<PAGE>
As filed with the Securities and Exchange Commission on December 7, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
Form S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
----------------
Alabama National BanCorporation
(Exact name of registrant as specified in its charter)
Delaware 6712 63-1114426
(State or other (Primary Standard Industrial (I.R.S. Employer
jurisdiction Classification Code Number) Identification No.)
of incorporation or
organization)
----------------
1927 First Avenue North
Birmingham, Alabama 35203
(205) 583-3600
(Address, including zip code, and telephone number of registrant's principal
executive office)
----------------
JOHN H. HOLCOMB, III
Chairman and Chief Executive Officer
1927 First Avenue North
Birmingham, AL 35203
(205) 583-3600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------
Copies to:
CHRISTOPHER B. HARMON, ESQ. ROD JONES, ESQ.
Maynard, Cooper & Gale, P.C. Shutts & Bowen, LLP
1901 Sixth Avenue North 300 South Orange Avenue
Suite 2400 Suite 1000
Birmingham, Alabama 35203 Orlando, Florida 32801
(205) 254-1000 (407) 423-3200
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this Registration Statement has become
effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Each Class of to be Price Aggregate Registration
Securities to be Registered Registered Per Unit(1) Price(1) Fee
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common, $1.00 par value..... 735,000 $12.01 $8,827,148 $2,330
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f)(2) based upon the book value of all outstanding
shares of Peoples State Bank of Groveland as of September 30, 2000.
----------------
The registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
[PEOPLES STATE BANK OF GROVELAND LETTERHEAD]
MERGER PROPOSED--YOUR VOTE IS
VERY IMPORTANT
The Board of Directors of Peoples State Bank of Groveland has agreed to a
merger of Peoples State Bank with Peoples State Interim Bank, a Florida state
bank and a wholly-owned subsidiary of Alabama National BanCorporation. Before
we can complete this merger, the agreement must be approved by Peoples State
Bank shareholders. We are sending you this proxy statement-prospectus to ask
you to vote in favor of the merger.
We believe the merger will provide our bank with increased capabilities in
serving individuals, businesses and corporate clients in and around Lake
County, Florida, and will, therefore, create more value for Peoples State Bank
shareholders.
If the merger is completed, the shareholders of Peoples State Bank will receive
1.16396 shares of common stock in Alabama National BanCorporation, the parent
of Peoples State Interim Bank, for each share they own just before the merger.
We estimate that, on completion of the merger, the former Peoples State Bank
shareholders will own about 6.65% of the outstanding stock of Alabama National.
The merger cannot be completed unless a majority (50.1%) of Peoples State
Bank's shareholders approve it. We have scheduled a special shareholder meeting
for you to vote on the merger.
Your vote is very important. Whether or not you plan to attend our special
shareholder meeting, please take the time to vote by completing and mailing the
enclosed proxy card. If you sign, date and mail your proxy card without
indicating how you want to vote, we will vote your proxy in favor of the
merger.
The date, time and place of the special meeting is:
Date: January 25, 2001
Time: 6:00 p.m.
Place: E. L. Puryear Building
243 South Lake Avenue
Groveland, Florida 34736
This proxy statement-prospectus provides you with detailed information about
the proposed merger. You can also get information about Alabama National from
documents Alabama National has filed with the Securities and Exchange
Commission. We encourage you to read this entire document carefully.
We are very enthusiastic about this merger and the strength and capabilities we
expect.
Sincerely,
Wayne M. Turner
President and Chief Executive Officer
Peoples State Bank of Groveland
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities to be issued under
this proxy statement-prospectus or determined if this proxy statement-
prospectus is accurate or adequate. Any representation to the contrary is a
criminal offense. These securities are not savings or deposit accounts or
other obligations of any bank or non-bank subsidiary of any of the parties,
and they are not insured by the Federal Deposit Insurance Corporation, the
Bank Insurance Fund or any other governmental agency.
This proxy statement-prospectus is dated December , 2000 and was first mailed
to shareholders on or about December , 2000.
<PAGE>
We have not been authorized to give any information or make any representation
about the merger or Peoples State Bank or Alabama National that differs from,
or adds to, the information in this proxy statement-prospectus or in documents
that are publicly filed with the Securities and Exchange Commission. Therefore,
if anyone does give you different or additional information, you should not
rely on it.
This proxy statement-prospectus incorporates important business and financial
information about Alabama National that is not included or delivered with this
document. Instructions regarding how to obtain this information are contained
on page 90 under the caption "Where You Can Find More Information."
If you are in a jurisdiction where it is unlawful to offer to exchange or sell,
or to ask for offers to exchange or buy, the securities offered by this proxy
statement-prospectus or to ask for proxies, or if you are a person to whom it
is unlawful to direct such activities, then the offer presented by this proxy
statement-prospectus does not extend to you.
The information contained in this proxy statement-prospectus speaks only as of
its date unless the information specifically indicates that another date
applies.
Information in this proxy statement-prospectus about Alabama National has been
supplied by Alabama National, and information about Peoples State Bank has been
supplied by Peoples State Bank.
A Warning About Forward-Looking Statements
Alabama National and Peoples State Bank make forward-looking statements in this
document that are subject to risks and uncertainties. These forward-looking
statements include information about possible or assumed future results of our
operations or the performance of the combined bank after the merger. Also, when
any of the words "believes," "expects," "anticipates" or similar expressions
are used, forward-looking statements are being made. Many possible events or
factors could affect the future financial results and performance of each of
Alabama National and Peoples State Bank and the combined bank after the merger.
This could cause results or performance to differ materially from those
expressed in those forward-looking statements. You should consider these risks
when you vote on the merger. These possible events or factors include the
following:
1. Alabama National's revenues after the merger are lower than expected,
Alabama National's merger-related charges are higher than it expects, the
combined bank loses more deposits, customers or business than we expect, or
our operating costs after the merger are greater than we expect;
2. competition among depository and other financial institutions increases
significantly;
3. we have more trouble obtaining regulatory approvals for the merger than we
expect;
4. we have more trouble integrating our businesses or retaining key personnel
than we expect;
5. our costs savings from the merger are less than we expect, or we are unable
to obtain those cost savings as soon as we expect;
6. changes in the interest rate environment reduce our margins;
7. general economic or business conditions are worse than we expect;
8. legislative or regulatory changes adversely affect our business;
9. technological changes and systems integration are harder to make or more
expensive than we expect; or
10. adverse changes occur in the securities markets.
<PAGE>
PEOPLES STATE BANK OF GROVELAND
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To be held on January 25, 2001
----------------
Peoples State Bank of Groveland will hold a special meeting of shareholders at
E. L. Puryear Building, 243 South Lake Avenue in Groveland, Florida at 6:00
p.m. local time on Thursday, January 25, 2001 to vote on:
1. The Agreement and Plan of Merger, dated as of October 10, 2000, by and
between Alabama National BanCorporation and Peoples State Bank and the
transactions contemplated by that document. These transactions include the
merger of Peoples State Interim Bank into Peoples State Bank and the
issuance of Alabama National shares to Peoples State Bank's shareholders.
2. Any other matters that properly come before the special meeting, or any
adjournments or postponements of the special meeting.
Record holders of Peoples State Bank common stock at the close of business on
December 15, 2000, will receive notice of and may vote at the special meeting,
including any adjournments or postponements. The Agreement and Plan of Merger
requires approval by a majority (50.1%) of the outstanding shares of Peoples
State Bank.
Holders of Peoples State Bank common stock may exercise dissenters' rights
under Section 658.44 of the Florida Statutes. We have attached a copy of that
law as an Appendix to the accompanying proxy statement-prospectus.
Wayne M. Turner
President and Chief Executive
Officer
December , 2000
Please mark, sign, date and return your proxy promptly, whether or not you plan
to attend the special meeting. Your Board of Directors unanimously recommends
that you vote FOR approval of the matters that you will vote on at the special
meeting.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.................................................................... 1
Parties to the Merger.................................................... 1
Shareholder Meeting to Approve the Merger................................ 1
The Merger............................................................... 2
Selected Consolidated Financial Data..................................... 6
Pro Forma Selected Consolidated Financial Data........................... 11
Comparative Per Share Data............................................... 14
RISK FACTORS............................................................... 15
Restrictions on Dividends................................................ 15
Fixed Merger Consideration Despite Potential Change in Relative Stock
Prices.................................................................. 15
Supervision and Regulation............................................... 15
Monetary Policies........................................................ 16
Allowance for Loan Losses................................................ 16
Interests of Certain Persons in the Transaction.......................... 16
GENERAL INFORMATION........................................................ 17
Meeting, Record Dates and Votes Required................................. 17
Proxies and Other Matters................................................ 17
Dissenters' Rights....................................................... 18
Recommendation of Board of Directors..................................... 19
THE MERGER................................................................. 20
Terms of the Merger...................................................... 20
Effective Time........................................................... 20
Background of and Reasons for the Merger................................. 20
Opinion of Carson Medlin................................................. 23
VALUATION METHODOLOGIES.................................................... 27
Effect on Certain Employee Benefit Plans of Peoples State Bank........... 32
Surrender of Certificates................................................ 34
Conditions to Consummation of the Merger................................. 35
Regulatory Approvals..................................................... 37
Conduct of Business Pending the Merger................................... 38
Waiver and Amendment; Termination; Termination Fee....................... 39
Management and Operations After the Merger............................... 40
Interests of Certain Persons in the Merger............................... 41
Federal Income Tax Consequences.......................................... 41
Accounting Treatment..................................................... 43
Expenses and Fees........................................................ 43
Resales of Alabama National Common Stock................................. 43
PRO FORMA FINANCIAL INFORMATION ........................................... 45
Pro Forma Combined Condensed Consolidated Statement of Condition......... 45
Pro Forma Combined Condensed Consolidated Statements of Income........... 47
DESCRIPTION OF ALABAMA NATIONAL CAPITAL STOCK.............................. 52
General.................................................................. 52
Common Stock............................................................. 52
Preferred Stock.......................................................... 52
Certain Anti-Takeover Effects............................................ 53
SUPERVISION AND REGULATION OF ALABAMA NATIONAL AND PEOPLES STATE BANK...... 55
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS................................ 59
Charter and Bylaw Provisions............................................ 59
Shareholder Approval of Mergers......................................... 59
Dissenters' Rights...................................................... 60
Shareholders Meetings and Voting........................................ 60
Dividends............................................................... 62
Preemptive Rights....................................................... 63
Liquidation Rights...................................................... 63
Limitation of Liability and Indemnification............................. 63
Antitakeover Legislation................................................ 64
CERTAIN INFORMATION CONCERNING ALABAMA NATIONAL........................... 66
CERTAIN INFORMATION CONCERNING PEOPLES STATE BANK......................... 67
Description of Business................................................. 67
Information About Voting Securities and Principal Holders Thereof....... 71
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS OF PEOPLES STATE BANK......................................... 73
Financial Condition..................................................... 73
Loans................................................................... 74
Investment Securities................................................... 76
Deposits................................................................ 76
Capital Resources....................................................... 77
Results of Operations................................................... 78
Interest Sensitivity.................................................... 82
Market Risk............................................................. 83
Provision and Allowance for Loan Losses................................. 85
Nonperforming Assets.................................................... 87
Noninterest Income...................................................... 87
Noninterest Expense..................................................... 88
Income Taxes, Inflation and Other Issues................................ 88
LEGAL MATTERS............................................................. 90
EXPERTS................................................................... 90
WHERE YOU CAN FIND MORE INFORMATION....................................... 90
APPENDICES
Appendix A-Agreement and Plan of Merger
Appendix B-Provisions of Florida Statutes Relating to Dissenters' Rights
Appendix C-Financial Statements of Peoples State Bank of Groveland
Appendix D-Opinion of The Carson Medlin Company
</TABLE>
ii
<PAGE>
SUMMARY
This summary highlights selected information from this proxy statement-
prospectus. It does not contain all of the information that is important to
you. You should carefully read this entire document and the other documents to
which we refer. These will give you a more complete description of the
transactions we are proposing. For more information about Alabama National, see
"Where You Can Find More Information" (page 90). Each item in this summary
refers to the pages where that subject is discussed more fully.
Parties to the Merger (Page 66)
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
(205) 583-3650
Alabama National is the sixth largest bank holding company headquartered in the
State of Alabama, with ten bank subsidiaries in Alabama, Florida and Georgia.
Alabama National, through its subsidiary banks, provides full banking services
to individuals and small businesses.
At September 30, 2000, Alabama National had total assets of about $2.2 billion,
total deposits of about $1.7 billion, and total shareholders' equity of about
$153.2 million.
Peoples State Interim Bank
200 East Broad Street
Groveland, Florida 34736
(352) 429-2131
Peoples State Interim Bank is a Florida state bank and a wholly-owned
subsidiary of Alabama National. Interim Bank was recently formed for the
purpose of effecting the merger with Peoples State Bank. Interim Bank will not
engage in any business prior to the merger and will not survive the merger.
Peoples State Bank of Groveland
200 East Broad Street
Groveland, Florida 34736
(352) 429-2131
Peoples State Bank is a Florida state bank, providing commercial banking
services through its main office located in Groveland, Florida and branch
offices in Clermont, Florida and Leesburg, Florida. As of September 30, 2000,
the total assets of Peoples State Bank were about $121.6 million, total
deposits were about $102.0 million and shareholders' equity was about $8.8
million.
Shareholder Meeting to Approve Merger (Page 17)
We will hold the Peoples State Bank special meeting at 6:00 p.m. local time, on
Thursday, January 25, 2001, at the E. L. Puryear Building, 243 South Lake
Avenue, Groveland, Florida 34736.
<PAGE>
At this important meeting, we will ask Peoples State Bank shareholders to (i)
consider and vote upon approval of the merger agreement and (ii) act on any
other matters that may be put to a vote at the Peoples State Bank special
meeting. You may vote at the Peoples State Bank meeting if you owned Peoples
State Bank shares at the close of business on December 15, 2000. As of such
date, there were 631,464 shares of Peoples State Bank common stock issued and
outstanding and entitled to be voted at the special meeting.
The Merger (Page 20)
Terms of the Merger (Page 20). The merger agreement is the document that
governs the merger of Peoples State Bank with Interim Bank, and the issuance of
shares of Alabama National common stock to Peoples State Bank shareholders in
connection with the merger. We encourage you to read the merger agreement which
is attached to this proxy statement-prospectus as Appendix A. The merger
agreement provides for the merger of Interim Bank with and into Peoples State
Bank. Peoples State Bank shareholders will receive 1.16396 shares of Alabama
National common stock for each share of Peoples State Bank common stock they
own just before the merger. Following the merger, Peoples State Bank will be a
wholly-owned subsidiary of Alabama National.
Regulatory Approvals; Effective Time (Page 37). We cannot complete the merger
unless we obtain the approval of the Florida Department of Banking and Finance,
the Federal Deposit Insurance Corporation and the Board of Governors of the
Federal Reserve System. The merger will become effective as of the date and at
the time that the later of the following occurs: (i) the articles of merger
reflecting the merger of Alabama National and Peoples State Bank (the "Articles
of Merger") are accepted for filing by the Secretary of State of Florida, or
(ii) such later date and time as agreed upon in writing by Alabama National and
Peoples State Bank and specified in the Articles of Merger. We will not make
this filing until all conditions contained in the merger agreement have been
satisfied or waived, including (i) receipt of all regulatory approvals, and
expiration of all statutory waiting periods and (ii) the approval of the merger
agreement by the shareholders of Peoples State Bank. As of November 27, 2000,
all required regulatory approvals necessary for the merger had been obtained,
subject to certain conditions.
Recommendation of Peoples State Bank Board of Directors; Opinion of The Carson
Medlin Company (Page 23). The Peoples State Bank Board of Directors believes
that the merger is fair to you and in your best interests, and recommends that
you vote "FOR" the proposal to approve the merger and the merger agreement. The
Peoples State Bank Board of Directors believes that the merger will provide
Peoples State Bank with increased capabilities in serving individuals,
businesses and corporate clients in and around Groveland, and will therefore
create more value for Peoples State Bank's shareholders. In deciding to approve
the merger, the Peoples State Bank Board of Directors considered the opinion of
The Carson Medlin Company, that, as of the date of the opinion, the
consideration to be received was fair from a financial point of view to Peoples
State Bank shareholders. We have attached as Appendix D the written opinion of
The Carson Medlin Company dated December 7, 2000. You should read it carefully
to understand the assumptions made, matters considered and limitations of the
review undertaken by The Carson Medlin Company in providing its opinion.
2
<PAGE>
Vote Required (Page 17). In order to approve the merger, Peoples State Bank
shareholders holding at least a majority (50.1%) of the outstanding shares of
Peoples State Bank common stock must vote for the merger agreement. The
directors and executive officers of Peoples State Bank beneficially owned, as
of December 15, 2000, a total of 136,289 shares (21.58%) of Peoples State Bank
common stock. Each member of the Board of Directors of Peoples State Bank and
certain officers of Peoples State Bank have agreed, subject to certain
conditions, to vote their shares of Peoples State Bank common stock in favor of
the merger.
Surrender of Certificates (Page 34). Following the merger, holders of Peoples
State Bank stock certificates will need to exchange their certificates for new
certificates or a book-entry position. Shortly after we complete the merger,
Alabama National will send Peoples State Bank shareholders
detailed instructions on how to exchange their shares. Please do not send us
any stock certificates until you receive these instructions if you want new
stock certificates.
Conditions to Completion of the Merger (Page 35). The completion of the merger
depends on meeting a number of conditions, including the following: (i) Peoples
State Bank shareholders must approve the merger agreement, (ii) we must receive
all required regulatory approvals and any waiting periods required by law must
have passed, (iii) we must receive consents of third parties necessary to the
consummation of the merger, (iv) receipt of certain opinions of counsel, (v) we
must receive a fairness opinion from The Carson Medlin Company and (vi) Alabama
National must receive a letter from PricewaterhouseCoopers LLP concurring with
the conclusions of Alabama National's and Peoples State Bank's management that
no conditions exist with respect to each company that would preclude accounting
for the merger as a "pooling of interests."
Federal Income Tax Consequences (Page 41). We expect that Peoples State Bank,
Alabama National and their respective shareholders will not recognize any gain
or loss for U.S. Federal income tax purposes in the merger, except in
connection with any cash that Peoples State Bank shareholders receive instead
of fractional shares or as a result of exercising their dissenter's rights.
Peoples State Bank and Alabama National have received a legal opinion that this
will be the case. This opinion is subject to certain assumptions and
exceptions, some of which are described under the caption "Federal Income Tax
Consequences" beginning on page 41. This legal opinion is filed as an exhibit
to the Registration Statement of which this proxy statement-prospectus forms a
part. Peoples State Bank and Alabama National each has the right not to
complete the merger if it does not receive a confirming legal opinion at the
time of the merger. This opinion will not bind the Internal Revenue Service,
which could take a different view.
This tax treatment may not apply to some Peoples State Bank shareholders, and
will not apply to any Peoples State Bank shareholder who exercises dissenters'
rights under the Florida Statutes. Determining the actual tax consequence of
the merger to you as an individual taxpayer can be complicated. The tax
treatment will depend on your specific situation and many variables not within
our control. You should consult your own tax advisor for a full understanding
of this merger's tax consequences.
Management and Operations after the Merger (Page 40). Following the merger, the
Peoples State Bank Board of Directors will consist of the eight incumbent
directors of Peoples State Bank plus John H. Holcomb III, Chairman and CEO of
Alabama National and Richard Murray IV,
3
<PAGE>
Executive Vice President of Alabama National. Wayne M. Turner, the President
and Chief Executive Officer of Peoples State Bank, will continue to serve such
position of Peoples State Bank. All current Alabama National and Peoples State
Bank officers will continue to serve in their current positions after the
completion of the merger.
Interests of Certain Persons in the Merger that are Different from Yours (Page
41). Certain directors and officers of Alabama National and Peoples State Bank
have interests in the merger agreement that are different from your interests.
Certain directors and officers of Alabama National and Peoples State Bank have
been selected or will be selected to serve, or continue to serve as directors
and officers of Alabama National or Peoples State Bank after the merger. In
addition, Wayne M. Turner will enter into an employment agreement with Peoples
State Bank upon completion of the merger. Mr. Turner will also receive a
payment in the amount of $375,000 as compensation for the termination of his
current Employment Agreement with Peoples State Bank. Certain directors and
officers of Peoples State Bank currently participate in deferred compensation
plans of Peoples State Bank. We are amending these plans under the terms of the
merger agreement. These amendments provide for cash payments to some of these
individuals and provide for revised terms that may be more beneficial to some
or all of these individuals.
Accounting Treatment (Page 43). We expect the merger to qualify as a "pooling
of interests," which means that, for accounting and financial reporting
purposes, we will treat Peoples State Bank and Alabama National as if they had
always been one bank. Either of Peoples State Bank or Alabama National has the
right not to complete the merger if it does not receive a letter from certain
independent public accountants that the merger will qualify as a "pooling of
interests."
Market Prices. The following table sets forth (i) the market value of Alabama
National common stock, (ii) the market value of Peoples State Bank common stock
and (iii) the market value of Peoples State Bank common stock on an equivalent
per share basis determined as if the completion of the merger occurred on (A)
October 9, 2000, the business day immediately preceding the announcement of the
execution of the merger agreement and (B) , 2000, the last day
for which such information could be calculated prior to the mailing of this
proxy statement-prospectus:
<TABLE>
<CAPTION>
Alabama National Peoples State Bank Equivalent Price Per Share
Common Stock(1) Common Stock(2) of Peoples State Bank(3)
---------------- ------------------ --------------------------
<S> <C> <C> <C>
October 9,
2000........... $21.06 N/A $24.51
,
2000...........
</TABLE>
--------
(1) Determined on an historical basis with reference to the last sales price as
reported on the NASDAQ National Market for each particular date.
(2) There is no established public trading market for the Peoples State Bank
common stock on which an historical market value could be based.
(3) Determined on an equivalent price per share basis by multiplying the
Alabama National market value on each particular date by the exchange ratio
of 1.16396.
Resales of Alabama National Stock (Page 43). The shares of Alabama National
common stock issued to Peoples State Bank shareholders in the merger will be
freely transferable under federal
4
<PAGE>
securities law, except for shares issued to any shareholder who may be deemed
an "affiliate" of Peoples State Bank for purposes of Rule 145 under the
Securities Act (generally including directors, executive officers and
beneficial owners of 10% of any class of capital stock). Affiliates will be
subject to certain restrictions on resales of newly acquired Alabama National
shares.
Waiver and Amendment; Termination; Termination Fee (Page 39). Either Alabama
National or Peoples State Bank may waive or extend the time for performing the
others' obligations under the merger agreement. In addition, the Boards of
Directors of each of Alabama National and Peoples State Bank may agree to amend
the merger agreement. The merger agreement may be terminated at any time prior
to completion of the merger by the agreement of Peoples State Bank and Alabama
National.
Either company can also terminate the merger agreement under the following
circumstances:
(i) if any government body whose approval is necessary to complete the
merger makes a final decision not to approve the merger;
(ii) if we do not complete the merger by March 31, 2001;
(iii) if Peoples State Bank shareholders do not approve the merger
agreement;
(iv) if Peoples State Bank or Alabama National, as the case may be,
materially violates any of its representations, warranties or obligations
under the merger agreement; or
(v) if there is a material adverse change to the business of either Peoples
State Bank or Alabama National.
Generally, the entity seeking to terminate the merger agreement cannot itself
be in violation of the merger agreement so as to allow the other party to
terminate the agreement.
In addition, Alabama National can terminate the merger agreement if greater
than 5% of the outstanding Peoples State Bank shares have asserted dissenters'
rights under the Florida Statutes.
Peoples State Bank can terminate the merger agreement under certain
circumstances if it chooses to enter into a transaction that it considers
superior to the merger with Alabama National. If Peoples State Bank terminates
the merger agreement to enter into such a superior transaction, it has agreed
to pay Alabama National a termination fee of $750,000.
Differences in Your Rights as a Shareholder (Page 59). As a Peoples State Bank
shareholder, your rights are currently governed by Peoples State Bank's
Articles of Association and Bylaws and by the Florida Statutes. Upon completion
of the merger, you will automatically become an Alabama National shareholder,
and your rights as an Alabama National shareholder will be determined by
Alabama National's Certificate of Incorporation and Bylaws and by the Delaware
General Corporation Law. The rights of Alabama National's shareholders differ
from the rights of Peoples State Bank shareholders in certain important
respects.
Dissenters' Rights (Page 18). As a Peoples State Bank shareholder, you have the
right to dissent from the merger and to receive cash in respect of the "fair
value" of your shares of Peoples State
5
<PAGE>
Bank common stock. To do this, you must follow certain procedures required by
the Florida Statutes, including filing notices with us and/or voting against
the merger. The procedures to be followed by dissenting shareholders are
summarized under "General Information-Dissenters' Rights" at page 18. A copy of
the Florida Statutes' statutory provisions regarding dissenters' rights is set
forth in Appendix B to this Proxy Statement-Prospectus. Failure to follow
precisely such provisions as are applicable may result in loss of your
dissenters' rights.
If a significant number of shares of Peoples State Bank common stock are held
by shareholders who dissent and elect to receive cash in lieu of their shares,
the merger might not qualify for pooling-of-interests accounting treatment.
Such accounting treatment is a condition to Alabama National's obligation to
complete the merger. In addition, the merger agreement may be terminated by
Alabama National if the holders of more than 5% of the outstanding shares of
Peoples State Bank common stock invoke their dissenters' rights. Further,
dissent by holders of a significant number of shares of Peoples State Bank
common stock could cause the merger not to qualify as a tax-free reorganization
for federal income tax purposes.
Selected Consolidated Financial Data
The following tables present for Alabama National and Peoples State Bank, on an
historical basis, selected consolidated financial data and ratios. This
information is based on the consolidated financial statements of Alabama
National that it has presented in its filings with the Securities and Exchange
Commission, and financial information of Peoples State Bank, included herein as
Appendix C, and should be read in conjunction with those financial statements
and accompanying notes.
6
<PAGE>
ALABAMA NATIONAL BANCORPORATION SELECTED CONSOLIDATED FINANCIAL DATA
(HISTORICAL)
(Amounts in thousands, except ratios and per share data)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
---------------------- ----------------------------------------------------------
2000 1999 1999 1998(1) 1997(1) 1996(1) 1995(1)
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income......... $ 117,181 $ 90,811 $ 125,668 $ 115,704 $ 104,508 $ 93,178 $ 62,090
Interest expense........ 61,493 42,441 59,283 56,555 48,379 42,174 30,079
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income..... 55,688 48,370 66,385 59,149 56,129 51,004 32,011
Provision for loan
losses (benefit of
recoveries)............ 1,553 1,338 1,954 1,796 3,421 1,035 1,171
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses (benefit of
recoveries)............ 54,135 47,032 64,431 57,353 52,708 49,969 30,840
Net securities gains
(losses)............... 1 189 190 174 (2) (84) 21
Noninterest income...... 23,399 22,203 30,367 29,176 20,296 19,214 10,749
Noninterest expense..... 51,880 45,835 62,455 61,154 52,788 50,175 32,141
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 25,655 23,589 32,533 25,549 20,214 18,924 9,469
Provision for income
taxes.................. 7,868 7,452 10,237 8,154 6,086 5,279 951
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before minority
interest in earnings of
consolidated
subsidiary............. 17,787 16,137 22,296 17,395 14,128 13,645 8,518
Minority interest in
earnings of
consolidated
subsidiary............. 20 18 25 23 12 14 650
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 17,767 $ 16,119 $ 22,271 $ 17,372 $ 14,116 $ 13,631 $ 7,868
========== ========== ========== ========== ========== ========== ==========
Balance Sheet Data:
Total assets............ $2,187,324 $1,863,368 $1,921,884 $1,672,049 $1,495,814 $1,260,635 $1,142,064
Earning assets.......... 1,981,210 1,687,253 1,716,935 1,493,122 1,313,097 1,149,038 1,035,396
Securities.............. 339,641 348,181 345,123 324,213 265,102 224,939 227,087
Loans held for sale..... 8,761 8,162 8,615 19,047 5,291 4,339 2,431
Loans, net of unearned
income................. 1,586,220 1,252,806 1,320,160 1,087,027 961,079 863,968 743,530
Allowance for loan
losses................. 20,840 17,553 18,068 16,540 14,844 12,633 11,621
Deposits................ 1,704,810 1,408,965 1,442,155 1,275,175 1,125,479 988,876 945,544
Short-term debt......... 72,589 48,389 18,389 21,700 29,087 42,205 21,280
Long-term debt.......... 78,948 71,025 124,005 32,328 16,587 12,939 1,089
Stockholders' equity.... 153,228 137,641 138,255 130,993 116,888 105,204 88,230
Weighted Average Shares
Outstanding--Diluted
(2).................... 11,221 11,273 11,273 11,173 10,999 10,490 6,429
Per Common Share Data:
Net income--diluted
(3).................... $ 1.58 $ 1.43 $ 1.98 $ 1.55 $ 1.28 $ 1.30 $ 1.09
Book value (period
end)................... 13.87 12.44 12.49 11.94 11.02 10.43 9.04
Tangible book value
(period end)........... 12.55 11.46 11.52 11.19 10.20 9.66 8.24
Dividends declared...... 0.63 0.54 0.72 0.60 0.46 0.28 --
Performance Ratios:
Return on average
assets................. 1.17% 1.25% 1.26% 1.10% 1.05% 1.17% 1.02%
Return on average
equity................. 16.42 15.86 16.28 13.81 12.73 14.22 14.30
Net interest margin
(4).................... 4.04 4.19 4.18 4.24 4.62 4.75 4.44
Net interest margin
(taxable equivalent)
(4).................... 4.10 4.25 4.25 4.31 4.71 4.83 4.53
Asset Quality Ratios:
Allowance for loan
losses to period end
loans (5).............. 1.31% 1.40% 1.37% 1.52% 1.54% 1.46% 1.56%
Allowance for loan
losses to period end
nonperforming loans
(6).................... 451.57 432.77 394.67 340.61 281.14 377.22 296.61
Net charge-offs
(recoveries) to average
loans (5).............. 0.02 0.04 0.04 0.01 0.13 0.00 0.05
Nonperforming assets to
period end loans and
foreclosed property (5)
(6).................... 0.37 0.40 0.40 0.56 0.73 0.48 0.63
Capital and Liquidity
Ratios:
Average equity to
average assets......... 7.14% 7.91% 7.77% 7.95% 8.27% 8.21% 7.11%
Leverage (4.00% required
minimum) (7)........... 6.90 7.36 7.18 7.41 7.75 8.64 10.33
Risk-based capital
Tier 1 (4.00% required
minimum) (7).......... 8.67 9.69 9.38 10.03 9.89 10.91 10.83
Total (8.00% required
minimum) (7).......... 9.91 10.93 10.62 11.28 11.14 12.16 12.08
Average loans to average
deposits............... 93.68 88.21 88.96 83.02 85.44 84.08 78.81
</TABLE>
7
<PAGE>
--------
(1) On December 31, 1998, Community Bank of Naples, N.A. ("Naples") merged with
and into a subsidiary of Alabama National (the "Naples Merger"). Pursuant
to the terms of the Naples Merger, each share of Naples common stock was
converted into 0.53271 shares of Alabama National's common stock. On
October 2, 1998, Community Financial Corporation ("CFC") merged with and
into Alabama National (the "CFC Merger"). Pursuant to the terms of the CFC
Merger, each share of CFC common stock was converted into 0.351807 shares
of Alabama National's common stock. On May 29, 1998, Public Bank
Corporation ("PBC") merged with and into Alabama National (the "PBC
Merger"). Pursuant to the terms of the PBC Merger, each share of PBC common
stock was converted into 0.2353134 shares of Alabama National's common
stock. On November 30, 1997, First American Bancorporation ("FAB") merged
with and into Alabama National (the "FAB Merger"). Pursuant to the terms of
the FAB Merger, each share of FAB common stock was converted into 0.7199
shares of Alabama National's common stock. On September 30, 1996, FIRSTBANC
Holding Company, Inc. ("FIRSTBANC") was merged with and into Alabama
National, with each share of common stock of FIRSTBANC being converted into
7.12917 shares of Alabama National's common stock. Each of the
aforementioned mergers was accounted for as pooling of interests. On
December 29, 1995, National Commerce Corporation ("NCC") and Commerce
Bankshares, Inc. ("CBS") merged with and into the Company (the "NCC
Merger"). Pursuant to the terms of the NCC Merger, each share of NCC common
stock was converted into 348.14 shares of Alabama National's common stock
and each share of CBS common stock was converted into 7.0435 shares of
Alabama National's common stock for a total of 3,106,981 shares (or 50.1%)
of the then outstanding Company common stock being issued to NCC and CBS
shareholders. The NCC Merger was accounted for as a "reverse acquisition,"
whereby NCC is deemed to have acquired Alabama National for financial
reporting purposes. However, Alabama National remained as the continuing
legal entity and registrant for Securities and Exchange Commission filing
purposes. Consistent with the reverse acquisition accounting treatment, the
historical income statement information included in the Five-Year Summary
of Selected Financial Data of Alabama National is that of NCC for 1995. The
historical Five-Year Summary of Selected Financial Data for all periods
have been restated to include the results of operations of Naples, CFC,
PBC, FAB, and FIRSTBANC from the earliest period presented, except for
dividends per common share.
(2) The weighted average common share and common equivalent shares outstanding
are those of NCC, CBS, Naples, CFC, PBC, FAB, and FIRSTBANC converted into
Alabama National common stock and common stock equivalents at the
applicable exchange ratios.
(3) Net income per common share-diluted is calculated based upon net income
adjusted for cash dividends on preferred stock.
(4) Net interest income divided by average earning assets.
(5) Does not include loans held for sale.
(6) Nonperforming loans and nonperforming assets includes loans past due 90
days or more that are still accruing interest. It is Alabama National's
policy to place all loans on nonaccrual status when over ninety days past
due.
(7) Based upon fully phased-in requirements.
8
<PAGE>
PEOPLES STATE BANK SELECTED CONSOLIDATED FINANCIAL DATA (HISTORICAL)
(Amounts in thousands, except ratios and per share data)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
----------------- --------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- ------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income (5)..... $ 6,934 $ 5,257 $ 7,257 $ 6,009 $ 5,542 $ 4,753 $ 4,368
Interest expense........ 3,231 2,154 3,024 2,509 2,469 1,897 1,538
-------- ------- -------- ------- ------- ------- -------
Net interest income..... 3,703 3,103 4,233 3,500 3,073 2,856 2,830
Provision for loan
losses (benefit of
recoveries)............ 200 57 153 -- -- -- 60
-------- ------- -------- ------- ------- ------- -------
Net interest income
after provision for
loan losses (benefit of
recoveries)............ 3,503 3,046 4,080 3,500 3,073 2,856 2,770
Net securities gains
(losses)............... -- 6 6 13 (2) 1 --
Noninterest income (5).. 787 680 934 787 815 722 757
Noninterest expense..... 2,752 2,593 3,405 3,247 2,722 2,396 2,519
-------- ------- -------- ------- ------- ------- -------
Income before income
taxes.................. 1,538 1,139 1,615 1,053 1,164 1,183 1,008
Provision for income
taxes.................. 575 423 580 350 409 439 363
-------- ------- -------- ------- ------- ------- -------
Net income.............. $ 963 $ 716 $ 1,035 $ 703 $ 755 $ 744 $ 645
======== ======= ======== ======= ======= ======= =======
Balance Sheet Data:
Total assets............ $121,622 $96,398 $103,619 $79,675 $72,848 $64,879 $54,982
Earning assets.......... 113,308 88,544 94,377 70,845 67,811 61,421 52,063
Securities.............. 12,602 8,997 8,800 9,685 10,551 10,498 10,708
Loans held for sale..... -- -- -- -- -- -- --
Loans, net of unearned
income................. 98,557 79,029 83,329 60,073 54,026 46,775 31,890
Allowance for loan
losses................. 1,211 967 1,043 925 936 919 932
Deposits................ 101,955 81,183 87,096 69,842 65,461 57,729 48,022
Short-term debt......... 8,000 6,000 6,000 -- -- -- --
Long-term debt.......... -- -- -- -- -- -- --
Stockholders' equity.... 8,827 7,850 8,029 7,522 7,084 6,547 6,668
Weighted Average Shares
Outstanding--Diluted
(1).................... 631 631 631 631 631 668 691
Per Common Share Data:
Net income--diluted..... $ 1.52 $ 1.13 $ 1.64 $ 1.11 $ 1.20 $ 1.11 $ 0.93
Book value (period
end)................... 13.99 12.44 12.72 11.92 11.23 31.18 28.99
Tangible book value
(period end)........... 13.99 12.44 12.72 11.92 11.23 31.18 28.99
Dividends declared...... 0.45 0.35 0.45 0.40 0.40 1.20 0.91
Performance Ratios:
Return on average
assets................. 1.13% 1.04% 1.11% 0.93% 1.09% 1.27% 1.21%
Return on average
equity................. 15.25 12.43 13.24 9.60 11.04 11.10 10.06
Net interest margin
(2).................... 4.76 5.06 5.04 5.11 4.75 5.21 5.59
Net interest margin
(taxable equivalent)
(2).................... 4.82 5.09 5.08 5.16 4.78 5.25 5.63
Asset Quality Ratios:
Allowance for loan
losses to period end
loans.................. 1.23% 1.22% 1.25% 1.54% 1.73% 1.96% 2.92%
Allowance for loan
losses to period end
nonperforming loans
(3).................... 332.69 208.86 363.41 218.16 120.00 149.19 269.36
Net charge-offs
(recoveries) to average
loans.................. 0.05 0.03 0.05 0.02 (0.03) 0.03 0.20
Nonperforming assets to
period end loans and
foreclosed property
(3).................... 0.50 0.65 0.56 0.71 1.53 1.61 1.45
Capital and Liquidity
Ratios:
Average equity to
average assets......... 7.40% 8.40% 8.35% 9.71% 9.88% 11.47% 12.04%
Leverage (4.00% required
minimum) (4)........... 7.54 8.41 8.06 9.72 9.75 10.65 12.33
Risk-based capital
Tier 1 (4.00% required
minimum) (4).......... 9.98 11.15 10.97 13.34 15.53 15.23 21.70
Total (8.00% required
minimum) (4).......... 11.23 12.41 12.22 14.59 16.79 16.49 22.94
Average loans to average
deposits............... 95.85 89.38 89.79 82.68 82.21 79.16 68.19
</TABLE>
9
<PAGE>
--------
(1) The calculation of the weighted average shares outstanding has been
adjusted to reflect the following changes in equity. Effective July 17,
1997, Peoples State Bank declared a three-for-one stock split, and changed
the par value of its common stock from $5 to $1.67 per common share.
Effective May 19, 1995, Peoples State Bank declared an eight-for-one stock
split, and changed the par value of its common stock from $25 to $5 per
common share.
(2) Net interest income divided by average earning assets.
(3) Nonperforming loans and nonperforming assets include loans past due 90 days
or more and still accruing interest.
(4) Based upon fully phased-in requirements.
(5) Includes loan fees of $128,000, $119,000, $156,000, $123,000, $83,000,
$97,000 and $150,000 for the nine month periods ended September 30, 2000
and 1999 and for the years ended December 31, 1999, 1998, 1997, 1996 and
1995, respectively, that were reclassified from noninterest income to be
consistent with Alabama National's presentation.
10
<PAGE>
Pro Forma Selected Consolidated Financial Data
The following table sets forth financial results of Peoples State Bank and
Alabama National as if the companies had been combined for the periods shown
("pro forma results"). You should not assume that Peoples State Bank and
Alabama National would have achieved the pro forma results if they had actually
been combined during the periods shown. For additional pro forma information,
you should read "Pro Forma Financial Information" beginning on page 45.
11
<PAGE>
PRO FORMA SELECTED CONSOLIDATED FINANCIAL DATA
(Amounts in thousands, except ratios and per share data)
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
---------------------- ----------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Interest income......... $ 124,115 $ 96,068 $ 132,925 $ 121,713 $ 110,050 $ 97,931 $ 66,458
Interest expense........ 64,724 44,595 62,307 59,064 50,848 44,071 31,617
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income..... 59,391 51,473 70,618 62,649 59,202 53,860 34,841
Provision for loan
losses (benefit of
recoveries)............ 1,753 1,395 2,107 1,796 3,421 1,035 1,231
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses (benefit of
recoveries)............ 57,638 50,078 68,511 60,853 55,781 52,825 33,610
Net securities gains
(losses)............... 1 195 196 187 (4) (83) 21
Noninterest income...... 24,186 22,883 31,301 29,963 21,111 19,936 11,506
Noninterest expense..... 54,632 48,428 65,860 64,401 55,510 52,571 34,660
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income
taxes.................. 27,193 24,728 34,148 26,602 21,378 20,107 10,477
Provision for income
taxes.................. 8,443 7,875 10,817 8,504 6,495 5,718 1,314
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before minority
interest in earnings of
consolidated
subsidiary............. 18,750 16,853 23,331 18,098 14,883 14,389 9,163
Minority interest in
earnings of
consolidated
subsidiary............. 20 18 25 23 12 14 650
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............. $ 18,730 $ 16,835 $ 23,306 $ 18,075 $ 14,871 $ 14,375 $ 8,513
========== ========== ========== ========== ========== ========== ==========
Balance Sheet Data:
Total assets............ $2,308,946 $1,959,766 $2,025,503 $1,751,724 $1,568,662 $1,325,514 $1,197,046
Earning assets.......... 2,094,518 1,775,797 1,811,312 1,563,967 1,380,908 1,210,459 1,087,459
Securities.............. 352,243 357,178 353,923 333,898 275,653 235,437 237,795
Loans held for sale..... 8,761 8,162 8,615 19,047 5,291 4,339 2,431
Loans, net of unearned
income................. 1,684,777 1,331,835 1,403,489 1,147,100 1,015,105 910,743 775,420
Allowance for loan
losses................. 22,051 18,520 19,111 17,465 15,780 13,552 12,553
Deposits................ 1,806,765 1,490,148 1,529,251 1,345,017 1,190,940 1,046,605 993,566
Short-term debt......... 80,589 54,389 24,389 21,700 29,087 42,205 21,280
Long-term debt.......... 78,948 71,025 124,005 32,328 16,587 12,939 1,089
Stockholders' equity.... 162,055 145,491 146,284 138,515 123,972 111,751 94,898
Weighted Average Shares
Outstanding-- Diluted
(1).................... 11,956 12,008 12,008 11,908 11,734 11,268 7,234
Per Common Share Data:
Net income--diluted
(2).................... $ 1.57 $ 1.40 $ 1.94 $ 1.52 $ 1.27 $ 1.28 $ 1.18
Book value (period end)
(3).................... 13.75 12.33 12.40 11.83 10.93 10.29 9.33
Tangible book value
(period end) (3)....... 12.51 11.64 11.49 11.13 10.16 9.57 8.56
Dividends declared (4).. 0.63 0.54 0.72 0.60 0.46 0.28 --
Performance Ratios:
Return on average
assets................. 1.17% 1.24% 1.26% 1.09% 1.05% 1.17% 1.03%
Return on average
equity................. 16.36 15.68 16.11 13.57 12.63 14.02 14.00
Net interest margin
(5).................... 4.08 4.23 4.23 4.28 4.63 4.77 4.50
Net interest margin
(taxable equivalent)
(5).................... 4.14 4.30 4.29 4.35 4.71 4.85 4.58
Asset Quality Ratios:
Allowance for loan
losses to period end
loans.................. 1.31% 1.39% 1.36% 1.52% 1.55% 1.49% 1.62%
Allowance for loan
losses to period end
nonperforming loans
(6).................... 442.88 409.83 431.11 330.78 260.40 341.79 294.39
Net charge-offs
(recoveries) to average
loans.................. 0.02 0.04 0.04 0.01 0.12 0.00 0.06
Nonperforming assets to
period end loans and
foreclosed property
(6).................... 0.38 0.42 0.38 0.57 0.77 0.54 0.66
Capital and Liquidity
Ratios:
Average equity to
average assets......... 7.15% 7.93% 7.80% 8.03% 8.35% 8.37% 7.46%
Leverage (4.00% required
minimum) (7)........... 6.93 7.42 7.23 7.51 7.85 8.74 10.47
Risk-based capital
Tier 1 (4.00% required
minimum) (7).......... 8.73 9.77 9.46 10.18 10.11 11.11 11.59
Total (8.00% required
minimum) (7).......... 9.98 11.01 10.70 11.43 11.36 12.36 12.84
Average loans to average
deposits............... 93.80 88.27 89.00 83.00 85.26 83.83 78.30
</TABLE>
12
<PAGE>
--------
(1) The weighted average common shares and common equivalent shares outstanding
are of Alabama National plus Peoples State Bank converted at the exchange
ratio of 1.16396 shares of Alabama National common stock for each share of
Peoples State Bank common stock. For the purpose of these pro forma
selected consolidated financial data, the shares of Alabama National common
stock and common equivalent shares to be issued as a result of the
consummation of the merger is calculated by multiplying the exchange ratio
by the number of Peoples State Bank common shares actually outstanding.
(2) Net income per common share-diluted is calculated based upon net income as
adjusted for minority interests in earnings of consolidated subsidiaries.
(3) Book value and tangible book value are calculated on the total shares of
Alabama National common stock plus shares of Peoples State Bank common
stock converted at the exchange ratio of 1.16396 shares of Alabama National
common stock for each share of Peoples State Bank common stock. For purpose
of this pro forma selected consolidated financial data, it is assumed that
735,000 shares of Alabama National stock will be issued in consummating the
merger. This figure is calculated by multiplying the exchange ratio by the
number of Peoples State Bank shares actually outstanding.
(4) Pro forma dividend amounts are unchanged from Alabama National historical
amounts.
(5) Net interest income divided by average earning assets.
(6) Nonperforming loans and nonperforming assets include loans past due 90 days
or more that are still accruing interest.
(7) Based upon fully phased-in requirements.
13
<PAGE>
Comparative Per Share Data
The following table shows selected comparative per share information for each
of our companies on an historical basis, for Alabama National common stock on a
pro forma basis reflecting consummation of the merger and for the Peoples State
Bank common stock on an equivalent pro forma basis reflecting consummation of
the merger. This table has been prepared giving effect to the merger on a
pooling-of-interests accounting basis. We expect that we will incur
reorganization and restructuring expenses as a result of combining our
companies. The data in the following table does not reflect these anticipated
expenses. We also anticipate that the merger will provide the combined company
with certain financial benefits that include reduced operating expenses and
opportunities to earn more revenue. However, we do not reflect any of these
anticipated cost savings or benefits in the pro forma information. Therefore,
the pro forma information, while helpful in illustrating the financial
characteristics of the combined company under one set of assumptions, does not
attempt to predict or suggest future results. The pro forma information also
does not attempt to show how the combined company would actually have performed
had the companies been combined throughout these periods. We base this
information on the consolidated historical financial statements of Alabama
National that it has presented in its filings with the Securities and Exchange
Commission and the historical financial statements of Peoples State Bank which
are included herein as Appendix C and the Pro Forma Financial Information
beginning on page 45 of this Proxy Statement-Prospectus.
