ANB Company has any obligations for retiree health and life
benefits under any of the ANB Benefit Plans, and there are no restrictions on
the rights of such ANB 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 ANB.
(F) Neither the execution and delivery of this Agreement nor the
consummation of the transactions provided for herein 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 ANB Company from any ANB Company under any ANB Benefit Plan or otherwise,
(ii) increase any benefits otherwise payable under any ANB Benefit Plan, or
(iii) result in any acceleration of the time of payment or vesting of any such
benefit,
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where such payment, increase or acceleration is reasonably likely to have,
individually or in the aggregate, a Material Adverse Effect on ANB.
(G) With respect to all ANB Benefit Plans (whether or not subject to
ERISA and whether or not qualified under Section 401(a) of the Internal Revenue
Code), all contributions due (including any contributions to any trust account
or payments due under any insurance policy) previously declared or otherwise
required by law or contract to have been made and any employer contributions
(including any contributions to any trust account or payments due under any
insurance policy) accrued but unpaid as of the date hereof will be paid by the
time required by law or contract. All contributions made or required to be made
under any ANB Benefit Plan have been made and such contributions meet the
requirements for deductibility under the Internal Revenue Code, and all
contributions which are required and which have not been made have been
properly recorded on the books of ANB.
6.15 MATERIAL CONTRACTS. ANB has filed as an exhibit to its annual
report on Form 10-K each Contract required to be so filed under the 1934 Act
and the rules and regulations promulgated thereunder. None of the ANB Companies
is in Default under any ANB Contract, other than Defaults which are not
reasonably likely to have, individually or in the aggregate, a Material Adverse
Effect on ANB. All of the indebtedness of any ANB Company for money borrowed is
prepayable at any time by such ANB Company without penalty or premium.
6.16 LEGAL PROCEEDINGS. Except as set forth on Schedule 6.16, there is
no Litigation instituted or pending, or, to the Knowledge of ANB, 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
ANB 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 ANB, nor are there any Orders of any Regulatory Authorities, other
governmental authorities or arbitrators outstanding against any ANB Company,
that are reasonably likely to have, individually or in the aggregate, a
Material Adverse Effect on ANB.
6.17 REPORTS. Since January 1, 1993, or the date of organization if
later, each ANB Company has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the SEC, including, but not limited to, Forms 10-K, Forms 10-Q,
Forms 8-K, and proxy statements, (ii) other Regulatory Authorities, and (iii)
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 ANB).
As of their respective dates, each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all applicable Laws. As of its respective date, each such report
and document did not, in all material respects, contain any untrue statement of
a material fact or omit 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.
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6.18 STATEMENTS TRUE AND CORRECT. No statement, certificate,
instrument or other writing furnished or to be furnished by any ANB Company or
any Affiliate thereof to FHC 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 ANB Company or any Affiliate thereof for inclusion in the Proxy
Statement to be mailed to FHC's stockholders in connection with the
Stockholders' Meetings, and any other documents to be filed by a ANB Company or
any Affiliate thereof with the SEC or any other Regulatory Authority in
connection with the transactions provided for herein, will, at the respective
time such documents are filed, and with respect to the Proxy Statement, when
first mailed to the stockholders of FHC, 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 Stockholders' Meetings 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 Stockholders' Meetings. All
documents that any ANB Company or any Affiliate thereof is responsible for
filing with any Regulatory Authority in connection with the transactions
provided for herein will comply as to form in all material respects with the
provisions of applicable Law.
6.19 ACCOUNTING, TAX AND REGULATORY MATTERS. No ANB Company or any
Affiliate thereof has taken any action or has any Knowledge of any fact or
circumstance that is reasonably likely to (i) prevent the transactions
contemplated hereby, including the Merger, from qualifying for
pooling-of-interests accounting treatment or as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (ii) materially
impede or delay receipt of any Consents of Regulatory Authorities referred to
in Section 9.1(b) of this Agreement or result in the imposition of a condition
or restriction of the type referred to in the last sentence of such Section.
6.20 ADMINISTRATION OF TRUST ACCOUNTS. The ANB Companies have properly
administered, in all respects material and which could reasonably be expected
to be material to the business, operations or financial condition of the ANB
Companies, taken as a whole, all accounts for which they act as a fiduciary,
including, but not limited to, accounts for which they serve as a trustee,
agent, custodian, personal representative, guardian, conservator or investment
advisor, in accordance with the terms of the governing documents and applicable
state and federal Law, regulation and common Law. None of the ANB Companies nor
any director, officer or employee of the ANB Companies has committed any breach
of trust with respect to any such fiduciary account which will have a Material
Adverse Effect on ANB. The accounting for each such fiduciary account in the
aggregate is true and correct in all material respects and accurately reflects
the assets of such fiduciary accounts in all material respects.
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ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 COVENANTS OF BOTH PARTIES. Unless the prior written consent of the
other Party shall have been obtained, and except as otherwise expressly
provided for herein, each Party shall and shall cause each of its Subsidiaries
to (a) preserve intact its business organization, goodwill, relationships with
depositors, customers and employees, and Assets and maintain its rights and
franchises, and (b) take no action which would (i) adversely affect the ability
of any Party to obtain any Consents required for the transactions provided for
herein without imposition of a condition or restriction of the type referred to
in the last sentences of Section 9.1(b) or 9.1(c) of this Agreement or (ii)
adversely affect the ability of any Party to perform its covenants and
agreements under this Agreement.