<TABLE>
<CAPTION>
Year Ended
December 31,
Nine Months Ended --------------------
September 30, 2000 1999 1998 1997
------------------ ------ ------ ------
<S> <C> <C> <C> <C>
Alabama National Common Stock
Net income per common share--diluted:
Historical.......................... $ 1.58 $ 1.98 $ 1.55 $ 1.28
Pro forma combined.................. 1.57 1.94 1.52 1.27
Dividends paid per common share:
Historical.......................... 0.63 0.72 0.60 0.46
Book value per common share (end of
period)
Historical (1)...................... 13.87 12.49 11.94 11.02
Pro forma combined.................. 13.75 12.40 11.83 10.93
Peoples State Bank Common Stock
Net income per common share:
Historical.......................... $ 1.52 $ 1.64 $ 1.11 $ 1.20
Pro forma equivalent (2)............ 1.83 2.26 1.77 1.48
Dividends paid per common share:
Historical.......................... 0.45 0.45 0.40 0.40
Pro forma equivalent (2)............ 0.73 0.84 0.70 0.54
Book value per common share (end of
period)
Historical.......................... 13.99 12.72 11.92 11.23
Pro forma equivalent (2)............ 16.00 14.43 13.77 12.72
</TABLE>
--------
(1) Pro forma dividends for Alabama National are the same as historical
dividends. Alabama National does not anticipate a change in its dividend
policy as a result of the Merger.
(2) Peoples State Bank equivalent pro forma amounts are computed by multiplying
the Alabama National pro forma amount by the exchange ratio of 1.16396
shares of Alabama National common stock for each share of Peoples State
Bank common stock. See "The Merger-Terms of the Merger."
14
<PAGE>
RISK FACTORS
In addition to the other information included in this proxy statement-
prospectus, shareholders of Peoples State Bank are urged to consider carefully
the following factors in determining whether to approve the merger agreement:
Restrictions on Dividends
The principal business operations of Alabama National are conducted through its
subsidiary banks. Cash available to pay dividends to shareholders of Alabama
National is derived primarily, if not entirely, from dividends paid by the
banks. After the merger, the ability of the banks to pay dividends to Alabama
National as well as Alabama National's ability to pay dividends to its
stockholders will continue to be subject to and limited by certain legal and
regulatory restrictions. Further, any lenders making loans to Alabama National
may impose financial covenants that may be more restrictive than regulatory
requirements with respect to the payment of dividends by Alabama National.
There can be no assurance of whether or when Alabama National may pay dividends
after the merger.
Fixed Merger Consideration Despite Potential Change in Relative Stock Prices
Upon completion of the merger, each share of Peoples State Bank common stock
will be converted into the right to receive 1.16396 shares of Alabama National
common stock. This exchange ratio will not be adjusted in the event of any
increase or decrease in the price of Alabama National common stock. The price
of Alabama National common stock when the merger takes place may vary from its
prices at the date of this proxy statement-prospectus and at the date of the
special meeting of shareholders of Peoples State Bank. For example, during the
twelve month period ending on , 2000 (the most recent practicable
date prior to the printing of this proxy statement-prospectus), the closing
price of Alabama National common stock varied from a low of $ to a high
of $ and ended that period at $ , (see "Market Prices" on page 4 for
further information). Such variations may be the result of changes in the
business, operations or prospects of Alabama National, Peoples State Bank or
the merged companies, regulatory considerations, general market and economic
conditions and other factors.
Holders of common stock of Peoples State Bank are urged to obtain current
market quotations for Alabama National common stock.
Supervision and Regulation
The banking industry is heavily regulated. Subsequent to the merger, Alabama
National and its subsidiary banks will be subject, in certain respects, to
regulation by the Federal Reserve, the Federal Depository Insurance Corporation
(the "FDIC"), the Office of the Comptroller of the Currency (the "OCC"), the
Alabama State Banking Department, the Florida Department of Banking and Finance
and the Georgia State Banking Department. The success of Alabama National
depends not only on competitive factors but also on state and federal
regulations affecting banks and bank holding companies. The regulations are
primarily intended to protect depositors, not shareholders. The ultimate effect
of recent and proposed changes to the regulation of the financial institution
industry
15
<PAGE>
cannot be predicted. The effects of the implementation of new legislation
applicable to Alabama National and its subsidiary banks including the Gramm-
Leach-Bliley Act of March 2000, cannot be measured at this time. The Gramm-
Leach-Bliley Act permits bank holding companies to affiliate with securities
firms and insurance companies and engage in other activities that are financial
in nature. Regulations now affecting Alabama National and Peoples State Bank
may be modified at any time, and there is no assurance that such modification
will not adversely affect the business of Alabama National and its subsidiary
banks.
Monetary Policies
The results of operations of Alabama National and Peoples State Bank are
affected by credit policies of monetary authorities, particularly the Federal
Reserve. The instruments of monetary policy employed by the Federal Reserve
include open market operations in U.S. government securities, changes in the
discount rate on bank borrowings and changes in reserve requirements against
bank deposits. In view of changing conditions in the national economy and in
the money markets no prediction can be made as to possible future changes in
interest rates, deposit levels, loan demand or the business and earnings of the
Banks and Peoples State Bank.
Allowance for Loan Losses
Management of each of Alabama National's subsidiary banks and of Peoples State
Bank maintains an allowance for loan losses based upon, among other things, (i)
historical experience, (ii) an evaluation of economic conditions and (iii)
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. Management then 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 Alabama National and Peoples State
Bank believes that the allowance for loan losses at each of their companies 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 Alabama National and Peoples State Bank. Material
additions to the allowance for loan losses of Alabama National and Peoples
State Bank would result in a material decrease in Alabama National's net
income, and possibly its capital, and could result in its inability to pay
dividends, among other adverse consequences.
Interests of Certain Persons in the Transaction
Directors and officers of Alabama National and Peoples State Bank (and certain
of their family members and related interests) have personal interests in the
Merger that may present them with conflicts of interest in connection with the
Merger. The Boards of Directors of Alabama National and Peoples State Bank are
aware of this and have considered the personal interests disclosed in this
Proxy Statement-Prospectus in their evaluation of the Merger. Reference should
be made to "The Merger-Background of and Reasons for the Merger" at page 20 and
"The Merger-Interests of Certain Persons in the Merger" at page 41 for a
description of such potential conflicts of interest.
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GENERAL INFORMATION
Meeting, Record Dates and Votes Required
A special meeting of Shareholders of Peoples State Bank will be held at 6:00
p.m. local time, on Thursday, January 25, 2001 (the "Special Meeting"), at the
E. L. Puryear Building, 243 South Lake Avenue, Groveland, Florida 34736. The
purpose of the meeting is to consider and vote upon a proposal to approve the
Merger Agreement dated October 10, 2000 between Peoples State Bank and Alabama
National (the "Merger Agreement"), which provides for, among other things, the
merger of Peoples State Interim Bank ("Interim Bank"), a subsidiary of Alabama
National with and into Peoples State Bank (the "Merger"). Following the merger,
Peoples State Bank will be a wholly-owned subsidiary of Alabama National. Only
holders of record of Peoples State Bank common stock at the close of business
on December 15, 2000 (the "Record Date"), will be entitled to notice of and to
vote at the Special Meeting. As of the Record Date, there were 631,464 shares
of Peoples State Bank common stock issued, outstanding and entitled to be
voted. There were 184 Peoples State Bank shareholders of record on the Record
Date. Each share of Peoples State Bank common stock will be entitled to one
vote at the Special Meeting.
The presence, in person or by proxy, of holders of a majority of the issued and
outstanding shares of Peoples State Bank common stock entitled to vote at the
Special Meeting is necessary to constitute a quorum at such meeting.
Approval of the Merger Agreement on behalf of Peoples State Bank, pursuant to
the Florida Statutes, will require the affirmative vote of the holders of at
least a majority (50.1%) of the outstanding shares of Peoples State Bank common
stock entitled to be voted thereon. In order to vote for the Merger Agreement,
Peoples State Bank shareholders must vote for their approval on the enclosed
proxy or attend the Special Meeting and vote for the Merger Agreement. As of
the Record Date, 136,289 shares of Peoples State Bank common stock, or 21.58%
of the total shares of Peoples State Bank common stock outstanding, were
beneficially owned and entitled to be voted by directors and executive officers
of Peoples State Bank and certain family members and related interests. Certain
officers and directors of Peoples State Bank with the power to vote an
aggregate of 136,289 shares of Peoples State Bank common stock (approximately
21.58% of the outstanding shares entitled to vote), have entered into
agreements with Alabama National whereby they have agreed to vote in favor of
the Merger.
Dissenters' rights may be demanded by Peoples State Bank shareholders who do
not vote in favor of the Merger and who follow the specified procedures of the
Florida Statutes. See "Dissenters' Rights" on page 18.
Proxies and Other Matters
The enclosed Peoples State Bank proxies are solicited on behalf of the Board of
Directors of Peoples State Bank for use in connection with the Special Meeting
and any adjournment or adjournments thereof. Holders of Peoples State Bank
common stock are requested to complete, date and sign the accompanying proxy
and return it promptly to Peoples State Bank in the enclosed envelope. Failure
to return a properly executed proxy or to vote at the Peoples State Bank
Meeting will have the same effect as a vote against approval of the Merger
Agreement. Peoples State Bank shareholders should not forward any stock
certificates with their proxies.
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A Peoples State Bank shareholder who has executed and delivered a proxy may
revoke it at any time before such proxy is voted (i) by giving a later written
proxy, (ii) by giving written revocation to the Secretary of Peoples State
Bank, provided such later proxy or revocation is actually received by Peoples
State Bank before the vote of the shareholders, or (iii) by voting in person at
the Special Meeting. Any shareholder attending the Special Meeting may vote in
person whether or not a proxy has been previously filed. The shares represented
by all properly executed proxies received in time for the Special Meeting,
unless said proxies are revoked, will be voted in accordance with the
instructions therein. If instructions are not given, properly executed proxies
received will be voted FOR approval of the Merger Agreement and FOR the
election of each of the nominated directors.
Peoples State Bank will bear the costs of solicitation of proxies for the
Special Meeting. Such solicitation will be made by mail but also may be made by
telephone, facsimile or in person by the directors, officers and employees of
Peoples State Bank.
If a quorum is not obtained, or if fewer shares of Peoples State Bank common
stock are voted in favor of approval of the Merger than the number required for
approval, it is expected that the Special Meeting will be postponed or
adjourned for the purpose of allowing additional time for obtaining additional
proxies or votes, and, at any subsequent reconvening of such Special Meeting,
all proxies will be voted in the same manner as such proxies would have been
voted at the original convening of the meeting (except for any proxies which
have theretofore effectively been revoked), notwithstanding that they might
have been effectively voted on the same or any other matter at a previous
meeting.
The management of Peoples State Bank is not aware of any business to be acted
upon at the Special Meeting other than the proposal to approve the Merger
Agreement. If other matters are properly brought before the Special Meeting or
any adjournment thereof, the enclosed proxy, if properly signed, dated and
returned, will be voted in accordance with the recommendation of the Peoples
State Bank's management or, if there is no such recommendation, in the
discretion of the individuals named as proxies therein.
Dissenters' Rights
Pursuant to the Florida Statutes, each shareholder of Peoples State Bank
entitled to vote on the Merger who objects to the Merger in strict compliance
with the procedures set forth in Section 658.44 of the Florida Statutes
relating to the rights of dissenting stockholders (the "Dissent Provisions")
shall be entitled to receive in cash the value of his or her shares of Peoples
State Bank Common Stock. A PEOPLES STATE BANK STOCKHOLDER MUST COMPLY STRICTLY
WITH THE PROCEDURES SET FORTH IN THE DISSENT PROVISIONS. FAILURE TO FOLLOW ANY
SUCH PROCEDURES MAY RESULT IN A TERMINATION OR WAIVER OF HIS OR HER DISSENTERS'
RIGHTS.
To perfect dissenters' rights, a holder of Peoples State Bank Common Stock must
vote against approval of the Merger Agreement or provide written notice to
Peoples State Bank at or prior to the Special Meeting indicating that such
stockholder dissents from the plan of Merger and the Merger Agreement. Such
written notification should be delivered either in person or by mail (certified
mail,
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return receipt requested, being the recommended form of transmittal) to Peoples
State Bank of Groveland, 200 East Broad Street, Groveland, Florida 34736,
Attention: Secretary. All such communications should be signed by or on behalf
of the dissenting Peoples State Bank shareholder in the form in which his or
her shares are registered on the books of Peoples State Bank.
If the dissenting stockholder properly perfects his or her dissenters' rights
and the Merger Agreement is adopted and approved by the shareholders of Peoples
State Bank, then such dissenting Peoples State Bank shareholder shall have the
following rights with respect to those shares. Under the Dissent Provisions, on
or promptly after the effective date of a merger between two Florida state
banks, the surviving state bank may fix an amount which it will pay in cash to
dissenting shareholders of the acquired institution. If the surviving state
bank fixes such an amount (which it is not legally required to do), it shall
offer to pay such amount to the holders of all dissenting shares of the
acquired institution. The owners of dissenting shares who have accepted the
offer shall be entitled to receive the amount so offered upon surrender of
their stock certificates at any time within 30 days after the effective date of
the merger. Those owners who have not accepted such an offer for their shares
shall have the value of their dissenting shares determined as of the effective
date of the merger by three appraisers; one to be selected by the owners of at
least two-thirds of such dissenting shares, one to be selected by the board of
directors for the surviving bank, and the third to be selected by the other two
appraisers so chosen. The value agreed upon by any two of the three appraisers
shall control and be final and binding on all parties. If, within 90 days from
the effective date of the merger, for any reason one or more of the appraisers
is not selected as required under the Florida Statutes, or the appraisers fail
to determine the value of the dissenting shares, the Department shall cause an
appraisal of the dissenting shares to be made, which appraisal shall be paid
for by the surviving state bank. Upon conclusion of the appraisal process, the
value determined pursuant to the appraisal shall be paid to all dissenting
shareholders in cash upon surrender of the stock certificates representing such
shares within 30 days after the appraisal has been made.
The foregoing does not purport to be a complete statement of the provisions of
the Florida Statutes relating to statutory dissenters' rights and is qualified
in its entirety by reference to the Dissent Provisions, which are reproduced in
full in Appendix B to this Proxy Statement-Prospectus and which are
incorporated herein by reference.
Recommendation of Board of Directors
The Board of Directors of Peoples State Bank recommends that the shareholders
of Peoples State Bank vote FOR the proposal to approve the Merger Agreement.
See "The Merger-Background of and Reasons for the Merger."
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THE MERGER
The following information concerning the Merger is qualified in its entirety by
reference to the Merger Agreement, which is attached hereto as Appendix A and
incorporated herein by reference. The information contained herein with respect
to the opinion of the financial advisor to Peoples State Bank is qualified in
its entirety by reference to the opinion of such financial advisor, which is
attached hereto as Appendix D and incorporated herein by reference.
Terms of the Merger
At the date and time when the Merger becomes effective (the "Effective Time"),
Interim Bank, a newly formed subsidiary of Alabama National, will merge with
and into Peoples State Bank. In the Merger, each share of Peoples State Bank
common stock outstanding immediately prior to the Effective Time, other than
shares with respect to which dissenters' rights shall have been perfected, will
be converted into and exchanged for the right to receive 1.16396 shares of
Alabama National common stock (the "Exchange Ratio"). If the Merger is
consummated, approximately 6.65% of the outstanding shares of Alabama National
common stock will be held by former Peoples State Bank shareholders.
No fractional shares of Alabama National common stock will be issued in respect
to Peoples State Bank common stock, and cash will be paid by Alabama National
in lieu of issuance of such fractional shares. The amount paid in lieu of
fractional shares will be calculated by multiplying such fractional part of a
share of Alabama National common stock by the average of the high and low sales
price of one share of Alabama National common stock reported on the NASDAQ
National Market System on each of the ten trading days ending on the fifth
business day prior to the Effective Time. No holder of Peoples State Bank
common stock who would otherwise have been entitled to a fractional share of
Alabama National common stock will be entitled to dividends, voting rights or
any right as holder with respect to such fractional shares.
Holders of Peoples State Bank common stock will have the right to dissent from
the Merger Agreement and receive a cash payment equal to the fair value of
their shares, all in conformity with the Florida Statutes. See "General
Information-Dissenters' Rights."
Effective Time
Articles of Merger will be filed with the Secretary of State of the State of
Florida as soon as practicable after all conditions contained in the Merger
Agreement have been satisfied or lawfully waived, including receipt of all
regulatory approvals, and expiration of all statutory waiting periods, and the
approval of the Merger Agreement by the shareholders of Peoples State Bank. The
Effective Time of the Merger will be at the time the Articles of Merger shall
be accepted for filing by the Secretary of State of Florida (or such later time
as the parties may agree).
Background of and Reasons for the Merger
Alabama National management came into contact with Peoples State Bank
management through Alabama National's investment department. John H. Holcomb,
III, Alabama National's Chairman and Chief Executive Officer, often travels
with officers of Alabama National's investment department
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as they visit banks in the Southeast. Mr. Holcomb met informally with Wayne
Turner, Peoples State Bank's President and Chief Executive Officer, and several
other members of the Groveland board of directors on May 11, 1999. At that
meeting, Mr. Holcomb described Alabama National, its history, strategy, and
operating structure. He also expressed an interest in Peoples State Bank should
it decide to consider a merger partner. Peoples State Bank had received similar
informal expressions of interest from other potential merger partners in the
past.
In the fall of 1999, Peoples State Bank's board decided to more formally
explore potential merger options and hired The Carson Medlin Company,
investment bankers ("Carson Medlin"), to aid them in considering potential
offers and partners. Carson Medlin prepared an informational package requesting
acquisition proposals and submitted the package to a group of 16 potentially
interested parties. From this group, Carson Medlin received four non-binding
offers, including one from Alabama National for 675,000 shares of its common
stock.
After Carson Medlin had received and reviewed the non-binding offers, it
presented them to the Peoples State Bank board for its consideration and
analysis. The Peoples State Bank board reviewed and discussed the potential
partners, their offers, the form of currency offered and their operating
strategies. Although the Peoples State Bank board was most attracted to Alabama
National's strategy and operating structure, its offer was not at a level the
Peoples State Bank board deemed acceptable. Of the offers received, an offer
made by a competing suitor was closest to the pricing expectations of Peoples
State Bank, so on March 8, 2000, the Peoples State Bank board asked Carson
Medlin to advise that party that it would only be interested in further
discussions at a higher number of shares than that indicated in its initial
pricing indication. The suitor declined to raise its offer to the level
specified by the Peoples State Bank board. After further deliberations, the
Peoples State Bank board decided to postpone any further discussions with this
suitor.
During the summer of 2000, Alabama National continued to express an interest in
further discussions with Peoples State Bank. On August 9, 2000, John Holcomb
met with the Peoples State Bank board and presented an offer of 700,000 shares
of Alabama National stock for the acquisition of Peoples State Bank. Wayne
Turner subsequently responded in a telephone call that the board was interested
in a transaction at a pricing level of 735,000 shares. After further analysis
and consideration, Holcomb responded with an increase in the Alabama National
offer to 735,000 shares. The two parties then reached a tentative agreement at
this pricing level.
After the parties had reached this tentative agreement as to the exchange
ratio, Peoples State Bank's Chairman, Donald Bailey, and President, Wayne
Turner, visited Alabama National on September 5, 2000 to discuss the structure
and other terms of the proposed transaction. Alabama National management then
conducted a due diligence examination of Peoples State Bank from September 11
through September 13, 2000. Mr. Turner, along with Peoples State Bank director
Jeffrey A. Rice visited Alabama National's offices on September 25, 2000 to
conduct due diligence on Alabama National. After compiling and analyzing the
information obtained during the due diligence period, both parties determined
that they wished to pursue the transaction further.
The parties then began the negotiation of a definitive agreement for the merger
of a subsidiary of Alabama National and Peoples State Bank. The Peoples State
Bank board met on October 5, 2000 to discuss and vote upon the merger. At that
meeting, the Peoples State Bank board discussed the
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terms of the proposed transaction with legal counsel Shutts & Bowen, LLP. In
addition, Carson Medlin, in its role as financial advisor to Peoples State
Bank, presented the Peoples State Bank board with an opinion that the
consideration to be received by Peoples State Bank shareholders is fair from a
financial point of view. After deliberation, the Peoples State Bank board voted
unanimously to approve the transaction. The Peoples State Bank board further
authorized its officers to execute the Merger Agreement and to take all other
action necessary to consummate the transaction. The Merger Agreement was
executed by both parties on October 10, 2000.
At the regularly scheduled August 17, 2000 meeting of the Alabama National
board of directors, Mr. Holcomb presented information on Peoples State Bank and
discussed management's interest in further pursuing a merger. Subsequently, in
September, 2000, the board was sent a package providing additional information
on Peoples State Bank and the proposed merger at a price of 735,000 shares. The
Alabama National board, by unanimous written consent as of September 20, 2000,
formally approved the Merger and authorized Alabama National's officers to
execute the Merger Agreement and to take all other action necessary to
consummate the transaction.
Alabama National's Reasons for the Merger. In approving the Merger Agreement
and the Merger, the Alabama National Board considered a number of factors
concerning the benefits of the Merger. Without assigning any relative or
specific weights to the factors, the Alabama National Board of Directors
considered the following material factors:
(a) the information presented to the directors by the management of Alabama
National concerning the business, operations, earnings, asset quality and
financial condition of Peoples State Bank, including the composition of the
earning assets portfolio of Peoples State Bank;
(b) the financial terms of the Merger, including the relationship of the
value of the consideration issuable in the Merger to the market value,
tangible book value and earnings per share of Peoples State Bank;
(c) the nonfinancial terms of the Merger, including the treatment of the
Merger as a tax-free exchange of Peoples State Bank common stock for
Alabama National common stock for federal income tax purposes;
(d) the likelihood of the Merger being approved by applicable regulatory
authorities without undue conditions or delay;
(e) the opportunity for reducing the noninterest expense of the operations
of Peoples State Bank and the ability of the operations of Peoples State
Bank after the Effective Time to contribute to the earnings of Alabama
National;
(f) the attractiveness of the Peoples State Bank franchise, the market
position of Peoples State Bank in the markets in which it operates, and the
compatibility of the franchise of Peoples State Bank in Lake County,
Florida with the operations of Alabama National in its market areas; and
(g) the compatibility of the community banking orientation of the
operations of Peoples State Bank to that of Alabama National and the
subsidiary banks of Alabama National (the "Banks").
Peoples State Bank's Reasons for the Merger. In approving the Merger Agreement
and the Merger, the Board of Peoples State Bank considered a number of factors
and criteria regarding the potential
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benefits of the Merger. Without assigning relative or specific weights to those
factors, the Peoples State Bank Board considered the following material
factors:
(a) the financial terms of the Merger. In this regard, the Peoples State
Bank board of directors considered, among other things, the opinion of The
Carson Medlin Company as to the fairness of the consideration to be
received from a financial point of view, to the shareholders of Peoples
State Bank and the fact that Alabama National common stock has a more
liquid trading market than Peoples State Bank common stock;
(b) a comparison of Peoples State Bank as an independent entity with the
Merger, particularly as to shareholder value. The Peoples State Bank board
of directors considered the benefits that could reasonably be expected to
accrue to Peoples State Bank shareholders from the Merger;
(c) certain financial and other information concerning Alabama National.
Such information included, among other things, information with respect to
the business, operations, condition and future prospects of Alabama
National;
(d) the non-financial terms and structure of the Merger, in particular, the
fact that the Merger qualifies as a tax-free reorganization for Peoples
State Bank shareholders;
(e) the likelihood of the Merger being approved by the appropriate
regulatory authorities without undue conditions or delay;
(f) the limited adverse impact, generally, of the Merger on the various
constituencies served by Peoples State Bank, including its employees,
customers and the community; and
(g) the compatibility of management and the business philosophies of
Peoples State Bank and Alabama National.
The Peoples State Bank board of directors recommends that Peoples State Bank
shareholders vote FOR the approval of the Merger Agreement.
Opinion of Carson Medlin
Peoples State Bank engaged Carson Medlin pursuant to an engagement letter dated
September 20, 1999 to provide financial advisory services. Peoples State Bank
selected Carson Medlin as its financial adviser on the basis of Carson Medlin's
historical relationship with Peoples State Bank and Carson Medlin's experience
and expertise in representing community banks in similar transactions. Carson
Medlin is an investment banking firm which specializes in the securities of
financial institutions located in the southeastern United States. As part of
its investment banking activities, Carson Medlin is regularly engaged in the
valuation of financial institutions and transactions relating to their
securities, including mergers and acquisitions.
On October 5th, 2000, Carson Medlin delivered to Peoples State Bank's board, in
conjunction with their meeting held to consider the merger, its written opinion
to the effect that the consideration to be received is fair, from a financial
point of view, to the shareholders of Peoples State Bank. Carson Medlin
subsequently confirmed such opinion in writing as of the date of this proxy
statement prospectus.
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You should consider the following when reading the discussion of the Carson
Medlin opinion in this document:
. The summary of the opinion of Carson Medlin set forth in this proxy
statement/prospectus is qualified in its entirety by reference to the
full text of the opinion that is attached as Appendix D to this
document. You should read the opinion in its entirety for a full
discussion to the procedures followed, assumptions made, matters
considered and qualification and limitation on the review undertaken by
Carson Medlin in connection with its opinion.
. Carson Medlin's opinion is addressed to Peoples State Bank's board of
directors and is substantially identical to the written opinion
delivered to Peoples State Bank's board dated October 5th, 2000.
. Carson Medlin expressed no opinion as to the price at which Alabama
National common stock would actually be trading at any time.
. Carson Medlin's opinion does not address the relative merits of the
merger and the other business strategies considered by Peoples State
Bank's board, nor does it address Peoples State Bank's board decision to
proceed with the merger.
. Carson Medlin's opinion to Peoples State Bank's board of directors
rendered in connection with the merger does not constitute a
recommendation to any Peoples State Bank shareholder as to how he or she
should vote at the special meeting.
No limitations were imposed by Peoples State Bank's board of directors or its
management upon Carson Medlin with respect to the investigations made or the
procedures followed by Carson Medlin in rendering its opinion.
The preparation of a financial fairness opinion involves various determinations
as to the most appropriate methods of financial analysis and the application of
those methods to the particular circumstances. It is therefore not readily
susceptible to partial analysis or summary description. In connection with
rendering its opinions, Carson Medlin performed a variety of financial
analyses. Carson Medlin believes that its analyses must be considered together
as a whole and that selecting portions of its analyses and the facts considered
in its analyses, without considering all other factors and analyses, could
create an incomplete or inaccurate view of the analyses and the process
underlying the rendering of Carson Medlin's opinions. In performing its
analyses, Carson Medlin made numerous assumptions with respect to industry
performance, business and economic conditions, and other matters, many of which
are beyond the control of Alabama National and Peoples State Bank, and may not
be realized. Any estimates contained in Carson Medlin's analyses are not
necessarily predictive of future results or values, which may be significantly
more or less favorable than the estimates. Estimates of values of companies do
not purport to be appraisals or necessarily reflect the prices at which the
companies or their securities may actually be sold. Except as described below,
none of the analyses performed by Carson Medlin was assigned a greater
significance by Carson Medlin than any other. The relative importance or weight
given to these analyses by Carson Medlin is not effected by the order of the
analyses (and the corresponding results). The summaries of financial analyses
include information presented in tabular format. The tables should be read
together with the text of those summaries.
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Carson Medlin has relied, without independent verification, upon the accuracy
and completeness of the information it reviewed for the purpose of rendering
its opinion. Carson Medlin did not undertake any independent evaluation or
appraisal of the assets and liabilities of Alabama National or Peoples State
Bank, nor was it furnished with any appraisals.
Carson Medlin is not an expert in the evaluation of loan portfolios, including
under-performing or non-performing assets, charge-offs or the allowance for
loan losses; it has not reviewed any individual credit files of Alabama
National or Peoples State Bank; and it has assumed that Alabama National's and
Peoples State Bank's allowances are in the aggregate adequate to cover losses.
Carson Medlin's opinion is necessarily based on economic, market and other
conditions existing on the date of its opinion, and on information as of
various earlier dates made available to it which is not necessarily indicative
of current market conditions.
In rendering its opinions, Carson Medlin made the following assumptions:
. that the merger will be accounted for as a pooling of interests in
accordance with generally accepted accounting principles;
. that all material governmental, regulatory and other consents and
approvals necessary for the consummation of the merger would be obtained
without any adverse effect on Peoples State Bank, Alabama National or on
the anticipated benefits of the merger;
. that Peoples State Bank had provided it with all of the information
prepared by Peoples State Bank or its other representatives that might
be material to Carson Medlin in its review; and
. that the financial projections it reviewed were reasonably prepared on a
basis reflecting the best currently available estimates and judgement of
the management of Peoples State Bank as to the future operating and
financial performance of Peoples State Bank.
In connection with its opinion dated October 5, 2000, Carson Medlin reviewed:
. a draft of the Merger Agreement;
. the annual reports to shareholders of Alabama National, including the
audited financial statements for the five years ended December 31, 1999;
. audited financial statements of Peoples State Bank for the five years
ended December 31, 1999;
. unaudited interim financial statements of Alabama National for the six
months ended June 30, 2000;
. unaudited interim financial statements of Peoples State Bank for the six
months ended June 30, 2000; and
. financial and operating information with respect to the business,
operations and prospects of Alabama National and Peoples State Bank.
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In addition, Carson Medlin:
. held discussions with members of the senior management of Alabama
National and Peoples State Bank regarding the historical and current
business operations, financial condition and future prospects of their
respective companies;
. reviewed the historical market prices and trading activity for the
common stock of Alabama National and the limited information available
regarding the infrequent trades of Peoples State Bank common stock and
compared the market activity of Alabama National's common stock with
that of certain publicly traded companies which it deemed to be
relevant;
. compared the results of operations of Alabama National and Peoples State
Bank with those of certain financial institutions which it deemed to be
relevant;
. compared the financial terms of the merger with the financial terms, to
the extent publicly available, of certain other recent business
combinations of financial institutions;
. analyzed the pro forma financial impact of the merger on Alabama
National; and
. conducted such other studies, analyses, inquiries and examinations as
Carson Medlin deemed appropriate.
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VALUATION METHODOLOGIES
The following is a summary of all material analyses performed by Carson Medlin
in connection with its oral opinion provided to Peoples State Bank's board of
directors as of September 25, 2000, which was subsequently confirmed in writing
as of October 5, 2000. The summary does not purport to be a complete
description of the analyses performed by Carson Medlin.
Summary of Merger and Analysis. Carson Medlin reviewed the terms of the
proposed merger, including the form of consideration, the exchange ratio, the
closing price of Alabama National's common stock as of September 22, 2000, and
the resulting price per share of Peoples State Bank common stock pursuant to
the proposed merger. Under the terms of the merger agreement, each outstanding
share of Peoples State Bank common stock will be converted into 1.16396 shares
of Alabama National's common stock resulting in a value of $25.73 per share of
Peoples State Bank common stock based on the closing price of Alabama
National's common stock on September 22, 2000 of $22.11 per share.
Carson Medlin calculated that the indicated value represented:
. 192% of stated book value at June 30, 2000;
. 13.4 times annual earnings for the trailing twelve months ended June 30,
2000;
. a 9.1% core deposit premium at June 30, 2000, which is the aggregate
transaction value minus stated book value divided by core deposits; and
. 14% of total assets of Peoples State Bank at June 30, 2000.
Industry Comparative Analysis. In connection with rendering its opinion, Carson
Medlin compared selected operating results of Peoples State Bank to those of 56
publicly-traded community commercial banks in Alabama, Florida, Georgia,
Mississippi, North Carolina, South Carolina, Virginia and West Virginia as
contained in the Southeastern Independent Bank Review(TM) (SIBR), a proprietary
research publication prepared quarterly by Carson Medlin since 1991. Carson
Medlin considers this group of financial institutions more comparable to
Peoples State Bank than larger, more widely traded regional financial
institutions. Carson Medlin compared, among other factors, profitability,
capitalization, and asset quality of Peoples State Bank to these financial
institutions. Carson Medlin noted the following returns based on results for
the three months ended March 31, 2000:
<TABLE>
<CAPTION>
Peoples State Average for
Bank SIBR Banks
------------- -----------
<S> <C> <C>
Return on Average Assets..................................... 1.12% 1.17%
Return on Average Equity..................................... 14.7% 12.4%
Shareholders Equity to Total Assets at March 31, 2000........ 7.37% 9.3%
Non-Performing Assets (defined as 90 days past due,
non-accrual loans and other real estate) to Total Loans net
of unearned income and other real estate, at March 31, 2000.. 0.78% 0.82%
</TABLE>
This comparison indicated that Peoples State Banks had average profitability
and asset quality compared to SIBR banks, and a lower level of equity.
27
<PAGE>
Carson Medlin also compared selected operating results of Alabama National to
those of the SIBR banks. Carson Medlin considers this group of financial
institutions comparable to Alabama National as to financial characteristics,
operating philosophy, stock price performance and trading volume. Carson Medlin
compared selected balance sheet data, asset quality, capitalization,
profitability ratios and market statistics using financial data at or for the
three month period ended March 31, 2000 and market data as of June 30, 2000.
The results of this comparison are set forth below:
<TABLE>
<CAPTION>
Average for
Alabama National SIBR Banks
---------------- -----------
<S> <C> <C>
Return on Average Assets.......................... 1.17% 1.17%
Return on Average Equity.......................... 16.2% 12.4%
Efficiency Ratio (non-interest expense divided by
the sum of non-interest income and taxable
equivalent net interest income before provision
for loan losses)................................. 65.5% 61.3%
Shareholders Equity to Total Assets at March 31,
2000............................................. 7.1% 9.3%
Non-Performing Assets (defined as 90 days past
due, non-accrual loans and other real estate) to
Total Loans net of unearned income and other real
estate, at March 31, 2000........................ 0.38% 0.82%
</TABLE>
This comparison indicated that Alabama National's financial performance was at
or above the average profitability ratios in comparison to the SIBR banks, and
above average with regards to asset quality. Alabama National's capitalization
levels were lower than the average. The comparison also showed that:
<TABLE>
<CAPTION>
Average for
Alabama National SIBR Banks
---------------- -----------
<S> <C> <C>
Market Value to Trailing 12-months Earnings....... 9.7 12.5
Market Value to Book Value........................ 155% 142%
</TABLE>
This comparison indicated that Alabama National's relative market valuation was
below the average from a price to earnings perspective, and above the average
from a price to book perspective, in comparison to the SIBR banks.
28
<PAGE>
Comparable Transaction Analysis. Carson Medlin reviewed certain information
relating to the following 24 selected merger transactions involving commercial
banks with less than $150 million in assets, in central Florida, and announced
since February 1996:
<TABLE>
<CAPTION>
Target Buyer
------ -----
<S> <C>
Lake State Bank South Trust
Tomoka Bancorp Colonial BancGroup
Seminole National Bank Popular Inc.
South Hillsborough Community Provident Bancorp
Equity Bank South Trust
First Mercantile National Bank Regions Financial Corp.
First Commerce Banks of Florida Colonial BancGroup
Indian Rocks State Bank FNB Corp
Citizens National B&T Gulf West Banks
Bank of Winter Park Huntington Bancshares
First Central Bank Colonial BancGroup
First NB of Tampa Florida Banks
Seminole Bank FNB Corp
Public Bank Corp Alabama National
Marine Bank South Trust Corp.
CNB Holding Co Colonial BancGroup
Citizens Holding Corp FNB Corp
Prime Bank of Central Florida Colonial BancGroup
Bank of Newberry Republic Security
Northside Bank of Tampa Republic Security
City Financial Corp. DASCO Merger Corp.
Columbia Bank Charter Banking Corp
Tarpon Financial Corp. Community National Bancorp
East Coast Bank Corp. Regions Financial Corp.
</TABLE>
Carson Medlin considered, among other factors, the earnings, capital level,
asset size and quality of assets of the acquired financial institutions as well
as the quality of their markets. Carson Medlin compared the transaction prices
at the time of announcement to the stated book value, earnings, core deposits
and total assets of the acquired institutions. In addition, Carson Medlin
compared these transaction pricing ratios by year from 1996 to 2000. Carson
Medlin noted that relative pricing levels, and the number of transactions, have
declined steadily since 1998. This is consistent with Carson Medlin's
observations of pricing trends throughout the country and with the overall
trend in bank stock prices. Accordingly, Carson Medlin determined that
transactions announced in 1999 and 2000 are more comparable than those
announced in earlier years.
COMPARABLE TRANSACTION ANALYSIS
<TABLE>
<CAPTION>
Purchase Price as a Percentage of Stated Book
Value Low High Average
--------------------------------------------- ------ ------ -------
<S> <C> <C> <C>
Comparable Transactions........................... 146% 245% 193%
Range of Values (based on Peoples State Bank
stated book value of $13.41 per share at June 30,
2000)............................................ $19.58 $32.85 $25.88
</TABLE>
29
<PAGE>
The implied consideration of the merger, which is obtained by multiplying
Alabama National's closing stock price on September 22, 2000 of $22.11 per
share by the exchange ratio, is $25.73 per share, or 192% of stated book value,
which is approximately the average for the comparable transactions.
The comparable transactions did not have any relevant data for price to
earnings comparative purposes. The implied consideration of the merger is
$25.73, or 13.4X trailing 12-months earnings.
<TABLE>
<CAPTION>
Core Deposit Premium Low High Average
-------------------- ---- ---- -------
<S> <C> <C> <C>
Comparable Transactions................................ 11.7% 20.0% 17.2%
The premium on Peoples State Bank's core deposits implied by the merger is 9.1%
which is below the low for the comparable transactions.
<CAPTION>
Purchase Price as a Percentage of Total Assets Low High Average
---------------------------------------------- ---- ---- -------
<S> <C> <C> <C>
Comparable Transactions................................ 10.7% 22.5% 17.0%
</TABLE>
The purchase price as a percentage of total assets implied by the merger is
approximately 14%, which is below the average for the comparable transactions.
No company or transaction used in Carson Medlin's analyses is identical to
Alabama National, Peoples State Bank or the merger. Accordingly, the results of
these analyses necessarily involves complex considerations and judgments
concerning differences in financial and operating characteristics of Alabama
National and Peoples State Bank and other factors that could affect the value
of the companies to which they have been compared.
Present Value Analysis. Carson Medlin calculated the present value on a price
to earnings basis of Peoples State Bank, as well as a price to book basis,
assuming that Peoples State Bank remained an independent bank. For purposes of
this analysis, Carson Medlin utilized certain projections of Peoples State
Bank's future growth of assets, earnings and dividends and assumed that Peoples
State Bank's common stock would be sold at the end of 5 years at 17.4 times
projected 2004 earnings. As for the price to book value method, it was assumed
that Peoples State Bank's common stock would be sold at the end of 5 years at
187% of book value. These multiples were based on the average ratios of whole
bank transactions, for banks with less than $250 million in assets, over the
last eleven years. These values were then discounted to present value utilizing
discount rates of 15% through 17%. These rates were selected because, in Carson
Medlin's experience, they represent the rates that investors in securities such
as Peoples State Bank's common stock would demand in light of the potential
appreciation and risks. On the basis of these assumptions, Carson Medlin
calculated that the present value of Peoples State Bank as an independent bank
ranged from $17.33 per share to $18.86 per share, on a price to earnings basis,
and, $13.67 per share to $14.87 per share, on a price to book basis. The
consideration implied by the terms of the merger agreement was $25.73 per
share, which falls above the range under present value analysis on both a price
to earnings basis and price to book basis.
30
<PAGE>
Carson Medlin noted that it included present value analysis because it is a
widely used valuation methodology, but also noted that the results of this
methodology are highly dependent upon the numerous assumptions that must be
made, including assets and earnings growth rates, dividend payout rates,
terminal values and discount rates.
Historical Stock Performance Analysis. Carson Medlin reviewed and analyzed the
historical trading prices and volumes of Alabama National common stock on a
monthly basis from January 1995 to September 2000. Carson Medlin also compared
price performance of the Alabama National common stock to the performance of
the banks in the Southeastern Independent Bank Review, over the past 18
quarters ended June 30, 2000 on a price to book value basis and on a price to
earnings basis. Carson Medlin considers Alabama National common stock to be
liquid and marketable in comparison with these SIBR banks and bank holding
companies.
<TABLE>
<CAPTION>
Average for
Alabama National SIBR Banks
---------------- -----------
<S> <C> <C>
Stock Price to Book Value.................... 155% 142%
Stock Price to Trailing 12-months Earnings... 9.7 12.5
</TABLE>
Carson Medlin also examined the limited information regarding the infrequent
trading prices and volumes of Peoples State Bank common stock. Peoples State
Bank common stock has not traded in any public market or securities exchange,
and the number of shares traded was insufficient to reflect a meaningful market
value. Therefore, Carson Medlin did not place any weight on the market value of
Peoples State Bank's common stock in its analysis.
Contribution Analysis. Carson Medlin reviewed the relative contributions in
terms of various balance sheet and income statement components to be made by
Peoples State Bank and Alabama National to the combined institution based on
(1) balance sheet data at June 30, 2000, and (2) year to date income statement
as of June 30, 2000. The income statement and balance sheet components analyzed
included total assets, loans, net of unearned income, total deposits,
shareholders' equity, net interest income, core earnings and net income. The
following tables compare the pro forma ownership of Peoples State Bank and
Alabama National shareholders in the combined company based upon the exchange
ratio with each company's respective contribution to each element of this
analysis:
<TABLE>
<CAPTION>
Pro Forma Ownership of Pro Forma Ownership of
Peoples State Bank Alabama National
Shareholders in the Shareholders in the
Combined Company Combined Company
---------------------- ----------------------
<S> <C> <C>
Implied Pro Forma Ownership...... 6.2% 93.8%
</TABLE>
<TABLE>
<CAPTION>
Peoples Alabama
State Bank National
Contribution Contribution
to Combined to Combined
Company Company
------------ ------------
<S> <C> <C>
Income Statement
Net Interest Income................................. 6.2% 93.8%
Core Earnings....................................... 5.8% 94.2%
Net Income.......................................... 5.0% 95.0%
Balance Sheet as of June 30, 2000
Total Assets........................................ 5.3% 94.7%
Total Deposits...................................... 5.9% 94.1%
Shareholders Equity................................. 5.6% 94.4%
</TABLE>
31
<PAGE>
Other Analysis. Carson Medlin also reviewed selected investment research
reports on, and earnings estimates for, Alabama National as well as other
information which Carson Medlin deemed relevant.
The opinion expressed by Carson Medlin was based upon market, economic and
other relevant considerations as they existed and could be evaluated as of the
date of the opinion. Events occurring after the date of issuance of the
opinion, including but not limited to, changes affecting the securities
markets, the results of operations or material changes in the assets or
liabilities of Peoples State Bank or Alabama National could materially affect
the assumptions used in preparing the opinion.
In connection with its opinion, dated as of the date of this document, Carson
Medlin confirmed the appropriateness of its reliance on the analyses used to
render its October 5, 2000 written opinion by performing procedures to update
certain of such analyses and reviewing the assumptions on which its analyses
were based and the facts considered in connection therewith.
As part of its investment banking business, Carson Medlin is continually
engaged in the valuation of banking businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. As
specialists in the securities of banking companies, Carson Medlin has
experience in, and knowledge of, the valuation of banking enterprises.
Peoples State Bank has agreed to pay Carson Medlin at the closing of the
transaction, a cash fee equal to one percent (1%) of the aggregate
consideration to be received by Peoples State Bank's shareholders. Pursuant to
the Carson Medlin engagement agreement, Peoples State Bank also agreed to
indemnify Carson Medlin against certain liabilities, including liabilities
under the federal securities laws.
Effect on Certain Employee Benefit Plans of Peoples State Bank
401(k) Plan. Peoples State Bank maintains a 401(k) defined contribution plan
for its employees (the "401(k) Plan"). Pursuant to the Merger Agreement, the
401(k) Plan will be terminated prior to the Effective Time, and Alabama
National will offer each employee of Peoples State Bank the opportunity to
enroll in Alabama National 401(k) defined contribution plan (the "ANB Plan").
For purposes of vesting requirements under the ANB Plan, Peoples State Bank
employees will be given credit for their years of service with Peoples State
Bank.
Effect on Certain Employee Benefit Plans of Peoples State Bank
Deferred Compensation and Deferred Bonus Plans. Peoples State Bank offers its
directors, executive officers and certain other employees the opportunity to
defer a portion of his or her fees and/or compensation. The details are set
forth in separate deferred compensation agreements between the bank and each
participant, as described in more detail below. Pursuant to the Merger
Agreement, each of these agreements will either be amended or terminated prior
to the Effective Time, and certain of the participants will become eligible to
participate in comparable deferred compensation programs offered by Alabama
National.
32
<PAGE>
1. Director Deferred Fee and Bonus Agreements. Each member of Peoples State
Bank's Board of Directors has entered into Director Deferred Fee and Bonus
Agreements ("Director Agreements") with Peoples State Bank. The participating
directors are permitted to defer fees and bonuses to accumulate income for
retirement. Pursuant to the Merger Agreement, each Director Agreement will be
amended and restated prior to the Effective Time to include the following
features: (i) no payment will be due the participating director upon a change
in control; (ii) no additional contributions will be permitted after the
Effective Time; (iii) cash balances accrued in the director's deferral account
prior to the Effective Time will be carried forward through the Effective Time,
which balances will accrue interest at a rate equal to Peoples State Bank's
annual return on equity ("ROE") through December 31, 2000, and thereafter at an
interest rate equal to 30-day LIBOR; and (iv) the other provisions in the
Director Agreement, such as provisions related to disability, termination for
cause, etc., will be continued.
After the Effective Time, each participant in a Director Agreement will be
permitted to participate in an Alabama National deferred compensation plan
containing the following features: (i) up to 100% of the director's fees will
be eligible for deferral; (ii) Alabama National will not match contributions to
the plan; and (iii) deferred amounts may be (A) accumulated as a cash balance
receiving a 30-day LIBOR interest rate or (B) exchanged for Alabama National
stock.
2. Executive Deferred Compensation Agreements. Mr. Wayne M. Turner ("Mr.
Turner") and Mr. Joe E. Fairchild ("Mr. Fairchild") have entered into Executive
Deferred Compensation Agreements ("Compensation Agreements") with Peoples State
Bank whereby Mr. Turner and Mr. Fairchild are permitted to defer base
compensation to accumulate income for retirement. Pursuant to the Merger
Agreement, each Compensation Agreement will be amended and restated prior to
the Effective Time to include the following features: (i) no payment will be
due the participating executive upon a change in control; (ii) no additional
contributions will be permitted after the Effective Time; (iii) cash balances
accrued in the executive's deferral account will be carried forward after the
Effective Time, which balances will accrue interest at the ROE through December
31, 2000, and thereafter at an interest rate equal to 30-day LIBOR; and (iv)
the other provisions in the Compensation Agreement, such as provisions related
to disability, termination for cause, etc., will be continued.
After the Effective Time, each participant in a Compensation Agreement will be
permitted to participate in an Alabama National deferred compensation plan
containing the following features: (i) up to $2,731.82 of regular compensation
will be eligible for deferral in the 2001 plan year, which amount will be
increased by 3% each year thereafter; (ii) Alabama National will not match
contributions to the plan; and (iii) deferred amounts may be (A) accumulated as
a cash balance receiving a 30-day LIBOR interest rate or (B) exchanged for
Alabama National stock.
3. Executive Deferred Bonus Agreements. Eight directors and officers of Peoples
State Bank, including Mr. Turner and Mr. Fairchild, are parties to Executive
Deferred Bonus Agreements ("Bonus Agreements") whereby the participants are
permitted to defer annual bonuses to accumulate income for retirement. Pursuant
to the Merger Agreement, the Bonus Agreements for Mr. Turner and Mr. Fairchild
("Turner and Fairchild Bonus Agreements") will be amended and restated prior to
the Effective Time to include the following features: (i) no payment will be
due the participant upon a
33
<PAGE>
change in control; (ii) no additional contributions will be permitted after the
Effective Time; (iii) cash balances accrued in the deferral account will be
carried forward through the Effective Time, which balances will accrue interest
at the ROE through December 31, 2000, and thereafter at an interest rate equal
to 30-day LIBOR; and (iv) the other provisions in the Bonus Agreements, such as
provisions related to disability, termination for cause, etc., will be
continued.
After the Effective Time, Mr. Turner and Mr. Fairchild will be permitted to
participate in an Alabama National deferred compensation plan ("New Bonus
Plan") containing the following features: (i) up to 25% of bonus compensation
will be eligible for deferral; (ii) Alabama National will not match
contributions to the plan; and (iii) deferred amounts may be (A) accumulated as
a cash balance receiving a 30-day LIBOR interest rate or (B) exchanged for
Alabama National stock.
The remaining six participants in the Bonus Agreements may elect one of the two
following options: (1) participation in an amended and restated agreement on
the terms set forth in the Fairchild and Turner Bonus Agreements, together with
participation in an Alabama National plan after the Effective Time on the terms
set forth in the New Bonus Plan; or (2) termination of his or her respective
Bonus Agreement as of the Effective Time for a lump-sum payment in an amount
equal to the product of (i) the participant's vested accrual account balance as
of the Effective Time and (ii) the lesser of (A) the multiple of Peoples State
Bank's book value paid by Alabama National in connection with the Merger
Agreement, or (B) two (2). Participants electing option (ii) will not be
eligible to participate in a comparable deferred compensation arrangement after
the Effective Time.
4. Employee Deferred Bonus Agreement. Certain employees of Peoples State Bank
have entered into Employee Deferred Bonus Agreements ("Employee Agreements")
with Peoples State Bank whereby the participating employees are permitted to
defer bonuses to accumulate income for retirement. Pursuant to the Merger
Agreement, each employee participant shall terminate his or her respective
Employee Agreement prior to the Effective Time for a lump-sum payment in an
amount equal to the product of (i) the participant's vested accrual account
balance as of the Effective Time and (ii) the lesser of (A) the multiple of
Peoples State Bank's book value paid by Alabama National in connection with the
Merger Agreement, or (B) two (2). Participants in the Employee Agreements will
not be eligible to participate in a deferred compensation arrangement after the
Effective Time.
Surrender of Certificates
Promptly after the Effective Time, SunTrust Bank, Atlanta, acting in the
capacity of exchange agent for Alabama National (the "Exchange Agent"), will
mail to each former holder of record of Peoples State Bank common stock a form
letter of transmittal, together with instructions and a return mailing envelope
(collectively, the "Exchange Materials"), for the exchange of such holders'
Peoples State Bank common stock certificates for certificates representing
shares of Alabama National common stock and cash in lieu of fractional shares.
HOLDERS OF PEOPLES STATE BANK COMMON STOCK SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE THE EXCHANGE MATERIALS FROM THE EXCHANGE AGENT.
Upon receipt of the Exchange Materials, former holders of Peoples State Bank
common stock should complete the letter of transmittal in accordance with the
instructions and mail the letter of transmittal together with all stock
certificates representing shares of Peoples State Bank common stock to the
34
<PAGE>
Exchange Agent in the return envelope provided. Upon receipt of the
certificates and related documentation, Alabama National will issue, and the
Exchange Agent will mail, to such holder of Peoples State Bank common stock a
check in the amount of any payment in respect of fractional shares of Peoples
State Bank common stock payable to the surrendering shareholder and a
certificate representing the number of shares of Alabama National common stock
to which such holder is entitled pursuant to the Merger Agreement. No
certificates of Alabama National common stock and no payment in respect of
fractional shares will be delivered to a holder of Peoples State Bank common
stock unless and until such holder shall have delivered to the Exchange Agent
certificates representing the shares of Peoples State Bank common stock owned
by such holder and in respect of which such holder claims payment is due, or
such documentation and security in respect of lost or stolen certificates as
may be required by the Exchange Agent.
Former shareholders of record of Peoples State Bank will be entitled to vote
after the Effective Time at any meeting of Alabama National shareholders the
number of whole shares of Alabama National common stock into which such
holders' respective shares of Peoples State Bank common stock are converted,
regardless of whether such holders have exchanged their certificates
representing Peoples State Bank common stock for certificates representing
Alabama National common stock.
Beginning six months after the Effective Time, no dividend or other
distribution payable after the Effective Time with respect to Alabama National
common stock issued to replace Peoples State Bank common stock will be paid to
the holder of an unsurrendered Peoples State Bank common stock certificate
until the holder surrenders such certificate, at which time such holder will be
entitled to receive all previously withheld dividends and distributions,
without interest.
After the Effective Time, there will be no transfers on Peoples State Bank's
stock transfer books of shares of Peoples State Bank common stock issued and
outstanding at the Effective Time. If certificates representing shares of
Peoples State Bank common stock are presented for transfer after the Effective
Time, they will be returned to the presenter together with a form of letter of
transmittal and exchange instructions.
Neither Alabama National nor the Exchange Agent shall be liable to a holder of
Peoples State Bank common stock for any amounts paid or properly delivered in
good faith to a public official pursuant to any applicable abandoned property
law.
Conditions to Consummation of the Merger
The respective obligations of Alabama National and Peoples State Bank to effect
the Merger are subject to the satisfaction of the following conditions prior to
the Effective Time:
(i) shareholder approval of Peoples State Bank and Interim Bank and Board
of Director approval of Peoples State Bank, Interim Bank and Alabama
National shall have been received;
(ii) all regulatory approvals shall have been received and waiting periods
shall have expired, and no such approval shall be conditioned or restricted
in a manner which, in the opinion of the Board of Directors of Alabama
National or Peoples State Bank, materially adversely impacts the Merger so
as to render it inadvisable;
35
<PAGE>
(iii) all consents necessary to avoid a material adverse effect on the
relevant party shall have been obtained;
(iv) no court or regulatory authority shall have taken any action that
restricts, prohibits or makes illegal the transactions provided for in the
Merger Agreement, and no action shall have been instituted seeking to
restrain the Merger which renders its consummation inadvisable;
(v) Alabama National shall have received a letter, dated as of the
Effective Time, from PricewaterhouseCoopers LLP, concurring with the
conclusions of Alabama National's and Peoples State Bank's management that
no conditions exist with respect to each company which would preclude
accounting for the Merger as a pooling of interests.
(vi) Alabama National and Peoples State Bank shall have received a written
opinion of counsel from Maynard, Cooper & Gale, P.C. to the effect that the
Merger will qualify as a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended; and
(vii) the Registration Statement on Form S-4 shall have become effective
under the Securities Act, and no stop order suspending the effectiveness of
the Registration Statement shall have been issued and no proceeding for
that purpose shall have been commenced or threatened by the Commission.
The obligations of Alabama National and Interim Bank to effect the Merger are
further subject to the satisfaction or waiver of the following conditions:
(i) the representations and warranties of Peoples State Bank in the Merger
Agreement shall be true as if made at the Effective Time;
(ii) the agreements and covenants of Peoples State Bank in the Merger
Agreement shall have been performed and complied with by the Effective
Time;
(iii) Peoples State Bank shall have delivered to Alabama National certain
certificates of its corporate officers provided for in the Merger
Agreement;
(iv) Alabama National and Wayne M. Turner shall have signed an employment
agreement;
(v) Peoples State Bank shall have delivered to Alabama National an opinion
of its counsel as provided in the Merger Agreement;
(vi) immediately prior to the Effective Time, Peoples State Bank shall have
a minimum net worth (as defined in the Merger Agreement) of $8,500,000;
(vii) Alabama National shall have received from Beemer, Pricher, Kuehnhackl
& Heidbrink, P.A., a comfort letter dated as of the Effective Time with
respect to such matters relating to the financial statements of Peoples
State Bank as Alabama National may reasonably request;
(viii) Alabama National shall have received an affiliates letter from each
affiliate of Peoples State Bank assuring Alabama National that the
transactions provided for in the Merger Agreement will qualify for pooling
of interests accounting treatment;
(ix) Alabama National shall have received evidence that (A) each Director
Deferred Fee and Bonus Agreement; (B) each Executive Deferred Compensation
Agreement; (C) each Executive Deferred Bonus Agreement; and (D) each
Employee Deferred Bonus Agreement of Peoples State Bank have been either
amended or terminated as provided in the Merger Agreement; and
36
<PAGE>
(x) Peoples State Bank shall have taken all steps necessary to terminate
the Peoples State Bank 401(k) Plan immediately prior to the Effective Time.
The obligations of Peoples State Bank to effect the Merger are further subject
to the satisfaction or waiver of the following conditions:
(i) the representations and warranties of Alabama National in the Merger
Agreement shall be true as if made at the Effective Time;
(ii) the agreements and covenants of Alabama National in the Merger
Agreement shall have been performed and complied with by the Effective
Time;
(iii) Alabama National shall have delivered to Peoples State Bank certain
certificates of its corporate officers provided for in the Merger
Agreement;
(iv) Alabama National shall have delivered to Peoples State Bank an opinion
of its counsel as provided in the Merger Agreement;
(v) People State Bank shall have received an opinion from Carson Medlin
that the consideration to be received by the Peoples State Bank
stockholders is fair from a financial point of view; and
(vi) the Alabama National common stock to be issued in the Merger shall
have been qualified as a NASDAQ "National Market System Security."
Regulatory Approvals
The Merger is conditioned upon receipt of the necessary regulatory approvals.
Bank holding companies and banks are regulated extensively under both federal
and state law. Alabama National is subject to regulation by the Federal
Reserve. The Bank Holding Company Act requires a bank holding company to obtain
the prior approval of the Federal Reserve before it may acquire substantially
all of the assets of any bank or ownership or control of any voting shares of
any bank if, after such acquisition, it would own or control, directly or
indirectly, more than five percent of the voting shares of any such bank.
Accordingly, on October 11, 2000, Alabama National filed an application with
the Federal Reserve pursuant to Section 3 of the Bank Holding Company Act. By
letter dated November 21, 2000, the Federal Reserve approved the application by
Alabama National to acquire Peoples State Bank.
Peoples State Bank is subject to regulation by the Florida Department of
Banking and Finance (the "Department"). Pursuant to the requirements of Section
658.28 of the Florida Statutes, any proposed change in control, whether direct
or indirect, of a state bank must be submitted to the Department in the form of
an application for approval of such proposed change in ownership. Alabama
National submitted an application to indirectly acquire Peoples State Bank
(through the merger of Interim Bank with and into Peoples State Bank) to the
Department on October 11, 2000. By letter dated November 22, 2000, the
Department approved the Merger, subject to certain customary conditions.
The Merger is also subject to the approval of the FDIC under Section 18(c) and
other provisions of the Federal Deposit Insurance Act. Peoples State Bank
submitted an application to the FDIC to obtain such approval on October 11,
2000. By letter dated November 27, 2000, the FDIC approved the application of
Peoples State Bank to complete the Merger.
37
<PAGE>
Conduct of Business Pending the Merger
The Merger Agreement requires that each of Peoples State Bank and Alabama
National shall preserve its business organization, goodwill, relationships with
depositors, customers and employees and take no action that would adversely
affect its ability to perform under the Merger Agreement. In addition, Peoples
State Bank has agreed that, without the consent of Alabama National, it will
not:
(i) amend its Articles of Incorporation, Bylaws or other governing
instruments or those of any of its subsidiaries;
(ii) incur additional debt obligations except in the ordinary course of
business or allow any lien to exist on any share of the stock of itself or
any of its subsidiaries;
(iii) repurchase, redeem or otherwise acquire or exchange any shares, or
any securities convertible into any shares of the stock of itself or any of
its subsidiaries or declare or pay any dividend or make any other
distribution in respect of its capital stock;
(iv) except as provided in the Merger Agreement, issue, sell, pledge,
encumber or enter into any contract to issue, sell, pledge or encumber, or
authorize any of the foregoing, any additional shares of Peoples State Bank
common stock or any other capital stock of Peoples State Bank or any
subsidiary, or any options, warrants, conversion or other rights to acquire
any such stock;
(v) adjust, split, combine or reclassify any of its capital stock or that
of any of its subsidiaries, or authorize any of the foregoing, other than
in the ordinary course of business for reasonable and adequate
consideration;
(vi) except as specifically provided in the Merger Agreement, acquire any
direct or indirect equity interest in any entities, other than in
connection with foreclosures in the ordinary course of business and
acquisitions of control by a depository institution subsidiaries in a
fiduciary capacity;
(vii) grant any increase in compensation or benefits of the employees or
officers of Peoples State Bank or any of its subsidiaries, except in
accordance with past practices with respect to employees or enter into,
grant or pay bonuses, severance agreements, or material increases in fees
or other compensation to officers and directors;
(viii) enter into any employment contract without an unconditional right to
terminate without liability;
(ix) adopt any new employee benefit plans or make any material changes to
any existing employee benefit plans other than as required by law or that
is necessary or advisable to maintain the tax qualified status of any such
plan;
(x) make any significant change in any accounting methods or systems of
internal accounting controls, except as appropriate to conform to changes
in regulatory accounting requirements or generally accepted accounting
principles;
(xi) commence any litigation other than in accordance with past practice,
settle any litigation involving any liability for material monetary damages
or restrictions on the operations of Peoples State Bank or any of its
subsidiaries or, except in the ordinary course of business, modify, amend,
terminate, waive, release, compromise or assign any material rights,
contracts or claims;
38
<PAGE>
(xii) operate its business otherwise than in the ordinary course, or in a
manner not consistent with safe and sound banking practices or applicable
law;
(xiii) fail to file timely any report required to be filed with any
regulatory authorities;
(xiv) make any loan or advance to any shareholder owning 5% or more of the
outstanding shares of Peoples State Bank common stock, director or officer
of Peoples State Bank or any of its subsidiaries, or any of the members of
their immediate families, except for unfunded loan commitments or renewals
of existing loans in existence on the date of the Merger Agreement;
(xv) cancel without payment in full, or modify any contract relating to,
any loan or other obligation receivable from any shareholder, director,
officer or employee of Peoples State Bank or any of its subsidiaries or any
of their immediate families;
(xvi) enter into any contract for services or otherwise with any of the
holders of 5% or more of Peoples State Bank common stock, or the directors,
officers or employees of Peoples State Bank or any of its subsidiaries or
any members of their immediate families;
(xvii) 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;
(xviii) file any application to relocate or terminate the operations of any
of its banking offices or any of its subsidiaries;
(xix) except in accordance with applicable law, change its or any of its
subsidiary's lending, investment, liability management and other material
banking policies in any material respect;
(xx) intentionally take any action reasonably expected to jeopardize or
delay the receipt of any regulatory approval required to consummate the
Merger; or
(xxi) take any action that would cause the transactions provided for in the
Merger Agreement to be subject to requirements imposed by any anti-takeover
laws, and Peoples State Bank shall take all necessary steps within its
control to exempt (or ensure the continued exemption of) the transactions
provided for in the Merger Agreement from any anti-takeover law.
Alabama National has agreed that, without the consent of Peoples State Bank, it
will not:
(i) fail to file timely any report required to be filed with any regulatory
authorities, including the SEC; or
(ii) take any action that would cause the Alabama National common stock to
cease to be traded on the NASDAQ, except for certain exceptions specified
in the Merger Agreement.
Each party has also agreed to give written notice to the other promptly upon
becoming aware of the occurrence of any event which is likely to constitute a
Material Adverse Effect within the meaning given to such term in the Merger
Agreement or constitute a breach of any of its representations, warranties or
covenants contained in the Merger Agreement and to use its reasonable efforts
to remedy any such condition or breach.
Waiver and Amendment; Termination; Termination Fee
Prior to the Effective Time, either Alabama National or Peoples State Bank may
waive any default in performance of any term of the Merger Agreement, waive or
extend the time for the compliance or
39
<PAGE>
fulfillment by the other of any and all of its obligations under the Merger
Agreement, waive any or all of the conditions precedent and may, to the extent
permitted by law, amend the Merger Agreement in writing with the approval of
the Board of Directors of each of Peoples State Bank and Alabama National.
The Merger Agreement may be terminated at any time prior to the Effective Time,
as follows: (i) by mutual consent, (ii) in the event of a breach of a
representation or warranty or covenant or agreement by the non-breaching party
under certain circumstances, (iii) by either party (provided that such
terminating party is not in material breach of any material obligation in the
Merger Agreement), in the event any required regulatory approval is denied or
not obtained or the shareholders of Peoples State Bank fail to approve the
Merger, (iv) by either party, in the event there is a material adverse effect
on the business, operations or financial conditions of the other party that is
not remedied, (v) by either party, in the event any of the conditions precedent
to the Merger cannot be satisfied or fulfilled or the Merger is not consummated
by March 31, 2001, and such failure was not the fault of the terminating party,
unless a consent from a regulatory authority has not been obtained by March 31,
2001, at which time the termination date may be extended to June 30, 2001; (vi)
by Alabama National, if the holders of greater than 5% of the outstanding
shares of Peoples State Bank common stock properly assert their dissenters'
rights under the Florida Statutes; (vii) by Peoples State Bank, if a majority
of the disinterested members of the Board of Directors of Peoples State Bank
shall have determined to enter into an agreement with respect to an acquisition
or merger transaction proposal which it considers superior to the Merger,
provided that if Peoples State Bank terminates the Merger Agreement under such
circumstances of a superior acquisition or merger proposal, Peoples State Bank
shall pay to Alabama National a termination fee of $750,000; or (viii) by
Alabama National if any person or entity which is not a party to the Merger
Agreement initiates a legal proceeding with any regulatory authority
challenging the validity or legality of the transaction provided for in the
Merger Agreement.
In the event of the termination of the Merger Agreement, the Merger Agreement
shall become void and have no effect, except that the confidentiality
requirements, miscellaneous provisions, termination fee provisions and
provisions regarding expenses shall survive such termination. In addition, such
termination will not relieve a breaching party from liability for an uncured
willful breach of the representation, warranty, covenant or agreement giving
rise to the termination.
Management and Operations After the Merger
From and after the Effective Time, the Alabama National Board of Directors will
consist of the fourteen (14) current directors of Alabama National. The Merger
Agreement provides that from and after the Effective Time, the board of
directors of Peoples State Bank will consist of the current eight (8) directors
of Peoples State Bank, plus John H. Holcomb, III, Chairman and CEO of Alabama
National and Richard Murray IV, Executive Vice President of Alabama National.
Such directors are to serve in accordance with the bylaws of Alabama National
and Peoples State Bank, respectively.
All current Alabama National officers will continue to serve Alabama National
in accordance with the bylaws of Alabama National after the Effective Time. The
Merger Agreement further provides that, pursuant to the terms of an employment
agreement, after the Effective Time, Wayne M. Turner
40
<PAGE>
will continue to serve as President and Chief Executive Officer of Peoples
State Bank. All directors and officers of each of the subsidiaries of Alabama
National after the Effective Time will continue to serve in accordance with the
terms of the bylaws of each such subsidiary.
Interests of Certain Persons in the Merger
All of the current directors of Alabama National will serve as directors of
Alabama National after the Effective Time. As set forth above under "-
Management and Operations After the Merger," certain officers of Alabama
National and its subsidiaries will continue to serve as officers and certain
officers of Peoples State Bank will serve as officers of Peoples State Bank
after the Effective Time. No director or executive officer of Alabama National
has any material direct or indirect financial interest in Peoples State Bank or
the Merger, except as a director, executive officer or shareholder of Alabama
National or its subsidiaries.
In the normal course of business, Peoples State Bank makes loans to directors
and officers of Peoples State Bank, including loans to certain related persons
and entities. Such loans are made on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other customers, and, in the opinion of management of Peoples
State Bank, do not involve more than the normal risk of collectibility. As of
September 30, 2000, the amount of these loans (including amounts available
under lines of credit) by Peoples State Bank to Peoples State Bank directors
and officers was 1% of Peoples State Bank's total loans.
A condition precedent to the obligations set forth in the Merger Agreement is
that Wayne M. Tuner will, as of the Effective Time, enter into an employment
agreement (the "Employment Agreement") whereby Mr. Turner agrees, among other
things, to serve as President of Peoples State Bank for a period of three
years, unless earlier terminated pursuant to the terms of the Employment
Agreement. Pursuant to the employment agreement, Mr. Turner will receive (i)
annual compensation of not less than $125,000 for the term of the Employment
Agreement and (ii) certain other fringe benefits. Mr. Turner will also receive
a payment in the amount of $375,000 as consideration for the termination of his
current employment agreement with Peoples State Bank.
Certain directors and officers of Peoples State Bank are currently subject to
deferred compensation plans of Peoples State Bank. We are amending these plans
under the terms of the Merger Agreement. These amendments provide for cash
payments to some of these individuals and provide for revised terms that may be
more beneficial to some or all of these individuals. See "-Effect on Certain
Employee Benefit Plans of Peoples State Bank" on page 32 for a discussion of
the proposed amendments to these plans.
Federal Income Tax Consequences
Neither Alabama National nor Peoples State Bank has requested or will receive
an advance ruling from the Internal Revenue Service as to the tax consequences
of the Merger. Maynard, Cooper & Gale, P.C., counsel for Alabama National, has
delivered an opinion to Alabama National and Peoples State Bank that, for
federal income tax purposes, under current law, assuming (i) that the Merger
will take place as described in the Merger Agreement, (ii) that certain factual
matters represented by Alabama National and Peoples State Bank (including the
representation that Peoples State Bank
41
<PAGE>
shareholders will maintain sufficient equity ownership interests in Alabama
National after the Merger) are true and correct at the time of consummation of
the Merger, and (iii) that there are not significant numbers of Peoples State
Bank shareholders that invoke dissenters' rights, the Merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986 (the "Code"), and Alabama National and Peoples State Bank will
each be a party to the reorganization within the meaning of Section 368(b) of
the Code.
Assuming that significant numbers of Peoples State Bank's shareholders do not
invoke dissenters' rights, that the Merger will take place as described in the
Merger Agreement, and that certain factual matters represented by Alabama
National and Peoples State Bank (including the representation that Peoples
State Bank shareholders will maintain sufficient equity ownership interests in
Alabama National after the Merger) are true and correct at the time of
consummation of the Merger, then, in the opinion of Maynard, Cooper & Gale,
P.C., the following will be the material federal income tax consequences of the
Merger: (i) no gain or loss will be recognized by Alabama National or Peoples
State Bank in the Merger; (ii) the shareholders of Peoples State Bank will
recognize no gain or loss upon the exchange of their Peoples State Bank common
stock solely for shares of Alabama National common stock; (iii) the basis of
the Alabama National common stock received by the Peoples State Bank
shareholders in the proposed transaction will, in each instance, be the same as
the basis of the Peoples State Bank common stock surrendered in exchange
therefor; (iv) the holding period of the Alabama National common stock received
by the Peoples State Bank shareholders will, in each instance, include the
period during which the Peoples State Bank common stock surrendered in exchange
therefor was held, provided that the Peoples State Bank common stock was held
as a capital asset on the date of the exchange; (v) the payment of cash to
Peoples State Bank shareholders in lieu of fractional share interests of
Alabama National common stock will be treated for federal income tax purposes
as if the fractional shares were distributed as part of the exchange and then
were redeemed by Alabama National; these cash payments will be treated as
having been received as distributions in full payment in exchange for the stock
redeemed as provided in Code Section 302(a) of the Code; and (vi) where solely
cash is received by a Peoples State Bank shareholder in exchange for his or her
Peoples State Bank common stock pursuant to the exercise of dissenters' rights,
such cash will be treated as having been received in redemption of his or her
Peoples State Bank common stock, subject to the provisions and limitations of
Section 302 of the Code.
THE DISCUSSION SET FORTH ABOVE IS BASED UPON THE OPINION OF MAYNARD, COOPER &
GALE, P.C., AND APPLIES ONLY TO PEOPLES STATE BANK SHAREHOLDERS WHO HOLD
PEOPLES STATE BANK COMMON STOCK AS A CAPITAL ASSET, AND MAY NOT APPLY TO
SPECIAL SITUATIONS, SUCH AS PEOPLES STATE BANK SHAREHOLDERS, IF ANY, WHO
RECEIVED THEIR PEOPLES STATE BANK COMMON STOCK UPON EXERCISE OF EMPLOYEE STOCK
OPTIONS OR OTHERWISE AS COMPENSATION AND PEOPLES STATE BANK SHAREHOLDERS THAT
ARE INSURANCE COMPANIES, SECURITIES DEALERS, FINANCIAL INSTITUTIONS OR FOREIGN
PERSONS. IT DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN TAX ASPECTS OF THE
MERGER OR ANY TAX CONSEQUENCES OF A SUBSEQUENT TRANSACTION INVOLVING ALABAMA
NATIONAL COMMON STOCK, INCLUDING ANY REDEMPTION OR TRANSFER OF ALABAMA NATIONAL
COMMON STOCK. THIS DISCUSSION IS BASED ON CURRENTLY EXISTING PROVISIONS OF THE
CODE, EXISTING AND PROPOSED
42
<PAGE>
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. EACH PEOPLES STATE BANK
SHAREHOLDER SHOULD CONSULT HIS OWN TAX ADVISOR WITH RESPECT TO THE SPECIFIC TAX
CONSEQUENCES OF THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE,
LOCAL AND FOREIGN TAX LAWS.
Accounting Treatment
Alabama National 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 Peoples State Bank
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
Peoples State Bank common stock. Under this accounting treatment, assets and
liabilities of Peoples State Bank will be added to those of Alabama National at
their recorded book values, and the shareholders' equity of the two companies
will be combined in Alabama National's consolidated balance sheet. Financial
statements of Alabama National issued after the Effective Time of the Merger
will be restated to reflect the consolidated operations of Alabama National and
Peoples State Bank as if the Merger had taken place prior to the periods
covered by the financial statements. The receipt of a letter from
PricewaterhouseCoopers LLP, independent accountants, concurring with the
conclusions of Alabama National's and Peoples State Bank's management that no
conditions exist with respect to each company that would preclude accounting
for the Merger as a pooling of interests, is a condition to the consummation of
the Merger.
Expenses and Fees
The Merger Agreement provides that each of the parties will bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated by the Merger Agreement, including filing, registration and
application fees, printing and mailing fees and expenses, and fees and expenses
of their respective accountants and counsel.
Resales of Alabama National Common Stock
The shares of Alabama National common stock issued pursuant to the Merger
Agreement will be freely transferrable under the Securities Act, except for
shares issued to any shareholder who may be deemed to be an "affiliate"
(generally including, without limitation, directors, certain executive officers
and beneficial owners of 10% or more of a class of capital stock) of Peoples
State Bank for purposes of Rule 145 under the Securities Act of 1933 as of the
date of the Special Meeting or for purposes of applicable interpretations
regarding pooling-of-interests accounting treatment. Affiliates may not sell
their shares of Alabama National common stock acquired in connection with the
Merger except pursuant to an effective registration statement under the
Securities Act covering such shares or in compliance with Rule 145 promulgated
under the Securities Act or another applicable exemption from the registration
requirements of the Securities Act. In addition, affiliates may not sell their
shares of Alabama National common stock until such time as financial results
covering at least 30 days of combined operations of Alabama National and
Peoples State Bank after the Merger have
43
<PAGE>
been published. Alabama National may place restrictive legends on certificates
representing Alabama National common stock issued to all persons who are deemed
"affiliates" of Peoples State Bank under Rule 145. This Proxy Statement-
Prospectus does not cover resales of Alabama National common stock received by
any person who may be deemed to be an affiliate of Peoples State Bank.
44
<PAGE>
PRO FORMA FINANCIAL INFORMATION
Pro Forma Combined Condensed Consolidated Statement of Condition
The following unaudited Pro Forma Combined Condensed Consolidated Statement of
Condition combines the historical consolidated statements of condition of
Alabama National and Peoples State Bank giving effect to the merger, which will
be accounted for as a pooling of interests, as if it had been effective
September 30, 2000, after giving effect to the pro forma adjustments. For a
description of pooling of interests accounting treatment, see "The Merger-
Accounting Treatment." This financial data should be read in conjunction with
the historical consolidated financial statements, including the respective
notes thereto of Peoples State Bank, which are included herein as Appendix C,
and of Alabama National which are incorporated by reference in this Proxy
Statement. See "Where You Can Find More Information," and Appendix C. This pro
forma financial information is not necessarily indicative of the actual
financial position that would have occurred had the Merger been consummated on
September 30, 2000, nor is it necessarily indicative of the future financial
position.
45
<PAGE>
Pro Forma Combined Condensed Consolidated Statement of Condition
As of September 30, 2000 (Unaudited)
(In Thousands, Except Ratios)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------- Adjustments
Peoples ---------------- Pro Forma
Alabama National State Bank Debit Credit Combined
---------------- ---------- ------ ------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents............ $ 77,139 $ 4,277 $ -- $ -- $ 81,416
Investments............. 339,887 12,602 -- -- 352,489
Federal funds sold...... 44,449 2,149 -- -- 46,598
Loans, net of allowance
for loan losses........ 1,574,141 97,346 -- -- 1,671,487
Premises and equipment.. 48,388 2,090 -- -- 50,478
Intangibles, net........ 14,619 -- -- -- 14,619
Other assets............ 88,701 3,158 -- -- 91,859
---------- -------- ------ ------ ----------
Total assets........... $2,187,324 $121,622 $ -- $ -- $2,308,946
========== ======== ====== ====== ==========
LIABILITIES
Deposits................ $1,704,810 $101,955 $ -- $ -- $1,806,765
Federal funds
purchased.............. 138,089 1,844 -- -- 139,933
Short-term borrowings... 75,140 8,000 -- -- 83,140
Other liabilities....... 37,109 996 -- -- 38,105
Long-term debt.......... 78,948 -- -- -- 78,948
---------- -------- ------ ------ ----------
Total liabilities...... 2,034,096 112,795 -- -- 2,146,891
STOCKHOLDERS' EQUITY
Common stock............ 11,187 1,152 1,152(1) 735(1) 11,922
Additional paid-in
capital................ 85,642 288 288(1) 117(1) 85,759
Retained earnings....... 65,466 8,096 73,562
Treasury stock.......... (3,523) (588) -- 588(1) (3,523)
Unrealized gains
(losses) on investments
available for sale..... (5,544) (121) -- -- (5,665)
---------- -------- ------ ------ ----------
Total stockholders'
equity................ 153,228 8,827 1,440 1,440 162,055
---------- -------- ------ ------ ----------
Total liabilities and
stockholders' equity.. $2,187,324 $121,622 $1,440 $1,440 $2,308,946
========== ======== ====== ====== ==========
Capital ratios:
Average equity to
average assets........ 7.14% 7.40% 7.15%
Leverage............... 6.90 7.54 6.93
Tier 1 risk-based
capital............... 8.67 9.98 8.73
Total risk-based
capital............... 9.91 11.23 9.98
</TABLE>
--------
(1) To record the issuance of 735,000 shares of Alabama National common stock
in exchange for all of the outstanding common shares of Peoples State Bank
common stock. For purpose of these pro forma selected consolidated
financial data, it is assumed that 735,000 shares of Alabama National
common stock will be issued in consummating the Merger. This figure is
calculated by multiplying the exchange ratio by the number of Peoples
State Bank common shares actually outstanding at September 30, 2000. The
Merger is expected to be accounted for as a pooling of interests. See "The
Merger-Terms of the Merger."
<TABLE>
<CAPTION>
Outstanding
Shares
-----------
<S> <C> <C>
Peoples State Bank outstanding shares............. 631,464
Conversion ratio, as agreed upon.................. 1.163960
--------
Alabama National shares to be issued.............. 735,000
Par value of 735,000 shares issued at $1.00 per
share............................................ $ 735,000
Shares issued at par value........................ $735,000
Total capital stock of Peoples State Bank......... 852,397
--------
Excess recorded as an increase to additional paid-
in capital....................................... 117,397
-----------
852,397
To eliminate Peoples State Bank capital stock:
Common stock at par value........................ (1,152,000)
Treasury stock................................... 587,603
Additional paid-in capital....................... (288,000)
-----------
(852,397)
-----------
Net change in equity........................... $ --
===========
</TABLE>
46
<PAGE>
Pro Forma Combined Condensed Consolidated Statements of Income
The following unaudited Pro Forma Combined Condensed Consolidated Statements of
Income present the combined consolidated statements of income of Alabama
National and Peoples State Bank assuming the companies had been combined for
each period presented on a pooling of interests accounting basis, after giving
effect to the pro forma adjustments. For a description of pooling of interests
accounting treatment, see "The Merger-Accounting Treatment." This financial
data should be read in conjunction with the historical consolidated financial
statements, including the respective notes thereto, of Alabama National, which
are incorporated by reference in this proxy statement, and of Peoples State
Bank, included herein as Appendix C. See "Where You Can Find More Information"
and Appendix C. This pro forma financial information is not necessarily
indicative of the actual operating results that would have occurred had the
Merger been consummated as of the beginning of the periods presented, nor is it
necessarily indicative of future operating results.
Pro Forma Combined Condensed Consolidated Statement of Income
For the Nine Months Ended September 30, 2000 (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------- Adjustments
Peoples ------------- Pro Forma
Alabama National State Bank Debit Credit Combined
---------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Interest income (1)........ $117,181 $6,934 $ -- $ -- $124,115
Interest expense........... 61,493 3,231 -- -- 64,724
-------- ------ ----- ----- --------
Net interest income........ 55,688 3,703 -- -- 59,391
Provision for loan losses.. 1,553 200 -- -- 1,753
Noninterest income (1)..... 23,400 787 -- -- 24,187
Noninterest expense........ 51,880 2,752 -- -- 54,632
-------- ------ ----- ----- --------
Income before income
taxes..................... 25,655 1,538 -- -- 27,193
Provision for income
taxes..................... 7,868 575 -- -- 8,443
-------- ------ ----- ----- --------
Income before minority
interest in earnings of
consolidated subsidiary... 17,787 963 -- -- 18,750
Minority interest in
earnings of consolidated
subsidiary................ 20 -- -- -- 20
-------- ------ ----- ----- --------
Net income................. $ 17,767 $ 963 $ -- $ -- $ 18,730
======== ====== ===== ===== ========
Earnings per common share--
diluted................... $ 1.58 $ 1.52 $ 1.57
======== ====== ========
Average common shares
outstanding--diluted...... 11,221 631 (631) 735 11,956
======== ====== ===== ===== ========
</TABLE>
--------
(1) Loan fees of $128,000 have been reclassified from noninterest income to
interest income for Peoples State Bank to be consistent with Alabama
National's presentation.
47
<PAGE>
Pro Forma Combined Condensed Consolidated Statement of Income
For the Nine Months Ended September 30, 1999 (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------- Adjustments
Peoples ------------- Pro Forma
Alabama National State Bank Debit Credit Combined
---------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Interest income (1)........ $ 90,811 $5,257 $ -- $ -- $ 96,068
Interest expense........... 42,441 2,154 -- -- 44,595
-------- ------ ----- ----- --------
Net interest income........ 48,370 3,103 -- -- 51,473
Provision for loan losses.. 1,338 57 -- -- 1,395
Noninterest income (1)..... 22,392 686 -- -- 23,078
Noninterest expense........ 45,835 2,593 -- -- 48,428
-------- ------ ----- ----- --------
Income before income
taxes..................... 23,589 1,139 -- -- 24,728
Provision for income
taxes..................... 7,452 423 -- -- 7,875
-------- ------ ----- ----- --------
Income before minority
interest in earnings of
consolidated subsidiary... 16,137 716 -- -- 16,853
Minority interest in
earnings of consolidated
subsidiary................ 18 -- -- -- 18
-------- ------ ----- ----- --------
Net income................. $ 16,119 $ 716 $ -- $ -- $ 16,835
======== ====== ===== ===== ========
Earnings per common share--
diluted................... $ 1.43 $ 1.13 $ 1.40
======== ====== ========
Average common shares
outstanding--diluted...... 11,273 631 (631) 735 12,008
======== ====== ===== ===== ========
</TABLE>
--------
(1) Loan fees of $119,000 have been reclassified from noninterest income to
interest income for Peoples State Bank to be consistent with Alabama
National's presentation.
48
<PAGE>
Pro Forma Combined Condensed Consolidated Statement of Income
For the Year Ended December 31, 1999 (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------- Adjustments
Peoples ------------- Pro Forma
Alabama National State Bank Debit Credit Combined
---------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Interest income (1)........ $125,668 $ 7,257 $ -- $ -- $132,925
Interest expense........... 59,283 3,024 -- -- 62,307
-------- ------- ----- ----- --------
Net interest income........ 66,385 4,233 -- -- 70,618
Provision for loan losses.. 1,954 153 -- -- 2,107
Noninterest income (1)..... 30,557 940 -- -- 31,497
Noninterest expense........ 62,455 3,405 -- -- 65,860
-------- ------- ----- ----- --------
Income before income
taxes..................... 32,533 1,615 -- -- 34,148
Provision for income
taxes..................... 10,237 580 -- -- 10,817
-------- ------- ----- ----- --------
Income before minority
interest in earnings of
consolidated subsidiary... 22,296 1,035 -- -- 23,331
Minority interest in
earnings of consolidated
subsidiary................ 25 -- -- -- 25
-------- ------- ----- ----- --------
Net income................. $ 22,271 $ 1,035 $ -- $ -- $ 23,306
======== ======= ===== ===== ========
Earnings per common share--
diluted................... $ 1.98 $ 1.64 $ 1.94
======== ======= ========
Average common shares
outstanding--diluted...... 11,273 631 (631) 735 12,008
======== ======= ===== ===== ========
</TABLE>
--------
(1) Loan fees of $156,000 have been reclassified from noninterest income to
interest income for Peoples State Bank to be consistent with Alabama
National's presentation.
49
<PAGE>
Pro Forma Combined Condensed Consolidated Statement of Income
For the Year Ended December 31, 1998 (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------- Adjustments
Peoples ------------- Pro Forma
Alabama National State Bank Debit Credit Combined
---------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Interest income (1)........ $115,704 $6,009 $ -- $ -- $121,713
Interest expense........... 56,555 2,509 -- -- 59,064
-------- ------ ----- ----- --------
Net interest income........ 59,149 3,500 -- -- 62,649
Provision for loan losses.. 1,796 -- -- -- 1,796
Noninterest income (1)..... 29,350 800 -- -- 30,150
Noninterest expense........ 61,154 3,247 -- -- 64,401
-------- ------ ----- ----- --------
Income before income
taxes..................... 25,549 1,053 -- -- 26,602
Provision for income
taxes..................... 8,154 350 -- -- 8,504
-------- ------ ----- ----- --------
Income before minority
interest in earnings of
consolidated subsidiary... 17,395 703 -- -- 18,098
Minority interest in
earnings of consolidated
subsidiary................ 23 -- -- -- 23
-------- ------ ----- ----- --------
Net income................. $ 17,372 $ 703 $ -- $ -- $ 18,075
======== ====== ===== ===== ========
Earnings per common share--
diluted................... $ 1.55 $ 1.11 $ 1.52
======== ====== ========
Average common shares
outstanding--diluted...... 11,173 631 (631) 735 11,908
======== ====== ===== ===== ========
</TABLE>
--------
(1) Loan fees of $123,000 have been reclassified from noninterest income to
interest income for Peoples State Bank to be consistent with Alabama
National's presentation.
50
<PAGE>
Pro Forma Combined Condensed Consolidated Statement of Income
For the Year Ended December 31, 1997 (Unaudited)
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------- Adjustments
Peoples ------------- Pro Forma
Alabama National State Bank Debit Credit Combined
---------------- ---------- ----- ------ ---------
<S> <C> <C> <C> <C> <C>
Interest income (1)........ $104,508 $5,542 $ -- $ -- $110,050
Interest expense........... 48,379 2,469 -- -- 50,848
-------- ------ ----- ----- --------
Net interest income........ 56,129 3,073 -- -- 59,202
Provision for loan losses.. 3,421 -- -- -- 3,421
Noninterest income (1)..... 20,294 813 -- -- 21,107
Noninterest expense........ 52,788 2,722 -- -- 55,510
-------- ------ ----- ----- --------
Income before income
taxes..................... 20,214 1,164 -- -- 21,378
Provision for income
taxes..................... 6,086 409 -- -- 6,495
-------- ------ ----- ----- --------
Income before minority
interest in earnings of
consolidated subsidiary... 14,128 755 -- -- 14,883
Minority interest in
earnings of consolidated
subsidiary................ 12 -- -- -- 12
-------- ------ ----- ----- --------
Net income................. $ 14,116 $ 755 $ -- $ -- $ 14,871
======== ====== ===== ===== ========
Earnings per common share--
diluted................... $ 1.28 $ 1.20 $ 1.27
======== ====== ========
Average common shares
outstanding--diluted...... 10,999 631 (631) 735 11,734
======== ====== ===== ===== ========
</TABLE>
--------
(1) Loan fees of $83,000 have been reclassified from noninterest income to
interest income for Peoples State Bank to be consistent with Alabama
National's presentation.
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DESCRIPTION OF ALABAMA NATIONAL CAPITAL STOCK
General
The authorized capital stock of Alabama National currently consists of
17,500,000 shares of Alabama National common stock, par value $1.00 per share,
and 100,000 shares of preferred stock, par value $1.00 per share (the "Alabama
National Preferred Stock"). The following is a summary description of Alabama
National's capital stock.
Common Stock
Holders of shares of Alabama National common stock are entitled to receive such
dividends as may from time to time be declared by the Alabama National Board
out of funds legally available therefor. Holders of Alabama National common
stock are entitled to one vote per share on all matters on which the holders of
Alabama National common stock are entitled to vote and do not have cumulative
voting rights. Holders of Alabama National common stock have no preemptive,
conversion, redemption or sinking fund rights. In the event of a liquidation,
dissolution or winding-up of Alabama National, holders of Alabama National
common stock are entitled to share equally and ratably in the assets of Alabama
National, if any, remaining after the payment of all debts and liabilities of
Alabama National and the liquidation preference of any outstanding Preferred
Stock. The outstanding shares of Alabama National common stock are, and the
shares of Alabama National common stock offered by Alabama National hereby when
issued, will be fully paid and nonassessable. The rights, preferences and
privileges of holders of Alabama National common stock are subject to any class
or series of Alabama National Preferred Stock that Alabama National may issue
in the future.
Preferred Stock
The Alabama National Certificate of Incorporation, as amended, (the
"Certificate") provides that the Board of Directors is authorized without
further action by the holders of the Alabama National common stock to provide
for the issuance of shares of Alabama National Preferred Stock in one or more
classes or series and to fix the designations, powers, preferences and relative
participating options 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 services. Any share of Alabama
National Preferred Stock so issued may rank senior to the Alabama National
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 Alabama National Preferred Stock may have class or series voting rights.
Upon completion of this Merger, Alabama National will not have any shares of
Alabama National Preferred Stock outstanding. Issuances of Alabama National
Preferred Stock, while providing Alabama National with flexibility in
connection with general corporate purposes, may, among other things, have an
adverse effect on the rights of holders of Alabama National common stock, and
in certain circumstances such issuances could have the effect of decreasing the
market price of the Alabama National common stock. The Alabama National Board,
without stockholder approval, may issue Alabama National Preferred Stock with
voting or conversion rights which could adversely affect the voting power of
the holders of the Alabama National common stock. Alabama National has no
present plan to issue any shares of Alabama National Preferred Stock.
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<PAGE>
Certain Anti-Takeover Effects
The provisions of the Alabama National Certificate, the Alabama National Bylaws
and the DGCL 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.
Authorized but Unissued Stock. The authorized but unissued shares of Alabama
National common stock and Alabama National 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 Alabama
National common stock and Alabama National 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
Alabama National by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of Alabama National's management.
Limitations on Shareholder Action by Written Consent and Limitations on Calling
Shareholder Meetings. The Alabama National Certificate of Incorporation and
Alabama National 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 Alabama National Bylaws provide that
subject to the rights of holders of any series of Alabama National Preferred
Stock to elect additional directors under specified circumstances, special
meetings of stockholders can be called only by the Alabama National Board or
the Chairman of the Alabama National 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 Alabama National Board or the
Chairman of the Alabama National Board.
Section 203 of the Delaware Corporation Law. Subject to certain exclusions
summarized below, Section 203 of the DGCL ("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
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<PAGE>
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.
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<PAGE>
SUPERVISION AND REGULATION OF ALABAMA NATIONAL
AND PEOPLES STATE BANK
Alabama National, its subsidiary banks, and Peoples State Bank are subject to
state and federal banking laws and regulations which impose specific
requirements and restrictions on, and provide for general regulatory oversight
with respect to, virtually all aspects of operations. These laws and
regulations are generally intended to protect depositors, not stockholders. To
the extent that the following summary describes statutory or regulatory
provisions, it is qualified in its entirety by reference to the particular
statutory and regulatory provisions. Any change in applicable laws or
regulations may have a material effect on the business and prospects of Alabama
National and/or Peoples State Bank.
Beginning with the enactment of the Financial Institutions Reform, Recovery and
Enforcement Act of 1989 ("FIRREA") and following in 1991 with the Federal
Deposit Insurance Corporation Act ("FDICIA"), numerous additional regulatory
requirements have been placed on the banking industry in the past eleven years,
and additional changes have been proposed. The operations of Alabama National
and Peoples State Bank may be affected by legislative changes and the policies
of various regulatory authorities. Alabama National and Peoples State Bank are
unable to predict the nature or the extent of the effect on its business and
earnings that fiscal or monetary policies, economic control, or new federal or
state legislation may have in the future.
As a bank holding company, Alabama National is subject to the regulation and
supervision of the Federal Reserve. The Alabama National's subsidiary banks and
Peoples State Bank are subject to supervision and regulation by applicable
state and federal banking agencies, including the Federal Reserve, the Office
of the Comptroller of the Currency (the "OCC") and the Federal Deposit
Insurance Corporation (the "FDIC"). These banks are also subject to various
requirements and restrictions under federal and state law, including
requirements to maintain allowances against deposits, restrictions on the types
and amounts of loans that may be granted and the interest that may be charged
thereon, and limitations on the types of investments that may be made and the
types of services that may be offered. Various consumer laws and regulations
also affect the operations of the banks. In addition to the impact of
regulation, commercial banks are affected significantly by the actions of the
Federal Reserve as it attempts to control the money supply and credit
availability in order to influence the economy.