7.2 COVENANTS OF FHC. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, FHC
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, president or
chief financial officer of ANB, which consent shall not be unreasonably
withheld:
(A) amend the Certificate or Articles of Incorporation, Bylaws or
other governing instruments of any FHC Company; or
(B) incur any additional debt obligation or other obligation for
borrowed money except in the ordinary course of the business of FHC
Subsidiaries consistent with past practices (which shall include, for FHC
Subsidiaries that are depository institutions, creation of deposit liabilities,
purchases of federal funds, sales of certificates of deposit, advances from the
FRB or the Federal Home Loan Bank, entry into repurchase agreements fully
secured by U.S. government or agency securities and issuances of letters of
credit), or impose, or suffer the imposition, on any share of stock held by any
FHC Company of any Lien or permit any such Lien to exist; or
(C) except for a redemption of all outstanding shares of FHC Preferred
Stock for an amount equal to or less than $55,010, repurchase, redeem or
otherwise acquire or exchange, directly or indirectly, any shares, or any
securities convertible into any shares, of the capital stock of any FHC
Company, or, except for the payment of accrued and unpaid dividends on the FHC
Preferred Stock through the date of its redemption, declare or pay any dividend
or make any other distribution in respect of FHC's capital stock; or
(D) except for this Agreement, issue, sell, pledge, encumber, enter
into any Contract to issue, sell, pledge, or encumber, authorize the issuance
of, or otherwise permit to become outstanding, any additional shares of FHC
Common Stock or any other capital stock of any FHC 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 shares of such
stock; or
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(E) adjust, split, combine or reclassify any capital stock of any
FHC Company or issue or authorize the issuance of any other securities with
respect to or in substitution for shares of its capital stock or sell, lease,
mortgage or otherwise encumber any shares of capital stock of any FHC
Subsidiary or any Asset other than in the ordinary course of business for
reasonable and adequate consideration; or
(F) acquire any direct or indirect equity interest in any Person,
other than in connection with (i) foreclosures in the ordinary course of
business and (ii) 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 FHC Company, except in accordance with past
practices with respect to employees; pay any bonus except in accordance with
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 FHC Company; grant any material
increase in fees or other increases in compensation or other benefits to
directors of any FHC Company; or
(H) enter into or amend any employment Contract between any FHC
Company and any Person (unless such amendment is required by Law) that the FHC
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 FHC Company or make
any material change in or to any existing employee benefit plans of any FHC
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 FHC Company for
material money damages or restrictions upon the operations of any FHC Company,
or, 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; or
(L) operate its business otherwise than in the ordinary course of
business; or
(M) fail to file timely any report required to be filed by it with
any Regulatory Authority; or
(N) make any Loan or advance to any stockholder, director or
officer of FHC or any of the FHC Subsidiaries, or any member of the immediate
family of the foregoing, or any
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Related Interest (Known to FHC or any of its Subsidiaries) of any of the
foregoing, except for (i) advances under unfunded loan commitments in
existence on the date of this Agreement and (ii) renewals of existing lines
of credit in favor of directors of any FHC Company that do not exceed $25,000
per director, all of which is specifically described on Schedule 7.2(n); or
(O) cancel without payment in full, or modify any Contract
relating to, any loan or other obligation receivable from any stockholder,
director or officer of any FHC Company or any member of the immediate family of
the foregoing, or any Related Interest (Known to FHC or any of its
Subsidiaries) of any of the foregoing; or
(P) enter into any Contract for services or otherwise with any of
the 5% stockholders, directors, officers or employees of any FHC Company or any
member of the immediate family of the foregoing, or any Related Interest (Known
to FHC or any of its Subsidiaries) of any of the foregoing.
7.3 COVENANTS OF ANB. From the date of this Agreement until the
earlier of the Effective Time or the termination of this Agreement, ANB
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, president or
chief financial officer of FHC, which consent shall not be unreasonably
withheld:
(A) fail to file timely any report required to be filed by it with
Regulatory Authorities, including the SEC; or
(b) take any action that would cause the ANB Common Stock to cease to
be traded on the NASDAQ.
7.4 ADVERSE CHANGES IN CONDITION. Each Party agrees to give
written notice promptly to the other Party upon becoming aware of the
occurrence or impending occurrence of any event or circumstance relating to it
or any of its Subsidiaries that (i) is reasonably likely to have, individually
or in the aggregate, a Material Adverse Effect on it or (ii) would cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein, and to use its reasonable efforts to prevent or
promptly to remedy the same.
7.5. REPORTS. Each Party and its Subsidiaries shall deliver to the
other Party copies of all reports with Regulatory Authorities promptly after
the same are filed.
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1A PROXY STATEMENT: STOCKHOLDER APPROVAL. FHC shall call the
Stockholders' Meeting, to be held as soon as reasonably practicable after
approvals of the Merger have been received from the appropriate Regulatory
Authorities, for the purpose of voting upon adoption
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of this Agreement and such other related matters as it deems appropriate. In
connection with the Stockholders' Meeting, (i) FHC and ANB shall jointly prepare
a Proxy Statement and mail it to FHC's stockholders, (ii) the Parties shall
furnish to each other all information concerning them that they may reasonably
request in connection with such Proxy Statement, (iii) the Board of Directors of
FHC shall recommend (subject to compliance with its fiduciary duties as advised
by counsel) to its stockholders the approval of this Agreement, and (iv) the
Board of Directors and officers of FHC shall use their best efforts to obtain
such stockholders' approval (subject to compliance with its fiduciary duties as
advised by counsel).
8.1B COVENANTS OF ANB. With respect to the ANB Common Stock to be
issued to FHC Stockholders in connection with the Merger, but only that ANB
Common Stock to be issued to those FHC stockholders that comply with the terms
and conditions of Section 8.1C hereof, ANB covenants and agrees:
(A) to file with the SEC as soon as practicable following the
filing of ANB's Report on Form 10-Q which occurs after the Merger, but in any
event within one (1) year from the Closing Date, a Registration Statement
respecting the registration of shares of the ANB Common Stock to be issued
pursuant to this Agreement for the purpose of registering said shares of ANB
Common Stock with the SEC and to keep such Registration Statement effective for
a period of not less than two (2) years following Closing;
(B) to use its best efforts to cause the Registration Statement to
become effective as soon as possible and to prepare and file with the SEC, as
expeditiously as possible, any amendments and supplements to the Registration
Statement that may be necessary;
(C) to furnish to the FHC stockholders, as expeditiously as
possible, such documents as the FHC stockholders may reasonably request in
order to facilitate the public sale or other disposition of the shares of ANB
Common Stock owned by the FHC stockholders and so registered;
(D) to use its best efforts to register or qualify, as
expeditiously as possible, the shares of ANB Common Stock covered by the
Registration Statement under the securities or Blue Sky Laws of those states set
forth on schedules to be furnished to ANB by the FHC stockholders within fifteen
(15) days after the effective date of the Registration Statement listing those
states in which it is reasonable that registration or qualification will be
required to enable the FHC stockholders, through registered broker-dealers, to
consummate the public sale or other disposition of the ANB Common Stock by the
FHC stockholders, and do any and all other acts and things that may be necessary
or desirable to enable the FHC stockholders, through registered broker-dealers,
to consummate the public sale or other disposition of the ANB Common Stock owned
by them; provided, however, that the FHC stockholders holding shares of ANB
Common Stock included in any such registration shall furnish in writing to ANB
such information regarding such FHC stockholder and the distribution proposed by
such FHC stockholders as ANB may request in writing and as shall be required in
connection with any registrations, qualifications or compliance;
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(E) to pay all expenses incurred by ANB in complying with this
Section 8.1B, including without limitation registration fees, exchange listing
fees, printing expenses, fees and disbursements of counsel for ANB and the FHC
stockholders, state Blue Sky fees and expenses, and the expense of any special
audits incident to or required by any such registration, but excluding
underwriting discounts and selling commissions, if any; and,
(F) in the event of any registration of shares of the ANB Common
Stock pursuant to this Agreement, to indemnify and hold harmless the FHC
stockholders selling such shares, any underwriter of such shares and each other
person, if any, who controls such FHC stockholder or underwriter within the
meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages or
liabilities, joint or several, to which such seller, underwriter or controlling
person may become subject under the 1933 Act, the 1934 Act, state securities
laws or otherwise, insofar as such losses, claims, damages or liabilities (or
actions with respect thereto) arise out of or are based upon any untrue
statement of any material fact contained in the Registration Statement, any
prospectus contained in the Registration Statement, or any amendment or
supplement to such Registration Statement, or arise out of or are based upon the
omission or alleged omission to state a material fact required to be stated
therein or necessary to make the statements therein not misleading; and ANB
will reimburse such FHC stockholder, underwriter and each such controlling
person for any legal or any other expenses reasonably incurred by such FHC
stockholder, underwriter or controlling person in connection with investigating
or defending any such loss, claim, damage or action; provided, however, that
ANB will not be liable in any such case to the extent that any such loss,
claim, damage or liability arises out of or are based upon any untrue statement
or omission made in such Registration Statement, preliminary prospectus or
prospectus, or any such amendment or supplement, in reliance upon and in
conformity with information furnished to ANB, in writing, by or on behalf of
such FHC stockholder, underwriter or controlling person specifically for use in
the preparation thereof.