Pursuant to the Riegle-Neal Interstate Banking and Branching Efficiency Act of
1994, bank holding companies from any state may now acquire banks located in
any other state, subject to certain conditions, including concentration limits.
As of June 1, 1997, a bank may establish branches across state lines by merging
with a bank in another state (unless applicable state law prohibits such
interstate mergers), provided certain conditions are met. A bank may also
establish a de novo branch in a state in which the bank does not maintain a
branch if that state expressly permits such interstate de novo branching and
certain other conditions are met.
There are a number of obligations and restrictions imposed on bank holding
companies and their depository institution subsidiaries by federal law and
regulatory policy that are designed to reduce potential loss exposure to the
depositors of such depository institutions and to the FDIC insurance fund in
the event the depository institution becomes in danger of default or is in
default. For
55
<PAGE>
example, under a policy of the Federal Reserve with respect to bank holding
company operations, a bank holding company is required to serve as a source of
financial strength to its subsidiary depository institutions and commit
resources to support such institutions in circumstances where it might not do
so absent such policy. In addition, the "cross-guarantee" provisions of federal
law require insured depository institutions under common control to reimburse
the FDIC for any loss suffered or reasonably anticipated as a result of the
default of a commonly controlled insured depository institution or for any
assistance provided by the FDIC to a commonly controlled insured depository
institution in danger of default.
The federal banking agencies have broad powers under current federal law to
take prompt corrective action to resolve problems of insured depository
institutions. The extent of these powers depends upon whether the institutions
in question are "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized" as such terms are defined under regulations issued by each of
the federal banking agencies. In general, the agencies measure capital adequacy
within a framework that makes capital requirements sensitive to the risk
profiles of individual banking companies. The guidelines define capital as
either Tier 1 (primarily common shareholders' equity) or Tier 2 (certain debt
instruments and a portion of the allowance for loan losses). Alabama National
and the banks are subject to a minimum Tier 1 capital ratio (Tier 1 capital to
risk-weighted assets) of 4%, a total capital ratio (Tier 1 plus Tier 2 to risk-
weighted assets) of 8% and a Tier 1 leverage ratio (Tier 1 to average quarterly
assets) of 3%. To be considered a "well capitalized" institution, the Tier 1
capital ratio, the total capital ratio, and the Tier 1 leverage ratio must
equal or exceed 6%, 10% and 5%, respectively.
The banks are subject to the provisions of Section 23A of the Federal Reserve
Act, which place limits on the amount of loans or extensions of credit to,
investments in or certain other transactions with affiliates, and on the amount
of advances to third parties collateralized by the securities or obligations of
affiliates.
The banks are also subject to the provisions of Section 23B of the Federal
Reserve Act that, among other things, prohibit a bank from engaging in certain
transactions with affiliates unless the transactions are on terms substantially
the same, or at least as favorable to the bank, as those prevailing at the time
for comparable transactions with non-affiliated companies.
The banks are also subject to certain restrictions on extensions of credit to
executive officers, directors, certain principal stockholders and their related
interests. Such extensions of credit (i) must be made on substantially the same
terms, including interest rates and collateral, as those prevailing at the time
for comparable transactions with third parties and (ii) must not involve more
than the normal risk of repayment or present other unfavorable features.
The Community Reinvestment Act ("CRA") requires that, in connection with
examinations of financial institutions within their respective jurisdictions,
the Federal Reserve, the FDIC or the OCC shall evaluate the record of the
financial institutions in meeting the credit needs of their local communities,
including low and moderate income neighborhoods, consistent with the safe and
sound operation of those institutions. The CRA does not establish specific
lending requirements or programs for financial institutions nor does it limit
an institution's discretion to develop the types of products and services that
it believes are best suited to its particular community, consistent with the
CRA.
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<PAGE>
These factors are considered in evaluating mergers, acquisitions and
applications to open a branch or facility. The CRA also requires all
institutions to make public disclosure of their CRA ratings.
There are various legal and regulatory limits on the extent to which the banks
may pay dividends or otherwise supply funds to Alabama National. In addition,
federal and state regulatory agencies also have the authority to prevent a bank
or bank holding company from paying a dividend or engaging in any other
activity that, in the opinion of the agency, would constitute an unsafe or
unsound practice.
FDIC regulations require that management report on its responsibility for
preparing its institution's financial statements and for establishing and
maintaining an internal control structure and procedures for financial
reporting and compliance with designated laws and regulations concerning safety
and soundness.
On March 11, 2000, the Gramm-Leach-Bliley Act became effective. This Act
permits bank holding companies to become financial holding companies and
thereby affiliate with securities firms and insurance companies and engage in
other activities that are financial in nature. A bank holding company may
become a financial holding company by filing a declaration if each of its
subsidiary banks is well capitalized under the FDICIA prompt corrective action
provisions, is well managed, and has at least a satisfactory rating under the
CRA. No regulatory approval will be required for a financial holding company to
acquire a company, other than a bank or savings association, engaged in
activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the Federal Reserve.
The Gramm-Leach-Bliley Act broadly defines "financial in nature" to include
securities underwriting, dealing and market making; sponsoring mutual funds and
investment companies; insurance underwriting and agency; merchant banking; and
activities that the Federal Reserve has determined to be closely related to
banking. The Act also permits the Federal Reserve, in consultation with the
Department of Treasury, to determine that other activities are "financial in
nature" and therefore permissible for financial holding companies. A national
bank also may engage, subject to limitations on investment, in activities that
are financial in nature (other than insurance underwriting, insurance company
portfolio investment, merchant banking, real estate development and real estate
investment) through a financial subsidiary of the bank, if the bank is well
capitalized, well managed and has at least a satisfactory CRA rating.
Subsidiary banks of a financial holding company or national banks with
financial subsidiaries must continue to be well capitalized and well managed in
order to continue to engage in activities that are financial in nature without
regulatory actions or restrictions, which could include divestiture of the
financial subsidiary or subsidiaries. In addition, a financial holding company
or a bank may not acquire a company that is engaged in activities that are
financial in nature unless each of the subsidiary banks of the financial
holding company or the bank at issue has a CRA rating of satisfactory or
better.
The Act preserves the role of the Federal Reserve as the umbrella supervisor
for holding companies while at the same time incorporating a system of
functional regulation designed to take advantage of the strengths of the
various federal and state regulators. In particular, the Act replaces the broad
exemption from Securities and Exchange Commission regulation that banks
previously enjoyed with more limited exemptions, and it reaffirms that states
are the regulators for the insurance activities of all persons, including
federally-chartered banks.
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<PAGE>
The Gramm-Leach-Bliley Act also establishes a minimum federal standard of
financial privacy. Financial institutions are required to institute written
privacy policies that must be disclosed to customers at certain required
intervals.
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<PAGE>
EFFECT OF MERGER ON RIGHTS OF SHAREHOLDERS
As a result of the Merger, holders of Peoples State Bank common stock will be
exchanging shares of Peoples State Bank, a Florida banking corporation governed
by the Florida Banking Code ("FBC") and the Florida Business Corporation Act
("FBCA"), Peoples State Bank's Articles of Incorporation, and Peoples State
Bank's Bylaws, for shares of Alabama National, a Delaware corporation governed
by the DGCL, Alabama National's Certificate of Incorporation and Alabama
National's Bylaws. Certain significant differences exist between the rights of
Peoples State Bank shareholders and those of Alabama National shareholders. The
differences deemed material by Peoples State Bank and Alabama National are
summarized below. The following discussion is necessarily general; it is not
intended to be a complete statement of all differences affecting the rights of
shareholders and their respective entities, and it is qualified in its entirety
by reference to the FBC, the FBCA and the DGCL, as well as to Alabama
National's Certificate of Incorporation and Bylaws and Peoples State Bank's
Articles of Incorporation and Bylaws.
Charter and Bylaw Provisions
Alabama National's Certificate of Incorporation and Bylaws contain certain
provisions which may make Alabama National a less attractive target for an
acquisition of control by anyone who does not have the support of Alabama
National's Board of Directors and shareholders. Such provisions include, among
other things, the ability of the Alabama National Board of Directors to issue
preferred stock and to fix the designation, preferences and other rights of
such preferred stock. See "Description of Alabama National Common Stock."
Peoples State Bank's Articles of Incorporation and Bylaws do not contain any
provision providing for such action on behalf of the Board of Directors.
The foregoing summary is qualified in its entirety by reference to Alabama
National's Certificate and Bylaws, which are available upon written request
from Alabama National and which are on file with the Commission, and to the
Articles of Incorporation and Bylaws of Peoples State Bank, which are available
upon request from Peoples State Bank. See "Where You Can Find More
Information."
Shareholder Approval of Mergers
Section 658.44 of the FBC provides that certain mergers, consolidations, and
sales of substantially all of the assets of a Florida bank must be approved by
the Florida Department of Banking and Finance and by a majority of the
outstanding shares of the bank entitled to vote thereon. The Merger requires
the prior approval of the Florida Department of Banking and Finance.
The DGCL permits a merger to become effective without the approval of the
surviving corporation's shareholders provided certain requirements are met.
Under the DGCL, if the articles of incorporation of the surviving corporation
do not change following the merger, the amount of the surviving corporation's
common stock to be issued or delivered under the plan of merger does not exceed
20% of the total shares of outstanding voting stock immediately prior to the
acquisition, and the board of directors of the surviving corporation adopts a
resolution approving the plan of merger, no shareholder approval is required.
Where shareholder approval is required under the DGCL a merger can generally be
approved by a majority vote of the outstanding shares of capital stock of each
class
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<PAGE>
entitled to vote thereon, unless the certificate or articles of incorporation
require a greater vote. If the proposed merger or other business combination
were to involve an "interested person" or "affiliated transaction," however,
the DGCL imposes supermajority approval requirements with certain
qualifications. Neither the Alabama National Certificate of Incorporation nor
Peoples State Bank's Articles of Incorporation contain any supermajority
requirements. See "-Antitakeover Legislation."
Dissenters' Rights
Under Florida law, holders of Peoples State Bank Common Stock as of the Record
Date are entitled to dissenters' rights of appraisal. See "Dissenters' Rights."
Under the DGCL, a shareholder has the right, in connection with certain mergers
or consolidations, to dissent from certain corporate transactions and receive
the fair market value (excluding any appreciation or depreciation as a
consequence or in expectation of the transaction) of his shares in cash in lieu
of the consideration he otherwise would have received in the transaction. Such
fair value is determined by the Delaware Court of Chancery if a petition for
appraisal is timely filed. In addition, a Delaware corporation may, but is not
required to, provide in its certificate of incorporation that appraisal rights
shall be available to shareholders in certain other events regarding which
appraisal rights are not otherwise available. No such provision is included in
Alabama National's Certificate of Incorporation.
Under the DGCL, appraisal rights will not be available to shareholders of a
corporation (unless the certificate of incorporation provides otherwise, which
the Alabama National Certificate of Incorporation does not) if the shares are
listed on a national securities exchange or quoted on the NASDAQ National
Market or held of record by more than 2,000 shareholders and shareholders are
permitted by the terms of the merger or consolidation to accept in exchange for
their shares: (a) shares of stock of the surviving or resulting corporation,
(b) shares of stock of another corporation listed on a national securities
exchange or held of record by more than 2,000 shareholders; (c) cash in lieu of
fractional shares of such stock; or (d) any combination of the consideration
listed in (a) through (c) above. In addition, appraisal rights will not be
available to shareholders of a Delaware corporation in a merger if such
corporation is the surviving corporation and no vote of its shareholders is
required. See "-Shareholder Approval of Mergers."
Shareholders Meetings and Voting
Special Meetings. Under the FBCA and pursuant to the Peoples State Bank
Articles of Incorporation and Bylaws, a special meeting of shareholders may be
called at any time by the Chairman of the Board, the President or, in their
absence by the Vice President, or by the majority of the Board of Directors,
and shall be called upon the written request of the shareholders owning ten
percent (10%) or more of the outstanding stock of Peoples State Bank.
Under the DGCL, shareholders of Delaware corporations do not have a right to
call special meetings unless such right is conferred upon the shareholders in
the corporation's certificate of incorporation or bylaws. Alabama National's
Certificate of Incorporation does not confer the right to its shareholders to
call a special shareholders meeting.
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<PAGE>
Actions Without a Meeting. Under the FBCA and the DGCL, the shareholders may
take action without a meeting if a consent in writing to such action is signed
by the shareholders having the minimum number of votes that would be necessary
to take such action at a meeting, unless prohibited in the articles or
certificate of incorporation. Peoples State Bank's Articles and Bylaws do not
prohibit such action by written consent. Alabama National's Certificate denies
shareholder action by written consent.
Election and Removal of Directors. Pursuant to the Articles of Incorporation
and Bylaws of Peoples State Bank, members of the Board are elected by the
shareholders at each annual meeting of the shareholders and serves until the
next annual meeting or until their successors have been elected or appointed. A
majority of the full Board plus one may, at any time during the year following
the annual meeting of the shareholders in which such action has been
authorized, increase the number of directors by not more than two (2) and
appoint persons to fill the resulting vacancies. When any vacancy occurs among
the directors, a majority of the remaining members of the Board may appoint a
director to fill such vacancy at any regular or special meeting of the Board.
Under the DGCL, the directors of a corporation shall be elected by a plurality
of the votes cast by the holders of shares entitled to vote in the election of
directors at a meeting of shareholders at which a quorum is present, unless the
articles or certificate of incorporation provides for cumulative voting.
Alabama National's Certificate of Incorporation does not provide for cumulative
voting. See "Description of Alabama National Common Stock."
Under the FBCA, and if cumulative voting is not authorized, as in the case of
Peoples State Bank, once a director has been elected, he or she may be removed
if the number of votes cast to remove him is greater than the number of votes
cast not to remove him, unless the articles or certificate of incorporation
provide that directors may be removed only for cause. Peoples State Bank's
Articles do not contain such a provision.
Under the DGCL, unless the certificate of incorporation provides otherwise, in
the case of a corporation whose board of directors is staggered, shareholders
may effect a removal of a director only for cause. Alabama National's
Certificate of Incorporation does not provide for a classified or staggered
Board.
Voting on Other Matters. Section 658.23 of the FBC requires amendments to the
Articles of Incorporation of a Florida bank to be approved by the Florida
Department of Banking and Finance. The FBCA requires amendments to the Articles
of Incorporation to be approved by the shareholders of the corporation upon
recommendation of the corporation's Board of Directors. Unless the FBCA, the
Articles of Incorporation, or the Board of Directors requires a greater vote or
voting by groups, amendments to the Articles of Incorporation must be approved
by a majority of the votes cast, a quorum being present.
Section 658.23 of the FBC provides that, unless the Articles of Incorporation
provide otherwise, the Board has the authority to adopt or amend bylaws that do
not conflict with bylaws that may have been adopted by the shareholders.
Under the DGCL, an amendment to the articles or certificate of incorporation
requires the approval of the holders of at least a majority of the outstanding
shares of the corporation entitled to vote
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thereon, unless otherwise specified in the articles of incorporation. Alabama
National's Certificate of Incorporation does not contain a provision increasing
this voting requirement.
Under the DGCL and the FBCA, a corporation may sell, lease, exchange or
otherwise dispose of all, or substantially all, of its property and assets
(with or without the goodwill), otherwise than in the usual and regular course
of its business, only with the approval of the holders of a majority of all of
the outstanding shares of the corporation entitled to vote thereon, unless the
certificates or articles of incorporation or bylaws require a greater vote.
Alabama National's Certificates of Incorporation does not require a greater
vote.
Under the DGCL and the FBCA, the dissolution of a corporation must be approved
by the holders of a majority of the corporation's stock entitled to vote
thereon, unless the articles or certificate of incorporation requires the vote
of a larger portion of the outstanding stock. Neither Peoples State Bank's
Articles of Incorporation nor Alabama National's Certificate of Incorporation
require a greater vote.
Dividends
Under the FBC, the directors of any bank or trust company, after charging off
bad debts, depreciation, and other worthless assets if any, and making
provision for reasonably anticipated future losses on loans and other assets,
may quarterly, semiannually, or annually declare a dividend of so much of the
aggregate of the net profits of that period combined with its retained net
profits of the preceding 2 years as they shall judge expedient, and, with the
approval of the Department of Banking and Finance, any bank or trust company
may declare a dividend from retained net profits which accrued prior to the
preceding 2 years, but each bank or trust company shall, before the declaration
of a dividend on its common stock, carry twenty percent (20%) of its net
profits for such preceding period as is covered by the dividend to its surplus
fund, until the same shall at least equal the amount of its common and
preferred stock then issued and outstanding. No bank or trust company shall
declare any dividend at any time at which its net income from the current year
combined with the retained net income from the preceding two (2) years is a
loss or which would cause the capital accounts of the bank or trust company to
fall below the minimum amount required by law, regulation, order, or any
written agreement with the Department of Banking and Finance or a state or
federal regulatory agency. A bank or trust company may, however, split up or
divide the issued shares of capital stock into a greater number of shares
without increasing or decreasing the capital accounts of the bank or trust
company, and such shall not be construed to be a dividend.
The DGCL provides that dividends may be declared from the corporation's surplus
or, if there is no surplus, from its net profits (not only out of surplus) for
the fiscal year in which the dividend is declared and the preceding fiscal
year. Dividends may not be declared, however, if the corporation's capital has
been diminished to an amount less than the aggregate amount of all capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, substantially all of
the funds available for the payment of dividends by Alabama National are
derived from the Banks, and there are various statutory limitations on the
ability of the Banks to pay dividends to Alabama National. See "Risk Factors-
Restrictions on Dividends" and "Where You Can Find More Information."
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Holders of Alabama National common stock are entitled to receive dividends
ratably when, as and if declared by Alabama National's Board of Directors from
assets legally available therefor, after payment of all dividends on preferred
stock, if any is outstanding.
Preemptive Rights
Pursuant to Peoples State Bank's Articles of Incorporation, the shareholders of
Peoples State Bank have a preemptive right to acquire a proportional amount of
any additional shares of capital stock issued by Peoples State Bank, subject to
certain limitations under the FBCA. Alabama National's Certificate of
Incorporation does not provide for preemptive rights.
Liquidation Rights
Generally under both the FBCA and the DGCL, shareholders are entitled to share
ratably in the distribution of assets upon the dissolution of their
corporation. Preferred shareholders typically do not participate in the
distribution of assets of a dissolved corporation beyond their established
contractual preferences. Once the rights of preferred shareholders have been
fully satisfied, common shareholders are entitled to the distribution of any
remaining assets. Holders of Alabama National common stock are entitled to
receive their pro rata portion of the remaining assets of Alabama National
after the holders of Alabama National Preferred Stock, if any, have been paid
in full any sums to which they may be entitled. As of the date hereof, no
Alabama National Preferred Stock has been issued by Alabama National. Pursuant
to Alabama National's Certificate, the Alabama National Board has discretion to
set liquidation preferences for Alabama National's Preferred Stock. See
"Description of Alabama National Capital Stock."
Limitation of Liability and Indemnification
Peoples State Bank. Peoples State Bank's Articles do not provide for any
indemnification to Peoples State Bank officers, directors or employees, as
permitted by the FBCA. The Bylaws of Peoples State Bank do provide for
indemnification or reimbursement by Peoples State Bank of any person for any
reasonable expenses actually incurred in connection with any action, suit or
proceeding, civil or criminal, to which he or she is or shall be made a party
by reason of, among other things, his or her being or having been a director,
officer, or employee of Peoples State Bank, provided the person acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the corporation; provided, however, that no such reimbursement
shall occur if the person is adjudged guilty of or liable for negligence or
misconduct in the performance of his or her duties to the corporation, unless
the court determines that such indemnification is appropriate under the
circumstances. In any event, it is mandatory for a Florida corporation to
indemnify a director, officer, employee or agent against expenses actually and
reasonably incurred in successfully defending an action, if he or she prevails
on the merits in such action.
Alabama National. Delaware law permits a corporation to set limits on the
extent of a director's liability. Under the Alabama National Certificate, a
director will not be liable to Alabama National or its shareholders for
monetary damages for any breach of fiduciary duty as a director, except for
(a) breach of a director's duty of loyalty, (b) acts or omissions not in good
faith or which involve
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intentional misconduct or a knowing violation of law, (c) an unlawful payment
of dividends or an unlawful stock purchase or redemption, or (d) any
transaction from which the director derived any improper personal benefit. The
Alabama National Certificate of Incorporation authorizes the indemnification of
Alabama National's directors, officers and others to the fullest extent
permitted by law. Delaware law permits a corporation to indemnify its officers,
directors, employees and agents if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation. Indemnification is not allowed under Delaware law, absent a
court order to the contrary, if the officer, director, employee or agent
seeking indemnification has been finally adjudged to be liable to the
corporation.
Antitakeover Legislation
Affiliated Transactions and Certain Business Combinations. The FBCA requires
that any "affiliated transaction," which term includes a merger, sale of
significant assets of the corporation and similar extraordinary corporate
transactions, between the corporation and an interested shareholder (generally
defined as any person who is the beneficial owner of more than ten percent
(10%) of the outstanding voting shares of the corporation) be approved by the
affirmative vote of the holders of two-thirds of the voting shares of the
corporation other than the shares beneficially owned by the interested
shareholder. The voting requirements of the FBCA will not apply, however, to an
affiliated transaction if: (a) the affiliated transaction has been approved by
a majority of the corporation's disinterested directors; (b) the corporation
has not had more than 300 shareholders at any time during the preceding three
years; (c) the interested shareholder has been the beneficial owner of at least
80% of the corporation's outstanding voting shares for at least five (5) years;
(d) the interested shareholder is the beneficial owner of at least ninety
percent (90%) of the outstanding voting shares of the corporation; (e) certain
fair price requirements have been met. The statute also provides that the
restrictions contained therein shall not apply to any corporation whose
articles of incorporation or bylaws contain a provision expressly electing not
to be governed thereby. The Peoples State Bank Articles do not contain such a
provision.
The DGCL similarly prohibits a corporation from entering into certain "business
combinations" between the corporation and an "interested stockholder"
(generally defined as any person who is the beneficial owner of more than 15%
of the outstanding voting shares of the corporation), unless the corporation's
Board of Directors has previously approved either (a) the business combination
in question or (b) the stock acquisition by which such interested stockholder's
beneficial ownership interest reached 15%. The prohibition lasts for three
years from the date the interested stockholder's beneficial ownership reached
15%. Notwithstanding the preceding, the DGCL allows a corporation to enter into
a business combination with an interested stockholder if: (a) the business
combination is approved by the corporation's Board of Directors and is
authorized by an affirmative vote of at least two-thirds of the outstanding
voting stock of the corporation which is not owned by the interested
stockholder, or (b) such interested stockholder owned at least 85% of the
outstanding voting stock of the corporation. The statute also provides that the
restrictions contained therein shall not apply to any corporation whose
certificate of incorporation contains a provision expressly electing not to be
governed thereby. The Alabama National Certificate does not contain such a
provision.
Control Share Regulation. Unless the articles of incorporation or bylaws
provide otherwise, the FBCA restricts the voting rights of a person who
acquires "control shares" in an "issuing public
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corporation." "Control shares" are defined under the FBCA as those shares that,
when added to all other shares of the issuing public corporation owned by a
person or in respect to which that person may exercise or direct the exercise
of voting power, would entitle that person to exercise the voting power of the
corporation in the election of directors within any of the following ranges of
voting power: (a) one-fifth or more but less than one-third of all voting
power; (b) one-third or more but less than a majority of all voting power; or
(c) a majority or more of all voting power. An "issuing public corporation" is
a corporation that has: (a) 100 or more shareholders; (b) its principal place
of business, its principal office or substantial assets within Florida; and (c)
either (i) more than ten percent (10%) of its shareholders reside in Florida,
(ii) more than ten percent (10%) of its shares are owned by Florida residents,
or (iii) 1,000 shareholders reside in Florida. However, Florida's "control
share" anti-takeover statute does not apply to a merger transaction that is
subject to shareholder approval. The effect of this statute is discussed below
only to illustrate the differences between Delaware and Florida law.
If a control share acquisition has been made, the control shares have no voting
rights unless the holders of a majority of shares (other than those held by the
acquirer and the corporation's officers and employee-directors) grant voting
rights to those shares by resolution. Any person who proposes to make or has
made a control share acquisition (an "Acquirer") may, at his or her election,
deliver an acquiring person statement to the issuing public corporation setting
forth certain information concerning the Acquirer and the acquisition of his
shares, together with a request for a shareholders meeting to determine his
voting rights, which meeting must be held within fifty (50) days of the date of
the request. The Acquirer must pay the expenses of the shareholders meeting.
If an Acquirer acquires a majority of the outstanding shares of the corporation
and is granted full voting rights pursuant to the procedure outlined above, the
other shareholders of the corporation have dissenters' rights to require the
corporation to purchase their shares for a "fair value." The term "fair value"
is defined as a value not less than the highest price paid per share by the
acquirer in the control share acquisition.
Although certain of the specific differences between the voting and other
rights of Peoples State Bank's shareholders and Alabama National's shareholders
are discussed above, the foregoing summary is not intended to be a complete
statement of the comparative rights of such shareholders under the laws of the
FBC, FBCA and Delaware law, or the rights of such persons under the respective
charters and Bylaws of Alabama National and Peoples State Bank. Nor is the
identification of certain specific differences meant to indicate that other
differences do not exist. The foregoing summary is qualified in its entirety by
reference to the particular requirements of the FBC, FBCA and the DGCL and the
specific provisions of Alabama National's Certificate of Incorporation and
Bylaws and Peoples State Bank's Articles of Incorporation and Bylaws.
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CERTAIN INFORMATION CONCERNING ALABAMA NATIONAL
General
Alabama National is a registered bank holding company subject to supervision
and regulation by the Federal Reserve and is a corporation organized under the
laws of the State of Delaware. Its main office is located at 1927 First Avenue
North, Birmingham, Alabama 35203 (Telephone Number: (205) 583-3600). Alabama
National is currently the parent of three national banks, National Bank of
Commerce of Birmingham (Birmingham, Alabama and the Birmingham metropolitan
area), Community Bank of Naples, National Association (Naples, Florida) and
Citizens & Peoples Bank, National Association (Escambia County, Florida); three
state member banks, Alabama Exchange Bank (Tuskegee, Alabama), Bank of
Dadeville (Dadeville, Alabama) and First Gulf Bank (Baldwin County, Alabama),
and four state nonmember banks, First American Bank (Decatur/Huntsville,
Alabama), Public Bank (St. Cloud, Florida), Georgia State Bank (Mableton,
Georgia) and First Citizens Bank (Talladega, Alabama). In addition, Alabama
National is the ultimate parent entity of one securities brokerage firm, NBC
Securities, Inc. (Birmingham, Alabama); one receivables factoring company,
Corporate Billing, Inc. (Decatur, Alabama); and one insurance agency, Rankin
Insurance, Inc. (Decatur, Alabama).
At September 30, 2000, Alabama National had total assets of approximately $2.2
billion, total deposits of approximately $1.7 billion, total net loans of
approximately $1.6 billion and total shareholders' equity of approximately
$153.2 million. Additional information about Alabama National is included in
documents incorporated by reference in this Proxy Statement-Prospectus. See
"Summary-Selected Consolidated Financial Data," and "Where You Can Find More
Information."
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CERTAIN INFORMATION CONCERNING PEOPLES STATE BANK
Description of Business
General
Peoples State Bank commenced operations in 1949 as a full service commercial
bank, without trust powers, in Groveland, Florida. Its main office is located
at 200 East Broad Street in Groveland, Florida.
Peoples State Bank offers a full range of retail and commercial deposit
accounts and loans. In addition, Peoples State Bank provides such consumer
services as U.S. Savings Bonds, wire transfers, automatic teller services,
travelers checks, cashiers checks, safe deposit boxes, bank by mail services
and direct deposit services.
Market Area and Competition
The primary service area for Peoples State Bank presently consists of southern
and central Lake County, Florida with offices located in Groveland, Clermont
and Leesburg. The market area is bounded on the west by Sumter County, on the
south by Polk County, on the east by Orange County, and on the north by State
Road 44. Competition among financial institutions in southern and central Lake
County is intense. There are currently 13 commercial banks with 51 branches,
and two savings and loan associations with seven branch offices within the
Bank's primary service area.
Peoples State Bank is in competition with existing area financial institutions
other than commercial banks and savings and loan associations, including
insurance companies, consumer finance companies, brokerage houses, credit
unions and other business entities which have recently been invading the
traditional banking markets. The extent to which other types of financial
institutions compete with commercial banks has increased significantly within
the past few years as a result of federal and state legislation which has, in
several respects, deregulated financial services. The impact of existing
legislation and subsequent laws that deregulated the financial services
industry cannot be fully assessed or accurately predicted.
Deposits
Peoples State Bank offers a full range of interest bearing and non-interest
bearing accounts, including commercial and retail checking accounts, money
market accounts, individual retirement accounts, regular interest bearing
statement savings accounts and certificates of deposit with fixed rates and a
range of maturity date options. The sources of deposits are residents,
businesses and employees of businesses within the bank's market area. Peoples
State Bank pays competitive interest rates on time and savings deposits. In
addition, Peoples State Bank has implemented a service charge fee schedule
competitive with other financial institutions in the bank's market area,
covering such matters as maintenance fees on checking accounts, per item
processing fees on checking accounts, returned check charges and the like.
No material portion of the bank's deposits have been obtained from any one
customer or group of customers. There are no material seasonal factors that
would have an adverse impact on the Bank's deposits. No material deposit
liabilities have been incurred from outside the Bank's service area.
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Loan Portfolio
Peoples State Bank engages in a full complement of lending activities,
including commercial, consumer/installment and real estate loans.
Lending is directed principally towards individuals and businesses whose
demands for funds fall within Peoples State Bank's legal lending limits and
which are potential deposit customers of Peoples State Bank. This includes
loans made to individuals, partnerships or corporate borrowers, which are
obtained for a variety of business purposes. Particular emphasis is placed on
small and middle market commercial loans and owner occupied commercial and
residential real estate loans.
Peoples State Bank may originate loans and participate with other banks with
respect to loans which exceed Peoples State Bank's lending limits. Management
of Peoples State Bank does not believe that loan participations necessarily
pose any greater risk of loss than loans which Peoples State Bank originates.
No material portion of Peoples State Bank's outstanding loans was concentrated
within a single industry or group of related industries, with the exception of
residential and commercial mortgage loans. As of September 30, 2000,
approximately 82.3% of Peoples State Bank's outstanding loans consisted of
residential and commercial mortgage loans. There are no material seasonal
factors that would have an adverse impact on Peoples State Bank's outstanding
loans. However, because Peoples State Bank derives a substantial portion of its
business from mortgage loans, to the extent that fluctuations and changes occur
in the housing industry, Peoples State Bank's business could fluctuate as well.
The following is a description of each of the major categories of loans in
Peoples State Bank's loan portfolio:
Commercial, Financial and Agricultural. These loans are customarily granted to
local business customers, usually on a collateralized basis, to meet local
credit needs. The loans can be extended for periods of between one year and
five years and are usually structured to fully amortize over the term of the
amortization up to ten years. The terms and loan structure are dependent on the
collateral and strength of the borrower. The loan to value ratios typically
range from 50% to 80%. The risks of these types of loans depend on the general
business conditions of the local economy and the local business borrower's
ability to sell its products and services in order to generate sufficient
business profits to repay Peoples State Bank under the agreed upon terms and
conditions. The value of the collateral held by Peoples State Bank as a measure
of safety against loss is most volatile in this loan category.
Real Estate-Construction. These loans are made for the construction of single
family residences in Peoples State Bank's market area. The loans are granted to
qualified individuals with down payments which are typically at least 20% of
the appraised value or contract price, whichever is less. The interest rates
typically fluctuate up to 1% above Peoples State Bank's prime interest rate
during the 6 months to 1 year construction period, and Peoples State Bank
generally charges a fee of up to 1% in addition to the normal closing costs.
These loans generally command higher rates and fees commensurate with the risk
warranted in the construction lending field. The risk in construction lending
is dependent upon the performance of the builder in building the project to the
plans and
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specifications of the borrower and the bank's ability to administer and control
all phases of the construction disbursements. Upon completion of the
construction period, the mortgage is converted to a permanent loan and normally
sold to an investor in the secondary mortgage market.
Real Estate Mortgage
These loans are granted to qualified individuals for the purchase and refinance
of existing single family residences in Peoples State Bank's market area. Both
fixed and variable rate loans are offered at competitive rates and terms.
Peoples State Bank generally grants only those fixed rate loans which can be
sold immediately upon closing in accordance with commitments obtained in
advance from a mortgage investor. This practice allows the bank to limit
interest rate risk associated with this type of lending. Peoples State Bank
retains adjustable rate loans for its portfolio when it has sufficient
liquidity to fund them and when rates are favorable for the retention of these
loans. The bank's adjustable rate mortgages have annual and lifetime interest
rate caps consistent with industry standards. None of the bank's home mortgage
loans carry prepayment penalties, and therefore all of these loans can be paid
out or refinanced at any time.
Installment/Consumer Loans
These loans are granted to individuals for personal, family or household
purposes including the purchase of automobiles and recreational vehicles which
may be used to secure these loans. This category also includes loans made for
home improvements and may be secured by first or junior mortgage liens.
Consumer loans are generally granted for periods ranging between one and five
years at fixed rates ranging from 1% below the prime rate to 8% above the prime
rate depending on the loan term and collateral. Losses or declines in the
borrowers' income due to unemployment or divorce and increases in the
borrowers' expenses due to illness or injury represent the most common risks
associated with defaults on consumer loans.
Investments
As of September 30, 2000, investment in securities comprised approximately
10.4% of Peoples State Bank's assets, federal funds sold comprised
approximately 1.8% of the bank's assets, and loans comprised approximately
81.0% of the bank's assets. Peoples State Bank invests primarily in direct
obligations of the United States, obligations guaranteed as to principal and
interest by the United States and obligations of agencies of the United States.
In addition, Peoples State Bank enters into federal funds transactions with its
principal correspondent banks, and primarily acts as a net seller of such
funds. The sale of federal funds amounts to a short term loan from Peoples
State Bank to another bank. A state bank's lending and investment limits are
separate and distinct requirements.
Asset/Liability Management
It is the objective of Peoples State Bank to manage assets and liabilities to
provide a satisfactory, consistent level of profitability within the framework
of established cash, loan, investment, borrowing and capital policies. Certain
of the officers of Peoples State Bank are responsible for monitoring policies
and procedures that are designed to ensure an acceptable composition of
asset/liability mix, stability and leverage of all sources of funds while
adhering to prudent banking practices. It is the overall philosophy of
management to support asset growth primarily through growth of core deposits,
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which include deposits of all categories made by individuals, partnerships and
corporations. Management of Peoples State Bank seeks to invest the largest
portion of the bank's assets in commercial, consumer and real estate loans.
Peoples State Bank regards certificates of deposits of $100,000 or more as
volatile deposits. The Bank maintains sufficient liquidity to repay these
deposits on maturity. While Peoples State Bank does not generally pursue these
types of deposits, at times it is profitable to do so and this option is
exercised when deemed prudent by management. This accounts for the volatility
in this liability category.
Securities sold subject to repurchase are only done on an exception basis to
maintain account relationships. As of September 30, 2000, Peoples State Bank
had entered into repurchase agreements totaling $1.8 million. Peoples State
Bank has available four (4) overnight federal funds purchased lines totaling
$6.5 million which may be used to meet liquidity needs. As of September 30,
2000, Peoples State Bank had no balances outstanding under these lines. As of
September 30, 2000, Peoples State Bank had total loans from the Federal Home
Loan Bank of Atlanta of $8.0 million that were comprised of $6.0 million in a
one-year advance and $2.0 million in an overnight line of credit.
The bank's asset/liability mix is monitored on a daily basis with a quarterly
report reflecting interest sensitive assets and interest sensitive liabilities
being prepared and presented to the Peoples State Bank's Board of Directors.
The objective of this policy is to control interest sensitive assets and
liabilities so as to minimize the impact of substantial movements in interest
rates on the bank's earnings.
Correspondent Banking
Correspondent banking involves the provision of services by one bank to another
bank which cannot provide the services for itself from an economic or practical
standpoint. Peoples State Bank is required to purchase correspondent services
offered by larger banks, including check collections, purchase of federal
funds, security safekeeping, investment services, coin and currency supplies,
overline and liquidity loan participations and sales of loans to or
participations with correspondent banks.
Peoples State Bank may sell loan participations to correspondent banks with
respect to loans which exceed the Bank's lending limit. As of September 30,
2000, portions of six loans were sold to other banks.
Data Processing
Peoples State Bank has entered into a data processing services agreement with
Phoenix International, Ltd., Inc., a financial institutions software services
company based in central Florida. Under the agreement, Peoples State Bank
licenses the use of a full range of data processing software, including such
operating systems as an automated general ledger, deposit accounting,
commercial, real estate and installment lending data processing and central
information file.
Facilities
Peoples State Bank owns all of its facilities. The Bank's main office is
located in a single-story commercial building in Groveland, Florida. The
facility consists of 7,500 square feet, 9 teller
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stations, 11 offices, a vault, a night depository, and 5 drive-in windows. A
board/conference room is located in an adjacent building on the Bank's premises
which consists of 1,008 square feet. Simpson House, an adjacent storage
facility, consists of approximately 4,200 square feet.
The Bank's Clermont branch office is located in a single-story commercial
building which consists of 4,159 square feet and includes 9 teller stations, 1
office, a vault, a night depository and 5 drive-in windows. The Bank's Leesburg
branch office is located in a single-story commercial building which consists
of 2,500 square feet and includes 5 teller stations, a vault, a night
depository and 4 drive-in windows.
Employees
Peoples State Bank presently employs 56.5 full-time equivalent persons,
including 15 officers. Peoples State Bank hires additional persons as needed,
including additional tellers and customer service representatives. Management
of Peoples State Bank believes that its employee relations are good. There are
no collective bargaining agreements covering any of the Bank's employees, and
the only employee subject to an employment contract is the bank's President and
CEO.
Information About Voting Securities and Principal Holders Thereof
Market Price and Dividends. There is no established public trading market for
Peoples State Bank's common stock. As of September 30, 2000, there were 184
record holders of Peoples State Bank's common stock.
During 1998 and 1999, Peoples State Bank paid quarterly dividends of $.10 per
share. In the second quarter of 1999, a special additional dividend of $.05 per
share was also paid. For the first three quarters of 2000, Peoples State Bank
has paid regular quarterly dividends of $.15 per share. See "Effect of Merger
on Rights of Shareholders-Dividends" for a discussion of the present
restrictions on the payment of dividends of Peoples State Bank's common stock,
and the restrictions which will limit the future payment of dividends on
Alabama National's common stock upon consummation of the merger.
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Security Ownership of Certain Beneficial Owners and Management. The following
table sets forth, as of the Record Date, (i) the names and addresses of each
beneficial owner of more than 5% of Peoples State Bank common stock showing the
amount and nature of such beneficial ownership, (ii) the names of each director
and executive officer of Peoples State Bank and the number of shares of Peoples
State Bank common stock owned beneficially by each of them, and (iii) the
number of shares of Peoples State Bank common stock owned beneficially by all
directors and executive officers as a group.
<TABLE>
<CAPTION>
Percent
Shares Beneficially of Outstanding
Name Owned Shares
---- ------------------- --------------
<S> <C> <C>
Bradford Johnson........................... 58,440 9.25%
Post Office Box 8208
Shawnee Mission, Kansas 66208
Gerald Horowitz............................ 50,040 7.92%
3860 Northside Drive
Atlanta, Georgia 30305
Suntrust Banks, Inc........................ 33,816 5.36%
Post Office Box 4418
Center Code 0635
Atlanta, Georgia 30302
Donald B. Bailey........................... 25,287(1) 4.00%
Peggy Sue Brinkley......................... 250 *
Joe E. Fairchild........................... 14,493 2.30%
Jane L. Geraci............................. 23,187(2) 3.67%
Bobby L. Leininger......................... 11,544 1.83%
Mark I. McLin.............................. 11,811(3) 1.87%
Stephen W. Parrish......................... 1,497 *
Jeffrey A. Rice............................ 45,591(4) 7.22%
Post Office Box 4418
Center Code 0635
Atlanta, Georgia 30303
W. Wayne Sittler........................... 0 *
Dan Summerlin.............................. 10 *
Wayne M. Turner............................ 2,619 0.41%
All executive officers and directors as a
group (11 persons)........................ 136,289 21.58%
</TABLE>
--------
* Represents less than 1%.
(1) Includes 1,920 shares held by Mr. Bailey's wife in her own right and 3,135
shares held by Mr. and Mrs. Bailey as trustee or custodian for their
children, with respect to which Mr. Bailey disclaims beneficial ownership.
(2) Includes 480 shares held jointly by Mrs. Geraci and her daughter, with
respect to which Mrs. Geraci disclaims beneficial ownership.
(3) Includes 3,000 shares held by Mr. McLin as custodian for his children, with
respect to which he disclaims beneficial ownership.
(4) Includes 90 shares held by Mr. Rice as custodian for his daughter, with
respect to which he disclaims beneficial ownership.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OF PEOPLES STATE BANK
The following discussion and financial information are presented to aid in an
understanding of the current financial position and results of operations of
Peoples State Bank and should be read in conjunction with the Audited Financial
Statements and Notes thereto included at Appendix C. The emphasis of this
discussion will be on the nine month periods ended September 30, 2000 and 1999
and the years 1999, 1998, and 1997.
At September 30, 2000, Peoples State Bank had assets of approximately $121.6
million and operated three banking locations in Lake County, Florida. Peoples
State Bank's primary business is banking; therefore loans and investments are
the principal source of income.
This discussion contains certain forward looking statements with respect to the
financial condition, results of operation and business of Peoples State Bank
related, among other things to: trends or uncertainties which will impact
future operating results, liquidity and capital resources, and the relationship
between those trends or uncertainties and nonperforming loans and other loans;
the effect of the market's perception of future inflation and real returns and
the monetary policies of the Federal Reserve on short and long term interest
rates; and the effect of interest rate changes on liquidity and the interest
rate sensitivity management. These forward-looking statements involve certain
risks and uncertainties. Factors that may cause actual results to differ
materially from those contemplated by such forward looking statements include,
among others, the following possibilities: (a) difficulty integrating the
operations of Peoples State Bank and Alabama National and (b) general economic
conditions, either nationally or in Florida, are less favorable than expected.
Financial Condition
Average Assets and Liabilities
During the nine months ended September 30, 2000, average assets increased $22.3
million, or 24.3%, from the nine months ended September 30, 1999. From 1998 to
1999 average assets increased $18.2 million, or 24.1%. From 1997 to 1998
average assets increased $6.2 million, or 9.0%. The primary emphasis of Peoples
State Bank's growth strategy is in the lending area.
During the nine months ended September 30, 2000, average deposits increased
$15.0 million to $94.7 million, an 18.9% increase over the September 30, 1999
average deposits of $79.6 million. From 1998 to 1999 average deposits increased
$13.8 million, or 20.6%. From 1997 to 1998 average deposits increased $5.4
million, or 8.8%. Peoples State Bank carried no foreign loans or deposits in
any period discussed.
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The following table depicts Peoples State Bank's average balance sheets for the
nine months ended September 30, 2000 and 1999 and for the years ending December
31, 1999, 1998 and 1997:
AVERAGE BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30, Year Ended December 31,
----------------- -------------------------
2000 1999 1999 1998 1997
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Assets:
Cash and due from banks.......... $ 4,505 $ 4,667 $ 4,511 $ 2,965 $ 2,433
Funds sold....................... 2,432 2,228 2,470 2,724 2,996
Securities....................... 10,827 8,664 8,893 10,296 11,051
Loans, net of unearned income.... 90,737 71,177 72,571 55,404 50,654
Allowance for loan losses........ (1,120) (945) (953) (920) (935)
-------- ------- ------- ------- -------
Loans, net of allowance for loan
losses.......................... 89,617 70,232 71,618 54,484 49,719
Premises and equipment........... 2,181 2,457 2,417 2,342 1,867
Other assets..................... 4,457 3,488 3,704 2,606 1,135
-------- ------- ------- ------- -------
Total assets................. $114,019 $91,736 $93,613 $75,417 $69,201
======== ======= ======= ======= =======
Liabilities and Stockholders'
Equity:
Deposits:
Demand deposits................ $ 18,114 $15,065 $15,651 $12,222 $ 9,856
Interest-bearing transaction
accounts...................... 5,027 6,019 5,925 5,553 5,103
Savings and money market
deposits...................... 21,256 18,376 18,416 15,943 13,699
Time deposits.................. 50,266 40,174 40,834 33,294 32,959
-------- ------- ------- ------- -------
Total deposits............... 94,663 79,634 80,826 67,012 61,617
-------- ------- ------- ------- -------
Funds purchased.................. 2,231 1,504 1,510 552 205
Short-term debt.................. 7,556 1,778 2,825 -- --
Long-term debt................... -- -- -- -- --
Accrued interest and other
liabilities..................... 1,136 1,117 634 529 541
Stockholders' equity............. 8,433 7,703 7,818 7,324 6,838
-------- ------- ------- ------- -------
Total liabilities and
stockholders' equity........ $114,019 $91,736 $93,613 $75,417 $69,201
======== ======= ======= ======= =======
</TABLE>
Loans
Net loans at December 31, 1999 were $83.3 million, an increase of 38.7% over
December 31, 1998's total of $60.1 million. At December 31, 1999, real estate-
mortgage and construction loans represented 82.3% of total loans, commercial
and financial loans represented 14.1% of total loans, and consumer loans
represented only 3.3% of total loans.
At September 30, 2000, $77.2 million, or 78.3%, of total loans, net of unearned
interest, mature within one year or may be repriced within one year due to a
variable rate arrangement.
74
<PAGE>
The table immediately below shows the classification of loans by major category
at December 31, 1999, 1998, 1997, 1996, and 1995. The second table depicts
maturities of selected loan categories for loans maturing after one year.
COMPOSITION OF LOAN PORTFOLIO
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
December 31,
-----------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
----------------- ----------------- ----------------- ----------------- -----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, financial
and agricultural....... $11,782 14.12% $ 5,693 9.46% $ 4,012 7.41% $ 7,199 15.36% $ 1,778 5.56%
Real estate:
Construction........... 5,795 6.94 4,534 7.53 3,048 5.63 4,670 9.96 3,547 11.10
Mortgage--residential.. 34,586 41.44 27,101 45.03 27,880 51.51 17,558 37.45 11,568 36.20
Mortgage--commercial... 27,154 32.54 19,173 31.86 15,057 27.82 12,960 27.65 10,958 34.29
Mortgage--other........ 1,173 1.41 1,609 2.67 2,081 3.84 1,984 4.23 2,370 7.42
Consumer................ 2,762 3.31 1,919 3.19 1,785 3.30 2,320 4.95 1,389 4.35
Other................... 201 .24 153 .25 263 .49 187 .40 348 1.09
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total gross loans...... 83,453 100.00% 60,182 100.00% 54,126 100.00% 46,878 100.00% 31,958 100.00%
------ ------ ------ ------ ------
Unearned income......... (124) (109) (100) (103) (68)
------- ------- ------- ------- -------
Total loans, net of
unearned income....... 83,329 60,073 54,026 46,775 31,890
Allowance for loan
losses................. (1,043) (925) (936) (919) (932)
------- ------- ------- ------- -------
Total net loans........ $82,286 $59,148 $53,090 $45,856 $30,958
======= ======= ======= ======= =======
</TABLE>
LOAN MATURITY AND SENSITIVITY TO CHANGES IN INTEREST RATES
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31, 1999
------------------------------------------------------
Over one year
through five
One year or less years Over five years Total
---------------- ------------- --------------- -------
<S> <C> <C> <C> <C>
Commercial, financial
and agricultural....... $7,717 $4,124 $1,902 $13,743
Real estate............. 7,260 21,906 37,740 66,906
Consumer................ 359 1,884 437 2,680
</TABLE>
<TABLE>
<CAPTION>
Predetermined Floating
Rates Rates
------------- --------
<S> <C> <C>
Maturing after one year but within five years............ $ 18,908 $ 9,000
Maturing after five years................................ 8,296 31,789
-------- -------
$ 27,204 $40,789
======== =======
</TABLE>
Peoples State Bank's rollover/renewal policy consists of a re-evaluation of
maturing loans to determine whether such loans will be renewed (or rolled over)
and, if so, at what amount, rate and maturity.
75
<PAGE>
Investment Securities
The following table summarizes securities available for sale for the periods
presented.
AVAILABLE FOR SALE SECURITIES
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31,
---------------------------
1999 1998
------------- -------------
Cost Market Cost Market
------ ------ ------ ------
<S> <C> <C> <C> <C>
U.S. Treasury securities........................... $ -- $ -- $1,000 $1,001
U.S. Government Agencies........................... 4,655 4,512 4,520 4,532
State and political subdivisions................... 1,282 1,222 1,690 1,703
Mortgage backed securities......................... 2,896 2,746 2,120 2,112
Other.............................................. 320 320 337 337
------ ------ ------ ------
Total............................................ $9,153 $8,800 $9,667 $9,685
====== ====== ====== ======
</TABLE>
The maturities and weighted average yields of securities available for sale at
December 31, 1999, are presented in the following table using the average
stated contractual maturities.
SECURITIES AVAILABLE FOR SALE MATURITY DISTRIBUTION AND YIELDS
(Amounts in thousands, except yields)
<TABLE>
<CAPTION>
December 31, 1999
---------------------------------------------------------------------------------------------
After one but After five but
Within one year Within five years Within ten years After ten years Other securities
--------------- ------------------- ------------------- --------------- -------------------
Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1) Amount Yield(1)
------ -------- --------- --------- --------- --------- ------ -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S. Treasury
securities............. $ -- -- % $ -- -- % $ -- -- % $ -- -- % $ -- -- %
U.S. Government
Agencies............... -- -- 2,427 6.51 2,085 6.36 -- -- -- --
State and political
subdivisions........... 102 6.01 103 5.87 115 4.00 $ 902 5.47 -- --
Mortgage backed
securities............. -- -- 256 6.06 -- -- 2,490 7.25 -- --
Equity securities....... -- -- -- -- -- -- -- -- 320 5.01
----- ---- --------- ------- --------- ------- ------ ---- -------- -------
Total.................. $ 102 5.93% $ 2,786 6.44% $ 2,200 6.24% $3,392 6.78% $ 320 5.01%
===== ==== ========= ======= ========= ======= ====== ==== ======== =======
</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.
Deposits
Between 1998 and 1999 Peoples State Bank experienced growth in each type of
deposit as shown in the table below. Non-interest bearing demand deposits
increased by $3.8 million, or 27.8%, from year-end 1998 to year-end 1999. Total
time deposits increased by $12.9 million, or 39.9%, to $45.1 million from year-
end 1998. All categories of deposits, except for time deposits less than
$100,000, increased from year-end 1997 to year-end 1998, including an increase
of $3.9 million, or 40.2%, in non-interest bearing deposits and an increase of
$4.2 million, or 29.7%, in savings and money market deposits.
76
<PAGE>
Peoples State Bank has maintained and strengthened a stable base of non-
interest bearing demand deposits despite consumer trends toward interest
bearing deposits. At December 31, 1998, non-interest bearing demand deposits
were 19.34% of total deposits and at December 31, 1999 this ratio had increased
to 19.81%.
The table below summarizes deposits of Peoples State Bank for the dates
indicated:
DEPOSITS
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
December 31,
------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
---------------- ---------------- ---------------- ---------------- ----------------
Percent Percent Percent Percent Percent
Amount of Total Amount of Total Amount of Total Amount of Total Amount of Total
------- -------- ------- -------- ------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Demand.................. $17,257 19.81% $13,505 19.34% $ 9,632 14.71% $ 8,423 14.59% $ 7,814 16.27%
NOW..................... 6,154 7.07 5,715 8.18 5,539 8.46 5,863 10.16 5,177 10.78
Savings and money
market................. 18,568 21.32 18,371 26.30 14,166 21.64 14,208 24.61 13,878 28.90
Time less than
$100,000............... 33,460 38.42 26,018 37.26 30,708 46.91 24,911 43.15 17,163 35.74
Time greater than
$100,000............... 11,657 13.38 6,233 8.92 5,416 8.28 4,324 7.49 3,990 8.31
------- ------ ------- ------ ------- ------ ------- ------ ------- ------
Total deposits......... $87,096 100.00% $69,842 100.00% $65,461 100.00% $57,729 100.00% $48,022 100.00%
======= ====== ======= ====== ======= ====== ======= ====== ======= ======
</TABLE>
The following table reflects maturities of time deposits of $100,000 or more at
December 31, 1999. Time deposits include both certificates of deposit and time
deposit open accounts. Deposits of $11.7 million in this category represented
13.4% of total deposits at year-end 1999. Peoples State Bank management does
not actively pursue these deposits as a means to fund interest earning assets,
and as a result, rates paid on these deposits do not differ from rates paid on
smaller denomination certificates of deposit.
MATURITIES OF CERTIFICATES OF DEPOSIT AND OTHER TIME
DEPOSITS OF $100,000 OR MORE
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------
After Three
Zero Through Through One Through Greater Than
Three Months Twelve Months Three Years Three Years Total
------------ ------------- ----------- ------------ -------
<S> <C> <C> <C> <C> <C>
Certificates of deposit
of $100,000 or more.... $2,530 $5,210 $3,917 $-- $11,657
------ ------ ------ --- -------
Total............... $2,530 $5,210 $3,917 $-- $11,657
====== ====== ====== === =======
</TABLE>
Capital Resources
Shareholders' equity increased by $798,000 to $8.8 million at September 30,
2000 from $8.0 million at year-end 1999. The increase is primarily attributable
to net income of $963,000, less dividends paid during the first nine months of
$284,000.
The Federal Reserve and FDIC require that banks have a minimum of Tier I
capital equal to not less than 4% of risk adjusted assets and total capital
equal to not less than 8% of risk adjusted assets. Tier I capital consists of
common shareholders' equity. Tier II capital includes reserves for loan losses
up to 1.25% of risk adjusted assets. Tier I capital was $8.9 million at
September 30, 2000, and total
77
<PAGE>
(Tier I plus Tier II) capital was $10.1 million at September 30, 2000. Tier I
and total capital ratios were 9.98% and 11.23%, respectively, at September 30,
2000. Both ratios were above the regulatory minimums. The following table
summarizes the components of regulatory capital and regulatory capital ratios
for the periods presented.
ANALYSIS OF CAPITAL
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
September 30, December 31,
------------- -------------------------
2000 1999 1998 1997
------------- ------- ------- -------
<S> <C> <C> <C> <C>
Tier 1 Capital....................... $ 8,948 $ 8,269 $ 7,518 $ 7,077
Tier 2 Capital....................... 1,122 944 707 574
------- ------- ------- -------
Total qualifying capital (1)....... $10,070 $ 9,213 $ 8,225 $ 7,651
======= ======= ======= =======
Risk-adjusted total assets (including
off-balance sheet exposures)........ $89,690 $75,385 $56,374 $45,567
Tier 1 risk-based capital ratio
(4.00% required minimum)............ 9.98% 10.97% 13.34% 15.53%
Total risk-based capital ratio (8.00%
required minimum)................... 11.23 12.22 14.59 16.79
Tier 1 leverage ratio (4.00% required
minimum)............................ 7.54 8.06 9.72 9.75
</TABLE>
--------
(1) Does not include $89,000, $99,000, $218,000 and $362,000 of Peoples State
Bank's allowance for loan losses at September 30, 2000 and December 31,
1999, 1998 and 1997, respectively, in excess of 1.25% of risk-adjusted
total assets.
Results of Operations
Net Interest Income
Net interest income, which is the difference between interest income earned on
earning assets and the interest paid on interest-bearing liabilities, is the
largest component of a bank's earnings. Net interest income increased by
$600,000, or 19.3%, in the nine months ended September 30, 2000 ("the 2000 nine
months") compared with the nine months ended September 30, 1999 ("the 1999 nine
months"). Average earning assets increased by $21.9 million, or 26.7%, in the
2000 nine months compared to the 1999 nine months. During the 2000 nine months
the increase in earning assets was partly funded by a volume increase of $18.5
million, or 27.2%, in average interest-bearing liabilities. Despite the
increase in net interest income during the 2000 nine months versus the 1999
nine months, the net interest spread and net interest margin decreased by 39
and 30 basis points, respectively. The decline in net interest spread and net
interest margin is primarily attributable to increased reliance on time
deposits and Federal Home Loan Bank (FHLB) borrowings as a proportion of
overall funding because time deposits and FHLB borrowings generally bear higher
interest rates than other deposit liabilities. The following table analyzes net
interest income, weighted average yields on earning assets and weighted average
rates paid on interest-bearing liabilities for the 1999 and 2000 nine months.
78
<PAGE>
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(Amounts in thousands, except yields and rates)
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------------------------
2000 1999
------------------------ -----------------------
Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate
-------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Loans (1) (3) (4)........... $ 90,737 $6,279 9.24% $71,177 $4,742 8.91%
Securities:
Taxable.................... 8,399 413 6.57 7,483 337 6.02
Tax exempt................. 2,428 148 8.17 1,181 68 7.72
Funds sold.................. 2,432 145 7.96 2,228 134 8.04
-------- ------ ------- ------
Total earning assets (2).. 103,996 6,985 8.97 82,069 5,281 8.60
-------- ------ ------- ------
Cash and due from banks...... 4,505 4,667
Premises and equipment....... 2,181 2,457
Other assets................. 4,457 3,488
Allowance for loan losses.... (1,120) (945)
-------- -------
Total assets.............. $114,019 $91,736
======== =======
Liabilities:
Interest-bearing liabilities:
Interest-bearing transaction
accounts................... $ 5,027 86 2.29 $ 6,019 81 1.80
Savings deposits............ 21,256 572 3.59 18,376 400 2.91
Time deposits............... 50,266 2,156 5.73 40,174 1,551 5.16
Funds purchased............. 2,231 62 3.71 1,504 71 6.31
Other short-term
borrowings................. 7,556 355 6.28 1,778 51 3.84
-------- ------ ------- ------
Total interest-bearing
liabilities.............. 86,336 3,231 5.00 67,851 2,154 4.24
-------- ------ ------- ------
Demand deposits............. 18,114 15,065
Accrued interest and other
liabilities................ 1,136 1,117
Stockholders' equity........ 8,433 7,703
-------- -------
Total liabilities and
stockholders' equity..... $114,019 $91,736
======== =======
Net interest spread.......... 3.97% 4.36%
==== ====
Net interest income/margin on
a taxable equivalent basis.. 3,754 4.82% 3,127 5.09%
==== ====
Tax equivalent adjustment
(2)......................... 51 24
------ ------
Net interest income/margin... $3,703 4.76% $3,103 5.06%
====== ==== ====== ====
</TABLE>
--------
(1) Average loans include nonaccrual loans. All loans and deposits are
domestic.
(2) Tax equivalent adjustments are based on the assumed rate of 34%, and do
not give effect to the disallowance for Federal income tax purposes of
interest expense related to tax exempt assets.
(3) Fees in the amount of $265,000 and 232,000 are included in interest and
fees on loans for the 2000 nine months and the 1999 nine months,
respectively.
(4) Includes loan fees in the amount of $128,000 and $119,000 for the periods
ended September 30, 2000 and 1999, respectively, that have been
reclassified from noninterest income to be consistent with Alabama
National's presentation.
From 1998 to 1999, net interest income increased $733,000, or 20.9%. Average
earning assets increased by $15.5 million, or 22.7% from 1998 to 1999. During
1999, average interest-bearing
79
<PAGE>
liabilities increased $14.2 million, or 25.6%. Competition for lending and
funding resulted in a 7 basis point reduction in Peoples State Bank's net
interest margin from 1998 to 1999. Presented below is an analysis of net
interest income, weighted average yields on earning assets and weighted average
rates paid on interest-bearing liabilities for 1999, 1998, and 1997.
AVERAGE BALANCES, INCOME AND EXPENSES AND RATES
(Amounts in thousands, except yields and rates)
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
1999 1998 1997
----------------------- ----------------------- -----------------------
Average Income/ Yield/ Average Income/ Yield/ Average Income/ Yield/
Balance Expense Rate Balance Expense Rate Balance Expense Rate
------- ------- ------ ------- ------- ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Earning assets:
Loans (1) (3) (4)...... $72,571 $6,543 9.02% $55,404 $5,242 9.46% $50,654 $4,717 9.31%
Securities:
Taxable............... 7,705 466 6.05 9,472 562 5.93 10,514 629 5.98
Tax exempt............ 1,188 92 7.78 824 68 8.27 537 47 8.75
Funds sold............. 2,470 188 7.61 2,724 165 6.06 2,996 167 5.57
------- ------ ------- ------ ------- ------
Total earning assets
(2)................. 83,934 7,289 8.68 68,424 6,037 8.82 64,701 5,560 8.59
------- ------ ------- ------ ------- ------
Cash and due from
banks................. 4,511 2,965 2,433
Premises and
equipment............. 2,417 2,342 1,867
Other assets........... 3,704 2,606 1,135
Allowance for loan
losses................ (953) (920) (935)
------- ------- -------
Total assets......... $93,613 $75,417 $69,201
======= ======= =======
Liabilities:
Interest-bearing
liabilities:
Interest-bearing
transaction
accounts.............. $ 5,925 113 1.91 $ 5,553 103 1.85 $ 5,103 122 2.39
Savings and money
market deposits....... 18,416 546 2.96 15,943 509 3.19 13,699 450 3.28
Time deposits.......... 40,834 2,143 5.25 33,294 1,872 5.62 32,959 1,887 5.73
Funds purchased........ 1,510 85 5.63 552 25 4.53 205 10 4.88
Other short-term
borrowings............ 2,825 137 4.85 -- -- -- --
------- ------ ------- ------ ------- ------
Total interest-
bearing
liabilities......... 69,510 3,024 4.35 55,342 2,509 4.53 51,966 2,469 4.75
------- ------ ------- ------ ------- ------
Demand deposits......... 15,651 12,222 9,856
Accrued interest and
other liabilities...... 634 529 541
Stockholders' equity.... 7,818 7,324 6,838
------- ------- -------
Total liabilities and
stockholders'
equity.............. $93,613 $75,417 $69,201
======= ======= =======
Net interest spread..... 4.33% 4.29% 3.84%
==== ==== ====
Net interest
income/margin on a
taxable equivalent
basis.................. 4,265 5.08% 3,528 5.16% 3,091 4.78%
==== ==== ====
Tax equivalent
adjustment (2)......... 32 28 18
------ ------ ------
Net interest
income/margin.......... $4,233 5.04% $3,500 5.11% $3,073 4.75%
====== ==== ====== ==== ====== ====
</TABLE>
--------
(1) Average loans include nonaccrual loans. All loans and deposits are
domestic.
(2) Tax equivalent adjustments are based on the assumed rate of 34%, and do not
give effect to the disallowance for Federal income tax purposes of interest
expense related to tax exempt assets.
(3) Fees in the amount of $314,000, $177,000 and $68,000 are included in
interest and fees on loans for 1999, 1998 and 1997, respectively.
80
<PAGE>
(4) Includes loan fees in the amount of $156,000, $123,000 and $83,000 for
1999, 1998 and 1997, respectively, that have been reclassified from
noninterest income to be consistent with Alabama National's presentation.
The percentage of earning assets funded by interest-bearing liabilities also
affects Peoples State Bank's net interest income. Peoples State Bank's earning
assets are funded by interest-bearing liabilities, noninterest-bearing demand
deposits and stockholders' equity. The net return on earning assets funded by
noninterest-bearing demand deposits and stockholders' equity exceeds the net
return on earning assets funded by interest-bearing liabilities. Peoples State
Bank maintains a relatively consistent percentage of earning assets that are
funded by noninterest-bearing liabilities. During the 2000 nine months, 18.5%
of Peoples State Bank's average earning assets were funded by noninterest-
bearing liabilities compared with 19.7% in the 1999 nine months. In 1999, 19.4%
of Peoples State Bank's average earning assets were funded by noninterest-
bearing liabilities as compared to 18.6% in 1998. The earning assets funded by
noninterest-bearing liabilities had a positive impact on the net interest
income for each period.
The following tables set forth the effect which varying levels of earning
assets and interest-bearing liabilities and the applicable rates had on changes
in net interest income for the 2000 nine months and for the years ended 1999
and 1998. For the purposes of these tables, changes, which are not solely
attributable to volume or rates, are allocated to volume and rates on a pro
rata basis.
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------------------
2000 Compared to 1999
Variance Due to
-------------------------
Volume Yield/Rate Total
------ ---------- ------
<S> <C> <C> <C>
Earning assets:
Loans..................... $1,354 $ 183 $1,537
Securities:
Taxable................. 44 32 76
Tax exempt.............. 76 4 80
Cash balances in other
banks.................... -- -- --
Funds sold................ 13 (2) 11
Trading account
securities............... -- -- --
------ ----- ------
Total interest income... 1,487 217 1,704
Interest-bearing
liabilities:
Interest-bearing
transaction accounts..... (20) 25 5
Savings and money market
deposits................. 69 103 172
Time deposits............. 420 185 605
Funds purchased........... 37 (46) (9)
Other short-term
borrowings............... 254 50 304
Long-term debt............ -- -- --
------ ----- ------
Total interest expense.. 760 317 1,077
------ ----- ------
Net interest income on a
taxable equivalent
basis.................. $ 727 $(100) 627
====== =====
Taxable equivalent
adjustment............... (27)
======
Net interest income....... $ 600
======
</TABLE>
81
<PAGE>
ANALYSIS OF CHANGES IN NET INTEREST INCOME
(Amounts in thousands)
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------
1999 Compared to 1998 1998 Compared to 1997
Variance Due to Variance Due to
------------------------- -----------------------
Volume Yield/Rate Total Volume Yield/Rate Total
------ ---------- ------ ------ ---------- -----
<S> <C> <C> <C> <C> <C> <C>
Earning assets:
Loans....................... $1,555 $(254) $1,301 $448 $ 77 $525
Securities:
Taxable................... (107) 11 (96) (62) (5) (67)
Tax exempt................ 28 (4) 24 24 (3) 21
Cash balances in other
banks...................... -- -- -- -- -- --
Funds sold.................. (16) 39 23 (16) 14 (2)
Trading account securities.. -- -- -- -- -- --
------ ----- ------ ---- ---- ----
Total interest income..... 1,460 (208) 1,252 394 83 477
Interest-bearing
liabilities:
Interest-bearing transaction
accounts................... 7 3 10 10 (29) (19)
Savings and money market
deposits................... 75 (38) 37 72 (13) 59
Time deposits............... 401 (130) 271 20 (35) (15)
Funds purchased............. 53 7 60 16 (1) 15
Other short-term
borrowings................. 68 69 137 -- -- --
Long-term debt.............. -- -- -- -- -- --
------ ----- ------ ---- ---- ----
Total interest expense.... 604 (89) 515 118 (78) 40
------ ----- ------ ---- ---- ----
Net interest income on a
taxable equivalent
basis.................... $ 856 $(119) 737 $276 $161 437
====== ===== ==== ====
Taxable equivalent
adjustment................. (4) (10)
------ ----
Net interest income......... $ 733 $427
====== ====
</TABLE>
Interest Sensitivity
Peoples State Bank monitors and manages the pricing and maturity of its assets
and liabilities in order to diminish the potential adverse impact that changes
in interest rates could have on net interest income. The principal monitoring
technique employed by Peoples State Bank is the measurement of the 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 and 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.
Peoples State Bank evaluates interest sensitivity risk and then formulates
guidelines regarding asset generation and repricing, and sources and prices of
off-balance sheet commitments in order to decrease interest sensitivity risk.
Peoples State Bank uses computer simulations to measure the net income effect
of various interest rate scenarios. The modeling reflects interest rate changes
and the related impact on net income over specified periods of time.
82
<PAGE>
The following table illustrates Peoples State Bank's interest rate sensitivity
at September 30, 2000, assuming the relevant assets and liabilities are
collected and paid, respectively, based on historical experience rather than
their stated maturities.
INTEREST SENSITIVITY ANALYSIS
(Amounts in thousands, except ratios)
<TABLE>
<CAPTION>
September 30, 2000
------------------------------------------------------------------
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 (3)............. $58,037 $ 7,622 $ 11,493 $77,152 $19,830 $ 96,982
Securities (1)........ 605 984 411 2,000 10,132 12,132
Funds sold............ 2,149 -- -- 2,149 -- 2,149
------- ------- -------- ------- ------- --------
Total interest-
earning assets..... $60,791 $ 8,606 $ 11,904 $81,301 $29,962 $111,263
Liabilities:
Interest-bearing
liabilities:
Interest-bearing
deposits:
Demand deposits..... $14,268 $ -- $ -- $14,268 $ 4,657 $ 18,925
Savings deposits.... -- -- -- -- 7,955 7,955
Time deposits (2)... 2,498 4,996 $ 22,482 29,976 27,280 57,256
Funds purchased....... 1,844 -- -- 1,844 -- 1,844
Short-term
borrowings........... 6,000 -- 2,000 8,000 -- 8,000
------- ------- -------- ------- ------- --------
Total interest-
bearing
liabilities........ $24,610 $ 4,996 $ 24,482 $54,088 $39,892 $ 93,980
------- ------- -------- ------- ------- --------
Period gap.............. $36,181 $ 3,610 $(12,578) $27,213 $(9,930)
======= ======= ======== ======= =======
Cumulative gap.......... $36,181 $39,791 $ 27,213 $27,213 $17,283 $ 17,283
======= ======= ======== ======= ======= ========
Ratio of cumulative gap
to total earning
assets................. 32.52% 35.76% 24.46 % 24.46% 15.53 %
</TABLE>
--------
(1) Excludes investment equity securities of $470,000.
(2) Excludes matured certificates which have not been redeemed by the customer
and on which no interest is accruing.
(3) Excludes nonaccrual loans of $364,000.
Market Risk
Peoples State Bank's earnings are dependent on its net interest income which is
the difference between interest income earned on all earning assets, primarily
loans and securities, and interest paid on all interest bearing liabilities,
primarily deposits. Market risk is the risk of loss from adverse changes in
market prices and rates. Peoples State Bank's market risk arises primarily from
inherent interest rate risk in its lending, investing and deposit gathering
activities. Peoples State Bank seeks to reduce its exposure to market risk
through actively monitoring and managing its interest rate risk. Management
relies upon static "gap" analysis to determine the degree of mismatch in the
maturity and repricing distribution of interest earning assets and interest
bearing liabilities which quantifies, to
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<PAGE>
a large extent, the degree of market risk inherent in Peoples State Bank's
balance sheet. Gap analysis is further augmented by simulation analysis to
evaluate the impact of varying levels of prevailing interest rates and the
sensitivity of specific earning assets and interest bearing liabilities to
changes in those prevailing rates. Simulation analysis consists of evaluating
the impact on net interest income given changes from 200 basis points below to
200 basis points above the current prevailing rates. Management makes certain
assumptions as to the effect varying levels of interest rates have on certain
earning assets and interest bearing liabilities, which assumptions consider
both historical experience and consensus estimates of outside sources.
With respect to the primary earning assets, loans and securities, certain
features of individual types of loans and specific securities introduce
uncertainty as to their expected performance at varying levels of interest
rates. In some cases, imbedded options exist whereby the borrower may elect to
repay the obligation at any time. These imbedded prepayment options make
anticipating the performance of those instruments difficult given changes in
prevailing rates. At September 30, 2000, essentially every loan, net of
unearned income, (totaling $98.6 million, or 81.0% of total assets), carry such
imbedded options. Management believes that assumptions used in its simulation
analysis about the performance of financial instruments with such imbedded
options are appropriate. However, the actual performance of these financial
instruments may differ from management's estimates due to several factors,
including the diversity and financial sophistication of the customer base, the
general level of prevailing interest rates and the relationship to their
historical levels, and general economic conditions. The difference between
those assumptions and actual results, if significant, could cause the actual
results to differ from those indicated by the simulation analysis.
Deposits totaled $102.0 million, or 83.8%, of total assets at September 30,
2000. Since deposits are the primary funding source for earning assets, the
associated market risk is considered by management in its simulation analysis.
Generally, it is anticipated that deposits will be sufficient to support
funding requirements. However, the rates paid for deposits at varying levels of
prevailing interest rates have a significant impact on net interest income and
therefore, must be quantified by Peoples State Bank in its simulation analysis.
Specifically, Peoples State Bank's spread, the difference between the rates
earned on earning assets and rates paid on interest bearing liabilities, is
generally higher when prevailing rates are higher. As prevailing rates reduce,
the spread tends to compress, with severe compression at very low prevailing
interest rates. This characteristic is called "spread compression" and
adversely effects net interest income in the simulation analysis when
anticipated prevailing rates are reduced from current rates. Management relies
upon historical experience to estimate the degree of spread compression in its
simulation analysis. Management believes that such estimates of possible spread
compression are reasonable. However, if the degree of spread compression varies
from that expected, the actual results could differ from those indicated by the
simulation analysis.
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<PAGE>
The following table illustrates the results of simulation analysis used by
Peoples State Bank to determine the extent to which market risk would affect
net interest margin for the next twelve months if prevailing interest rates
increased or decreased the specified amounts from current rates. Because of the
inherent use of estimates and assumptions in the simulation model used to
derive this information, the actual results of the future impact of market risk
on Peoples State Bank's net interest margin may differ from that found in the
table.
MARKET RISK
(Amounts in thousands)
<TABLE>
<CAPTION>
As of September 30, 2000
---------------------------
Net Interest Change from
Change in Prevailing Interest Rates Income Amount Income Amount
----------------------------------- ------------- -------------
<S> <C> <C>
+200 basis points................................... $6,348 15.73%
+100 basis points................................... 5,918 7.89
0 basis points...................................... 5,485 --
-100 basis points................................... 5,055 (7.84)
-200 basis points................................... 4,592 (16.28)
</TABLE>
Provision and Allowance for Loan Losses
Peoples State Bank has policies and procedures for evaluating the overall
credit quality of its loan portfolio including timely identification of
potential problem credits. On a monthly basis, management reviews the
appropriate level for the allowance for loan losses. This review and analysis
is based on the results of the internal monitoring and reporting system,
analysis of economic conditions in its markets and a review of historical
statistical data, current trends regarding the volume and severity of past due
and problem loans and leases, the existence and effect of concentrations of
credit, and changes in national and local economic conditions for both Peoples
State Bank and other financial institutions. Management also considers in its
evaluation of the adequacy of the allowance for loan losses the results of
recent regulatory examinations.
Management's periodic evaluation of the adequacy of the allowance for loan
losses is based on Peoples State Bank's past loan loss experience, known and
inherent risks in the portfolio, adverse situations that may affect the
borrowers' ability to repay, estimated value of any underlying collateral, and
an analysis of current economic conditions. While management believes that it
has established the allowance in accordance with generally accepted accounting
principles and has taken into account the views of its regulators and the
current economic environment, there can be no assurance that in the future
Peoples State Bank's regulators or its economic environment will not require
further increases in the allowance.
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<PAGE>
The table below sets forth certain information with respect to Peoples State
Bank's average loans, allowance for loan losses, charge-offs and recoveries for
the 2000 nine months and each of the five years in the period ended December
31, 1999.
ALLOWANCE FOR LOAN LOSSES
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
Nine Months
Ended
September 30 Year Ended December 31,
------------ -------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total loans outstanding
at end of period, net
of unearned income..... $98,557 $83,329 $60,073 $54,026 $46,775 $31,890
======= ======= ======= ======= ======= =======
Average amount of loans
outstanding, net of
unearned income........ $90,737 $72,571 $55,404 $50,654 $40,272 $31,647
======= ======= ======= ======= ======= =======
Allowance for loan
losses at beginning of
period................. $ 1,043 $ 925 $ 936 $ 919 $ 932 $ 935
Charge-offs:
Commercial, financial
and agricultural..... 23 4 6 1 14 --
Real estate--
mortgage............. -- 11 15 2 6 83
Consumer.............. 29 20 8 6 18 36
------- ------- ------- ------- ------- -------
Total charge-offs... 52 35 29 9 38 119
------- ------- ------- ------- ------- -------
Recoveries:
Commercial, financial
and agricultural..... 6 -- 15 17 6 23
Real estate--
mortgage............. 10 -- 2 -- 6 --
Consumer.............. 4 -- 1 9 13 33
------- ------- ------- ------- ------- -------
Total recoveries.... 20 -- 18 26 25 56
------- ------- ------- ------- ------- -------
Net charge-offs
(recoveries)....... 32 35 11 (17) 13 63
Provision for loan
losses................. 200 153 -- -- -- 60
------- ------- ------- ------- ------- -------
Allowance for loan
losses at period-end... $ 1,211 $ 1,043 $ 925 $ 936 $ 919 $ 932
======= ======= ======= ======= ======= =======
Allowance for loan
losses to period-end
loans.................. 1.23% 1.25% 1.54% 1.73% 1.96% 2.92%
Net charge-offs
(recoveries) to average
loans.................. 0.05 0.05 0.02 (0.03) 0.03 0.20
</TABLE>
At September 30, 2000, the allowance for loan losses was $1.2 million as
compared to $1.0 million and $925,000 at year-end 1999 and 1998, respectively.
The allowance for loan losses at September 30, 2000 to ending loans was 1.23%
and was relatively unchanged from 1999 year-end total of 1.25%. This ratio has
been relatively consistent from year to year since 1996. The allowance was
considered adequate at September 30, 2000.
Peoples State Bank experienced net charge-offs of $32,000 and $35,000 in the
2000 nine months and year-end 1999, respectively. Net charge-offs in 1998
totaled $11,000 and Peoples State Bank recorded a net recovery of $17,000 in
1997.
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<PAGE>
Nonperforming Assets
Nonperforming assets are loans on a non-accrual basis, accruing loans 90 days
or more past due, and other real estate owned. At September 30, 2000,
nonperforming assets totaled $490,000 compared with $467,000 at December 31,
1999. At year-end 1998 and 1997, nonperforming assets were $424,000 and
$825,000, respectively. The following table summarizes nonperforming assets for
the periods indicated:
NONPERFORMING ASSETS
(Amounts in thousands, except percentages)
<TABLE>
<CAPTION>
September 30, At December 31,
------------- --------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Nonaccrual loans........ $ 364 $ 287 $ 411 $ 766 $ 590 $ 346
Restructured loans...... -- -- -- -- -- --
Loans past due 90 days
or more and still
accruing............... -- -- 13 14 26 --
------ ------ ------ ------ ------ ------
Total nonperforming
loans................ 364 287 424 780 616 346
Other real estate
owned.................. 126 180 -- 45 141 117
------ ------ ------ ------ ------ ------
Total nonperforming
assets............... $ 490 $ 467 $ 424 $ 825 $ 757 $ 463
====== ====== ====== ====== ====== ======
Allowance for loan
losses to period-end
loans.................. 1.23% 1.25% 1.54% 1.73% 1.96% 2.92%
Allowance for loan
losses to period-end
nonperforming loans.... 332.69 363.41 218.16 120.00 149.19 269.36
Allowance for loan
losses to period-end
nonperforming assets... 247.14 223.34 218.16 113.45 121.40 201.30
Net charge-offs
(recoveries) to average
loans.................. 0.05 0.05 0.02 (0.03) 0.03 0.20
Nonperforming assets to
period-end loans and
foreclosed property.... 0.50 0.56 0.71 1.53 1.61 1.45
Nonperforming loans to
period-end loans....... 0.37 0.34 0.71 1.44 1.32 1.08
</TABLE>
In accordance with regulatory standards, loans are classified as non-accrual
when the collection of principal or interest is 90 days or more past due or
when, in management's judgment, such principal or interest will not be
collectible in the ordinary course of business, unless in the opinion of
management the loan is both adequately secured and in process of collection.
Peoples State Bank has identified loans totaling approximately $3.9 million, or
4.1%, of the loan portfolio at September 30, 2000, through Peoples State Bank's
internal loan evaluation program in which some concern exists about the
borrower's ability to comply with present repayment terms. These loans are not
included as nonperforming assets and are categorized as "watch" for internal
evaluation purposes only. These credits, however, were considered in
determining the adequacy of the allowance for possible loan losses and, while
current, are regularly monitored for changes with a particular industry or
general economic trends, which could cause the borrowers severe financial
difficulties. Peoples State Bank's management does not expect a significant
loss in any of these loans.
Noninterest Income
Total noninterest income increased $101,000, or 14.7%, from the 1999 nine
months to the 2000 nine months. For year-end 1999, noninterest income increased
$140,000, or 17.5% over 1998 noninterest
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<PAGE>
income of $800,000. Increases occurred in all major categories of noninterest
income. The following table depicts the major sources of noninterest income for
the periods indicated:
NONINTEREST INCOME
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine
Months
Ended
September Year Ended
30, December 31,
--------- --------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Service charges on deposit accounts................... $402 $374 $532 $491 $222
Bank owned life insurance............................. 34 28 39 25 --
Fees on business manager program...................... 209 129 181 35 --
Loan loss recoveries.................................. -- -- -- -- 150
Securities gains (losses)............................. -- 6 6 13 (2)
Other................................................. 142 149 182 236 443
---- ---- ---- ---- ----
Total noninterest income............................ $787 $686 $940 $800 $813
==== ==== ==== ==== ====
</TABLE>
Noninterest Expense
Total noninterest expense increased $159,000 from the 1999 nine months to the
2000 nine months, representing a 6.1% increase. Noninterest expense totaled
$3.4 million for 1999, an increase of $158,000 compared to 1998. The following
table summarizes noninterest expenses for the periods indicated:
NONINTEREST EXPENSE
(Amounts in thousands)
<TABLE>
<CAPTION>
Nine Months Year Ended December
Ended September 30, 31,
------------------- --------------------
2000 1999 1999 1998 1997
--------- --------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Salaries and employee benefits........ $1,523 $1,410 $1,894 $1,752 $1,494
Net occupancy expense................. 507 468 619 603 473
Postage and freight................... 33 42 43 49 37
Directors fees........................ 101 49 63 74 67
Banking assessments................... 32 22 30 27 24
Data processing expenses.............. -- -- 36 28 27
Legal and professional fees........... 32 26 85 83 67
Advertising........................... 73 108 105 79 79
Other................................. 451 468 530 552 454
--------- --------- ------ ------ ------
Total noninterest expense........... $2,752 $2,593 $3,405 $3,247 $2,722
========= ========= ====== ====== ======
</TABLE>
Income Taxes, Inflation and Other Issues
Income tax expense was $575,000 during the 2000 nine months compared to
$423,000 during the 1999 nine months, for an effective tax rate of 37.4% and
37.1%, respectively. Income tax expense was $580,000 for 1999 versus $350,000
during 1998, for an effective tax rate of 35.9% and 33.2%, respectively. These
effective rates are impacted by items of income and expense that are not
subject to federal or state taxation.
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<PAGE>
Because Peoples State Bank's assets and liabilities are essentially monetary in
nature, the effect of inflation on Peoples State Bank's assets differs greatly
from that of most commercial and industrial companies. Inflation can have an
impact on the growth of total assets in the banking industry and the resulting
need to increase capital at higher than normal rates in order to maintain an
appropriate equity to assets ratio. Inflation also can have a significant
effect on other expenses, which tend to rise during periods of general
inflation. Peoples State Bank's management believes, however, that Peoples
State Bank's financial results are influenced more by its ability to react to
changes in interest rates than by inflation.
Except as discussed in this Management's Discussion and Analysis, Peoples State
Bank's management is not aware of any trends, events or uncertainties that will
have or that are reasonably likely to have a material effect on liquidity,
capital resources or operations. Peoples State Bank's management is not aware
of any current recommendations by regulatory authorities, which, if
implemented, would have such an effect.
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<PAGE>
LEGAL MATTERS
The legality of the Alabama National common stock to be issued in the Merger
will be passed upon by Maynard, Cooper & Gale, P.C., Birmingham, Alabama
("Maynard, Cooper"). As of December 7, 2000, attorneys in the law firm of
Maynard, Cooper owned an aggregate of 36,470 shares of Alabama National common
stock.
Certain legal matters in connection with the Merger will be passed upon for
Peoples State Bank by Shutts & Bowen, LLP, Orlando, Florida.
Maynard, Cooper has rendered an opinion with respect to the federal tax
consequences of the Merger. See "The Merger-Federal Income Tax Consequences."
EXPERTS
The consolidated financial statements of Alabama National as of December 31,
1999, 1998 and 1997 and for each of the three years ended December 31, 1999,
have been incorporated by reference in this Proxy Statement-Prospectus, in
reliance on the report of PricewaterhouseCoopers LLP, independent accountants,
given on the authority of that firm as experts in accounting and auditing.
The financial statements of Peoples State Bank as of December 31, 1999 and 1998
and for each of the two years ended December 31, 1999 have been included herein
in reliance on the report of Beemer, Pricher, Kuehnhackl & Heidbrink, P.A.,
successor to Beemer, Kuehnhackl & Company, P.A., independent certified public
accountants, given upon the authority of such firm as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
Alabama National files annual, quarterly and special reports, proxy statements
and other information with the Securities and Exchange Commission (the "SEC").
You may read and copy any reports, statements or other information that the
companies file with the SEC at the SEC's public reference room at 450 5th
Street, Northwest, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-
0330 for further information on the public reference rooms. These SEC filings
are also available to the public from commercial document retrieval services
and at the Internet world wide web site maintained by the SEC at
"http://www.sec.gov." In addition, Alabama National common stock is traded on
the NASDAQ National Market System. Reports, proxy statements and other
information should also be available for inspection at the offices of the
National Association of Securities Dealers, Inc., 1735 K Street, N.W.,
Washington, D.C. 70006.
Alabama National filed a Registration Statement on Form S-4 (the "Registration
Statement") to register with the SEC the Alabama National common stock to be
issued to Peoples State Bank Shareholders in the Merger. This Proxy Statement-
Prospectus is a part of that Registration Statement and constitutes a
prospectus of Alabama National. As allowed by SEC rules, this Proxy Statement-
Prospectus does not contain all the information you can find in Alabama
National's Registration Statement.
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<PAGE>
The SEC allows Alabama National to "incorporate by reference" information into
this Proxy Statement-Prospectus, which means that the companies can disclose
important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is
considered part of this Proxy Statement-Prospectus, except for any information
superseded by information contained directly in this Proxy Statement-Prospectus
or in later filed documents incorporated by reference in this Proxy Statement-
Prospectus.
This Proxy Statement-Prospectus incorporates by reference the documents set
forth below that Alabama National has previously filed with the SEC. These
documents contain important information about Alabama National. Some of these
filings have been amended by later filings, which are also listed.
<TABLE>
<CAPTION>
SEC Filings (File No. 0-25160) Period/As of date
------------------------------ -----------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1999
Quarterly Reports on Form 10-Q Quarters ended March 31, 2000, June 30, 2000,
and September 30, 2000
</TABLE>
Alabama National also incorporates by reference additional documents that may
be filed with the SEC between the date of this Proxy Statement-Prospectus and
date of the Special Meeting, the consummation of the Merger or the termination
of the Merger Agreement. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K,
as well as proxy statements.
Alabama National has supplied all information contained or incorporated by
reference in this Proxy Statement-Prospectus relating to Alabama National and
Peoples State Interim Bank, and Peoples State Bank has supplied all such
information relating to Peoples State Bank.
As noted in the "Surrender of Certificates" section of this Proxy Statement-
Prospectus on page 35, Peoples State Bank Shareholders should not send in their
Peoples State Bank certificates until they receive the transmittal materials
from the exchange agent. Registered Peoples State Bank Shareholders who have
further questions about their share certificates, the conversion of
certificates into book-entry form or the exchange of their Peoples State Bank
common stock for Alabama National common stock should call the stock transfer
agent at 1-800-568-3476.
You can obtain any of the documents incorporated by reference through Alabama
National, the SEC or the SEC's Internet web site as described above. Documents
incorporated by reference are available from Alabama National without charge.
Peoples State Bank Shareholders may obtain documents incorporated by reference
in this Proxy Statement-Prospectus by requesting them in writing or by
telephone from the appropriate company at the following addresses:
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Attn.: Corporate Secretary, Kimberly Moore
Telephone: (205) 583-3600
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<PAGE>
You should rely only on the information contained or incorporated by reference
in this Proxy Statement-Prospectus. We have not authorized anyone to provide
you with information that is different from what is contained in this Proxy
Statement-Prospectus. This Proxy Statement- Prospectus is dated December ,
2000. You should not assume that the information contained in this Proxy
Statement-Prospectus is accurate as of any date other than that date. Neither
the mailing of this Proxy Statement-Prospectus to shareholders nor the issuance
of Alabama National common stock in the Merger creates any implication to the
contrary.
92
<PAGE>
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and between
ALABAMA NATIONAL BANCORPORATION
and
PEOPLES STATE BANK OF GROVELAND
Dated as of
October 10, 2000
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
<S> <C>
1.1 Merger.......................................................................................... 2
1.2 Time and Place of Closing....................................................................... 2
1.3 Effective Time.................................................................................. 2
ARTICLE 2
TERMS OF MERGER
2.1 Articles of Incorporation....................................................................... 2
2.2 Bylaws.......................................................................................... 2
2.3 Directors....................................................................................... 2
2.4 Name and Business............................................................................... 2
ARTICLE 3
MANNER OF CONVERTING SHARES
3.1 Conversion of Shares............................................................................ 3
3.2 Anti-Dilution Provisions........................................................................ 3
3.3 Shares Held by PSBG............................................................................. 3
3.4 Dissenting Stockholders......................................................................... 3
3.5 Fractional Shares............................................................................... 4
ARTICLE 4
EXCHANGE OF SHARES
4.1 Exchange Procedures............................................................................. 4
4.2 Rights of Former PSBG Stockholders.............................................................. 4
4.3 Lost or Stolen Certificates..................................................................... 5
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PSBG
5.1 Organization, Standing and Power................................................................ 5
5.2 Authority; No Breach By Agreement............................................................... 5
5.3 Capital Stock................................................................................... 6
5.4 PSBG Subsidiaries............................................................................... 6
5.5 Financial Statements............................................................................ 7
5.6 Absence of Undisclosed Liabilities.............................................................. 7
5.7 Absence of Certain Changes or Events............................................................ 7
5.8 Tax Matters..................................................................................... 7
5.9 Loan Portfolio; Documentation and Reports....................................................... 8
5.10 Assets; Insurance............................................................................... 8
5.11 Environmental Matters........................................................................... 9
5.12 Compliance with Laws............................................................................ 10
5.13 Labor Relations; Employees...................................................................... 10
5.14 Employee Benefit Plans......................................................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
5.15 Material Contracts............................................................................. 12
5.16 Legal Proceedings.............................................................................. 12
5.17 Reports........................................................................................ 12
5.18 Statements True and Correct.................................................................... 13
5.19 Accounting, Tax and Regulatory Matters......................................................... 13
5.20 Offices........................................................................................ 13
5.21 Data Processing Systems........................................................................ 13
5.22 Intellectual Property.......................................................................... 14
5.23 Administration of Trust Accounts............................................................... 14
5.24 Broker's Fees.................................................................................. 14
5.25 Regulatory Approvals........................................................................... 14
5.26 Opinion of Counsel............................................................................. 14
5.27 Takeover Laws.................................................................................. 14
5.28 Year 2000...................................................................................... 14
5.29 Derivatives Contracts.......................................................................... 14
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ANB
6.1 Organization, Standing and Power............................................................... 14
6.2 Authority; No Breach By Agreement.............................................................. 15
6.3 Capital Stock.................................................................................. 15
6.4 Financial Statements........................................................................... 15
6.5 Absence of Undisclosed Liabilities............................................................. 16
6.6 Absence of Certain Changes or Events........................................................... 16
6.7 Compliance with Laws........................................................................... 16
6.8 Material Contracts............................................................................. 16
6.9 Legal Proceedings.............................................................................. 16
6.10 Reports........................................................................................ 17
6.11 Statements True and Correct.................................................................... 17
6.12 Accounting, Tax and Regulatory Matters......................................................... 17
6.13 1934 Act Compliance............................................................................ 17
6.14 Regulatory Approvals........................................................................... 17
6.15 Opinion of Counsel............................................................................. 17
ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
7.1 Covenants of Parties........................................................................... 18
7.2 Covenants of PSBG.............................................................................. 18
7.3 Covenants of ANB............................................................................... 20
7.4 Adverse Changes in Condition................................................................... 20
7.5 Reports........................................................................................ 20
7.6 Acquisition Proposals.......................................................................... 20
7.7 NASDAQ Qualification........................................................................... 21
ARTICLE 8
ADDITIONAL AGREEMENTS
8.1 Regulatory Matters............................................................................. 21
8.2 Access to Information.......................................................................... 22
8.3 Efforts to Consummate.......................................................................... 22
8.4 PSBG Stockholders' Meeting..................................................................... 23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
8.5 Certificates of Objections..................................................................... 23
8.6 Press Releases................................................................................. 23
8.7 Expenses....................................................................................... 23
8.8 Failure to Close............................................................................... 23
8.9 Fairness Opinion............................................................................... 24
8.10 Accounting and Tax Treatment................................................................... 24
8.11 Agreement of Affiliates........................................................................ 24
8.12 Takeover Laws.................................................................................. 24
8.13 Indemnification; Directors and Officers Insurance.............................................. 25
8.14 ANB 401(k) Plan................................................................................ 25
ARTICLE 9
CONDITIONS PRECEDENT TO OBLIGATIONS TO CONSUMMATE
9.1 Conditions to Obligations of Each Party........................................................ 25
9.2 Conditions to Obligations of ANB and Interim................................................... 26
9.3 Conditions to Obligations of PSBG.............................................................. 28
ARTICLE 10
TERMINATION
10.1 Termination.................................................................................... 29
10.2 Effect of Termination.......................................................................... 30
10.3 Non-Survival of Representations and Covenants.................................................. 30
ARTICLE 11
MISCELLANEOUS
11.1 Definitions.................................................................................... 30
11.2 Entire Agreement............................................................................... 36
11.3 Amendments..................................................................................... 36
11.4 Waivers........................................................................................ 36
11.5 Assignment..................................................................................... 36
11.6 Notices........................................................................................ 36
11.7 Brokers and Finders............................................................................ 37
11.8 Governing Law.................................................................................. 37
11.9 Counterparts................................................................................... 37
11.10 Captions....................................................................................... 37
11.11 Enforcement of Agreement....................................................................... 37
11.12 Severability................................................................................... 37
11.13 Singular/Plural; Gender........................................................................ 38
</TABLE>
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and entered
into as of October 10, 2000, by and among 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, and Peoples
State Bank of Groveland ("PSBG"), a Florida banking corporation, with its
principal office located in Groveland, Florida.