8.1C COVENANTS OF THE FHC STOCKHOLDERS. With respect to the shares
of ANB Common Stock to be registered under the 1933 Act and sold by FHC
stockholders, prior to any obligation on behalf of ANB to comply with Section
8.1B hereof with respect to any such shares of ANB Common Stock to be issued to
a particular FHC stockholder, each such FHC stockholder shall enter into an
agreement with ANB whereby, among other things, such selling FHC stockholder
shall covenant and agree, severally and not jointly, to indemnify and hold
harmless ANB, each of its directors and officers and each underwriter (if any)
and each person, if any, who controls ANB or any such underwriter within the
meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages or
liabilities, joint or several, to which ANB, such directors and officers,
underwriter or controlling person may become subject under the 1933 Act, the
1934 Act, state securities laws or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement under which such shares of ANB Common
Stock were registered under the 1933 Act, any preliminary prospectus or final
prospectus contained in the Registration Statement, or any amendment or
supplement to the Registration Statement, or prospectus, or arise out of or are
based upon any omission or alleged omission to state a material fact required
to be stated therein
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or necessary to make the statements therein not misleading, if the statement or
omission was made in reliance upon and in conformity with information furnished
in writing to ANB by such selling FHC stockholder, specifically for use in
connection with the preparation of such Registration Statement, prospectus,
amendment or supplement; provided, however, that the obligation of any such
individual FHC stockholder thereunder shall be limited to such losses, claims,
damages or liabilities as arise out of or are based upon information furnished
in writing by or withheld by such FHC stockholder.
8.1D CONDITIONS TO INDEMNIFICATION UNDER SECTIONS 8.1B AND 8.1C.
Each party entitled to indemnification under Section 8.1B or 8.1C (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought,
and shall permit the Indemnifying Party to assume the defense of any such claim
or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim of litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld); and provided, further, that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under Section 8.1B or Section 8.1C, as
applicable, unless and to the extent the failure to notify materially adversely
affects the defense of such action. The Indemnified Party may participate in
such defense at such party's expense; provided, however, that the Indemnifying
Party shall pay such expense if representation of such Indemnifying Party by
the counsel retained by the Indemnifying Party would be inappropriate due to
actual or potential differing interests between the Indemnified Party and any
other party represented by such counsel in such proceeding. No Indemnifying
Party, in the defense of any such claim or litigation shall, except with the
consent of each Indemnifying Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party or a release from
all liability in respect of such claim or litigation.
8.2 APPLICATIONS. ANB shall promptly prepare and file, and FHC
shall cooperate in the preparation and, where appropriate, filing of,
applications with all Regulatory Authorities having jurisdiction over the
transactions provided for in this Agreement seeking the requisite Consents
necessary to consummate the transactions provided for in this Agreement.
8.3 FILINGS WITH STATE OFFICES. Upon the terms and subject to the
conditions of this Agreement, ANB shall execute and file both the Certificate
of Merger with the Secretary of State of the State of Delaware and the Articles
of Merger with the Secretary of State of Alabama in connection with the
Closing.
8.4 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 to consummate and make effective, as soon as
practicable after the date of this Agreement, the transactions provided for in
this Agreement, including, without limitation, using its reasonable efforts to
lift or rescind any Order adversely
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affecting its ability to consummate the transactions provided for herein and to
cause to be satisfied the conditions referred to in Article Nine of this
Agreement. Each Party shall use, and shall cause each of its Subsidiaries to
use, its reasonable efforts to obtain all Consents necessary or desirable for
the consummation of the transactions provided for in this Agreement.
8.5 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 provided for herein and shall not
interfere unnecessarily with normal operations. No investigation by a Party
shall affect the representations and warranties of the other Party.
(B) 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 positions and shall not use such information for any purpose except
in furtherance of the transactions provided for in 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 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.
8.6 PRESS RELEASES. Prior to the Effective Time, FHC and ANB
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 provided for herein; provided, however, that nothing in this
Section 8.6 shall be deemed to prohibit any Party from making any disclosure
that its counsel deems necessary or advisable in order to satisfy such Party's
disclosure obligations imposed by Law.
8.7 FAILURE TO CLOSE.
(A) ANB expressly agrees to consummate the transactions provided
for herein upon the completion of all conditions to Closing and shall not have
taken any action reasonably calculated to prevent the Closing and shall have
not unreasonably delayed any action reasonably required to be taken by it to
facilitate the Closing.
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(B) FHC expressly agrees to consummate the transactions provided
for hereunder upon the completion of all conditions to Closing and shall not
have taken any action reasonably calculated to prevent the Closing and shall
have not unreasonably delayed any action reasonably required to be taken by it
to facilitate the Closing. Notwithstanding any other provision of this
Agreement, to the extent required by the fiduciary obligations of the Board of
Directors of FHC, as determined in good faith by a majority of the
disinterested members thereof based on the advice of FHC's outside counsel, FHC
may:
(i) in response to an unsolicited request therefor,
participate in discussions or negotiations with, or furnish
information with respect to FHC pursuant to a customary
confidentiality agreement to, any person concerning an Acquisition
Proposal involving FHC or any of its Subsidiaries; and
(ii) approve or recommend (and, in connection therewith
withdraw or modify its approval or recommendation of this Agreement or
the Merger) a superior Acquisition Proposal involving FHC or any of
its Subsidiaries or enter into an agreement with respect to such
superior Acquisition Proposal (for purposes of this Agreement,
"superior Acquisition Proposal," when used with reference to FHC or
any of its Subsidiaries, means a bona fide Acquisition Proposal
involving FHC or any of its Subsidiaries made by a third party which a
majority of the disinterested members of the Board of Directors of FHC
determines in its good faith judgment to be more favorable to FHC's
stockholders than the Merger, and for which financing, to the extent
required, is then committed).
FHC shall promptly advise ANB in writing of any Acquisition Proposal involving
FHC or any of its Subsidiaries or any inquiry with respect to or which could
lead to any such Acquisition Proposal and the identity of the Person making any
such Acquisition Proposal or inquiry. FHC will keep ANB fully informed of the
status and details of any such Acquisition Proposal or inquiry.
8.8 ACCOUNTING AND TAX TREATMENT. Each of the Parties undertakes
and agrees to use its best efforts to cause the Merger, and to take no action
which would cause the Merger not to qualify for pooling-of-interests accounting
treatment and treatment as a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code for federal income tax purposes.