Preamble
--------
The Boards of Directors of ANB and PSBG 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 acquisition of PSBG by
ANB pursuant to the merger of Peoples State Interim Bank ("Interim") with and
into PSBG. Interim will be a new Florida banking corporation formed by ANB
pursuant to Section 658.42(2) of the Florida Statutes as soon as practicable
after the execution of this Agreement. At the effective time of such merger,
the outstanding shares of the capital stock of PSBG shall be converted into the
right to receive shares of the common stock of ANB (except as provided herein).
As a result, stockholders of PSBG shall become stockholders of ANB, and the
assets and operations of PSBG and Interim shall be combined under the charter of
PSBG. The transactions described in this Agreement are subject to the approvals
of the stockholders of PSBG, the stockholder of Interim, the Federal Reserve
Board, the FDIC, the Florida Department of Banking Finance, and the satisfaction
of certain other conditions described in this Agreement. It is the intention of
the parties to this Agreement that the merger (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:
<PAGE>
ARTICLE 1
TRANSACTIONS AND TERMS OF MERGER
--------------------------------
1.1 Merger. Subject to the terms and conditions of this Agreement, at the
------
Effective Time, Interim shall be merged with and into PSBG in accordance with
the provisions of the FFIC (the "Merger"). At the Effective Time, the separate
corporate existence of Interim shall cease, and PSBG, which shall become a
wholly-owned subsidiary of ANB, shall be the surviving corporation resulting
from the Merger (the "Surviving Corporation") and shall continue to be governed
by the laws of the State of Florida. The Merger will be consummated pursuant to
the terms of this Agreement, which has been (or, in the case of Interim, will
be) approved and adopted by the respective Boards of Directors of ANB, Interim
and PSBG, and the Plan of Merger in substantially the form set forth in Exhibit
-------
A, which has been (or, in the case of Interim, will be) approved and adopted by
-
the respective Boards of Directors of Interim and PSBG. From and after the
Effective Time, the Merger shall have the effects set forth in the FFIC.
1.2 Time and Place of Closing. 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. The Closing will take
place at 9:00 A.M. Central Standard Time on such date and time as the Parties,
acting through their chief executive officers or chief financial officers, may
mutually agree. 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 Closing to occur on the last business day of the month in which the
later of the following occurs: (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 PSBG approve this Agreement.
1.3 Effective Time. The Merger and other transactions provided for in
--------------
this Agreement shall become effective on the date and at the time on which the
articles of merger ("Articles of Merger") containing the provisions required by,
and executed in accordance with, the Florida Business Corporation Act, shall
have been accepted for filing by the Secretary of State of the State of Florida
or such later date and time as is agreed upon in writing by ANB and PSBG and
specified in the Articles of Merger (the "Effective Time"). Unless ANB and PSBG
otherwise mutually agree in writing, the Parties shall use their best efforts to
cause the Effective Time to occur on the date of Closing.
ARTICLE 2
TERMS OF MERGER
---------------
2.1 Articles of Incorporation. The Articles of Incorporation of PSBG in
-------------------------
effect immediately prior to the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation immediately following the Effective
Time.
2.2 Bylaws. The Bylaws of PSBG 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 incumbent directors of PSBG and the
other individuals identified in the Plan of Merger.
2.4 Name and Business. The name of the Surviving Corporation shall remain
-----------------
Peoples State Bank of Groveland. The business of the Surviving Corporation
shall be conducted at its main office located in Groveland, Florida, and at its
legally established branches.
2
<PAGE>
ARTICLE 3
MANNER OF CONVERTING SHARES
---------------------------
3.1 Conversion of Shares. Subject to the provisions of this Article 3, at
--------------------
the Effective Time, by virtue of the Merger and without any action on the part
of the holders thereof, the shares of the constituent corporations shall be
converted as follows:
(a) Each share of PSBG Common Stock (excluding shares held by PSBG, 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 1.16396 shares of ANB Common Stock (the
"Exchange Ratio"). The Exchange Ratio shall be fixed and no adjustment shall be
made except pursuant to Section 3.2 of this Agreement. Assuming that no holders
of PSBG Common Stock exercise their rights under the Dissenter Provisions, the
holders of PSBG Common Stock shall receive, in the aggregate, approximately
735,000 shares of ANB Common Stock.
(b) At and as of the Effective Time, each share of common stock, $1.667
par value per share, of Interim shall be converted into one share of common
stock, $1.667 par value per share, of the Surviving Corporation.
(c) 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.
3.2 Anti-Dilution Provisions. In the event PSBG changes the number of
------------------------
shares of PSBG 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 PSBG. Each of the shares of PSBG Common Stock held by
-------------------
any PSBG 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. Notwithstanding Section 3.1(a) of this
-----------------------
Agreement, shares of PSBG Common Stock issued and outstanding at the Effective
Time which are held by a holder who has not voted in favor of the Merger and who
has demanded payment for such shares in accordance with Section 658.44 of the
Florida Statutes ("Dissenting PSBG Shares") shall not be converted into or
represent the right to receive the ANB Common Shares payable thereon pursuant to
Section 3.1 of this Agreement, and any such holder shall be entitled only to
such rights of appraisal as are granted by Section 658.44 of the Florida
Statutes ("Dissenter Provisions"), unless and until such holder fails to perfect
or effectively withdraws or otherwise loses his or her right to appraisal;
provided, however, that no payment in connection with Dissenting PSBG Shares
shall be made to any dissenting stockholder unless and until such dissenting
stockholder has complied with the applicable provisions of the Dissenter
Provisions and surrendered to the Surviving Corporation the certificate or
certificates representing the shares for which payment is being made; provided,
further, that nothing contained in this Section 3.4 shall in any way limit the
right of ANB or Interim to terminate this Agreement and abandon the Merger under
Section 10.1(i). If after the Effective Time any such holder fails to perfect
or effectively withdraws or loses his right to appraisal, such shares of PSBG
Common Stock shall be treated as if they had been converted at the Effective
Time into the right to receive the ANB Common Shares (without interest) payable
thereon pursuant to Section 3.1 of this Agreement. PSBG shall give ANB prompt
notice upon receipt by PSBG of any written objection to the Merger and such
written demands for payment for shares of PSBG Common Stock under the Dissenter
Provisions, and the withdrawals of such demands, and any other
3
<PAGE>
instruments provided to PSBG pursuant to the Dissenter Provisions (any
shareholder duly making such demand being hereinafter called a "Dissenting
Shareholder"). Each Dissenting Shareholder that becomes entitled, pursuant to
the Dissenter Provisions, to payment for any shares of PSBG Common Stock held by
such Dissenting Shareholder shall receive payment therefor from ANB (but only
after the amount thereof shall have been agreed upon or at the times and in the
amounts required by the Dissenter Provisions), and all of such Dissenting PSBG
Shares shall be canceled. PSBG shall not, except with the prior written consent
of ANB, voluntarily make any payment with respect to, or settle or offer to
settle, any demand for payment by a Dissenting Shareholder.
3.5 Fractional Shares. No certificates or scrip representing fractional
-----------------
shares of ANB Common Stock shall be issued upon the surrender of certificates
for exchange; no dividend or distribution with respect to ANB Common Stock shall
be payable on or with respect to any fractional share; and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of ANB. In lieu of any such fractional share, ANB shall pay to
each former stockholder of PSBG who otherwise would be entitled to receive a
fractional share of ANB Common Stock an amount in cash (without interest)
determined by multiplying (a) the Average Quoted Price by (b) the fraction of a
share of ANB Common Stock to which such holder would otherwise be entitled.
ARTICLE 4
EXCHANGE OF SHARES
------------------
4.1 Exchange Procedures. Promptly after the Effective Time, the Surviving
-------------------
Corporation or ANB shall cause the Exchange Agent to mail to the former
stockholders of PSBG appropriate transmittal materials (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of PSBG Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent). After the
Effective Time, each holder of shares of PSBG 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 PSBG 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). Except as provided in Section 4.3,
neither the Surviving Corporation nor ANB shall be obligated to deliver the
consideration to which any former holder of PSBG Common Stock is entitled as a
result of the Merger until such holder surrenders his certificate or
certificates representing the shares of PSBG Common Stock for exchange as
provided in this Section 4.1. The certificate or certificates for PSBG 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, ANB nor the Exchange Agent shall be liable to a holder of PSBG
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 PSBG Stockholders. At the Effective Time, the stock
----------------------------------
transfer books of PSBG shall be closed as to holders of PSBG Common Stock
immediately prior to the Effective Time, and no transfer of PSBG Common Stock by
any such holder shall thereafter be 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 PSBG Common Stock ("PSBG
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 PSBG Common Stock
shall be entitled to vote after the Effective Time at any meeting of ANB
stockholders the number of whole shares of ANB Common Stock into which their
respective shares of PSBG Common Stock are converted, regardless of whether such
holders have exchanged their PSBG Certificates
4
<PAGE>
for certificates representing ANB Common Stock in accordance with the provisions
of this Agreement. Whenever a dividend or other distribution is declared by ANB
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 PSBG 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 PSBG Certificate held after the Cutoff, until
such person surrenders said PSBG Certificate for exchange as provided in Section
4.1 of this Agreement. However, upon surrender of such PSBG 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 PSBG Certificate.
4.3 Lost or Stolen Certificates. If any holder of PSBG Common Stock
---------------------------
convertible into the right to receive shares of ANB Common Stock is unable to
deliver the PSBG Certificate that represents PSBG 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 PSBG
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 PSBG
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 PSBG
Certificate for exchange pursuant to this Agreement.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF PSBG
--------------------------------------
PSBG hereby represents and warrants to Interim and ANB as follows:
5.1 Organization, Standing and Power. PSBG is a state banking corporation
--------------------------------
duly organized, validly existing and in good standing under the Laws of the
State of Florida 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. PSBG is duly qualified or licensed to transact business as a
foreign corporation and is 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 PSBG. PSBG has delivered to ANB complete and correct copies of its
Articles of Incorporation and Bylaws. PSBG is an "insured institution" as
defined in the Federal Deposit Insurance Act and applicable regulations
thereunder, and PSBG's deposits are insured by the FDIC to the maximum extent
permitted by law.
5.2 Authority; No Breach By Agreement.
---------------------------------
(a) PSBG 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 PSBG, subject to the approval of this Agreement
by the holders of a majority of the outstanding shares of PSBG Common Stock.
Subject to such requisite stockholder approval and required regulatory consents,
this Agreement represents a legal, valid and binding obligation of PSBG,
enforceable against PSBG 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).
5
<PAGE>
(b) Neither the execution and delivery of this Agreement by PSBG, nor the
consummation by PSBG of the transactions provided for herein, nor compliance by
PSBG with any of the provisions hereof, will (i) conflict with or result in a
breach of any provision of PSBG'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 PSBG Company under, any
Contract or Permit of any PSBG 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 PSBG 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 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
PSBG, no notice to, filing with or Consent of, any public body or authority is
necessary for the consummation by PSBG of the Merger and the other transactions
provided for in this Agreement.
5.3 Capital Stock.
-------------
(a) The authorized capital stock of PSBG consists of 5,000,000 shares of
PSBG Common Stock, of which 631,464 shares are issued and outstanding. All of
the issued and outstanding shares of capital stock of PSBG are duly and validly
issued and outstanding and are fully paid and nonassessable. None of the
outstanding shares of capital stock of PSBG has been issued in violation of any
preemptive rights of the current or past stockholders of PSBG.
(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 PSBG outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls, stock
appreciation rights or commitments of any character whatsoever relating to, or
securities or rights convertible into or exchangeable for, shares of the capital
stock of PSBG or contracts, commitments, understandings or arrangements by which
PSBG 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. PSBG has no liability for dividends declared or accrued, but
unpaid, with respect to any of its capital stock.
5.4 PSBG Subsidiaries.
-----------------
(a) The PSBG Subsidiaries are set forth on Schedule 5.4. To the extent
------------
any PSBG Subsidiaries exist, each such PSBG 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 PSBG
Subsidiary is duly qualified or licensed to transact business as a foreign
corporation and is 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 PSBG.
(b) The authorized and issued and outstanding capital stock of each PSBG
Subsidiary is set forth on Schedule 5.4. PSBG owns all of the issued and
------------
outstanding shares of capital stock of each PSBG Subsidiary. No equity
securities of any PSBG 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 PSBG 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
PSBG Company is or may be bound to transfer any shares of the capital stock of
any PSBG Subsidiary. There are no Contracts relating to the rights of any PSBG
Company to vote or to dispose of any shares of the capital stock of any PSBG
Subsidiary. All of the shares of capital stock of each PSBG Subsidiary held by a
PSBG Company are fully paid and nonassessable under the
6
<PAGE>
applicable corporation Law of the jurisdiction in which such Subsidiary is
incorporated and organized and are owned by the PSBG Company free and clear of
any Lien. No PSBG 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 PSBG Financial Statements and PSBG Call Reports for periods ended prior to
the date hereof, and PSBG will deliver to ANB promptly copies of all PSBG
Financial Statements and PSBG Call Reports prepared subsequent to the date
hereof. The PSBG Financial Statements (as of the dates thereof and for the
periods covered thereby) (a) are or, if dated after the date of this Agreement,
will be in accordance with the books and records of the PSBG Companies, which
are or will be, as the case may be, complete and correct and which have been or
will have been, as the case may be, maintained in accordance with good business
practices, and (b) present or will present, as the case may be, fairly the
consolidated financial position of the PSBG Companies as of the dates indicated
and the consolidated results of operations, changes in stockholders' equity and
cash flows of the PSBG 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 in amount or
effect). The PSBG 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 PSBG Company has any
----------------------------------
Liabilities that are reasonably likely to have, individually or in the
aggregate, a Material Adverse Effect on PSBG, except Liabilities accrued or
reserved against in the consolidated balance sheets of PSBG as of December 31,
1999, included in the PSBG Financial Statements or reflected in the notes
thereto. No PSBG Company has incurred or paid any Liability since December 31,
1999, 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
PSBG.
5.7 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
5.7, since December 31, 1999 (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 PSBG or its Subsidiaries, (ii) the
PSBG 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 PSBG provided in Article 7 of this
Agreement, and (iii) to PSBG's Knowledge, no fact or condition exists which PSBG
believes will cause a Material Adverse Effect on PSBG or its Subsidiaries in the
future.
5.8 Tax Matters.
-----------
(a) All Tax returns required to be filed by or on behalf of any of the
PSBG Companies have been timely filed or requests for extensions have been
timely filed, granted and have not expired for periods ended on or before the
date of this Agreement, and all returns filed are complete and accurate in all
material respects. All Taxes shown as due on filed returns have been paid. There
is no audit examination, deficiency, refund Litigation or matter in controversy
pending, or to the Knowledge of PSBG, threatened, with respect to any Taxes that
might result in a determination that would have, individually or in the
aggregate, a Material Adverse Effect on PSBG, except as reserved against in the
PSBG 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 PSBG 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
PSBG Companies for the period or periods through and including the date of the
respective PSBG Financial Statements has been made and is reflected on such PSBG
Financial Statements.
7
<PAGE>
(d) Deferred Taxes of the PSBG Companies have been provided for in
accordance with GAAP.
5.9 Loan Portfolio; Documentation and Reports.
-----------------------------------------
(a) Except as disclosed in Schedule 5.9(a), none of the PSBG 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 or $50,000 in the aggregate,
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(a),
---------------
none of the PSBG 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 PSBG, 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 PSBG Companies were solicited,
originated and exist in material compliance with all applicable PSBG loan
policies, except for deviations from such policies that (a) have been approved
by current management of PSBG, in the case of Loans with an outstanding
principal balance that exceeds $25,000, or (b) in the judgment of PSBG, will not
adversely effect the ultimate collectibility of such Loan. Except as set forth
in Schedule 5.9(a), none of the PSBG Companies holds any Loans in the original
---------------
principal amount in excess of $25,000 per Loan or $50,000 in the aggregate that
since January 1, 1997 have been classified by PSBG or 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. The allowance for possible loan or
credit losses (the "PSBG Allowance") shown on the consolidated balance sheets of
PSBG included in the most recent PSBG Financial Statements dated prior to the
date of this Agreement was, and the PSBG Allowance shown on the consolidated
balance sheets of PSBG included in the PSBG 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 PSBG Companies and
other extensions of credit (including letters of credit and commitments to make
loans or extend credit) by the PSBG Companies as of the dates thereof, except
where the inadequacy of such Allowance does not have a Material Adverse Effect
on PSBG.
(b) The documentation relating to each Loan made by any PSBG 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 PSBG.
(c) Each of the PSBG 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, 1994, with
(i) the FRB, (ii) the FDIC and (iii) any state regulatory authority ("State
Regulator") (collectively "Regulatory Authorities") and all other material
reports and statements required to be filed by it since December 31, 1994,
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(c) and as
---------------
otherwise provided herein, and except for normal examinations conducted by
Regulatory Authorities in the regular course of the business of the PSBG
Companies, to the Knowledge of PSBG, no Regulatory Authority has initiated any
proceeding or, to the Knowledge of PSBG, investigation into the business or
operations of any PSBG Company since December 31, 1993. There is no unresolved
violation, criticism or exception by any Regulatory Authority with respect to
any report or statement or lien or any examinations of any PSBG Company.
5.10 Assets; Insurance. The PSBG Companies have marketable title, free
-----------------
and clear of all Liens, to all of their respective Assets. A true, complete, and
correct list of all real property owned by PSBG, including without limitation
real property acquired in foreclosure of mortgages, is set forth on Schedule
--------
5.10(a). One of the PSBG Companies has good and marketable fee simple title to
------
the real property described in Schedule 5.10(a), and one of the PSBG Companies
---------------
has an enforceable leasehold interest in the real property described in Schedule
--------
5.10(b), if any.
-------
8
<PAGE>
All tangible properties used in the businesses of the PSBG Companies are in good
condition, reasonable wear and tear excepted, and are usable in the ordinary
course of business consistent with PSBG's past practices. All Assets that are
material to PSBG's business on a consolidated basis, held under leases or
subleases by any of the PSBG 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 PSBG
or, to the Knowledge of PSBG, by any other party to the Contract. Schedule
--------
5.10(c) contains a list of all policies of fire, theft and liability insurance
-------
and the fidelity and blanket bonds and other insurance maintained with respect
to the Assets or businesses of the PSBG Companies and specifies the carrier,
matters covered, premium cost and coverage limits of each such policy. The
Assets of the PSBG Companies include all assets required to operate the business
of the PSBG Companies as now conducted.
5.11 Environmental Matters.
---------------------
(a) To the Knowledge of PSBG, each PSBG 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 PSBG.
(b) There is no Litigation pending or, to the Knowledge of PSBG,
threatened before any court, governmental agency or authority or other forum in
which any PSBG 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 PSBG 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 PSBG.
(c) There is no Litigation pending or, to the Knowledge of PSBG,
threatened before any court, governmental agency or board or other forum in
which any of its Loan Properties (or PSBG 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 PSBG.
(d) To the Knowledge of PSBG, 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 PSBG.
(e) To the Knowledge of PSBG, during the period of (i) any PSBG
Company's ownership or operation of any of its respective current properties,
(ii) any PSBG Company's participation in the management of any Participation
Facility or (iii) any PSBG 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 PSBG. Prior to
the period of (i) any PSBG Company's ownership or operation of any of its
respective current properties, (ii) any PSBG Company's participation in the
management of any Participation Facility, or (iii) any PSBG Company's holding of
a security interest in a Loan Property, to the Knowledge of PSBG, 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 PSBG.
9
<PAGE>
5.12 Compliance with Laws. PSBG is a duly organized banking corporation
--------------------
under the Laws of the State of Florida. Each PSBG 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 PSBG, and there has occurred no Default under any such Permit. Except
as may be disclosed on Schedule 5.12, none of the PSBG 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 PSBG; 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 PSBG 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 PSBG, (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 PSBG, or
(iii) requiring any PSBG 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 PSBG Company is the subject of any Litigation asserting that it
or any other PSBG 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 PSBG 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 PSBG Company, pending or threatened, nor to its Knowledge,
is there any activity involving any PSBG 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 current executive officers of each of the
PSBG Companies and lists for each such person the amounts paid, payable or
expected to be paid as salary, bonus payments and other compensation for 1998,
1999 and 2000. Schedule 5.13(b) also sets forth the name and offices held by
----------------
each officer and director of each of the PSBG Companies.
5.14 Employee Benefit Plans.
----------------------
(a) Schedule 5.14 lists, and PSBG 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, terminated within the last eight (8) years, maintained by, sponsored in
whole or in part by, or contributed to by any PSBG 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 "PSBG Benefit
Plans"). Any of the PSBG 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 "PSBG ERISA Plan." Each PSBG ERISA Plan which is also a "defined benefit
plan" (as defined in Section 414(j) of the Internal Revenue Code) is referenced
to herein as an "PSBG Pension Plan". No PSBG Pension Plan is or has been a multi
employer plan within the meaning of Section 3(37) of ERISA.
10
<PAGE>
(b) All PSBG 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 PSBG. Each
PSBG 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 PSBG has no Knowledge of any circumstances likely
to result in revocation of any such favorable determination letter. Schedule
--------
5.14 includes a copy the Form 5500 filed in each of the most recent three plan
----
years with respect to each PSBG ERISA Plan, including all schedules thereto and
the opinions of independent accountants. To the Knowledge of PSBG, no PSBG
Company has engaged in a transaction with respect to any PSBG Benefit Plan that,
assuming the taxable period of such transaction expired as of the date hereof,
would subject any PSBG 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 PSBG. 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 PSBG Benefit Plan or any PSBG Company with regard to
any PSBG Benefit Plan, any trust which is a part of any PSBG Benefit Plan, any
trustee, fiduciary, custodian, administrator or other person or entity holding
or controlling assets of any PSBG Benefit Plan, and no basis to anticipate any
such action, suit, arbitration, claim, investigation or audit exists. With
respect to the litigation relating to D. Graham Payne, Sr. and the settlement
agreement reached thereunder, all issues have been finally resolved and all
conditions and obligations of the parties under said agreement have been
completely satisfied.
(c) Except as shown on Schedule 5.14, no PSBG ERISA Plan which is a
-------------
defined benefit pension plan has any "unfunded current liability," as that term
is defined in Section 302(d)(8)(A) of ERISA, 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 PSBG Pension Plan, (ii) no change in the actuarial assumptions with respect
to any PSBG Pension Plan, (iii) no increase in benefits under any PSBG 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 PSBG or to materially adversely affect the funding status of any such
plan. Neither any PSBG Pension Plan nor any "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by any
PSBG Company, or the single-employer plan of any entity which is considered one
employer with PSBG under Section 4001 of ERISA or Section 414 of the Internal
Revenue Code or Section 302 of ERISA (whether or not waived) (an "ERISA
Affiliate") has an "accumulated funding deficiency" within the meaning of
Section 412 of the Internal Revenue Code or Section 302 of ERISA, which is
reasonably likely to have a Material Adverse Effect on PSBG. No PSBG Company has
provided, or is required to provide, security to a PSBG 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 PSBG 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 PSBG. No PSBG Company has incurred any withdrawal Liability with
respect to a multi-employer 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 PSBG. 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 PSBG Pension Plan or by any ERISA Affiliate within the 12-month
period ending on the date hereof.
(e) No PSBG Company has any obligations for retiree health and life
benefits under any of the PSBG Benefit Plans, and there are no restrictions on
the rights of such PSBG 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 PSBG.
11
<PAGE>
(f) Except to the extent described on Schedule 5.14(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 PSBG Company from
any PSBG Company under any PSBG Benefit Plan or otherwise, (ii) increase any
benefits otherwise payable under any PSBG 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 PSBG.
(g) With respect to all PSBG 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 PSBG 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 PSBG.
5.15 Material Contracts. Except as set forth on Schedule 5.15, none of the
------------------ -------------
PSBG 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 PSBG Company
or the guarantee by any PSBG Company of any such obligation (other than
Contracts evidencing deposit liabilities, purchases of federal funds, Federal
Home Loan Bank advances, 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 PSBG 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 5% stockholder, director or officer of any of the
PSBG Companies, any member of the immediate family of the foregoing or, to the
Knowledge of PSBG, any related interest (as defined in Regulation O promulgated
by the FRB) ("Related Interest") of any of the foregoing; (vii) any Contract (A)
which limits the freedom of any of the PSBG Companies to compete in any line of
business or with any Person or (B) which limits the freedom of any other Person
to compete in any line of business with any PSBG Company; (viii) any Contract
providing a power of attorney or similar authorization given by any of the PSBG
Companies, except as issued in the ordinary course of business with respect to
routine matters; or (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 PSBG
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 "PSBG Contracts"). None of the PSBG Companies is in Default under
any PSBG Contract. All of the indebtedness of any PSBG Company for money
borrowed is prepayable at any time by such PSBG 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 PSBG, 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 PSBG
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 PSBG, nor are there any Orders of any Regulatory Authorities, other
governmental authorities or arbitrators outstanding against any PSBG Company,
that are reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on PSBG.
5.17 Reports. Since January 1, 1995, or the date of organization if later,
-------
each PSBG 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) any Regulatory Authorities or (ii) any applicable state securities
or banking authorities
12
<PAGE>
(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 PSBG). 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 PSBG Company or any Affiliate
thereof to ANB pursuant to this Agreement, including the Exhibits and Schedules
hereto, 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 PSBG Company or any Affiliate
thereof for inclusion in the documents to be prepared by ANB in connection with
the transactions provided for in this Agreement, including without limitation
(i) documents to be filed with the SEC, including without limitation the
Registration Statement on Form S-4 of ANB registering the shares of ANB Common
Stock to be offered to the holders of PSBG Common Stock, and all amendments
thereto (as amended, the "S-4 Registration Statement") and the Proxy Statement
and Prospectus in the form contained in the S-4 Registration Statement, and all
amendments and supplements thereto (as amended and supplemented, the "Proxy
Statement/Prospectus"), (ii) filings pursuant to any state securities and blue
sky Laws, and (iii) filings made in connection with the obtaining of Consents
from Regulatory Authorities, in the case of the S-4 Registration Statement, at
the time the S-4 Registration Statement is declared effective pursuant to the
1933 Act, in the case of the Proxy Statement/Prospectus, at the time of the
mailing thereof and at the time of the meeting of stockholders to which the
Proxy Statement/Prospectus relates, and in the case of any other documents, the
time such documents are filed with a Regulatory Authority and/or at the time
they are distributed to stockholders of ANB or PSBG, contains or will contain
any untrue statement of a material fact or fails to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. All documents that any PSBG 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 PSBG 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 PSBG Company and each other office,
-------
branch or facility maintained and operated by each PSBG 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 PSBG 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 PSBG 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) subject
only to the conditions provided in the related license agreements, such systems
are wholly within the possession and control of one of the PSBG 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.
13
<PAGE>
5.22 Intellectual Property. One of the PSBG Companies owns or possesses
---------------------
valid and binding licenses or other rights (including common law 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 PSBG
Companies has received any notice of conflict with respect thereto that asserts
the rights of others. The PSBG 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 5.22 lists all of the trademarks,
-------------
trade names, licenses and other intellectual property used to conduct the
businesses of the PSBG Companies.
5.23 Administration of Trust Accounts. PSBG does not possess and does not
--------------------------------
exercise trust powers.
5.24 Broker's Fees. Except as shown on Schedule 5.24, neither PSBG nor any
------------- -------------
of its Subsidiaries nor any of their respective officers or directors has
employed any broker or finder or incurred any liability for any broker's fees,
commissions or finder's fees in connection with any of the transactions provided
for in this Agreement.
5.25 Regulatory Approvals. PSBG knows of no reason why all requisite
--------------------
regulatory approvals should not or cannot be obtained.
5.26 Opinion of Counsel. PSBG has no Knowledge of any facts that would
------------------
preclude issuance of the opinion of counsel referred to in Section 9.2(e).
5.27 Takeover Laws. PSBG has taken all action required to be taken by it
-------------
in order to exempt this Agreement and the transactions provided for hereby, and
this Agreement and the transactions provided for hereby are exempt from, the
requirements of any applicable "moratorium", "control share", "fair price",
"business combination" or other anti-takeover laws and regulations
(collectively, "Takeover Laws") of the State of Florida or of any other
jurisdiction.
5.28 Year 2000. PSBG represents and warrants that all computer software
---------
and hardware necessary for the conduct of its business (the "Software") is
designed to be used prior to, during, and after the calendar year 2000 A.D., and
that the Software has operated during each such time period without error
relating to the year 2000, specifically including any error relating to, or the
product of, date data which represents or references different centuries or more
than one century. PSBG further represents and warrants that the Software
accepts, calculates, sorts, extracts and otherwise processes date inputs and
date values, and returns and displays date values, in a consistent manner
regardless of the dates used, whether before, on, or after January 1, 2000.
5.29 Derivatives Contracts. PSBG is not a party to nor has PSBG agreed to
---------------------
enter into any swap, forward, future, option, cap, floor, or collar financial
contract, or any other interest rate or foreign currency protection contract not
included on its balance sheet which is a financial derivative contract
(including various combinations thereof).
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF ANB
-------------------------------------
ANB hereby represent and warrant to PSBG 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 and is 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, or upon
14
<PAGE>
request will deliver, to PSBG 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, or prior to the Effective Time will be, duly
and validly authorized by all necessary corporate action on the part of ANB.
Subject to required regulatory consents, 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
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 provided for in this Agreement.
6.3 Capital Stock. The authorized capital stock of ANB, as of the date of
-------------
this Agreement, consists of (i) 17,500,000 shares of ANB Common Stock, of which
11,047,305 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
PSBG 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 PSBG 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 384,905 shares of ANB Common Stock under various stock plans.
6.4 Financial Statements. Attached hereto as Schedule 6.4 are copies of
-------------------- ------------
all ANB Financial Statements and ANB Regulatory Reports for periods ended prior
to the date hereof, and ANB will deliver to PSBG 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
15
<PAGE>
of operations, changes in 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 year-
end adjustments that are not material in amount or effect). The ANB Regulatory
Reports have been prepared in material compliance with the rules and regulations
of the FRB.
6.5 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 June 30, 2000
included in the ANB Financial Statements or reflected in the notes thereto. No
ANB Company has incurred or paid any Liability since June 30, 2000, 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.
6.6 Absence of Certain Changes or Events. Except as set forth on Schedule
------------------------------------ --------
6.6, since June 30, 2000 (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 7 of this Agreement.
6.7 Compliance with Laws. ANB is duly registered as a bank holding
--------------------
company under the BHC Act. 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 6.7, 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
(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.
6.8 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.
6.9 Legal Proceedings. Except as set forth on Schedule 6.9, 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
16
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arbitrators outstanding against any ANB Company, that are reasonably likely to
have, individually or in the aggregate, a Material Adverse Effect on ANB.
6.10 Reports. Since January 1, 1995, 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.
6.11 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 PSBG pursuant to this Agreement, the Exhibits or Schedules hereto, 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/Prospectus to be mailed to PSBG's stockholders in connection
with the PSBG Stockholders' Meeting, and any other documents to be filed by an
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/Prospectus, when first mailed to the stockholders of PSBG, 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 PSBG
Stockholders' Meeting be false or misleading with respect to any material fact,
or omit to state any material fact necessary to correct any statement in any
earlier communication with respect to the solicitation of any proxy for the PSBG
Stockholders' Meeting. 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.
6.12 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.
6.13 1934 Act Compliance. The Proxy Statement/Prospectus will comply in
-------------------
all material respects with applicable provisions of the 1933 Act and the 1934
Act and the rules and regulations thereunder.
6.14 Regulatory Approvals. ANB knows of no reason why all requisite
--------------------
regulatory approvals should not or cannot be obtained.
6.15 Opinion of Counsel. ANB has no Knowledge of any facts that would
------------------
preclude issuance of the opinion of counsel referred to in Section 9.3(d).
17
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ARTICLE 7
CONDUCT OF BUSINESS PENDING CONSUMMATION
----------------------------------------
7.1 Covenants of Parties.
--------------------
(a) Unless the prior written consent of ANB or PSBG, as the case may be,
shall have been obtained, and except as otherwise expressly provided for herein,
each Party shall and shall cause each of its Subsidiaries to (i) preserve intact
its business organization, goodwill, relationships with depositors, customers
and employees, and Assets and maintain its rights and franchises, and (ii) other
than pursuant to Section 8.8(b), take no action, except as required by
applicable Law, which would (A) 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 (B) adversely affect
the ability of any Party to perform its covenants and agreements under this
Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, each of ANB and PSBG shall cause its Designated Representative (and, if
necessary, representatives of any of its Subsidiaries) to confer on a regular
and frequent basis with the Designated Representative of the other Party hereto
and to report on the general status of its and its Subsidiaries' ongoing
operations. Each of ANB and PSBG shall permit the other Party hereto to make
such investigation of its business or properties and its Subsidiaries and of
their respective financial and legal conditions as the investigating Party may
reasonably request. Each of ANB and PSBG shall promptly notify the other Party
hereto concerning (a) any material change in the normal course of its or any of
its Subsidiaries' businesses or in the operation of their respective properties
or in their respective conditions; (b) any material governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) or the institution or the threat of any material Litigation
involving it or any of its Subsidiaries; and (c) the occurrence or impending
occurrence of any event or circumstance that would cause or constitute a breach
of any of the representations, warranties or covenants contained herein; and
each of ANB and PSBG shall, and shall cause each of their respective
Subsidiaries to, use its best efforts to prevent or promptly respond to same.
7.2 Covenants of PSBG. From the date of this Agreement until the earlier
-----------------
of the Effective Time or the termination of this Agreement, PSBG 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 Articles of Incorporation, Bylaws or other governing
instruments of any PSBG Company; or
(b) incur any additional debt obligation or other obligation for borrowed
money except in the ordinary course of the business of PSBG Subsidiaries
consistent with past practices (which, for PSBG, shall include 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 PSBG Company of any Lien or permit any such Lien to
exist; or
(c) 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 PSBG Company, or, declare or pay any dividend or make any
other distribution in respect of PSBG'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 PSBG Common
Stock or any other capital stock of any PSBG 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
18
<PAGE>
(e) adjust, split, combine or reclassify any capital stock of any PSBG
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 PSBG 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 in its fiduciary
capacity; or
(g) grant any increase in compensation or benefits to the employees or
officers of any PSBG 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 the PSBG Board prior to the date of
this Agreement; enter into or amend any severance agreements with officers of
any PSBG Company; grant any material increase in fees or other increases in
compensation or other benefits to directors of any PSBG Company; or
(h) enter into or amend any employment Contract between any PSBG Company
and any Person (unless such amendment is required by Law) that the PSBG 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 PSBG Company or make any
material change in or to any existing employee benefit plans of any PSBG 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 material 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) (i) commence any Litigation other than in accordance with past
practice, (ii) settle any Litigation involving any Liability of any PSBG Company
for material money damages or restrictions upon the operations of any PSBG
Company, or, (iii) 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) enter into any material transaction or course of conduct not in the
ordinary course of business, or not consistent with safe and sound banking
practices, or not consistent with applicable Laws; 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 5% stockholder, director or officer of
PSBG or any of the PSBG Subsidiaries, or any member of the immediate family of
the foregoing, or any Related Interest (Known to PSBG or any of its
Subsidiaries) of any of the foregoing, except for advances under unfunded loan
commitments in existence on the date of this Agreement and specifically
described on Schedule 7.2(n); or
---------------
(o) cancel without payment in full, or modify in any material respect any
Contract relating to, any loan or other obligation receivable from any
stockholder, director or officer of any PSBG Company or any member of the
immediate family of the foregoing, or any Related Interest (Known to PSBG 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 PSBG Company or any member
of the immediate family of the foregoing, or any Related Interest (Known to PSBG
or any of its Subsidiaries) of any of the foregoing; or
(q) 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; or
19
<PAGE>
(r) file any application to relocate or terminate the operations of any
banking office of it or any of its Subsidiaries; or
(s) except in accordance with applicable Law, change its or any of its
Subsidiaries' lending, investment, liability management and other material
banking policies in any material respect; or
(t) intentionally take any action that would reasonably be expected to
jeopardize or delay the receipt of any of the regulatory approvals required in
order to consummate the transactions provided for in this Agreement; or
(u) take any action that would cause the transactions provided for in this
Agreement to be subject to requirements imposed by any Takeover Law, but PSBG
shall take all necessary steps within its control to exempt (or ensure the
continued exemption of) the transactions provided for in this Agreement from, or
if necessary challenge the validity or applicability of, any applicable Takeover
Law now or hereafter in effect.
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 any of the following without
the prior written consent of the chief executive officer, president or chief
financial officer of PSBG, 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 or another National Securities Exchange; provided, however,
that any action or transaction in which the ANB Common Stock is converted into
cash or another marketable security that is traded on a National Securities
Exchange shall not be deemed a violation of this Section 7.3(b).
7.4 Adverse Changes in Condition. ANB and PSBG, as the case may be, agree
----------------------------
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 commercially reasonable best efforts
to prevent or promptly to remedy the same.
7.5 Reports. Each Party and its subsidiaries shall file all reports
-------
required to be filed by it with Regulatory Authorities between the date of this
Agreement and the Effective Time, and PSBG shall deliver to ANB copies of all
such reports filed by PSBG or its Subsidiaries promptly after the same are
filed.
7.6 Acquisition Proposals. Except with respect to this Agreement and the
---------------------
transactions provided for herein, PSBG expressly agrees that neither PSBG nor
any of its Subsidiaries, nor any representative retained by PSBG or any of its
Subsidiaries or any Affiliate thereof will solicit any Acquisition Proposal by
any person until the earlier of the termination of this Agreement or the
consummation of the Merger. PSBG shall promptly notify ANB orally and in
writing in the event it or any of its Subsidiaries receives any inquiry or
proposal relating to any such transaction. PSBG, acting through the PSBG Board
or otherwise, agrees that it shall not, except pursuant to Section 8.8(b) below,
(i) withdraw, modify or change its recommendation to its stockholders with
respect to approval of this Agreement or the Merger, (ii) resolve to engage in
any Acquisition Proposal, (iii) recommend to the stockholders of PSBG any
Acquisition Proposal, or (iv) make any public announcement of a proposal, plan,
or intention to do any of the foregoing or enter into and have any agreement,
written or oral, to enter into, any agreement, contract, understanding, or
arrangement to engage in any of the foregoing.
20
<PAGE>
7.7 NASDAQ Qualification. ANB shall, prior to the Effective Time, secure
--------------------
designation of all ANB Common Stock to be issued in the Merger as a NASDAQ
"national market system security" within the meaning of Rule 11Aa2-1 of the SEC.
ARTICLE 8
ADDITIONAL AGREEMENTS
---------------------
8.1 Regulatory Matters.
------------------
(a) ANB shall promptly prepare and file with the SEC the S-4 Registration
Statement (or such other form as may be appropriate), and all amendments and
supplements thereto, in form reasonably satisfactory to PSBG and its counsel.
ANB shall use its reasonable good faith efforts to have the S-4 Registration
Statement declared effective under the 1933 Act as promptly as practicable after
such filing. PSBG shall mail the Proxy Statement/Prospectus to its stockholders
simultaneously with delivery of notice of the meeting of stockholders called to
approve the Merger. ANB shall also use its reasonable efforts to obtain all
necessary state securities Law or "Blue Sky" permits and approvals required to
carry out the transaction provided for in this Agreement, and PSBG shall furnish
all information concerning PSBG and the holders of PSBG Common Stock as may be
requested in connection with any such action. If at any time prior to the
Effective Time of the Merger any event shall occur which should be set forth in
an amendment of, or a supplement to, the Proxy Statement/Prospectus, PSBG will
promptly inform ANB and cooperate and assist ANB in preparing such amendment or
supplement and mailing the same to the stockholders of PSBG. As of the date of
the execution of this Agreement, and assuming the absence of any additional
material factors, unless the PSBG Board in its good faith judgment determines
that it is otherwise required by Law it is the intent of the PSBG Board that the
Proxy Statement/Prospectus shall contain the recommendation of the PSBG Board in
favor of the Merger and, subject to the foregoing, the PSBG Board shall
recommend that the holders of PSBG Common Stock vote for and adopt the Merger
provided for in the Proxy Statement/Prospectus and this Agreement.
(b) The Parties shall cooperate with each other and use their best efforts
to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings and to obtain as promptly as
practicable all Consents of all third parties and Regulatory Authorities which
are necessary or advisable to consummate the transactions contemplated by this
Agreement. ANB and PSBG shall each have the right to review in advance, and to
the extent practicable each will consult the other on, in each case subject to
applicable Laws relating to the exchange of information, all the information
relating to ANB or PSBG, as the case may be, and any of their respective
Subsidiaries, which appear in any filing made with, or written materials
submitted to, any third party or any Regulatory Authority in connection with the
transactions contemplated by this Agreement. In exercising the foregoing right,
each of the Parties hereto shall act reasonably and as promptly as practicable.
The Parties hereto agree that they will consult with each other with respect to
the obtaining of all Permits and Consents, approvals and authorizations of all
third parties and Regulatory Authorities necessary or advisable to consummate
the transactions provided for in this Agreement, and each Party will keep the
other apprised of the status of matters relating to completion of the
transactions provided for in this Agreement.
(c) ANB and PSBG shall, upon request, furnish each other all information
concerning themselves, their Subsidiaries, directors, officers and stockholders
and such other matters that as may be reasonably necessary or advisable in
connection with the Proxy Statement/Prospectus, the S-4 Registration Statement
or any other statement, filing, notice or application made by or on behalf of
ANB, PSBG or any of their Subsidiaries to any Regulatory Authority in connection
with the Merger and the other transactions provided for in this Agreement.
(d) ANB and PSBG shall promptly furnish each other with copies of written
communications received by ANB or PSBG, as the case may be, or any of their
respective Subsidiaries, Affiliates or associates from, or delivered by any of
the foregoing to, any Regulatory Authority in respect of the transactions
provided for herein.
21
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(e) ANB will indemnify and hold harmless PSBG and its officers and
directors and PSBG will indemnify and hold harmless ANB and its directors and
officers, from and against any and all actions, causes of actions, losses,
damages, expenses or liabilities to which any such entity, or any director,
officer or controlling person thereof, may become subject under applicable Laws
(including the 1933 Act and the 1934 Act) and rules and regulations thereunder
and will reimburse the other, and any such director, officer or controlling
person for any legal or other expenses reasonably incurred in connection with
investigating or defending any actions, whether or not resulting in liability,
insofar as such losses, damages, expenses, liabilities or actions arise out of
or are based upon any untrue statement or alleged untrue statement of a material
fact contained in any such request, statement, application, report or material
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary in order to
make the statement therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing in connection therewith by such indemnifying
Party for use therein.
8.2 Access to Information.
---------------------
(a) Upon reasonable notice and subject to applicable Laws relating to the
exchange of information, from the date of this Agreement, ANB and PSBG shall,
and shall cause each of their respective Subsidiaries to, afford to the
officers, employees, accountants, counsel and other representatives of the
other, access during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such period,
each of ANB and PSBG shall, and shall cause each of their respective
Subsidiaries to, make available to the other (i) a copy of each report,
schedule, registration statement and other document filed or received by it
during such period pursuant to the requirements of the Securities Laws or
Federal or state banking Laws (other than reports or documents which such Party
is not permitted to disclose under applicable Law, in which case such Party
shall notify the other Party of the nondisclosure and the nature of such
information) and (ii) also other information concerning its business, properties
and personnel as the other party may reasonably request.
(b) All information furnished by ANB to PSBG or its representatives
pursuant hereto shall be treated as the sole property of ANB, and, if the Merger
shall not occur, PSBG and its representatives shall return to ANB all of such
written information and all documents, notes, summaries or other materials
containing, reflecting or referring to, or derived from, such information. PSBG
shall, and shall use its best efforts to cause its representatives to, keep
confidential all such information, and shall not directly or indirectly use such
information for any competitive or other commercial purpose. The obligation to
keep such information confidential shall continue for five years from the date
the proposed Merger is abandoned and shall not apply to (i) any information
which (x) was already in PSBG's possession prior to the disclosure thereof by
ANB; (y) was then generally known to the public; or (z) was disclosed to PSBG by
a third party not bound by an obligation of confidentiality, or (ii) disclosures
made as required by Law.
(c) All information furnished by PSBG or its Subsidiaries to ANB or its
representatives or subsidiaries pursuant hereto shall be treated as the sole
property of PSBG and, if the Merger shall not occur, ANB and its representatives
shall return to PSBG all of such written information and all documents, notes,
summaries or other materials containing, reflecting or referring to, or derived
from, such information. ANB shall, and shall use its best efforts to cause its
representatives to, keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purpose. The obligation to keep such information confidential shall
continue for five years from the date the proposed Merger is abandoned and shall
not apply to (i) any information which (x) was already in ANB's possession prior
to the disclosure thereof by PSBG or any of its Subsidiaries; (y) was then
generally known to the public; or (z) was disclosed to ANB by a third party not
bound by an obligation of confidentiality, or (ii) disclosures made as required
by Law.
(d) No investigation by either of the parties or their respective
representatives shall affect the representations and warranties of the other set
forth herein.
8.3 Efforts to Consummate. Subject to the terms and conditions of this
---------------------
Agreement, each of PSBG and ANB shall use its reasonable best efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all
22
<PAGE>
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
obtaining of all of the Consents.
8.4 PSBG Stockholders' Meeting. PSBG shall call a meeting of its
--------------------------
stockholders (the "PSBG Stockholders' Meeting") to be held as soon as reasonably
practicable after the date of this Agreement for the purpose of voting upon this
Agreement and such other related matters as it deems appropriate. In connection
with the PSBG Stockholders' Meeting (a) PSBG shall, with the assistance of ANB,
prepare, publish and mail a notice of meeting in accordance with applicable Law;
(b) ANB shall furnish all information concerning it that PSBG may reasonably
request in connection with conducting the PSBG Stockholders' Meeting; (c) ANB
shall prepare and furnish to PSBG for distribution to PSBG's stockholders the
Proxy Statement/Prospectus; (d) PSBG shall furnish all information concerning it
that ANB may reasonably request in connection with preparing the Proxy
Statement/Prospectus; (e) the PSBG Board shall recommend to its stockholders the
approval of this Agreement; and (f) PSBG shall use its reasonable best efforts
to obtain its stockholders' approval. The Parties will use their reasonable
best efforts to prepare a preliminary draft of the Proxy Statement/Prospectus
within 30 days of the date of this Agreement, and will consult with one another
on the form and content of the Proxy Statement/Prospectus (including the
presentation of draft copies of such proxy materials to the other) prior to
delivery to PSBG's stockholders. PSBG will use its reasonable best efforts to
publish and deliver notice of meeting and mail the Proxy Statement/Prospectus as
soon as practicable after receipt of all required regulatory approvals and the
expiration of all applicable waiting periods.