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY. The respective
obligations of each Party to perform this Agreement and consummate the Merger
and the other transactions provided for herein are subject to the satisfaction
of the following conditions, unless waived by both Parties pursuant to Section
11.5 of this Agreement:
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(A) STOCKHOLDER APPROVAL. The stockholders of FHC shall have
approved this Agreement, and the consummation of the transactions provided for
herein.
(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 that is necessary
to consummate the transactions provided for herein 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 as to render inadvisable the
consummation of the Merger.
(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 9.1(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. No Consent so obtained which is
necessary to consummate the transactions provided for herein shall be
conditioned or restricted in a manner 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 as to render inadvisable the consummation of the Merger.
(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 that prohibits, restricts or make illegal
consummation of the transactions contemplated by this Agreement.
(E) POOLING LETTER. ANB shall have received a letter, dated as of
the Effective Time, in form and substance reasonably acceptable to it, from
Coopers & Lybrand, L.L.P., to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
(F) TAX MATTERS. FHC and ANB shall have received a written
opinion of counsel from Wallace, Jordan, Ratliff & Brandt, L.L.C. and Coopers &
Lybrand, L.L.P., respectively, in form reasonably satisfactory to them (the
"Tax Opinions"), to the effect that (i) the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code, (ii) the exchange in the Merger of FHC Common Stock for ANB Common Stock
will not give rise to gain or loss to the stockholders of FHC with respect to
such exchange (except to the extent of any cash received), and (iii) neither
FHC nor ANB will recognize gain or loss as a consequence of the Merger (except
for income and deferred gain recognized pursuant to Treasury regulations issued
under Section 1502 of the Internal Revenue Code). In rendering such Tax
Opinion, counsel for FHC and ANB shall be entitled to rely upon representations
of officer of FHC and ANB reasonably satisfactory in form and substance to such
counsel.
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9.2 CONDITIONS TO OBLIGATIONS OF ANB. The obligations of ANB to
perform this Agreement and consummate the Merger and the other transactions
provided for herein are subject to the satisfaction of the following
conditions, unless waived by ANB pursuant to Section 11.5(a) of this
Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of FHC set forth or referred to in this Agreement shall be true and
correct 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 material
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
FHC.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of FHC to be performed and complied with pursuant to
this Agreement and the other agreements provided for herein prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(C) CERTIFICATES. FHC shall have delivered to ANB (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 9.2(a) and 9.2(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by FHC's Board of Directors and stockholders evidencing the taking of
all corporate action necessary to authorize the execution, delivery and
performance of this Agreement, and the consummation of the transactions
provided for herein, all in such reasonable detail as ANB and its counsel shall
request.
(D) OPINION OF COUNSEL. FHC shall have delivered to ANB an
opinion of Wallace, Jordan, Ratliff & Brandt, L.L.C., counsel to FHC, dated as
of the Closing, in substantially the form of Exhibit A hereto.
(E) NET WORTH AND CAPITAL REQUIREMENTS. Immediately prior to the
Effective Time, First Bank shall have a minimum net worth of $2,745,382. For
purposes of this Section 9.2(e), "net worth" shall mean the sum of the amounts
set forth on the balance sheet as shareholders' equity (including the par or
stated value of all outstanding capital stock, retained earnings, additional
paid-in capital, capital surplus and earned surplus), less the sum of (a) any
amounts at which shares of capital stock of such person appear on the asset
side of the balance sheet and (b) any amounts due from or owed by any
Subsidiary thereof.
(F) Prior to the Effective Time, FHC shall have redeemed all of
the outstanding shares of the FHC Preferred Stock for an aggregate amount not
in excess of $55,010.
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9.3 CONDITIONS TO OBLIGATIONS OF FHC. The obligations of FHC to
perform this Agreement and consummate the Merger and the other transactions
provided for herein are subject to the satisfaction of the following
conditions, unless waived by FHC pursuant to Section 11.6(b) of this Agreement:
(A) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of FHC set forth or referred to in this Agreement shall be true and
correct 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 6.3 of this Agreement, which shall be true in all material
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
ANB.
(B) PERFORMANCE OF AGREEMENTS AND COVENANTS. Each and all of the
agreements and covenants of ANB to be performed and complied with pursuant to
this Agreement and the other agreements provided for herein prior to the
Effective Time shall have been duly performed and complied with in all material
respects.
(C) CERTIFICATES. ANB shall have delivered to FHC (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 9.3(a) and 9.3(b) of this
Agreement have been satisfied, and (ii) certified copies of resolutions duly
adopted by ANB'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 FHC and its counsel shall request.
(D) OPINION OF COUNSEL. ANB shall have delivered to FHC an
opinion of Maynard, Cooper & Gale, P.C., counsel to ANB, dated as of the
Effective Time, in substantially the form of Exhibit B hereto.
ARTICLE 10
TERMINATION
10.1 TERMINATION. Notwithstanding any other provision of this
Agreement, and notwithstanding the approval of this Agreement by the
stockholders of FHC, this Agreement may be terminated and the Merger abandoned
at any time prior to the Effective Time:
(A) by mutual written consent of the Board of Directors of ANB and
the Board of Directors of FHC; or
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(B) by the Board of Directors of either Party in the event of a
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 is reasonably likely, in the opinion of the non-breaching Party, to
have, individually or in the aggregate, a material Adverse Effect on the
breaching Party; or
(C) by the Board of Directors of either Party in the event of a
material breach by the other Party of any covenant, agreement or other
obligation contained in this Agreement which cannot be or has not been cured
within thirty (30) days after the giving of written notice to the breaching
Party of such breach; or
(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, agreement or other obligation contained in this Agreement)
if (i) any Consent of any Regulatory Authority required for consummation of the
Merger and the other transactions provided for herein shall have 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) the
stockholders of FHC fail to vote their approval of this Agreement and the
transactions provided for herein as required by the ABCA at the Stockholders'
Meeting where the transactions were presented to such FHC stockholders for
approval and voted upon; or
(E) by ANB, upon written notice to FHC, if there shall have
occurred any Material Adverse Effect to the business, operations or financial
condition of FHC taken as a whole and such Material Adverse Effect shall not
have been remedied within 15 days after receipt by FHC of notice in writing
from ANB specifying the nature of such Material Adverse Effect and requesting
that it be remedied; or
(F) by FHC, upon written notice to ANB, if there shall have
occurred any Material Adverse Effect to the business, operations, or financial
condition of ANB taken as a whole and such Material Adverse Effect shall not
have been remedied within 15 days after receipt by ANB of notice in writing
from FHC specifying the nature of such Material Adverse Effect and requesting
that it be remedied; or
(G) by the Board of Directors of either Party if the Merger shall
not have been consummated by December 31, 1996, if the failure to consummate the
transactions contemplated hereby on or before such date is not caused by any
breach of this Agreement by the Party electing to terminate pursuant to this
Section 10.1(g); or
(H) by the Board of Directors of either Party if 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 10.1(g) of
this Agreement; or
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(I) by the Board of Directors of ANB if the holders of in excess
of five percent (5%) of the outstanding shares of FHC Common Stock properly
assert their dissenters' rights of appraisal pursuant to Article 13 of the
ABCA; or
(J) by FHC, to the extent that a majority of the disinterested
members of the Board of Directors of FHC shall have determined to enter into an
agreement with respect to a superior Acquisition Proposal as contemplated by
Section 8.7(b); provided that, concurrently with such termination, FHC shall
pay to ANB a termination fee equal to $200,000.00. In such an event, ANB shall
not be entitled to receive any additional amounts (for damages, expenses, costs
or otherwise) from FHC, its officers, directors or shareholders.
10.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to Section 10.1 of this Agreement, this
Agreement shall become void and have no effect, except that (i) the provisions
of this Section 10.2 and Article 11 and Sections 8.5(b) and 10.1(j) of this
Agreement shall survive any such termination and abandonment, and (ii) a
termination pursuant to Sections 10.1(b), 10.1(c) or 10.1(h) of this Agreement
shall not relieve the breaching Party from Liability for an uncured willful
breach of a representation, warranty, covenant, obligation or agreement giving
rise to such termination.
10.3 NON-SURVIVAL OF REPRESENTATIONS AND COVENANTS. The respective
representations, warranties, obligations, covenants and agreements of the
Parties shall not survive the Effective Time, except Sections 8.1B, 8.1C and
8.1D, this Section 10.3 and Articles Two, Three, Four and Eleven of this
Agreement.
ARTICLE 11
MISCELLANEOUS
11.1 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:
"ABCA" shall mean the Alabama Business Corporation Act.
"ACQUISITION PROPOSAL" with respect to a Party shall mean any
tender offer or exchange offer or any proposal for a merger,
acquisition of all of the stock or assets of, or other business
combination involving such Party or any of its Subsidiaries or the
acquisition of a substantial equity interest in, or a substantial
portion of the assets of, such Party or any of its Subsidiaries,
including a plan of liquidation of a Party or any of its Subsidiaries,
other than the transaction provided for in this Agreement.
"1933 ACT" shall mean the Securities Act of 1933, as amended.
"1934 ACT" shall mean the Securities Exchange Act of 1934, as
amended.
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"AFFILIATE" of a Person shall mean: (i) any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person;
(ii) any officer, director, partner, employer, or direct or indirect
beneficial owner of any 10% or greater equity or voting interest of
such Person; or (iii) any other Person for which a Person described in
clause (ii) acts in any such capacity.
"AGREEMENT" shall mean this Agreement and Plan of Merger,
including the Exhibits and Schedules delivered pursuant hereto and
incorporated herein by reference. References to "the date of this
Agreement," the date hereof" and words of similar import shall refer
to the date this Agreement was first executed, June 10, 1996.
"ALLOWANCE" shall have the meaning provided in Section 6.9 of
this Agreement.
"ANB BANKS" shall mean and include Alabama Exchange Bank,
Citizens Bank of Talladega, St. Clair Federal Savings Bank, Bank of
Dadeville, First National Bank of Ashland, Gulf Bank and National Bank
of Commerce of Birmingham.
"ANB BENEFIT PLAN" shall mean all pension, retirement,
profit-sharing, deferred compensation, stock option, employee stock
ownership, severance pay, vacation, bonus, or other incentive plan,
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 ANB 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.
"ANB COMMON STOCK" shall mean the $1.00 par value common stock
of ANB.
"ANB COMPANIES" shall mean, collectively, ANB and all ANB
Subsidiaries.
"ANB ERISA PLAN" shall mean any of the ANB Benefit Plans which
is an "employee pension benefit plan," as that term is defined in
Section 3(2) of ERISA.
"ANB FINANCIAL STATEMENTS" shall mean (i) the consolidated
statements of conditions (including related notes and schedule, if
any) of ANB as of December 31, 1995, 1994 and 1993, and the related
statements of income, changes in stockholders' equity, and cash flows
(including related notes and schedules, if any) for the years then
ended, as filed by ANB in SEC Documents, and (ii) the consolidated
Statements of condition of ANB (including related notes and schedules,
if any) and related statements of income, changes in stockholders'
equity and cash flows (including related notes and
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schedules, if any) included in SEC Documents filed with respect to
periods ended subsequent to December 31, 1995.
"ANB PENSION PLAN" shall mean each ANB ERISA Plan which is
also a "defined benefit plan" (as defined in Section 414(j) of the
Internal Revenue Code).
"ANB REGULATORY REPORTS" shall mean the Consolidated Financial
Statements for Bank Holding Companies, Form FRY 9C, for the years
ended December 31, 1995 and 1994, as filed by ANB with the FRB and
(ii) the Consolidated Financial Statements for Bank Holding
Companies, Form FRY 9C, delivered by ANB to FHC with respect to
periods ended subsequent to December 31, 1995.
"ANB STOCK PLAN" shall mean the existing stock option plans of
ANB designated as the "ANB 1994 Stock Option Plan" and the "ANB
Long-Term Incentive Compensation Plan".
"ANB SUBSIDIARIES" shall mean the Subsidiaries of ANB, which
shall include the ANB Subsidiaries described in Section 6.4 of this
Agreement and any corporation, bank, savings association, or other
organization acquired as a Subsidiary of ANB in the future and owned
by ANB at the Effective Time.
"ARTICLES OF MERGER" shall mean the Articles of Merger to be
executed by ANB and filed with the Secretary of State of Alabama
relating to the Merger as contemplated by Section 1.1 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 red, 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.
"CERTIFICATE OF MERGER" shall mean the Certificate of Merger
to be executed by ANB and filed with the Secretary of State of
Delaware relating to the Merger as contemplated by Section 1.1 of this
Agreement.
"CLOSING" shall mean the closing of the transactions provided
for herein, as described in Section 1.2 of this Agreement.
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"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.
"CUTOFF" shall have the same meaning provided in Section 4.2 of
this Agreement.
"DEFAULT" shall mean (i) any breach or violation of or default
under any Contract, Order or Permit, (ii) any occurrence of any event
that with the passage of time or the giving of notice or both would
constitute a breach or violation of or default under any Contract,
Order or Permit, or (iii) any occurrence of any event that with or
without the passage of time or the giving of notice would give rise to
a right to terminate or revoke, change the current terms of, or
renegotiate, or to accelerate, increase, or impose any Liability
under, any Contract, Order or Permit, where, in any such event, such
Default is reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on a Party.
"DGCL" shall mean the Delaware General Corporation Law.
"EFFECTIVE TIME" shall mean the date and time at which the
Merger becomes effective pursuant to applicable Law, as provided 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
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 same meaning provided in
Section 5.14 of this Agreement.
"EXCHANGE AGENT" shall mean AmSouth Bank.
"EXCHANGE RATIO" shall have the meaning given such term in
Section 3.1 hereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FHC BENEFIT PLANS" shall have the meaning set forth in
Section 5.14(a) of this Agreement.