8.5 Certificates of Objections. As soon as practicable (but in no event
--------------------------
more than three business days) after the PSBG Stockholders' Meeting, PSBG shall
deliver to ANB a certificate of the Secretary of PSBG containing the names of
the stockholders of PSBG that (a) gave written notice at or prior to the PSBG
Stockholders' Meeting that they dissent from the Merger, and/or (b) voted
against approval of this Agreement ("Certificate of Objections"). The
Certificate of Objections shall include the number of shares of PSBG Common
Stock held by each such stockholder and the mailing address of each such
stockholder.
8.6 Press Releases. Prior to the Effective Time, ANB and PSBG shall
--------------
obtain the prior consent of the other Party 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 which it deems necessary or advisable, with the advice of counsel, in
order to satisfy such Party's disclosure obligations imposed by Law.
8.7 Expenses. All costs and expenses incurred in connection with the
--------
transactions provided for in this Agreement, including without limitation,
attorneys' fees, accountants' fees, other professional fees and costs related
to expenses of officers and directors of PSBG and the PSBG Companies, shall be
paid by the party incurring such costs and expenses; provided, however, without
the consent of ANB, all such costs and expenses incurred by PSBG and the PSBG
Companies shall not exceed $75,000, exclusive of the Broker's Fee. Each Party
hereby agrees to and shall indemnify the other Party against any liability
arising from any such fee or payment incurred by such Party.
8.8 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 take any action
reasonably calculated to prevent the Closing and shall not unreasonably delay
any action reasonably required to be taken by it to facilitate the Closing.
(b) PSBG expressly agrees to consummate the transactions provided for
herein upon the completion of all conditions to Closing and shall not take any
action reasonably calculated to prevent the Closing and shall not unreasonably
delay 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 PSBG Board, as determined in good
faith by a majority of the PSBG Board based on the advice of PSBG's outside
counsel, PSBG may:
23
<PAGE>
(i) in response to an unsolicited request therefor, participate in
discussions or negotiations with, or furnish information with respect to
PSBG pursuant to a customary confidentiality agreement (as determined by
PSBG's outside counsel) to, any person concerning an Acquisition Proposal
involving PSBG; 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 PSBG 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
PSBG, means a bona fide Acquisition Proposal involving PSBG made by a third
party which a majority of the disinterested members of the PSBG Board
determines in its good faith judgment (based on the advice of PSBG's
independent financial advisor) to be more favorable to PSBG's stockholders
than the Merger, and for which financing, to the extent required, is then
committed).
PSBG shall promptly advise ANB in writing of any Acquisition Proposal involving
PSBG 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 and will keep ANB fully informed of the status and details of any such
Acquisition Proposal or inquiry.
8.9 Fairness Opinion. The PSBG Board has engaged The Carson Medlin
----------------
Company (the "PSBG Financial Advisor") to act as advisor to the PSBG Board
during the transaction and to opine separately as to the fairness from a
financial point of view of the consideration to be received by the stockholders
of PSBG under the terms of this Agreement. It is expected that said fairness
opinion shall be issued as soon as practicable after the signing of this
Agreement. The PSBG Board may, at its option, elect to have the final fairness
opinion updated as of the date of the Proxy Statement/Prospectus and immediately
prior to the Effective Time in order to account for any Material Adverse Effect
that may have occurred with regard to ANB or PSBG.
8.10 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.
8.11 Agreement of Affiliates. PSBG has disclosed on Schedule 8.11 each
----------------------- -------------
Person whom it reasonably believes is an "affiliate" of PSBG for purposes of
Rule 145 under the 1933 Act. PSBG shall use its reasonable efforts to cause each
such Person to deliver to ANB not later than 30 days prior to the Effective Time
a written agreement, substantially in the form of Exhibit B providing that such
---------
Person will not sell, pledge, transfer, or otherwise dispose of the shares of
PSBG Common Stock held by such Person except as contemplated by such agreement
or by this Agreement and will not sell, pledge, transfer, or otherwise dispose
of the shares of ANB Common Stock to be received by such Person upon
consummation of the Merger except in compliance with applicable provisions of
the 1933 Act and the rules and regulations thereunder and until such time as
financial results covering at least 30 days of combined operations of ANB and
PSBG have been published within the meaning of Section 201.01 of the SEC's
Codification of Financial Reporting Policies. Shares of ANB Common Stock issued
to such affiliates of PSBG in exchange for shares of PSBG Common Stock shall not
be transferable until such time as financial results covering at least 30 days
of combined operations of ANB and PSBG have been published within the meaning of
Section 201.01 of the SEC's Codification of Financial Reporting Policies,
regardless of whether each such affiliate has provided the written agreement
referred to in this Section 8.11 (and ANB shall be entitled to place restrictive
legends upon certificates for shares of ANB Common Stock issued to affiliates of
PSBG pursuant to this Agreement to enforce the provisions of this Section 8.11).
ANB shall not be required to maintain the effectiveness of the Registration
Statement under the 1933 Act for the purposes of resale of ANB Common Stock by
such affiliates.
8.12 Takeover Laws. PSBG shall take all action necessary to exempt the
-------------
transactions provided for in this Agreement from, or if necessary challenge the
validity or applicability of, any applicable Takeover Laws.
24
<PAGE>
8.13 Indemnification; Directors and Officers Insurance.
-------------------------------------------------
(a) From and after the Effective Time, ANB shall indemnify and advance
costs and expenses (including reasonable attorneys' fees, disbursements and
expenses) and hold harmless each present and former director and/or officer of
PSBG or its subsidiaries determined as of the Effective Time (the "Indemnified
Parties"), against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages, settlements or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative (each a "Claim"), arising out of or pertaining to matters existing
or occurring at or prior to the Effective Time, whether asserted or claimed
prior to, at or after the Effective Time to the fullest extent (not prohibited
by Federal law) that PSBG would have been required under Florida law and its
Articles of Incorporation or Bylaws in effect on the date hereof, to indemnify
such person (and also advance expenses as incurred to the fullest extent
permitted under applicable law).
(b) For a period of two (2) years after the Effective Time, ANB shall
cause to be maintained in effect the current policies of directors and officers
liability insurance maintained by PSBG (provided that ANB may substitute
therefore policies of at least the same coverage and amounts containing terms
and conditions which are not less advantageous to such directors and officers
and provided that the deductible amount on ANB's policies may be higher than
that for existing PSBG policies) with respect to claims arising from facts or
events which occurred before the Effective Time, provided that such policies may
be maintained at a cost that is comparable to the cost of such policies as of
the date of this Agreement.
(c) If ANB or any of its successors and assigns (i) shall consolidate with
or merge into any other corporation or entity and shall not be the continuing or
surviving corporation or entity of such consolidation or merger, or (ii) shall
transfer all or substantially all of its property and assets to any individual,
corporation or other entity, then, in each such case, proper provision shall be
made so that the successors and assigns of ANB shall assume the obligations set
forth in this section.
(d) The provisions of this Section 8.13 are intended to be for the benefit
of, and shall be enforceable by each Indemnified Party, and each Indemnified
Party's heirs and representatives.
8.14 ANB 401(k) Plan. Upon the Effective Time, ANB shall offer each PSBG
---------------
employee an opportunity to enroll in the ANB 401(k) Plan. For purposes of
vesting requirements under the ANB 401(k) Plan, each such enrollee shall be
granted credit for his or her service with PSBG.
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 11.4 of
this Agreement:
(a) Stockholder and Board Approval. The stockholders of each of PSBG and
------------------------------
Interim shall have approved this Agreement and the consummation of the
transactions provided for herein by a majority vote, as and to the extent
required by Law and by the provisions of any governing instruments, and each of
PSBG and Interim shall have furnished the other Party certified copies of
resolutions duly adopted by its stockholders evidencing same. The PSBG Board
and the Interim Board shall have approved the Agreement and the consummation of
the transactions provided for herein in writing by a majority vote.
(b) Regulatory Approvals. Other than the filing of the Articles of Merger
--------------------
as provided for in Section 1.3 hereof, 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
25
<PAGE>
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 provided for in 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 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 provided for in this Agreement. No action or proceeding shall have
been instituted by any Person, and the Parties shall not have Knowledge of any
threatened action or proceeding by any Person, which seeks to restrain the
consummation of the transactions provided for in this Agreement which, in the
opinion of the ANB Board or the PSBG Board, renders it impossible or inadvisable
to consummate the transactions provided for in 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
PricewaterhouseCoopers, L.L.P., to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
(f) Tax Matters. PSBG and ANB shall have received a written opinion of
-----------
counsel from Maynard, Cooper & Gale, P.C. in form reasonably satisfactory to
them (the "Tax Opinion"), 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 PSBG Common Stock for ANB Common Stock
will not give rise to gain or loss to the stockholders of PSBG with respect to
such exchange (except to the extent of any cash received), and (iii) neither
PSBG 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 ANB shall be entitled to rely upon representations of officers of
PSBG and ANB reasonably satisfactory in form and substance to such counsel.
(g) S-4 Registration Statement Effective. The S-4 Registration Statement
------------------------------------
shall have become effective under the 1933 Act and no stop order suspending the
effectiveness of the S-4 Registration Statement shall have been issued and no
proceeding for that purpose shall have been initiated or threatened by the SEC.
9.2 Conditions to Obligations of ANB and Interim. The obligations of ANB
--------------------------------------------
and Interim 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 11.4(a) of this
Agreement:
(a) Representations and Warranties. The representations and warranties of
------------------------------
PSBG 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 PSBG.
26
<PAGE>
(b) Performance of Agreements and Covenants. Each and all of the
---------------------------------------
agreements and covenants of PSBG 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. PSBG 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 the
PSBG Board and the PSBG 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) Employment Agreement. PSBG shall have delivered to ANB documentation,
--------------------
in a form satisfactory to ANB in its sole discretion, evidencing the pre-Closing
termination (at no cost to PSBG or ANB) of the Employment Agreement between PSBG
and Wayne M. Turner shall have executed and delivered an Employment Agreement
with ANB in the form attached hereto as Exhibit C.
---------
(e) Opinion of Counsel. PSBG shall have delivered to ANB an opinion of
------------------
Shutts & Bowen, LLP, counsel to PSBG, dated as of the Closing, in substantially
the form of Exhibit D hereto.
---------
(f) Comfort Letter. ANB shall have received from Beemer, Kuehnhackl &
--------------
Company, P.A., independent certified public accountants, a comfort letter dated
as of the Effective Time with respect to such matters relating to the financial
condition of PSBG as ANB may reasonably request.
(g) Net Worth and Capital Requirements. Immediately prior to the Effective
----------------------------------
Time, PSBG shall have a minimum net worth of $8,500,000. For purposes of this
Section 9.2(g), "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 (i) any amounts at which
shares of capital stock of such person appear on the asset side of the balance
sheet and (ii) any amounts due from or owed by any Subsidiary thereof; provided,
however, that for purposes of this Section, any reduction in PSBG's net worth
resulting from (i) a decline in the market value of PSBG's investment securities
after the date of this Agreement, (ii) any change in generally accepted
accounting principles or regulatory accounting requirements occurring after the
date of this Agreement, (iii) expenses related to the transactions contemplated
by this Agreement within the limits of Section 8.7, and (iv) any other expenses,
charges, revaluations or other adjustments made at the request of ANB, including
payments required to satisfy the conditions of Section 9.2(d), shall be
disregarded.
(h) Affiliate Agreements. ANB shall have received from each affiliate of
--------------------
PSBG, the affiliates letter referred to in Section 8.11 of this Agreement, to
the extent necessary to assure in the reasonable judgment of ANB that the
transactions contemplated hereby will qualify for pooling of interests
accounting treatment.
(i) Deferred Compensation Plans.
---------------------------
(i) ANB shall have received evidence, in a form reasonably
satisfactory to ANB and its counsel, that (A) each Director Deferred Fee and
Bonus Agreement and (B) each Executive Deferred Compensation Agreement, as more
specifically identified on Schedule 5.14, has been amended such that, as of the
-------------
Effective Time: (1) all provisions that would or may trigger a payment to the
participant upon a change of control have been deleted in their entirety, (2)
from and after January 1, 2001, no additional deferrals under the applicable
Agreement shall be permitted, and (3) from and after January 1, 2001, the
applicable interest rate payable pursuant to Section 3.1.2 of each such
Agreement shall be the 30-day London Interbank Offered Rate rather than the rate
equal to PSBG's Return on Equity; and
27
<PAGE>
(ii) ANB shall have received evidence, in a form reasonably
satisfactory to ANB and its counsel, that each Executive Deferred Bonus
Agreement, as more specifically identified on Schedule 5.14, has, as of the
-------------
Effective Time: (A) been amended in accordance with the provisions set forth in
sub-sections (i)(1), (2) and (3) above, or (B) been terminated in exchange
solely for a lump-sum payment by PSBG in an amount equal to the product of (Y)
the participant's vested accrual account balance as of the Effective Time and
(Z) the lesser of (a) the multiple of PSBG's book value paid by ANB in
connection with this Agreement (determined with reference to the Average Quoted
Price) or (b) two (2); and
(iii) ANB shall have received evidence, in a form reasonably
satisfactory to ANB and its counsel, that each Employee Deferred Bonus
Agreement, as more specifically identified on Schedule 5.14, has, as of the
-------------
Effective Time, been terminated in exchange solely for a lump-sum payment by
PSBG in an amount equal to the product of (Y) the participant's vested accrual
account balance as of the Effective Time and (Z) the lesser of (a) the multiple
of PSBG's book value paid by ANB in connection with this Agreement (determined
with reference to the Average Quoted Price) or (b) two (2).
(j) PSBG 401(k) Plan. PSBG shall have taken all steps necessary or
----------------
advisable, in the reasonable estimation of ANB, to terminate the Peoples State
Bank 401(k) Plan immediately prior to the Effective Time.
9.3 Conditions to Obligations of PSBG. The obligations of PSBG 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 PSBG pursuant to Section 11.4(b) of this Agreement:
(a) Representations and Warranties. The representations and warranties of
------------------------------
ANB 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 PSBG (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 the ANB
Board 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 PSBG and
its counsel shall request.
(d) Opinion of Counsel. ANB shall have delivered to PSBG an opinion of
------------------
Maynard, Cooper & Gale, P.C., counsel to ANB, dated as of the Effective Time, in
substantially the form of Exhibit E hereto.
---------
(e) Fairness Opinion. PSBG shall have received from the PSBG Financial
----------------
Advisor the fairness opinion described in Section 8.9 (as updated immediately
prior to the Effective Time, if requested by the PSBG Board) stating that the
consideration to be received by the stockholders of PSBG under the terms of this
Agreement and recommended by PSBG to its stockholders is fair to PSBG and its
stockholders from a financial point of view.
(f) ANB Common Stock. The ANB Common Stock to be issued in the Merger
----------------
shall have been qualified as a NASDAQ "national market system security" pursuant
to Section 7.7 hereof.
28
<PAGE>
ARTICLE 10
TERMINATION
-----------
10.1 Termination. Notwithstanding any other provision of this Agreement,
-----------
and notwithstanding the approval of this Agreement by the stockholders of PSBG,
this Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) by mutual written consent of the ANB Board and the PSBG Board; or
(b) by the ANB Board or the PSBG Board 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 ANB Board or the PSBG Board 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 ANB Board or the PSBG Board (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 PSBG fail
to vote their approval of this Agreement and the transactions provided for
herein at the PSBG Stockholders' Meeting where the transactions are presented to
such PSBG stockholders for approval and voted upon; or
(e) by the ANB Board if there shall have occurred any Material Adverse
Effect to the business, operations or financial condition of PSBG taken as a
whole and such Material Adverse Effect shall not have been remedied within 30
days after receipt by PSBG of notice in writing from ANB specifying the nature
of such Material Adverse Effect and requesting that it be remedied; or
(f) by the PSBG Board 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 30
days after receipt by ANB of notice in writing from PSBG specifying the nature
of such Material Adverse Effect and requesting that it be remedied; or
(g) by the ANB Board or the PSBG Board if the Merger shall not have been
consummated by March 31, 2001 (the "Termination Date"), 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); provided, however, that if a Consent from a
Regulatory Authority has not been obtained by the Termination Date, then the
Termination Date may be extended by either Party to June 30, 2001, if the
failure to obtain such Consent is not caused by any breach of this Agreement by
the Party electing such extension.
(h) by the ANB Board or the PSBG Board 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 and such
failure was not the fault of the terminating party; or
(i) by the ANB Board if the holders of in excess of five percent (5%) of
the outstanding shares of PSBG Common Stock properly assert their dissenters'
rights of appraisal pursuant to the Dissenter Provisions; or
29
<PAGE>
(j) by the PSBG Board if a majority of the disinterested members of the
PSBG Board shall have determined to enter into an agreement with respect to a
superior Acquisition Proposal in accordance with Section 8.8(b) of this
Agreement; provided, however, that concurrently with such termination, PSBG
shall pay to ANB a cash termination fee of $750,000; provided, further, that
such termination shall not be effective until such termination fee shall have
been paid in full; or
(k) by the ANB Board if any person or entity not a party to this Agreement
initiates a suit, action or similar proceeding with any Regulatory Authority or
in any court or similar tribunal challenging the transaction provided for herein
(including the legality of the Merger).
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, Article 11 and Sections 8.2(b) and (c) and 8.7 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 for those covenants and
agreements contained herein which by their terms apply in whole or in part after
the Effective Time.
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:
"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.
"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, as reflected in the preamble to this Agreement.
"ANB" shall mean Alabama National BanCorporation, a Delaware
corporation.
"ANB Board" shall mean the Board of Directors of ANB.
30
<PAGE>
"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 Financial Statements" shall mean (i) the audited consolidated
statements of conditions (including related notes and schedules, if any) of
ANB as of December 31, 1999, 1998 and 1997, 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, together with the
report thereon of PricewaterhouseCoopers, LLP, independent certified public
accountants, as filed by ANB in SEC Documents, and (ii) the unaudited
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 schedules,
if any) included in SEC Documents filed with respect to periods ended
subsequent to December 31, 1999.
"ANB Regulatory Reports" shall mean (i) the Consolidated Financial
Statements for Bank Holding Companies, Form FRY 9C, for the years ended
December 31, 1999 and 1998, as filed by ANB with the FRB and (ii) the
Consolidated Financial Statements for Bank Holding Companies, Form FRY 9C,
delivered by ANB to PSBG with respect to periods ended subsequent to
December 31, 1999.
"ANB Subsidiaries" shall mean the Subsidiaries of ANB.
"Assets" of a Person shall mean all of the assets, properties,
businesses and rights of such Person of every kind, nature, character and
description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in such
Person's business, directly or indirectly, in whole or in part, whether or
not carried on the books and records of such Person, and whether or not
owned in the name of such Person or any Affiliate of such Person and
wherever located.
"Average Quoted Price" shall mean the price derived by adding the
averages of the high and low sales price of one share of ANB Common Stock
as reported on NASDAQ on each of the ten (10) consecutive trading days
ending on the fifth business day prior to the Effective Time, and dividing
such sum by ten (10).
"BHC Act" shall mean the federal Bank Holding Company Act of 1956, as
amended.
"Broker's Fee" shall mean PSBG's liability to the PSBG Financial
Advisor for the fees and expenses reflected on Schedule 5.24.
-------------
"Certificate of Objections" shall have the meaning provided in Section
8.5 of this Agreement.
"Closing" shall mean the closing of the transactions provided for
herein, as described in Section 1.2 of this Agreement.
"Consent" shall mean any consent, approval, authorization, clearance,
exemption, waiver or similar affirmation by any Person pursuant to any
Contract, Law, Order or Permit.
"Contract" shall mean any written or oral agreement, arrangement,
authorization, commitment, contract, indenture, instrument, lease,
obligation, plan, practice, restriction, understanding or undertaking of
any kind or character, or other document to which any Person is a party or
that is binding on any Person or its capital stock, Assets or business.
"Cutoff" shall have the 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
31
<PAGE>
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.
"Designated Representative"
(a) with respect to PSBG shall mean Wayne M. Turner; and
(b) with respect to ANB shall mean John H. Holcomb, III and/or William
E. Matthews V.
"Dissenter Provisions" shall have the meaning provided in Section 3.4
of this Agreement.
"Effective Time" shall mean the date and time at which the Merger
becomes effective 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 meaning provided in Section 5.14 of
this Agreement.
"Exchange Agent" shall mean SunTrust Bank, Atlanta, Georgia.
"Exchange Ratio" shall have the meaning given such term in Section 3.1
hereof.
"FDIC" shall mean the Federal Deposit Insurance Corporation.
"FFIC" shall mean the Florida Financial Institutions Code, which
includes those Florida Laws identified in Section 655.005(j) of the Florida
Statutes.
"FRB" or "Federal Reserve Board" shall mean Board of Governors of the
Federal Reserve System.
"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. (S) 9601 et seq., or
any similar federal, state or local Law.
"Internal Revenue Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder.
"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
32
<PAGE>
of the Party would have obtained 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 statute applicable to a Person or its
Assets, Liabilities or business, including without limitation those
promulgated, interpreted or enforced by any of the Regulatory Authorities.
"Liability" shall mean any direct or indirect, primary or secondary,
liability, indebtedness, obligation, penalty, cost or expense (including
without limitation costs of investigation, collection and defense), claim,
deficiency, guaranty or endorsement of or by any Person (other than
endorsements of notes, bills, checks and drafts presented for collection or
deposit in the ordinary course of business) of any type, whether accrued,
absolute or contingent, liquidated or unliquidated, matured or unmatured,
or otherwise.
"Lien" shall mean any conditional sale agreement, default of title,
easement, encroachment, encumbrance, hypothecation, infringement, lien,
mortgage, pledge, reservation, restriction, security interest, title
retention or other security arrangement, or any adverse right or interest,
charge or claim of any nature whatsoever of, on or with respect to any
property or property interest, other than (i) Liens for current property
Taxes not yet due and payable, (ii) for depository institution Subsidiaries
of a Party, pledges to secure deposits and other Liens incurred in the
ordinary course of the banking business, and (iii) Liens which are not
reasonably likely to have, individually or in the aggregate, a Material
Adverse Effect on a Party.
"Litigation" shall mean any action, arbitration, cause of action,
claim, complaint, criminal prosecution, demand letter, governmental or
other examination or investigation, hearing, inquiry, administrative or
other proceeding or notice (written or oral) by any Person alleging
potential Liability or requesting information relating to or affecting a
Party, its business, its Assets (including without limitation Contracts
related to it), or the transactions 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 Interim with and into PSBG referred
to in Section 1.1 of this Agreement.
"NASD" shall mean the National Association of Securities Dealers, Inc.
33
<PAGE>
"NASDAQ" shall mean the National Association of Securities Dealers
Automated Quotations System.
"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.
"Participation Facility" shall mean any facility in which the Party in
question or any of its Subsidiaries participates in the management and,
where required by the context, includes the owner or operator or such
property, but only with respect to such property.
"Party" shall mean either PSBG, Interim or ANB, as the case may be,
and "Parties" shall mean PSBG, Interim 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.
"Proxy Statement/Prospectus" shall have the meaning set forth in
Section 5.18 of this Agreement.
"PSBG" shall mean Peoples State Bank of Groveland, a Florida banking
corporation located in Groveland, Florida.
"PSBG Allowance" shall have the meaning provided for in Section 5.9(a)
of this Agreement.
"PSBG Benefit Plans" shall have the meaning set forth in Section
5.14(a) of this Agreement.
"PSBG Board" shall mean the Board of Directors of PSBG.
"PSBG Call Reports" shall mean (i) the Reports of Income and Condition
of PSBG for the years ended December 31, 1999 and 1998, as filed with the
FDIC and (ii) the Reports of Income and Condition of PSBG delivered by PSBG
to ANB with respect to periods ended subsequent to December 31, 1999.
"PSBG Certificate" shall have the meaning provided in Section 4.2 of
this Agreement.
"PSBG Common Stock" shall mean the $1.667 par value common stock of
PSBG.
"PSBG Companies" shall mean, collectively, PSBG and all PSBG
Subsidiaries.
"PSBG Contracts" shall have the meaning set forth in Section 5.15 of
this Agreement.
"PSBG ERISA Plans" shall have the meaning set forth in Section 5.14(a)
of this Agreement.
"PSBG Financial Advisor" shall have the meaning set forth in Section
8.9 of this Agreement.
"PSBG Financial Statements" shall mean (i) the audited consolidated
balance sheets (including related notes and schedules, if any) of PSBG as
of December 31, 1999, 1998 and 1997, and the related
34
<PAGE>
statements of income, changes in stockholders' equity and cash flows
(including related notes and schedules, if any) for the years then ended,
together with the report thereon of Beemer, Kuehnhackl & Company, P.A.,
independent certified public accountants, as delivered by PSBG to ANB, and
(ii) the unaudited consolidated balance sheets of PSBG (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 PSBG to ANB with respect to periods ended subsequent
to December 31, 1999.
"PSBG Pension Plan" shall have the meaning set forth in Section
5.14(a) of this Agreement.
"PSBG Stockholders' Meeting" shall mean the meeting of the
stockholders of PSBG to be held pursuant to Section 8.4 of this Agreement,
including any adjournment or adjournments thereof.
"PSBG Subsidiaries" shall mean the Subsidiaries of PSBG, which shall
include the PSBG Subsidiaries described in Schedule 5.4 of this Agreement
and any corporation, bank, savings association or other organization
acquired as a Subsidiary of PSBG in the future and owned by PSBG at the
Effective Time.
"Registration Statement" shall mean the Registration Statement on Form
S-4 or 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, 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.
"S-4 Registration Statement" shall have the meaning set forth in
Section 5.18 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.
"Securities Laws" shall mean the 1933 Act, the 1934 Act, the
Investment Company Act of 1940 as amended, the Investment Advisors Act of
1940, as amended, the Trust Indenture Act of 1939, as amended, and the
rules and regulations of any Regulatory Authority promulgated thereunder.
"Software" shall have the meaning provided for in Section 5.28 of
this Agreement.
"State Regulator" shall have the meaning set forth in Section 5.9(c)
of this Agreement.
"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 PSBG as the surviving Florida
banking corporation in the Merger.
"Takeover Laws" shall have the meaning set forth in Section 5.27 of
this Agreement.
35
<PAGE>
"Tax Opinion" shall have the meaning set forth in Section 9.1(f) 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 Entire Agreement. Except as otherwise expressly provided herein,
----------------
the 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.
11.3 Amendments. To the extent permitted by Law, this Agreement may be
----------
amended by a subsequent writing signed by ANB and PSBG upon the approval of the
Boards of Directors of each of ANB and PSBG; provided, however, that after
approval of this Agreement by the holders of PSBG Common Stock, there shall be
made no amendment that pursuant to applicable Law requires further approval by
the PSBG stockholders without the further approval of the PSBG stockholders.
11.4 Waivers.
-------
(a) Prior to or at the Effective Time, ANB, acting through the ANB Board,
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 PSBG, to
waive or extend the time for the compliance or fulfillment by PSBG of any and
all of its obligations 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, PSBG, acting through the PSBG
Board, 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 PSBG 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 PSBG.
11.5 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.
11.6 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:
PSBG: Peoples State Bank of Groveland
200 East Broad Street
Groveland, Florida 34736
Telecopy Number: (352) 429-9896
Attention: Wayne M. Turner
President & Chief Executive Officer
36
<PAGE>
Copy to Counsel: Shutts & Bowen, LLP
20 North Orange Avenue, Suite 1000
Orlando, Florida 32801
Telecopy Number: (407) 425-8316
Attention: Rod Jones
ANB or Interim: Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Telecopy Number: (205) 583-3275
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
11.7 Brokers and Finders. Except as provided in Section 5.24, 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 PSBG or ANB, each of PSBG 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.
11.8 Governing Law. Except to the extent the laws of the State of Florida
-------------
apply to the Merger, 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.
11.9 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.
11.10 Captions. The captions contained in this Agreement are for reference
--------
purposes only and are not part of this Agreement.
11.11 Enforcement of Agreement. The Parties hereto agree that irreparable
------------------------
damage would occur in the event that any of the provisions of this Agreement was
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the Parties shall be entitled to an injunction or
injunctions 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.
11.12 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
37
<PAGE>
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.
11.13 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.
[Remainder of page intentionally left blank.]
38
<PAGE>
IN WITNESS WHEREOF, ANB and PSBG have each 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.
Peoples State Bank of Groveland
Attest:
By: /S/ Miriam R. Strong By: /S/ Wayne M. Turner
---------------------------- -------------------------------------
Its: Secretary Wayne M. Turner
Its: President
[BANK SEAL]
Alabama National BanCorporation
Attest:
By: /S/ Kimberly Moore By: /S/ John H. Holcomb, III
---------------------------- -------------------------------------
Its: Secretary John H. Holcomb III
Its: Chief Executive Officer
[CORPORATE SEAL]
S-1
<PAGE>
List of Exhibits
Exhibit A: Plan of Merger
Exhibit B: Form of Rule 145 Agreement
Exhibit C: Form of Employment Agreement (Turner)
Exhibit D: Form of Shutts & Bowen, LLP Opinion
Exhibit E: Form of Maynard, Cooper & Gale, P.C. Opinion
<PAGE>
Exhibit A
---------
(Plan of Merger)
PLAN OF MERGER OF
PEOPLES STATE INTERIM BANK WITH AND INTO
PEOPLES STATE BANK OF GROVELAND
THIS PLAN OF MERGER (this "Plan of Merger") dated October 10, 2000,
describing a merger by and between Peoples State Bank of Groveland ("PSBG"), a
Florida state chartered bank having its principal office at 200 East Broad
Street, Groveland, Florida 34736, and Peoples State Interim Bank ("Interim"), an
interim banking corporation in organization under the laws of the State of
Florida.
W I T N E S S E T H
WHEREAS, PSBG is a banking corporation chartered under the laws of the
State of Florida, the authorized capital stock of which consists of 5,000,000
shares of common stock, $1.667 par value per share ("PSBG Common Stock") of
which, at the date hereof, 631,464 shares are issued and outstanding, and none
of which are reserved for issuance pursuant to outstanding options;
WHEREAS, Interim, which is an interim Florida banking corporation in
organization pursuant to Section 658.42(2) of the Florida Statutes for purposes
of facilitating the transactions provided for herein, will be a wholly-owned
subsidiary of Alabama National BanCorporation, a Delaware corporation and a bank
holding company registered under the Bank Holding Company Act of 1956 ("ANB");
WHEREAS, the respective Boards of Directors of PSBG, Interim and ANB deem
the merger of Interim with and into PSBG, under and pursuant to the terms and
conditions herein set forth or referred to, desirable and in the best interests
of the respective banks, corporations and stockholders, and the respective
Boards of Directors have adopted resolutions approving the Agreement and Plan of
Merger of even date herewith by and among PSBG and ANB ("Merger Agreement"),
providing for all the terms of the merger of Interim with and into PSBG;
WHEREAS, the Merger Agreement and this Plan of Merger providing for the
merger pursuant to Section 658.42 of the Florida Statutes having been approved
by the Board of Directors of each of the parties thereto, the Board of Directors
of PSBG has directed the Merger Agreement and this Plan of Merger be submitted
to the stockholders of PSBG; and
NOW THEREFORE, in consideration of the premises and mutual agreements
herein contained, the parties do hereby agree that the Plan of Merger shall be
as follows:
ARTICLE 1
TERMS OF THE MERGER
-------------------
1.1 The Merger. Subject to the terms and conditions of this Plan of
----------
Merger, at the Effective Time (as hereinafter defined), Interim shall be merged
with and into PSBG pursuant to the provisions of, and with the effect provided
under, Florida law (said transaction being hereinafter referred to as the
"Merger"), such that from and after the Effective Time, PSBG shall be a wholly-
owned subsidiary of ANB. On the Effective Time, the separate existence of
Interim shall cease and PSBG, as the surviving entity, shall continue unaffected
and unimpaired by the Merger. (PSBG as existing on and after the Effective Time
being hereinafter sometimes referred to as the "Surviving Bank.") The name of
the Surviving Bank shall be and remain "Peoples State Bank of Groveland."
A-1
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1.2 Effective Time. The Articles of Merger evidencing the transactions
--------------
contemplated herein shall be delivered for filing to the Secretary of State of
the State of Florida (the "Secretary"). The Merger shall become effective at
the time and on the date the Articles of Merger are accepted for filing by the
Secretary, or such later time and date as agreed to by the parties and specified
in the Articles of Merger (such date being referred to herein as the "Effective
Time").
1.3 Effect of the Merger. The Merger shall have the effects specified in
--------------------
Section 658.45 of the Florida Statutes.
ARTICLE 2
ARTICLES OF INCORPORATION AND BYLAWS
------------------------------------
The Articles of Incorporation and the Bylaws of PSBG in effect immediately
prior to the Effective Time shall be the Articles of Incorporation and the
Bylaws of the Surviving Bank, in each case until amended in accordance with
applicable law. The complete text of the Articles of Incorporation of the
Surviving Bank is set forth at Exhibit A hereto, which such Exhibit is
---------
incorporated by reference herein.
ARTICLE 3
BOARD OF DIRECTORS
------------------
At the Effective Time, the Officers of the Surviving Bank shall consist of
those persons serving as executives of PSBG immediately prior to the Effective
Time, and the Board of Directors shall consist of those persons serving as
directors of PSBG immediately prior to the Effective Time, together with John H.
Holcomb III and Richard Murray IV. The name and address of each such officer and
director is set forth on Exhibit B hereto. Directors of the Surviving Bank will
---------
be elected annually and shall serve until the next election of directors or
until their successors are duly elected and qualified.
ARTICLE 4
BUSINESS OF BANK AND OFFICES
----------------------------
4.1 Business of Surviving Bank. The business of the Surviving Bank shall
--------------------------
be that of a state banking corporation. The Surviving Bank shall not have trust
powers as of the Effective Time.
4.2 Principal Office and Branches. The principle offices of the Surviving
-----------------------------
Bank shall be located at 200 East Broad Street, Groveland, Florida 34736. A
list of the branches of the Surviving Bank is attached hereto as Exhibit C.
---------
ARTICLE 5
CAPITAL STOCK
-------------
5.1 Conversion of Shares. Subject to the provisions of this Article 5, at
--------------------
the Effective Time, by virtue of the Merger and without any action on the part
of ANB, PSBG or Interim, or their respective stockholders, the shares of the
constituent corporations shall be converted in the manner set forth in Article 3
of the Merger Agreement as attached hereto as Exhibit D and incorporated herein
---------
by reference, and stockholders of PSBG shall be entitled to shares of ANB common
stock as provided therein, except to the extent that such stockholders of PSBG
have purportedly exercised dissenters' rights or as otherwise provided in the
Merger Agreement.
5.2 Capital of Surviving Bank. At the Effective Time, the Surviving Bank
-------------------------
shall have authorized capital stock of 5,000,000 shares of common stock, par
value $1.67 per share, of which 1,000 shall be issued and outstanding to ANB.
The Surviving Bank shall have surplus and retained earnings equal to the capital
accounts of PSBG and Interim immediately prior to the Effective Time. All such
amounts of surplus and retained earnings shall
A-2
<PAGE>
be adjusted for normal earnings and expenses and for any accounting adjustments
relating to the Merger provided for herein.
ARTICLE 6
CONDITIONS TO MERGER
--------------------
This Plan of Merger is subject to the following terms and conditions:
6.1 Merger Agreement Conditions. The obligations of PSBG and Interim to
---------------------------
effect the Merger as herein provided shall be subject to the satisfaction,
unless duly waived, of the conditions set forth in the Merger Agreement, which
conditions are incorporated herein by reference to the Merger Agreement.
6.2 Regulatory Approvals. The Florida Department of Banking and Finance
--------------------
shall have approved this Plan of Merger and shall have issued all other
necessary authorizations and approvals for the Merger, including the Certificate
of Merger. The appropriate federal regulatory agencies shall have approved the
Merger and the transactions provided for in the Merger Agreement and shall have
issued all other necessary authorizations and approvals for the Merger and the
transactions provided for in the Merger Agreement, and any statutory waiting
period shall have expired.
ARTICLE 7
STOCKHOLDER APPROVAL
--------------------
This Plan of Merger has been approved by the written consent of ANB, the
sole shareholder of Interim, and the affirmative vote of holders of at least a
majority of the outstanding PSBG Common Stock at a meeting of stockholders duly
called by the Directors of PSBG or as otherwise provided in its bylaws. PSBG
and Interim shall proceed expeditiously and cooperate fully in the procurement
of any other consents and approvals and in the taking of actions, and the
satisfaction of all other requests prescribed by law or otherwise necessary or
appropriate for consummation of the Merger and the transactions contemplated
thereby, including, without limitation, any necessary regulatory approvals and
consents.
ARTICLE 8
FURTHER ASSURANCES
------------------
If at any time the Surviving Bank shall consider or be advised that any
further assignments, conveyances, or assurances are necessary or desirable to
vest, perfect, or confirm in the Surviving Bank title to any property or rights
of Interim, or otherwise carry out the provisions hereof, the proper officers
and directors of Interim, as of the Effective Time, and thereafter the officers
of the Surviving Bank, acting on behalf of Interim, shall execute and deliver
any and all property or assignments, conveyances, and assurances, and do all
things necessary or desirable to vest, perfect or confirm title to such property
or rights in the Surviving Bank and otherwise carry out the provisions hereof.
ARTICLE 9
ABANDONMENT AND TERMINATION
---------------------------
Anything contained in the Plan of Merger to the contrary notwithstanding,
and notwithstanding adoption hereof by the stockholders of PSBG, this Plan of
Merger may be terminated and the Merger abandoned as provided in the Merger
Agreement. Any termination of the Merger Agreement pursuant to the terms
thereof shall for all purposes constitute a termination of this Plan of Merger.
A-3
<PAGE>
ARTICLE 10
MISCELLANEOUS
-------------
10.1 This Plan of Merger may be amended or supplemented at any time by
mutual agreement of PSBG and Interim. Any such amendment or supplement must be
in writing and approved by their respective Boards of Directors and shall be
subject to the proviso in Section 11.3 of the Merger Agreement.
10.2 Any notice or other communication required or permitted under this
Plan of Merger shall be given, and shall be effective, in accordance with the
provisions of the Merger Agreement.
10.3 The headings of the several Articles herein are inserted for
convenience of reference only and are not intended to be a part of or to affect
the meaning or interpretation of this Plan of Merger.
10.4 This Plan of Merger shall be governed by and construed in accordance
with the laws of the State of Florida applicable to agreements made and entirely
to be performed in such jurisdiction, except to the extent federal law may
applicable.
10.5 Notwithstanding anything to the contrary herein or elsewhere, this
Plan of Merger is subject to the terms and conditions of the Merger Agreement,
which are incorporated herein by reference. In the event of any inconsistency
or conflict in the terms or conditions of this Plan of Merger and those of the
Merger Agreement, the terms and conditions of the Merger Agreement shall
control.
[Remainder of page intentionally left blank.]
A-4
<PAGE>
IN WITNESS WHEREOF, PSBG and Interim have caused the signatures and seals
of said constituent banks to be affixed hereto as of the date first set forth
above, each hereunto set by its President or a Vice President and attested by
its Cashier or Secretary, pursuant to a resolution of its Board of Directors,
acting by a majority thereof.
Peoples State Bank of Groveland
Attest:
By: _______________________ By: ________________________________
Its: Secretary Wayne M. Turner
Its: President
Peoples State Interim Bank (in organization)
Attest:
By: _______________________ By: ________________________________
Its: Secretary Wayne M. Turner
Its: President
A-5
<PAGE>
Exhibit B
---------
(Form of Rule 145 Agreement)
[Date]
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Ladies and Gentlemen:
The undersigned has been advised that as of the date of this letter the
undersigned may be deemed to be an "affiliate" of Peoples State Bank of
Groveland, a Florida banking corporation ("PSBG"), as the term "affiliate" is
defined for purposes of paragraphs (c) and (d) of Rule 145 of the rules and
regulations (the "Rules and Regulations") of the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Act"). Pursuant to the terms of the Agreement and Plan of Merger dated as of
__________________, ______, (the "Merger Agreement"), executed by PSBG; Alabama
National BanCorporation, a Delaware corporation ("ANB"); and [Peoples State
Interim Bank], an interim Florida banking corporation and a wholly-owned
subsidiary of ANB ("Interim"), Interim will be merged with and into PSBG (the
"Merger").
As a result of the Merger, the undersigned may receive shares of common
stock, par value $1.00 per share, of ANB (such shares received by the
undersigned as a result of the Merger are hereinafter referred to as the "ANB
Securities") in exchange for any shares owned by the undersigned of common stock
of PSBG. Each of ANB and PSBG have agreed in the Merger Agreement to use its
best efforts to cause the Merger to qualify for pooling-of-interests accounting
treatment. In order to qualify for pooling-of-interests accounting treatment,
affiliates of PSBG are required to restrict transactions in ANB Securities for
specified time periods following the Closing of the Merger in compliance with
APB Opinion No. 16.
The undersigned represents, warrants and covenants to ANB that:
a. The undersigned shall not make any sale, transfer or other disposition
of the ANB Securities in violation of the Act or the Rules and Regulations.
b. The undersigned has carefully read this letter and the Merger
Agreement and discussed the requirements of such documents and other applicable
limitations upon the undersigned's ability to sell, transfer or otherwise
dispose of ANB Securities, to the extent the undersigned has considered
necessary, with the undersigned's counsel or counsel for PSBG.
c. The undersigned has been advised that the issuance of ANB Securities
to the undersigned pursuant to the Merger has been registered with the
Commission under the Act on a Registration Statement on Form S-4. However, the
undersigned has also been advised that, since at the time the Merger was
submitted for a vote of the shareholders of PSBG, the undersigned may be deemed
to have been an affiliate of PSBG and the distribution by the undersigned of the
ANB Securities has not been registered under the Act, the undersigned may not
sell, transfer or otherwise dispose of ANB Securities issued to the undersigned
in the Merger unless (1) such sale, transfer or other disposition has been
registered under the Act, (2) such sale, transfer or other disposition is made
in conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act (as hereafter amended, "Rule 145"), (3) ANB has
received an opinion of counsel reasonably acceptable to ANB (or other evidence
reasonably
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<PAGE>
acceptable to ANB) that such sale, transfer or other disposition is otherwise
exempt from registration under the Act or (4) Rule 145 is amended by the
Commission to eliminate the resale limitations that are based on a "presumptive
underwriter" approach, as currently proposed by the Commission in Release
No. 33-7391 on February 20, 1997 (the "Proposed Rule 145 Amendment").
d. The undersigned understands that ANB is under no obligation to
register the sale, transfer or other disposition of the ANB Securities by the
undersigned or on the undersigned's behalf under the Act or to take any other
action necessary in order to make compliance with an exemption from such
registration available.
e. The undersigned also understands that stop transfer instructions will
be given to ANB's transfer agent with respect to the ANB Securities and that
there will be placed on the certificates for the ANB Securities issued to the
undersigned, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THE CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
_______________, ______, BETWEEN THE REGISTERED HOLDER HEREOF AND
ALABAMA NATIONAL BANCORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICES OF ALABAMA NATIONAL BANCORPORATION."
f. The undersigned also understands that unless the transfer by the
undersigned of the undersigned's ANB Securities has been registered under the
Act or is a sale made in conformity with the provisions of Rule 145, ANB
reserves the right to put the following legend on the certificates issued to the
undersigned's transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN
ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION
WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OF 1933."
It is understood and agreed that the legends set forth in paragraphs e. and
f. above shall be removed by delivery of substitute certificates without such
legend and the related stop transfer instructions will be lifted forthwith, at
such time as (1) the undersigned is not an affiliate of ANB and a period of at
least one year (as determined in accordance with paragraph (d) of Rule 144 under
the Act) has elapsed since the date of consummation of the Merger, and ANB meets
the requirements of paragraph (c) of Rule 144 under the Act, (2) the undersigned
is not, and has not been for at least three months, an affiliate of ANB, and a
period of at least two years (as determined in accordance with paragraph (d) of
Rule 144 under the Act) has elapsed since the date of consummation of the
Merger, (3) ANB shall have received an opinion of counsel or other evidence, in
each case reasonably acceptable to ANB, that such legend and stop transfer
instructions are not required for purposes of the Act or (4) the Proposed Rule
145 Amendment or similar amendments eliminating the restrictions on resale based
on a "presumptive underwriter" approach shall have become final under the Rules
and Regulations.
g. The undersigned agrees that he will not sell, pledge, transfer or
otherwise dispose of any shares of PSBG common stock within 30 days prior to the
Effective Time (as defined in the Merger Agreement). The
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<PAGE>
undersigned agrees that until the publication of financial results covering at
least 30 days of post-Merger combined operations of ANB and PSBG (the "Holding
Period"), he will not sell, pledge, transfer or otherwise dispose of any shares
of the ANB Securities, except for pledges by the undersigned of all or part of
the ANB Securities to secure full recourse loans which have a loan term that is
greater than the Holding Period, provided the lender for such loan or loans
accepts any pledge of such ANB Securities subject to the terms of this letter
agreement. The undersigned agrees that the shares of ANB Securities to be issued
to him in the Merger will bear a restrictive transfer legend in substantially
the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN
AGREEMENT DATED __________________, ________ WHICH RESTRICTS ANY SALE
OR OTHER TRANSFER OF SUCH SHARES PRIOR TO THE PUBLIC RELEASE BY
ALABAMA NATIONAL BANCORPORATION ("ANB") OF 30 DAYS OF POST-MERGER
COMBINED OPERATIONS OF ANB AND PSBG, A COPY OF WHICH AGREEMENT IS ON
FILE AT THE PRINCIPAL OFFICES OF ANB."
Following a written request from the undersigned addressed to the Corporate
Secretary of ANB, ANB agrees to instruct its transfer agent to remove the
restrictive legend from any certificates evidencing shares subject hereto
promptly following the expiration of the transfer restrictions described in
Paragraph g.
Execution of this letter should not be considered an admission on the part
of the undersigned that the undersigned is an "affiliate" of PSBG as described
in the first paragraph of this letter, or as a waiver of any rights the
undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
Very truly yours,
_________________________________
[Name of Affiliate]
Accepted this _____ day of __________, __________ by
ALABAMA NATIONAL BANCORPORATION
By: _______________________________________
Name: _______________________________
Title: ____________________________________
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<PAGE>
Exhibit C
---------
(Form of Employment Agreement - Turner)
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (this "Agreement") is made and entered into this
[_____] day of [____________], [_____] (the "Effective Date"), by and between
Alabama National BanCorporation, a Delaware corporation ("ANB"); Peoples State
Bank of Groveland, a Florida banking corporation ("Bank"; hereinafter together
with ANB referred to as "Employer"); and Wayne M. Turner ("Executive").