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"FHC CALL REPORTS" shall mean (i) the Reports of Income and
Condition of First Bank for the years ended December 31, 1995 and
1994, as filed with the FDIC and the FRB and (ii) the Reports of
Income and Condition of First Bank delivered by FHC to ANB with
respect to periods ended subsequent to December 31, 1995.
"FHC CERTIFICATE" shall have the same meaning provided in
Section 4.2 of this Agreement.
"FHC COMMON STOCK" shall mean the $.10 par value Class A
voting common stock of FHC.
"FHC COMPANIES" shall mean, collectively, FHC and all FHC
Subsidiaries.
"FHC CONTRACTS" shall have the meaning set forth in Section
5.15 of this Agreement.
"FHC ERISA PLANS" shall have the meaning set forth in Section
5.14(a) of this Agreement.
"FHC FINANCIAL STATEMENTS" shall mean (i) the consolidated
balance-sheets (including related notes and schedules, if any) of FHC
as of December 31, 1995, 1994 and 1993, and the related statements of
income, changes in stockholders' equity and cash flows (including
related notes and schedules, if any) for the years then ended, as
delivered by FHC to ANB, and (ii) the consolidated balance sheets of
FHC (including related notes and schedules, if any) and related
statements of income, changes in stockholders' equity and cash flows
(including related notes and schedules, if any) delivered by FHC to
ANB with respect to periods ended subsequent to December 31, 1995.
"FHC PREFERRED STOCK" shall mean the $.10 par value preferred
stock of FHC.
"FHC REPRESENTATIVES" shall have the meaning set forth in
Section 8.7 of this Agreement
"FHC SUBSIDIARIES" shall mean the Subsidiaries of FHC, which
shall include the FHC Subsidiaries described in Section 5.4 of this
Agreement and any corporation, bank, savings association or other
organization acquired as a Subsidiary of FHC in the future and owned
by FHC at the Effective Time.
"FIRST BANK" shall have the meaning set forth in Section
5.4(a) of this Agreement.
"FRB" or "FEDERAL RESERVE BOARD" shall mean Board of Governors
of the Federal Reserve System.
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"GAAP" shall mean generally accepted accounting principles,
consistently applied during the periods involved.
"HAZARDOUS MATERIAL" shall mean any pollutant, contaminant, or
hazardous substance within the meaning of the Comprehensive
Environment Response, Compensation, and Liability Act, 42 U.S. C.
Section 9601 et seq., or any similar federal, state or local Law.
"INDEMNIFIED PARTY" shall have the meaning set forth in
Section 8.1C of this Agreement.
"INDEMNIFYING PARTY" shall have the meaning set forth in
Section 8.1C of this Agreement.
"INTERNAL REVENUE CODE" shall mean the Internal Revenue Code
of 1986, as amended, and the rules and regulations promulgated
thereunder.
"KNOWLEDGE" as used with respect to a Party shall mean the
actual knowledge of the officers and directors of such Party and that
knowledge that any director of the Party would have obtained upon a
reasonable examination of the books, records and accounts of such
Party and that knowledge that any officer of the Party would have upon
a reasonable examination of the books, records and accounts of such
officer and such Party.
"LAW" shall mean any code, law, ordinance, regulation,
reporting or licensing requirement, rule, or share applicable to a
Person or its Assets, Liabilities or business, including without
limitation those promulgated, interpreted or enforced by any of the
Regulatory Authorities.
"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 my 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 my 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
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business, and (ii) 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 provided for
in 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 a 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.
"LOANS" shall have the meaning set forth in Section 5.9(a) of
this Agreement.
"MATERIAL" for purposes of this Agreement shall be determined
in light of the facts and circumstances of the matter in question;
provided that any specific monetary amount stated in this Agreement
shall determine materiality in that instance.
"MATERIAL ADVERSE EFFECT" on a Party shall mean an event,
change or occurrence that has a material adverse impact on (i) the
financial position, results of operations or business of such Party
and its Subsidiaries, taken as a whole, or (ii) the ability of such
Party to perform its obligations under this Agreement or to consummate
the Merger or the other transactions provided for in 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 of 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 on the operating
performance of the Parties.
"MERGER" shall mean the merger of FHC with and into ANB
referred to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"NASDAQ" shall mean the National Association of Securities
Dealers Automated Quotations System.
"OCC" shall mean the Office of the Comptroller of the
Currency.
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"ORDER" shall mean any administrative decision or award,
decrees, 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.
"OTS" shall mean the Office of the Thrift Supervision.
"PARTICIPATION FACILITY" shall mean any facility in which the
Party in question or any of its Subsidiaries participates in the
management and, when required by the context, includes the owner or
operator or such property, but only with respect to such property.
"PARTY" shall mean either FHC or ANB, and "Parties" shall mean
both FHC and ANB.
"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 securities, Assets 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.
"REGISTRATION STATEMENT" shall mean the Registration Statement
on Form S-3, or other appropriate form, filed with the SEC by ANB
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 FRB,
the OCC, the FDIC, the OTS, all state regulatory agencies having
jurisdiction over the Parties and their respective Subsidiaries, the
NASD, and the SEC.
"RELATED INTERESTS" shall have the meaning set forth in
Section 5.15 of this Agreement.
"SEC" shall mean the Securities and Exchange Commission.
"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.
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"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 rust Indenture Act of 1939, as amended, and
the rules and regulations of any Regulatory Authority promulgated
thereunder.
"STATE REGULATOR" shall have the meaning set forth in Section
5.9(c) of this Agreement.
"STOCKHOLDERS' MEETING" shall mean the meeting of the
stockholders of FHC to be held pursuant to Section 8.1A of this
Agreement, including any adjournment or adjournments thereof.
"SUBSIDIARIES" shall mean all those corporations, banks,
associations or other entities of which the entity in question owns or
controls 50% or more of the outstanding equity securities either
directly or through an unbroken chain of entities as to each of which
50% 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.
"SURVIVING CORPORATION" shall mean ANB as the surviving
corporation in the Merger.
"TAX OPINIONS" shall have the meaning set forth in Section
9.1(g) 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.
11.2 EXPENSES. Each Party shall bear and pay its own costs and
expenses incurred in connection with the transactions provided for herein,
including fees and expenses of financial or other consultants, investment
bankers, accountants and counsel; provided, however, that nothing contained
herein shall limit either Party's rights under the termination provisions
contained in Article 10 hereof to recover any damages arising out of the other
Party's willful breach of any provision of this Agreement.
11.3 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 provided for herein and supersedes all prior arrangements or
understandings with respect thereto, written or oral. Nothing in this
Agreement expressed or implied is intended to confer upon any Person, other
than the Parties or their respective successors, any right, remedies,
obligations or liabilities under or by reason of this Agreement.
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11.4 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 approval of this Agreement by the holders of FHC Common Stock, there
shall be made no amendment that pursuant to the ABCA requires further approval
by the FHC stockholders, without the further approval of the FHC stockholders.
11.5 WAIVERS.
(a) Prior to or at the Effective Time, ANB, 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 FHC, to waive or extend the time for the compliance or fulfillment
by FHC of any and all of its obligation under this Agreement, and to waive any
or all of the conditions precedent to the obligations of ANB 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 ANB.
(b) Prior to or at the Effective Time, FHC, 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 ANB, to waive or extend the time for the compliance or fulfillment
by ANB of any and all of its obligations under this Agreement and to waive any
or all of the conditions precedent to the obligations of FHC under this
Agreement, except any condition which, if no 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 FHC.
11.6 ASSIGNMENT. Except as expressly provided for herein, 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 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.
11.7 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:
FHC: FIRSTBANC Holding Company, Inc.
P.O. Box 769
Robertsdale, Alabama 36567
Telecopy Number: (334) 943-6565
Attention: Mr. Doug Montgomery, Chairman
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<TABLE>
<S> <C>
Copy to Counsel: Wallace, Jordan, Ratliff & Brandt, L.L.C.
2000-A SouthBridge Parkway, Suite 525
Birmingham, Alabama 35209
Telecopy Number: (205) 871-7534
Attention: Michael J. Brandt
ANB: Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Telecopy Number: (205) 583-3724
Attention: John H. Holcomb, III, Chief Executive Officer
Copy to Counsel: Maynard, Cooper & Gale, P.C.
1901 Sixth Avenue North
2400 AmSouth/Harbert Plaza
Birmingham, Alabama 35203
Telecopy Number: (205) 254-1999
Attention: Mark L. Drew
</TABLE>
11.8 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 provided
for herein. In the event of a claim by any broker or finder based upon his or
its representing or being retained by or allegedly representing or being
retained by FHC or ANB, each of FHC and ANB, as the case may be, agrees to
indemnify and hold the other Party harmless of and from any Liability with
respect to any such claim.
11.9 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the Laws of the State of Delaware, without regard
to any applicable conflicts of Laws, except to the extent federal law shall be
applicable.
11.10 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.
11.11 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and are not part of this Agreement.
11.12 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
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accordance with its specific terms or was otherwise breached. It is
accordingly agreed that the Parties shall be entitled to an injunction or
injunctions 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.
11.13 SEVERABILITY. Any term or provision of this Agreement that 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.
11.14 SINGULAR/PLURAL: GENDER. Where the context so requires or
permits, the use of singular form includes the plural, and the use of the
plural form includes the singular, and the use of any gender includes any and
all genders.
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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 respectively authorized officers as of the day and year first
above written.
<TABLE>
<S> <C>
Attest: FIRSTBANC HOLDING COMPANY, INC.
/s/ Kathryn M. Novak By: /s/ William D. Montgomery
- --------------------------- -------------------------------
Secretary
Its: Chairman
------------------------------
[CORPORATE SEAL]
Attest: ALABAMA NATIONAL BANCORPORATION
/s/ Kimberly Moore By: /s/ John H. Holcomb, III
- ---------------------------- -------------------------------
Secretary John H. Holcomb, III
Its: Chief Executive Officer
[CORPORATE SEAL]
</TABLE>
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EXHIBIT B - APPRAISAL STATUTE
CODE OF ALABAMA
TITLE 10, CHAPTER 2B
ARTICLE 13.
DISSENTERS' RIGHTS
Division A
Right to Dissent and Obtain Payment for Shares
SECTION 10-2B-13.01. DEFINITIONS.
(1) "Corporate action" means the filing of articles of merger or
share exchange by the probate judge or Secretary of State, or other action
giving legal effect to a transaction that is the subject of dissenters' rights.
(2) "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.
(3) "Dissenter" means a shareholder who is entitled to dissent
from corporate action under Section 10-2B- 13.02 and who exercises that right
when and in the manner required by Sections 10-2B-13.20 through 10-2B-13.28.
(4) "Fair Value," with respect to 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 unless exclusion would be inequitable.
(5) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans, or, if none, at a rate that is
fair and equitable under all circumstances.
(6) "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.
(7) "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.
(8) "Shareholder" means the record shareholder or the beneficial
shareholder.
SECTION 10-2B-13.02. RIGHT TO DISSENT.
(a) A shareholder is entitled to dissent from, and obtain payment
of the fair value of his or her 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 (i) if shareholder approval is required for the
merger by Section 10-2B-11.03 or the articles of incorporation and the
shareholder is entitled to vote on the merger or (ii) if the
corporation is a subsidiary that is merged with its parent under
Section 10-2B-11.04;
(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 by all, or
substantially all, of the property of the corporation other than in
the usual and regular course of business, if the shareholder is
entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or a
sale
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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) To the extent that the articles of incorporation of
the corporation so provide, an amendment of the articles of
incorporation that materially and adversely affects rights in respect
to a dissenter's shares because it:
(i) Alters or abolishes a preferential right of
the shares;
(ii) 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;
(iii) Alters or abolishes a preemptive right of the
holder of the shares to acquire shares or other securities;
(iv) 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; or
(v) 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 Section
10-2B-6.04; or
(5) Any corporate action taken pursuant to a shareholder
vote to the extent 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
shares under this chapter may not challenge the corporate action creating his
or her entitlement unless the action is unlawful or fraudulent with respect to
the shareholder or the corporation.
SECTION 10-2B-13.03. DISSENT BY NOMINEES AND BENEFICIAL OWNERS.
(a) A record shareholder may assert dissenters' rights as to fewer
than all of the shares registered in his or her name only if he or she dissents
with respect to all shares beneficially owned by any one person and notifies
the corporation in writing of the name and address of each person on whose
behalf he or she asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares to which he or she
dissents and his or her other shares were registered in the names of different
shareholders.
(b) A beneficial shareholder may assert dissenters' rights as to
shares held on his or her behalf only if:
(1) He or she submits to the corporation the record
shareholder's written consent to the dissent not later than the time
the beneficial shareholder asserts dissenters' rights; and
(2) He or she does so with respect to all shares of which
he or she is the beneficial shareholder or over which he or she has
power to direct the vote.
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Division B.
Procedure of Exercise of Dissenters' Rights
SECTION 10-2B-13.20. NOTICE OF DISSENTERS' RIGHTS.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 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 dissenters' rights under Section
10-2B-13.02 is taken without a vote of shareholders, the corporation shall (1)
notify in writing all shareholders entitled to assert dissenters' rights that
the action was taken; and (2) send them the dissenters' notice described in
Section 10-2B-13.22.
SECTION 10-2B-13.21. NOTICE OF INTENT TO DEMAND PAYMENT.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is submitted to a vote at a shareholders' meeting, a
shareholder who wishes to assert dissenters' rights (1) must deliver to the
corporation before the vote is taken written notice of his or her intent to
demand payment or his or her shares if the proposed action is effectuated; and
(2) must not vote his or her shares in favor of the proposed action.
(b) A shareholder who does not satisfy the requirements of
subsection (a) is not entitled to payment for his or her shares under this
article.
SECTION 10-2B-13.22. DISSENTERS' NOTICE.
(a) If proposed corporate action creating dissenters' rights under
Section 10-2B-13.02 is authorized at a shareholders' meeting, the corporation
shall deliver a written dissenters' notice to all shareholders who satisfied
the requirement of Section 10-2B-13.21.
(b) The dissenters' notice must be sent no later than 10 days
after the corporate action was taken, and must:
(1) State where the payment demand must be sent;
(2) Inform holders of shares to what extent transfer of
the shares will be restricted after the payment demand is received;
(3) Supply a form for demanding payment;
(4) 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 subsection (a) notice is delivered; and
(5) Be accompanied by a copy of this article.
SECTION 10-2B-13.23. DUTY TO DEMAND PAYMENT.
(a) A shareholder sent a dissenters' notice described in Section
10-2B-13.22 must demand payment in accordance with the terms of the dissenters'
notice.
(b) The shareholder who demands payment retains all other rights
of a shareholder until those rights are canceled or modified by the taking of
the proposed corporate action.
(c) A shareholder who does not demand payment by the date set in
the dissenters' notice is not entitled to payment for his or her shares under
this article.
<PAGE> 177
(D) A shareholder who demands payment under subsection
(a) may not thereafter withdraw that demand and accept the terms offered under
the proposed corporate action unless the corporation shall consent thereto.
SECTION 10-2B-13.24 SHARE RESTRICTIONS.
(A) Within 20 days after making a formal payment demand, each
shareholder demanding payment shall submit the certificate or certificates
representing his or her shares to the corporation for (1) notation thereon by
the corporation that such demand has been made and (2) return to the
shareholder by the corporation.
(B) The failure to submit his or her shares for notation shall, at
the option of the corporation, terminate the shareholders' rights under this
article unless a court of competent jurisdiction, for good and sufficient
cause, shall otherwise direct.
(C) If shares represented by a certificate on which notation has
been made shall be transferred, each new certificate issued therefor shall bear
similar notation, together with the name of the original dissenting holder of
such shares.
(D) A transferee of such shares shall acquire by such transfer no
rights in the corporation other than those which the original dissenting
shareholder had after making demand for payment of the fair value thereof.
SECTION 10-2B-13.25. OFFER OF PAYMENT.
(A) As soon as the proposed corporate action is taken, or upon
receipt of a payment demand, the corporation shall offer to pay each dissenter
who complied with Section 10-2B-13.23 the amount the corporation estimates to
be the fair value of his or her shares, plus accrued interest.
(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 the
offer, an income statement 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 Section 10-2B-13.28; and
(5) A copy of this article.
(C) Each dissenter who agrees to accept the corporation's offer of
payment in full satisfaction of his or her demand must surrender to the
corporation the certificate or certificates representing his or her shares in
accordance with terms of the dissenters' notice. Upon receiving the
certificate or certificates, the corporation shall pay each dissenter the fair
value of his or her shares, plus accrued interest, as provided in subsection
(a). Upon receiving payment, a dissenting shareholder ceases to have any
interest in the shares.
SECTION 10-2B-13.26. FAILURE TO TAKE CORPORATE ACTION.
(A) If the corporation does not take the proposed action within 60
days after the date set for demanding payment, the corporation shall release
the transfer restrictions imposed on shares.
(B) If, after releasing transfer restrictions, the corporation
takes the proposed action, it must send a new dissenters' notice under Section
10-2B-13.22 and repeat the payment demand procedure.
SECTION 10-2B-13.27. RESERVED
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SECTION 10-2B-13.28. PROCEDURE IF SHAREHOLDER DISSATISFIED WITH OFFER OF
PAYMENT.
(A) A dissenter may notify the corporation in writing of his or
her own estimate of the fair value of his or her shares and amount of interest
due, and demand payment of the fair value of his or her shares and interest
due, if:
(1) The dissenter believes that the amount offered under
Section 10-2B-13.25 is less than the fair value of his or her shares
or that the interest due is incorrectly calculated;
(2) The corporation fails to make an offer under Section
10-2B-13.25 within 60 days after the date set for demanding payment;
or
(3) The corporation, having failed to take the proposed
action, does not release the transfer restrictions imposed on shares
within 60 days after the date set for demanding payment.
(B) A dissenter waives his or her right to demand payment under
this section unless he or she notifies the corporation of his or her demand in
writing under subsection (a) within 30 days after the corporation offered
payment for his or her shares.
Division C.
Judicial Appraisal of Shares.
SECTION 10-2B-13.30. COURT ACTION.
(A) If a demand for payment under Section 10-2B-13.28 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 in the circuit
court of the county where the corporation's principal office (or, if none in
this state, its registered office) is located. If the 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 where 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
proceedings as in an action against their shares, and all parties must be
served with a copy of the petition. Nonresidents may be served by registered
or certified mail or by publication as provided under the Alabama Rules of
Civil Procedure.
(D) After service is completed, the corporation shall deposit with
the clerk of the court an amount sufficient to pay unsettled claims of all
dissenters party to the action in an amount per share equal to its prior
estimate of fair value, plus accrued interest, under Section 10-2B-13.25.
(E) The jurisdiction of the court in which the proceeding is
commenced under subsection (b) 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. The dissenters are entitled
to the same discovery rights as parties in other civil proceedings.
(F) Each dissenter made a party to the proceedings is entitled to
judgment for the amount the court finds to be the fair value of his or her
shares, plus accrued interest. If the court's determination as to the fair
value of a dissenter's shares, plus accrued interest is higher than the amount
estimated by the corporation and deposited with the clerk of the court pursuant
to subsection (d), the corporation shall pay the excess to the dissenting
shareholder. If the court's determination as to fair value, plus accrued
interest, of a dissenter's shares is less than the amount estimated by the
corporation and deposited with the clerk of the court pursuant to subsection
(d), then the clerk shall return the balance of funds deposited, less any costs
under Section 10-2B-13.31, to the corporation.
<PAGE> 179
(g) Upon payment of the judgment, and surrender to the corporation
of the certificate or certificates representing the appraised shares, a
dissenting shareholder ceases to have any interest in the shares.
SECTION 10-2B-13.31. COURT COSTS AND COUNSEL FEES.
(a) The court in an appraisal proceeding commenced under Section
10-2B-13.30 shall determine all costs of the proceeding, including compensation
and expenses of appraisers appointed by the court. The court shall assess
costs against the corporation, except that the court may assess 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 Section 10-2B-13.28.
(b) The court may also assess the reasonable fees and expenses of
counsel 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 Section 10-2B-13.20 through
10-2B-13.28; 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 chapter.
(c) If the court finds that the service of counsel 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 counsel reasonable fees to be paid
out of the amounts awarded the dissenters who were benefitted. (Acts 1994, No.
94-245, p. 343, Section 1.)
SECTION 10-2B-13.32. STATUS OF SHARES AFTER PAYMENT.
Shares acquired by a corporation pursuant to payment of the agreed
value therefor or to payment of the judgment entered therefor, as in this
chapter provided, may be held and disposed by such corporation as in the case
of other treasury shares, except that, in the case of a merger or share
exchange, they may be held and disposed of as the plan of merger or share
exchange may otherwise provide.