Recitals
--------
WHEREAS, pursuant to that certain Agreement and Plan of Merger dated
[_____________], 2000, between ANB and Bank (the "Merger Agreement"), Bank has
become a wholly-owned subsidiary of ANB; and
WHEREAS, Executive has been and continues to serve as the President and
Chief Executive Officer of Bank, and, as a condition to the consummation of the
transactions provided for in the Merger Agreement, Executive and Employer have
agreed to enter into this Agreement.
Agreement
---------
NOW THEREFORE, in consideration of the mutual recitals and covenants
contained herein, and for other good and valuable consideration, the sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
1. Employment. Employer agrees to employ Executive and Executive agrees
----------
to be employed by Employer, subject to the terms and provisions of this
Agreement.
2. Term. The employment of Executive by Employer as provided in Section
----
1 will be for a period of three (3) years commencing at the Effective Date,
unless earlier terminated in accordance with the provisions of Section 9 hereof;
provided, however, that the obligations and rights set forth in Sections 7 and 8
hereof shall survive termination of this Agreement, as more particularly
described in Section 9 below.
3. Duties; Extent of Services. Executive shall perform for Bank all
--------------------------
duties incident to the positions of President and Chief Executive Officer of
Bank, under the direction of the board of directors of Bank or its designee. In
addition, Executive shall engage in such other services for Bank or its
affiliated companies as Employer from time to time shall direct. The precise
services of Executive and the title of Executive's position may be extended,
curtailed or modified by Bank from time to time without affecting the
enforceability of the terms of this Agreement. Executive shall use his best
efforts in, and devote his entire time, attention and energy, to Bank's business
and shall not during the term hereof be engaged in any other business activity,
whether or not such business activity is pursued for gain, profit or other
pecuniary advantage.
4. Compensation. From the Effective Date through the termination of this
------------
Agreement:
(a) Executive's total annual cash salary shall be an amount not less than
One Hundred Twenty Five Thousand Dollard ($125,000), payable with the same
frequency as the salaries of other employees of Employer;
(b) Executive shall be entitled to vacation days, paid holidays and sick
days, and to participate in Employer's retirements plan, as provided in Bank's
Personnel Policy and as such may be amended from time to time;
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(c) Executive shall be entitled to a $550 monthly automobile allowance or,
at the option of Employer, to the use of an automobile owned by Employer; and
(d) Within five (5) days of the Effective Date, Executive shall be
entitled to a one-time bonus in the amount of Three Hundred Seventy Five
Thousand Dollars ($375,000).
5. Compliance With Rules and Policies. Executive shall comply with all
----------------------------------
of the rules, regulations, and policies of Employer now or hereinafter in
effect. He shall promptly and faithfully do and perform any and all other duties
and responsibilities which he may, from time to time, be directed to do by the
board of directors of Bank or ANB or their respective designee.
6. Representation of Executive. Executive represents to Employer that he
---------------------------
is not subject to any rule, regulation or agreement, including without
limitation, any noncompete agreement, that purports to, or which reasonably
could, be expected to limit, restrict or interfere with Executive's ability to
engage in the activities provided for in this Agreement.
7. Disclosure of Information.
-------------------------
(a) Executive acknowledges that any documents and information, whether
written or not, that come into Executive's possession or knowledge during
Executive's course of employment with Employer, including, without limitation
the financial and business conditions, goals and operations of customers of
Bank, ANB or any of their respective affiliates or subsidiaries as the same may
exist from time to time (collectively, "Confidential Information"), are
valuable, special and unique assets of Employer's business. Executive will not,
during or after the term of this Agreement, (i) disclose any written
Confidential Information to any person, firm, corporation, association, or other
entity not employed by or affiliated with Employer for any reason or purpose
whatsoever, or (ii) use any written Confidential Information for any reason
other than to further the business of Employer. Executive agrees to return any
written Confidential Information, and all copies thereof, upon the termination
of Executive's employment (whether hereunder or otherwise). In the event of a
breach or threatened breach by Executive of the provisions of this Section 7, in
addition to all other remedies available to Employer, Employer shall be entitled
to an injunction restraining Executive from disclosing any written Confidential
Information or from rendering any services to any person, firm, corporation,
association or other entity to whom any written Confidential Information has
been disclosed or is threatened to be disclosed. Executive further agrees that
he will not divulge to any person, firm, corporation, association, or other
entity not employed by or affiliated with Employer, any of Employer's business
methods, sales, services, or techniques, regardless of whether the same is
written or not.
(b) If Executive breaches or violates the terms of his agreement not to
disclose, he will pay any damages proven by Employer, including reasonable
attorney fees, whether or not suit be instituted.
8. Competition.
-----------
(a) During the period of his employment by Employer and, subject to
extension as provided for in Section 9 below, for a period of one (1) year after
such employment (whether such employment shall have ended by reason of the
expiration or termination of this Agreement or otherwise), Executive will not,
individually or as an employee, agent, officer, director or shareholder of or
otherwise through any corporation or other business organization, directly or
indirectly, (i) carry on or engage in the business of banking or any similar
business in any territory in which Bank or ANB or any of their respective
subsidiaries or affiliates is conducting business; (ii) perform services for, as
an employee, consultant or otherwise, any bank, bank holding company,
corporation or other person or entity that has a branch or office in, or
conducts any banking or similar business in any territory in which Bank or ANB
or any of their respective subsidiaries or affiliates is conducting business;
(iii) solicit or do banking or similar business with any existing or prospective
customer of Bank or ANB or any of their respective subsidiaries or affiliates in
any territory in which Bank or ANB or any of their respective subsidiaries or
affiliates is conducting business; or (iv) solicit any employee of Bank or ANB
or any of their subsidiaries or affiliates to leave his or her employment with
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Bank or ANB or any of their subsidiaries or affiliates for any reason, or hire
any such employee of Bank or ANB or any of their subsidiaries or affiliates,
without the prior written consent of ANB.
(b) Executive represents that his experience and capabilities are such that
the provisions of this Section 8 will not prevent him from earning a livelihood.
(c) If Executive violates the provisions of Section 8(a) above, the period
during which the covenants set forth therein shall apply shall be extended one
(1) day for each day in which a violation of such covenants occurs; and if suit
be brought to enforce such covenants and one or more violations by Executive be
established, then Employer shall be entitled to an injunction restraining
Executive from further violations for a period of one (1) year from the date of
the final decree, less only such number of days that Executive shall have not
violated such covenants. The purpose of this provision is to prevent Executive
from profiting from his own wrong if he violates such covenants.
(d) If Executive breaches or violates the terms of the covenants set forth
in Section 8(a) not to compete, he will pay all costs incurred by Employer in
securing an injunction hereunder and/or securing payment of the liquidated
damages specified herein, including a reasonable attorney's fee, whether or not
suit be instituted; and Executive waives all right to claim exemptions of
personal property under the laws and Constitution of the State of Florida or any
other state of the United States.
(e) For purposes of Section 8(a), Executive shall be deemed to be engaged
in any activity engaged in by a person or an entity between Executive and whom
or which no deduction is allowable in respect to any loss from the sale or
exchange of property pursuant to Section 267 of the Internal Revenue Code of
1986 or whose stock in any corporation or interest in any partnership would be
deemed to be owned by Executive pursuant to Section 318 of the Internal Revenue
Code of 1986.
9. Termination.
-----------
(a) If Employer terminates Executive's employment hereunder "For Cause,"
all rights and obligations specified in Section 8 shall survive any such
termination through the fourth (4th) anniversary of the Effective Date, and
Executive shall not be entitled to any further compensation from Employer. "For
Cause" shall mean (i) abuse of or addiction to intoxicating drugs (including
alcohol); (ii) any act on the part of Executive which constitutes fraud,
malfeasance of duty or conduct grossly inappropriate to Executive's office and
is demonstrably likely to lead to material injury to Bank, ANB or a successor or
affiliate of Bank or ANB; (iii) a felony indictment of Executive; or (iv) the
suspension or removal of Executive by federal or state banking regulatory
authorities. In addition, the services of Executive and the obligations of ANB
under this Agreement may be terminated For Cause by Employer due to the death or
total disability of Executive. For purposes of this Section 9, the term "total
disability" shall mean Executive's inability, as a result of illness or injury,
to perform the normal duties of his employment for a period of ninety (90)
consecutive days.
(b) If Employer terminates Executive other than For Cause, Executive shall
continue to receive the minimum cash compensation provided for in Section 4(a)
through the third (3rd) anniversary of the Effective Date, and all rights and
obligations specified in Section 8 shall survive such termination until the
first (1/st/) anniversary of the date of such termination. Other than the
payment provided for in this Section 9(b), Executive acknowledges that he shall
not be entitled to any other payments, benefits or damages from Employer in
connection with a termination of Executive by Employer other than For Cause, and
Executive hereby waives all rights and claims with respect thereto.
(c) If Executive terminates his employment hereunder for any reason prior
to the third (3rd) anniversary of the Effective Date, (i) all rights and
obligations specified in Section 8 shall survive any such termination through
the first (1/st/) anniversary of the date of such termination, (ii) Executive
shall not be entitled to any further compensation from Employer, and (iii)
Employer shall be entitled to all remedies available under this Agreement and
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<PAGE>
applicable law; provided, however, that, at Employer's sole option and election,
Employer may continue paying to Executive the minimum cash compensation provided
for in Section 4(a) through the third (3rd) anniversary of the Effective Date
(each such payment, a "Continuation Payment"), and all rights and obligations
specified in Section 8 shall survive such termination through the first (1/st/)
anniversary of the date of the final Continuation Payment, not to exceed the
fourth (4/th/) anniversary of the Effective Date.
(d) The provisions of Section 7 shall survive regardless of any
termination of Executive's employment hereunder, whether voluntary or
involuntary.
10. Notice. For the purposes of this Agreement, notices and demands shall
------
be deemed given when mailed by United States mail, addressed in the case of Bank
to _______________________, Attention: Chairman of the Board of Directors, with
a copy to ANB at Alabama National BanCorporation, 1927 First Avenue North,
Birmingham, Alabama 35203, Attention: Chief Executive Officer; or in the case of
Executive, to:
_______________________________________
_______________________________________
_______________________________________
11. Miscellaneous. No provision of this Agreement may be modified, waived
-------------
or discharged unless such modification, waiver or discharge is agreed to in
writing. The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Alabama without regard
to principles of conflicts of laws. This Agreement supersedes and cancels any
prior employment agreement or understanding entered into between Executive and
PSBG, including but not limited to that certain Associate Agreement dated
January 1, 1998.
12. Validity. Should any court of competent jurisdiction decide, hold,
--------
adjudge or decree that any provision, clause or term of this Agreement is
invalid, void or unenforceable, such determination shall not affect any other
provision of this Agreement, and all other provisions of this Agreement shall
remain in full force and effect as if such void or unenforceable provision,
clause or term had not been included herein. Such determination shall not be
deemed to affect the validity or enforceability of this entire Agreement in any
other situation or circumstance, and the parties agree that the scope of this
Agreement is intended to extend to Employer the maximum protection permitted by
law. The parties expressly deem the length of time and the size of the
territory provided for in Section 8 of this Agreement to be reasonable. If,
however, any court of competent jurisdiction decides, holds, adjudges or decrees
that the length of time and/or the size of the territory provided for in Section
8 of this Agreement is/are unreasonable, then it is the express intent of the
parties that such court determine the length of time and/or size of the
territory that is/are reasonable and that such court enforce the terms of this
Agreement in accordance with such determination.
13. Default.
-------
(a) If Executive breaches or violates any of the covenants, conditions, or
terms of this Agreement on his part to be performed, Employer shall have the
right, without notice to Executive, to obtain a writ of injunction against him
restraining him from violating any such covenant, condition, or term, such
notice being hereby expressly waived by Executive; and, if Employer secures an
injunction against Executive for alleged breaches or violations by him of any
covenant, condition, or term of this Agreement and the injunction is for any
reason dissolved, Executive hereby expressly releases and discharges each of
Bank and ANB from and against any claim which he may have for damages, loss,
cost or expense with respect to, and he will make no claim against either of
Bank or ANB by reason of, the wrongful issuance of any such injunction; and
Executive hereby waives any and all claims for such damages, loss, cost or
expense arising in that connection.
(b) Additionally, in the event of any conduct by Executive violating any
provision of this Agreement, Employer shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction,
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<PAGE>
either at law or in equity, to obtain damages for such conduct, to enforce
specific performance of such provision or to obtain any other relief or any
combination of the foregoing that Employer may elect to pursue.
14. Parties. This Agreement shall be binding upon and shall inure to the
-------
benefit of any successors or assigns to Bank or ANB. Executive may not assign
any of his rights or delegate any of his duties or obligations under this
Agreement or any portion hereof.
15. Jurisdiction and Venue. Any proceeding to enforce the provisions of
----------------------
this Agreement or the declaration of any rights arising from the provisions of
this Agreement shall only be brought by Executive and may be brought by the
Employer in the Circuit Court of Jefferson County, Alabama or, if federal
jurisdictional requirements are met, in the United States District Court for the
Northern District of Alabama. Executive and Employer hereby waive any present
or future objection to such venue and irrevocably consent and submit to the non-
exclusive jurisdiction in personam of such courts.
16. Definitions. Any capitalized terms not otherwise defined herein shall
-----------
have the meanings ascribed to them in the Merger Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
Executive and by a duly authorized officer of each of Bank and ANB as of the
date first above written.
"Executive":
____________________________________________
Wayne M. Turner
"Bank":
Peoples State Bank of Groveland
By: ______________________________________
John H. Holcomb, III, Chairman
"ANB":
Alabama National BanCorporation
By: ______________________________________
John H. Holcomb, III, CEO
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Exhibit D
---------
(Form of opinion of Shutts & Bowen, LLP)
[Letterhead of Shutts & Bowen, LLP]
[Closing Date]
BY HAND DELIVERY
----------------
Alabama National BanCorporation
1927 First Avenue North
Birmingham, Alabama 35203
Attn: Chairman
Re: Agreement and Plan of Merger between Alabama National BanCorporation
("ANB") and Peoples State Bank of Groveland
Gentlemen:
We are counsel to Peoples State Bank of Groveland, a Florida banking
corporation located in Groveland, Florida ("PSBG"), and have represented PSBG in
connection with the execution and delivery of the Agreement and Plan of Merger,
dated as of [________], 2000 (the "Agreement"), by and between ANB and PSBG.
This opinion is delivered pursuant to Section 9.2(e) of the Agreement.
Capitalized terms used in this opinion shall have the meaning set forth in the
Agreement. The opinions expressed herein are limited to matters of federal laws
of the United States and the laws of the States of Delaware and Florida.
In rendering this opinion, we have examined the corporate books and records
of PSBG and made such other investigations as we have deemed necessary. We have
relied upon certificates of public officials and officers of PSBG as to certain
questions of fact.
Based upon and subject to the foregoing, we are of the opinion that:
1. PSBG is a banking corporation duly organized, validly existing and in
good standing under the laws of the State of Florida with full corporate power
and authority to carry on the business in which it is engaged as described in
the proxy statement used to solicit the approval by the stockholders of PSBG of
the transactions provided for in the Agreement (the "Proxy Statement") and to
own the properties owned by it.
2. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Articles of
Incorporation or Bylaws of PSBG or, to the best of our knowledge but without any
independent investigation, result in any conflict with, breach of or default or
acceleration under any mortgage, agreement, lease, indenture or other
instrument, order, judgment or decree to which any PSBG Company is a party or by
which any PSBG Company is bound.
3. In accordance with the Bylaws of PSBG and pursuant to resolutions duly
adopted by its Board of Directors and stockholders, the Agreement, together with
the Plan of Merger referenced therein, has been duly adopted and approved by the
Board of Directors of PSBG and by the stockholders of PSBG at the PSBG
Stockholders' Meeting.
D-1
<PAGE>
Alabama National BanCorporation
[Closing Date]
Page ___
4. The Agreement and the Plan of Merger attached as Exhibit A thereto
---------
(the "Plan of Merger") have been duly and validly executed and delivered by PSBG
and, assuming valid authorization, execution and delivery by ANB, constitute
valid and binding agreements of PSBG enforceable in accordance with their terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; provided,
however, that we express no opinion as to the availability of the equitable
remedy of specific performance.
5. The authorized capital stock of PSBG consists of 5,000,000 shares of
PSBG Common Stock, of which 631,464 shares were issued and outstanding as of the
date hereof. The shares of PSBG Common Stock that are issued and outstanding
were not issued in violation of any statutory preemptive rights of stockholders
and were duly issued and are fully paid and nonassessable under the laws of the
State of Florida and any other applicable Laws. Except as set forth in Section
5.3(a) of the Agreement, there are no options, subscriptions, warrants, calls,
rights or commitments obligating PSBG to issue any equity securities or acquire
any of its equity securities.
6. No consent, approval, authorization or other action by, or filing
with, any Regulatory Authority is required for PSBG's execution and delivery of
the Agreement and the consummation of the Merger, other than any consent,
approval or authorization which has been previously received by PSBG. The
Merger of Interim with and into PSBG, as provided for in the Plan of Merger, is
authorized under the Florida Statutes, and, at the Effective Time, PSBG shall
become a wholly-owned subsidiary of ANB.
This opinion is delivered solely for reliance by ANB.
Sincerely,
Shutts & Bowen, LLP
By: __________________________
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Exhibit E
---------
(Form of opinion of Maynard, Cooper & Gale, P.C.)
[Letterhead of Maynard, Cooper & Gale, P.C.]
[Closing Date]
BY HAND DELIVERY
----------------
Peoples State Bank of Groveland
200 East Broad Street
Groveland, Florida 34736
Attn: Chairman
Re: Agreement and Plan of Merger between Alabama National BanCorporation
and Peoples State Bank of Groveland
Gentlemen:
We are counsel to Alabama National BanCorporation ("ANB"), a corporation
organized and existing under the laws of the State of Delaware, and have
represented ANB in connection with the execution and delivery of the Agreement
and Plan of Merger, dated as of [_____], 2000 (the "Agreement"), by and between
ANB and Peoples State Bank of Groveland, a Florida banking corporation located
in Groveland, Florida ("PSBG").
This opinion is delivered pursuant to Section 9.3(d) of the Agreement.
Capitalized terms used in this opinion shall have the meaning set forth in the
Agreement. The opinions expressed herein are limited to matters of federal
laws of the United States and the laws of the States of Delaware and Alabama.
In rendering this opinion, we have examined the corporate books and records
of ANB and made such other investigations as we have deemed necessary. We have
relied upon certificates of public officials and officers of ANB as to certain
questions of fact.
Based upon and subject to the foregoing, we are of the opinion that:
1. ANB is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and ANB has the full corporate
power and authority to carry on the business in which it is engaged as described
in the proxy statement used to solicit the approval by the stockholders of PSBG
of the transactions provided for the Agreement ("Proxy Statement") and to own
the properties owned by it.
2. The execution and delivery of the Agreement and compliance with its
terms do not and will not violate or contravene any provision of the Certificate
of Incorporation or Bylaws of ANB or, to the best of our knowledge but without
any independent investigation, result in any conflict with, breach of, or
default or acceleration under any mortgage, agreement, lease, indenture or other
instrument, order, judgment or decree to which any ANB Company is a party or by
which any ANB Company is bound.
3. In accordance with the Bylaws of ANB, the Agreement has been duly
adopted and approved by the Board of Directors of ANB.
4. The Agreement has been duly and validly executed and delivered by ANB
and, assuming valid authorization, execution and delivery by PSBG, constitutes a
valid and binding agreement of ANB enforceable in
E-1
<PAGE>
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, or similar laws affecting creditors'
rights generally; provided, however, that we express no opinion as to the
availability of the equitable remedy of specific performance.
5. The authorized capital stock of ANB consists of 17,500,000 shares of
ANB Common Stock, of which [11,047,305] shares were issued and outstanding as of
[_____________], [_______], and 100,000 shares of preferred stock, $1.00 par
value, none of which is issued and outstanding. The shares of ANB Common Stock
that are issued and outstanding were not issued in violation of any statutory
preemptive rights of stockholders, were duly issued and are fully paid and
nonassessable under the Delaware General Corporation Law. The shares of ANB
Common Stock to be issued to the stockholders of PSBG as contemplated by the
Agreement are duly authorized, and when properly issued and delivered following
consummation of the Merger will be validly issued, fully paid and nonassessable.
This opinion is delivered solely for reliance by PSBG.
Sincerely,
MAYNARD, COOPER & GALE, P.C.
By: _______________________________
E-2
<PAGE>
Appendix B
----------
PROVISIONS OF FLORIDA STATUTES
RELATING TO DISSENTERS' RIGHTS
<PAGE>
APPENDIX B
PROVISIONS OF THE FLORIDA STATUTES RELATING TO
DISSENTERS' RIGHTS
The 2000 Florida Statutes
Title XXXVIII
BANKS AND BANKING
Chapter 658
Banking Code: Banks And Trust Companies
658.44 Approval by stockholders; rights of dissenters; preemptive rights.--
(1) The department shall not issue a certificate of merger to a resulting
state bank or trust company unless the plan of merger and merger agreement, as
adopted by a majority of the entire board of directors of each constituent bank
or trust company, and as approved by each appropriate federal regulatory agency
and by the department, has been approved:
(a) By the stockholders of each constituent national bank as provided
by, and in accordance with the procedures required by, the laws of the
United States applicable thereto, and
(b) After notice as hereinafter provided, by the affirmative vote or
written consent of the holders of at least a majority of the shares
entitled to vote thereon of each constituent state bank or state trust
company, unless any class of shares of any constituent state bank or state
trust company is entitled to vote thereon as a class, in which event as to
such constituent state bank or state trust company the plan of merger and
merger agreement shall be approved by the stockholders upon receiving the
affirmative vote or written consent of the holders of a majority of the
shares of each class of shares entitled to vote thereon as a class and of
the total shares entitled to vote thereon. Such vote of stockholders of a
constituent state bank or state trust company shall be at an annual or
special meeting of stockholders or by written consent of the stockholders
without a meeting as provided in s. 607.0704.
Approval by the stockholders of a constituent bank or trust company of a
plan of merger and merger agreement shall constitute the adoption by the
stockholders of the articles of incorporation of the resulting state bank or
state trust company as set forth in the plan of merger and merger agreement.
(2) Written notice of the meeting of, or proposed written consent action
by, the stockholders of each constituent state bank or state trust company shall
be given to each stockholder of record, whether or not entitled to vote, and
whether the meeting is an annual or a special meeting or whether the vote is to
be by written consent pursuant to s. 607.0704, and the notice shall state that
the purpose or one of the purposes of the meeting, or of the proposed action by
the stockholders without a meeting, is to consider the proposed plan of merger
and merger agreement. Except to the extent provided otherwise with respect to
stockholders of a resulting bank or trust company pursuant to subsection (7),
the notice shall also state that dissenting stockholders will be entitled to
payment in cash of the value of only those shares held by the stockholders:
(a) Which at a meeting of the stockholders are voted against the
approval of the plan of merger and merger agreement;
(b) As to which, if the proposed action is to be by written consent
of stockholders pursuant to s. 607.0704, such written consent is not given
by the holder thereof; or
B-1
<PAGE>
(c) With respect to which the holder thereof has given written notice
to the constituent state bank or trust company, at or prior to the meeting
of the stockholders or on or prior to the date specified for action by the
stockholders without a meeting pursuant to s. 607.0704 in the notice of
such proposed action, that the stockholder dissents from the plan of merger
and merger agreement.
Hereinafter in this section, the term "dissenting shares" means and
includes only those shares, which may be all or less than all the shares of any
class owned by a stockholder, described in paragraphs (a), (b), and (c).
(3) On or promptly after the effective date of the merger, the resulting
state bank or trust company, or a bank holding company which, as set out in the
plan of merger or merger agreement, is offering shares rights, obligations, or
other securities or property in exchange for shares of the constituent banks or
trust companies, may fix an amount which it considers to be not more than the
fair market value of the shares of a constituent bank or trust company and which
it will pay to the holders of dissenting shares of that constituent bank or
trust company and, if it fixes such amount, shall offer to pay such amount to
the holders of all dissenting shares of that constituent bank or trust company.
The amount payable pursuant to any such offer which is accepted by the holders
of dissenting shares, and the amount payable to the holders of dissenting shares
pursuant to an appraisal, shall constitute a debt of the resulting state bank or
state trust company.
(4) The owners of dissenting shares who have accepted an offer made
pursuant to subsection (3) shall be entitled to receive the amount so offered
for such shares in cash upon surrendering the stock certificates representing
such shares at any time within 30 days after the effective date of the merger,
and the owners of dissenting shares, the value of which is to be determined by
appraisal, shall be entitled to receive the value of such shares in cash upon
surrender of the stock certificates representing such shares at any time within
30 days after the value of such shares has been determined by appraisal made on
or after the effective date of the merger.
(5) The value of dissenting shares of each constituent state bank or state
trust company, the owners of which have not accepted an offer for such shares
made pursuant to subsection (3), shall be determined as of the effective date of
the merger by three appraisers, one to be selected by the owners of at least
two-thirds of such dissenting shares, one to be selected by the board of
directors of the resulting state bank, and the third to be selected by the two
so chosen. The value agreed upon by any two of the appraisers shall control and
be final and binding on all parties. If, within 90 days from the effective date
of the merger, for any reason one or more of the appraisers is not selected as
herein provided, or the appraisers fail to determine the value of such
dissenting shares, the department shall cause an appraisal of such dissenting
shares to be made which will be final and binding on all parties. The expenses
of appraisal shall be paid by the resulting state bank or trust company.
(6) Upon the effective date of the merger, all the shares of stock of
every class of each constituent bank or trust company, whether or not
surrendered by the holders thereof, shall be void and deemed to be canceled, and
no voting or other rights of any kind shall pertain thereto or to the holders
thereof except only such rights as may be expressly provided in the plan of
merger and merger agreement or expressly provided by law.
(7) The provisions of subsection (6) and, unless agreed by all the
constituent banks and trust companies and expressly provided in the plan of
merger and merger agreement, subsections (3), (4), and (5) are not applicable to
a resulting bank or trust company or to the shares or holders of shares of a
resulting bank or trust company the cash, shares, rights, obligations, or other
securities or property of which, in whole or in part, is provided in the plan of
merger or merger agreement to be exchanged for the shares of the other
constituent banks or trust companies.
(8) The stock, rights, obligations, and other securities of a resulting
bank or trust company may be issued as provided by the terms of the plan of
merger and merger agreement, free from any preemptive rights of the holders of
any of the shares of stock or of any of the rights, obligations, or other
securities of such resulting bank or trust company or of any of the constituent
banks or trust companies.
B-2
<PAGE>
(9) After approval of the plan of merger and merger agreement by the
stockholders as provided in subsection (1), there shall be filed with the
department, within 30 days after the time limit in s. 658.43(5), a fully
executed counterpart of the plan of merger and merger agreement as so approved
if it differs in any respect from any fully executed counterpart thereof
theretofore filed with the department, and copies of the resolutions approving
the same by the stockholders of each constituent bank or trust company,
certified by the president, or chief executive officer if other than the
president, and the cashier or corporate secretary of each constituent bank or
trust company, respectively, with the corporate seal impressed thereon.
B-3
<PAGE>
Appendix C
----------
FINANCIAL STATEMENTS OF
PEOPLES STATE BANK OF GROVELAND
PEOPLES STATE BANK OF GROVELAND
FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 1998
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF
PEOPLES STATE BANK OF GROVELAND
================================================================================
Page
----
1. Independent Auditor's Report................................. C-2
2. Statements of Financial Condition, December 31, 1999
and 1998..................................................... C-3
3. Statements of Income for the years ended December 31, 1999
and 1998..................................................... C-4
4. Statements of Changes in Stockholders' Equity for the years
ended December 31, 1999 and 1998............................. C-5
5. Statements of Cash Flows for the years ended December 31,
1999 and 1998................................................ C-6
6. Notes to Financial Statements................................ C-8
7. Compilation Report........................................... C-24
8. Statements of Financial Condition, September 30, 2000 and
1999 (unaudited)............................................. C-25
9. Statements of Income for the nine months ended September 30,
2000 and 1999 (unaudited).................................... C-26
10. Statement of Changes in Stockholders' Equity for the nine
months ended September 30, 2000 and 1999 (unaudited)......... C-27
11. Statement of Cash Flows for the nine months ended
September 30, 2000 and 1999 (unaudited)...................... C-28
12. Notes to Unaudited Financial Statements...................... C-30
C-1
<PAGE>
Independent Auditor's Report
To the Board of Directors and Stockholders
of Peoples State Bank of Groveland
We have audited the accompanying statements of financial condition of Peoples
State Bank of Groveland as of December 31, 1999 and 1998, and the related
statements of income, changes in stockholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Bank's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Peoples State Bank of Groveland
as of December 31, 1999 and 1998, and the results of its operations and cash
flows for the years then ended in conformity with generally accepted accounting
principles.
/s/ Beemer, Pricher, Kuehnhackl & Heidbrink, P.A.
March 24, 2000
C-2
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
December 31,
------------------------------------
1999 1998
---------------- ----------------
ASSETS
<S> <C> <C>
Cash and due from banks $ 4,930,095 $ 3,952,383
Interest-bearing deposits with banks 289,826 1,032,456
Federal funds sold 2,248,000 1,087,000
Investments available-for-sale 8,800,268 9,684,855
Loans, net 82,285,741 59,147,909
Other real estate owned 179,964 -
Premises and equipment, net 2,285,664 2,538,073
Accrued interest receivable 521,878 458,057
Cash surrender value of life insurance 1,712,063 1,617,446
Deferred taxes 197,227 -
Prepaid and other assets 168,677 156,450
------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 103,619,403 $ 79,674,629
========================================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Demand -
Noninterest bearing $ 17,257,532 $ 13,504,908
Interest bearing 11,956,033 10,782,004
Savings deposits 6,611,533 7,589,298
NOW accounts 6,153,614 5,714,632
Time deposits 45,117,430 32,250,745
------------------------------------------------------------------------------------------------------------------------
Total deposits 87,096,142 69,841,587
------------------------------------------------------------------------------------------------------------------------
Federal funds purchased and securities sold
under repurchase agreements 1,855,471 1,828,702
Other borrowed funds 6,000,000 -
Accrued interest payable and other liabilities 639,154 482,148
------------------------------------------------------------------------------------------------------------------------
Total liabilities 95,590,767 72,152,437
------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $1.67 par value; 5,000,000 shares authorized;
691,200 shares issued 1,152,000 1,152,000
Additional paid-in capital 288,000 288,000
Accumulated other comprehensive income (240,426) 4,132
Retained earnings 7,416,665 6,665,663
Treasury stock, 59,736 shares, at cost (587,603) (587,603)
------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 8,028,636 7,522,192
Commitments and contingent liabilities - -
------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 103,619,403 $ 79,674,629
========================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
C-3
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the years ended
December 31,
------------------------------------
1999 1998
----------------- ---------------
<S> <C> <C>
Interest income:
Loans $ 6,386,734 $ 5,113,584
Investment securities 526,536 606,879
Federal funds sold 188,084 165,374
-----------------------------------------------------------------------------------------------------------------------
Total interest income 7,101,354 5,885,837
-----------------------------------------------------------------------------------------------------------------------
Interest expense:
Deposits 2,801,635 2,484,903
Other borrowings 222,270 24,582
-----------------------------------------------------------------------------------------------------------------------
Total interest expense 3,023,905 2,509,485
-----------------------------------------------------------------------------------------------------------------------
Net interest income 4,077,449 3,376,352
Provision for loan losses 152,500 -
-----------------------------------------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,924,949 3,376,352
-----------------------------------------------------------------------------------------------------------------------
Noninterest income:
Charges related to deposit accounts 509,211 506,319
Noninterest income on loans 155,035 123,271
Gain on sale of securities 6,233 12,287
Other noninterest income 425,007 280,698
-----------------------------------------------------------------------------------------------------------------------
Total noninterest income 1,095,486 922,575
Noninterest expense:
Salaries and employee benefits 1,893,649 1,752,295
Occupancy & equipment expense 618,636 602,456
Other noninterest expense 892,398 892,060
-----------------------------------------------------------------------------------------------------------------------
Total noninterest expense 3,404,683 3,246,811
-----------------------------------------------------------------------------------------------------------------------
Income before income taxes 1,615,752 1,052,116
Income tax expense 580,277 348,728
-----------------------------------------------------------------------------------------------------------------------
Net income $ 1,035,475 $ 703,388
=======================================================================================================================
Basic earnings per common share $ 1.64 $ 1.11
=======================================================================================================================
</TABLE>
C-4
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
Shares of Accumulated
common stock, Additional other
net of treasury Common paid-in comprehensive Retained Treasury
shares stock capital income earnings stock Total
--------------- ---------- ---------- -------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 631,464 $1,152,000 $288,000 $ 16,983 $6,214,544 $(587,603) $7,083,924
----------
Comprehensive income:
Unrealized depreciation on securities
available-for-sale, net of reclassification
adjustment and tax effects - - - (12,851) - - (12,851)
Net income - - - - 703,388 - 703,388
----------
Total comprehensive income 690,537
----------
Dividends paid, $.40 per share - - - - (252,269) - (252,269)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1998 631,464 1,152,000 288,000 4,132 6,665,663 (587,603) 7,522,192
----------
Comprehensive income:
Unrealized depreciation on securities
available-for-sale, net of reclassification
adjustment and tax effects - - - (244,558) - - (244,558)
Net income - - - - 1,035,475 - 1,035,475
----------
Total comprehensive income 790,917
----------
Dividends paid, $.45 per share - - - - (284,473) - (284,473)
------------------------------------------------------------------------------------------------------------------------------------
Balance at December 31, 1999 631,464 $1,152,000 $288,000 $(240,426) $7,416,665 $(587,603) $8,028,636
====================================================================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
C-5
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended
December 31,
---------------------------
1999 1998
------------- ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 1,035,475 $ 703,388
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 152,500 -
Depreciation, amortization and accretion 362,774 325,108
Net realized gains on available-for-sale securities (6,233) (366)
Net realized gain on other real estate owned (13,304) (33,471)
(Increase) decrease in accrued interest receivable (63,821) 23,816
Increase in other assets (46,843) (23,184)
Increase in accrued interest payable
and other liabilities 157,004 162,507
Deferred income tax (benefit) expense (70,632) 64,323
--------------------------------------------------------------------------------------------
Net cash provided by operating activities 1,506,920 1,222,121
--------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net (increase) decrease in federal funds sold (1,161,000) 2,126,000
Net increase in loans (23,518,212) (6,103,367)
Purchases of available-for-sale securities (3,217,819) (6,726,770)
Proceeds from sales of available-for-sale securities 23,000 1,000,156
Proceeds from maturities and calls of
available-for-sale securities 3,693,329 6,567,188
Proceeds from sale of other real estate owned 61,220 124,768
Decrease (increase) in interest-bearing deposits with banks 742,630 (1,011,883)
Net additions to premises and equipment (89,207) (204,123)
Purchase of life insurance (60,000) (1,592,446)
--------------------------------------------------------------------------------------------
Net cash used for investing activities (23,526,059) (5,820,477)
--------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in noninterest bearing deposits 3,752,624 3,872,023
Net increase in interest bearing deposits 635,246 4,381,315
Net increase (decrease) in time deposits 12,866,685 (3,873,313)
Proceeds from other borrowings 6,000,000 -
Increase in federal funds purchased and
securities sold under repurchase agreements 26,769 1,828,702
Dividends paid (284,473) (252,269)
--------------------------------------------------------------------------------------------
Net cash provided by financing activities 22,996,851 5,956,458
--------------------------------------------------------------------------------------------
Net increase in cash and due from banks 977,712 1,358,102
Cash and due from banks at beginning of year 3,952,383 2,594,281
Cash and due from banks at end of year $ 4,930,095 $ 3,952,383
============================================================================================
</TABLE>
The accompanying notes are an integral part of these financial statements.
C-6
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF CASH FLOWS
(continued)
<TABLE>
<CAPTION>
For the years ended
December 31,
---------------------
1999 1998
---------- ---------
<S> <C> <C>
Supplemental schedule of non-cash investing activities:
Unrealized depreciation on securities
available-for-sale, net of taxes of $126,595 and
$2,619, respectively $(244,558) $(12,851)
Loans transferred to other real estate owned $ 227,880 $ 46,297
</TABLE>
The accompanying notes are an integral part of these financial statements.
C-7
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES:
Peoples State Bank of Groveland (the "Bank") is a state chartered bank organized
to offer a full range of banking services to individual and corporate customers
through its offices located in Lake County, Florida. The Bank is subject to
competition from other financial institutions and operates under the principal
supervision and regulation of the Federal Deposit Insurance Corporation and the
Comptroller of the State of Florida. Consequently, the Bank undergoes periodic
examinations by those regulatory authorities.
The following is a description of the significant accounting policies and
practices followed by the Bank, which conform with generally accepted accounting
principles and prevailing practices within the banking industry.
In preparing the financial statements, management is required to make estimates
and assumptions that affect the reported amounts of assets and liabilities as of
the date of the statements of financial condition and income and expense for the
periods presented. Actual results could differ significantly from those
estimates. Material estimates particularly susceptible to significant change in
the near term relate to the determination of the allowance for loan losses and
the evaluation of the carrying amount of real estate acquired through
foreclosure or in satisfaction of loans. In connection with the determination
of the allowance for loan losses and other real estate owned, management
generally obtains independent appraisal of the value of significant properties.
Investment securities
The Bank has classified as available-for-sale those investment securities which
may be sold prior to maturity in connection with changes in market interest
rates, liquidity needs or other reasons. Securities in the available-for-sale
portfolio have been reflected at their aggregate fair value in the accompanying
statements of financial condition. Unrealized holding gains or losses, net of
related income tax effects, have been reflected as a separate component of
stockholders' equity.
Those investment securities for which the Bank has the positive intent and
ability to hold until their maturity are classified as held-to-maturity
securities. These securities are carried on an amortized cost basis.
Amortization of premiums and accretion of discounts are recognized in interest
income as yield adjustments, in a manner which approximates the interest method.
Realized gains and losses on disposition are recorded in noninterest income on
the trade date, based on the net proceeds from, and adjusted carrying amount of
the security sold, using the specific identification method.
C-8
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
Loans and allowance for loan losses
Loans receivable that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the principal
amount outstanding, net of any charge-offs, the allowance for loan losses and
unamortized deferred loan origination fees and costs. Interest income is
recognized on a level yield basis.
The allowance for loan losses is established through a provision for loan losses
charged to operations. Loans are charged against the allowance for loan losses
when management believes that the collectibility of the principal is unlikely.
Subsequent recoveries are added to the reserve. The allowance is an amount that
management believes will be adequate to absorb possible losses inherent in
existing loans and loan commitments, based on evaluations of the collectibility
of loans and prior loan loss experience.
Management evaluates the adequacy of the allowance on a monthly basis. The
evaluations take into consideration such factors as changes in the nature and
volume of the loan portfolio, overall portfolio quality, loan concentrations,
review of specific problem loans and loan commitments, current and anticipated
economic conditions that may affect the borrowers' ability to repay, and the
estimated or appraised value of any underlying collateral.
Interest income on loans is accrued based upon the principal amount outstanding.
Loans on which the accrual of interest has been discontinued are designated as
nonaccrual or impaired loans. Accrual of interest on loans is discontinued when
either reasonable doubt exists as to the full, timely collection of interest or
principal or when a loan becomes contractually past due by ninety days or more
with respect to principal or interest. All interest previously accrued but not
collected is reversed against current period income if, in the judgment of
management, it is not considered fully collectible. Income on such loans is
then recognized only to the extent cash is received and where the future
collection of principal is probable. Accruals are resumed on loans only when
they are brought fully current with respect to principal and interest and when,
in the judgment of management, the loan is estimated to be fully collectible as
to both principal and interest.
Loan origination and commitment fees and certain direct loan origination costs
are deferred and the net amount amortized to interest income as a yield
adjustment over the contractual life of the related loan.
C-9
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
The Bank has adopted the provisions of Statement of Financial Accounting
Standards No. 114, Accounting by Creditors for Impairment of a Loan ("SFAS 114")
as amended by Statement of Financial Accounting Standards No. 118, Accounting by
Creditors for Impairment of a Loan, Income recognition and Disclosure ("SFAS
118"). A loan is considered to be impaired when, based on current information
and events, management believes it probable that the Bank will be unable to
collect all amounts due, both principal and interest, according to the
contractual terms of the loan agreement. SFAS 114 and 118 require that impaired
loans within the scope of the statements be measured based on the present value
of expected future cash flows discounted at the loan's effective interest rate
or, as a practical expedient, at the loan's observable market price or the fair
value of the underlying collateral if the loan is collateral dependent.
Interest income on impaired loans is recognized only to the extent cash is
received and where the future collection of principal is probable.
Other real estate owned
Other real estate owned consists of properties acquired through foreclosure or
by deed in lieu of foreclosure. At the time of acquisition, such properties are
recorded at the lesser of the Bank's net investment in the related loan or the
fair value of the property as determined by independent appraisal.
Gains and losses on the sale of other real estate owned, write-downs resulting
from periodic reevaluation of the property and revenues and expenses associated
with holding the properties are charged to other noninterest income or expense.
Legal expenses and other direct costs associated with foreclosure actions are
also included in the accompanying statements of income in other noninterest
expense.
A substantial amount of the Bank's loans are secured by real estate located
throughout Central Florida. In addition, all other real estate owned is located
in this area. Consequently, the ultimate recovery of the carrying amount of
foreclosed property is subject to changes in market conditions within this
region.
Premises and equipment
Premises and equipment are stated at cost less accumulated depreciation and
amortization. Improvements to leased property are amortized over the shorter of
the estimated useful lives of the improvements or the life of the related lease.
It is the policy of the Bank to provide depreciation based on the estimated
useful life of individual assets, calculated using the straight line method.
Estimated useful lives of premises and equipment range as follows:
Years
--------
Bank building 10-40
Furniture and equipment 5-25
C-10
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
Income taxes
The Bank uses the liability method of accounting for deferred income taxes.
Consequently, income tax benefit or expense includes Federal and state income
taxes currently payable or receivable and those deferred because of temporary
differences between the financial statement and tax bases of assets and
liabilities. Temporary differences which give rise to significant deferred tax
assets and liabilities relate to net operating loss carryforwards, net
unrealized appreciation or depreciation on securities available-for-sale, loans
and the allowance for loan losses, other real estate owned, fixed assets and
deferred compensation. The effective tax benefit or expense rate may differ
from the combined statutory Federal and state rate primarily due to the effect
of recognition of net operating losses carried forward less any related
valuation allowance.
Cash equivalents
For the purpose of presentation in the statements of cash flows, cash and cash
equivalents include cash on hand and deposits with other financial institutions
which are included in the balance sheet caption "Cash and Due from Banks."
Reclassifications
Management of the Bank periodically revises its classification of certain items
within the financial statements in order to provide a more meaningful
presentation of the Bank's financial position, results of operations and cash
flows. In those cases where revised presentation has been adopted in the 1999
financial statements, the corresponding 1998 balances have also been
reclassified to enhance comparability between periods.
Other comprehensive income
The Bank has adopted the provisions of Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income ("SFAS 130") as of January 1,
1998. Accounting principles generally require that recognized revenue,
expenses, gains and losses be included in net income. However, certain changes
in assets and liabilities, such as unrealized gains and losses on available-for-
sale securities, are reported as a separate component of the equity section of
the statement of financial condition. Such items, along with net income, are
components of comprehensive income. The adoption of SFAS 130 had no effect on
the Bank's net income or stockholders' equity.
C-11
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 2 - REGULATORY MATTERS:
Effective December 19, 1992, as required by the FDIC Improvement Act of 1991,
the Federal regulatory agencies of banks and bank holding companies adopted
standards for determining a financial institution's capital category for
purposes of regulatory enforcement. A financial institution will be classified
according to the lowest category in which any of its three separate capital
ratios (computed as defined in the standards) falls. Failure to meet the
minimum capital requirements can initiate mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements and operations. The capital
categories as established by the regulatory agencies, as well as the capital
ratios of the Bank at December 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Total Tier 1
risk based risk based Leverage
Category capital ratio ratio ratio
------------------------------------- -------------- ----------- ---------
<S> <C> <C> <C>
Well capitalized
(minimum ratios) 10% 6% 5%
Adequately capitalized
(minimum ratios) 8% 4% 4%
Undercapitalized
(less than) 8% 4% 4%
Significantly undercapitalized
(less than) 6% 3% 3%
Peoples State Bank of Groveland
December 31, 1999 12% 11% 8%
December 31, 1998 10% 9% 10%
</TABLE>
Florida Banking Statutes limit the amount of dividends that may be paid by the
Bank without prior approval of the Bank's regulatory agency. As of December 31,
1999 and 1998, the Bank had approximately $2,184,000 and $1,433,000,
respectively, available for the payment of dividends.
The Bank is required to maintain reserve balances with the Federal Reserve Bank
based on a specified percentage of deposits, less cash on hand. The amount of
required reserves to be maintained on hand or at the Federal Reserve Bank
totalled $426,000 and $328,000 at December 31, 1999 and 1998, respectively.
C-12
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 3 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE:
The amortized cost of securities and their approximate fair values at December
31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Fair
cost gain loss value
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
1999-
U.S. Government and agency
securities $ 7,551,315 $ - $ (292,896) $ 7,258,419
State and municipal securities 1,282,244 10,153 (70,548) 1,221,849
Equity securities 320,000 - - 320,000
----------- ---------- --------- -----------
$ 9,153,559 $ 10,153 $ (363,444) $ 8,800,268
=========== ========== ========= ===========
1998-
U.S. Government and agency
securities $ 8,138,129 $ 24,656 $ (17,733) $ 8,145,052
State and municipal securities 1,192,114 24,997 (14,108) 1,203,003
Equity securities 336,800 - - 336,800
----------- ---------- ---------- -----------
$ 9,667,043 $ 49,653 $ (31,841) $ 9,684,855
=========== ========== ========== ===========
</TABLE>
Equity securities includes investments in Federal Home Loan Bank and other
related stock which is restricted as to ownership and has a limited market.
These securities are carried at cost which totalled $320,000 and $336,800 at
December 31, 1999 and 1998, respectively.
During the years ended December 31, 1999 and 1998, the Bank realized gains of
$6,233 and $366, respectively, on the sale of securities available-for-sale.
At December 31, 1999, investment securities with a carrying amount of $3,523,324
and market value of $4,776,142 were pledged to secure public deposits or for
other purposes required or permitted by law.
Scheduled maturities of debt securities at December 31, 1999 are as follows:
Amortized Fair
cost Value
---------- ----------
Due in one year or less $ 100,056 $ 101,630
Due from one to five years 2,858,798 2,785,896
Due from five to ten years 2,282,129 2,200,367
Due after ten years 3,592,576 3,392,375
---------- ----------
$8,833,559 $8,480,268
========== ==========
C-13
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
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.
NOTE 4 - LOANS AND ALLOWANCE FOR LOAN LOSSES:
Major classifications of loans included in the loan portfolio are as follows:
December 31,
--------------------------
1999 1998
------------ ------------
Real estate $69,018,843 $52,977,704
Commercial and industrial 10,530,408 4,809,062
Consumer and personal 3,904,122 2,394,922
----------- -----------
83,453,373 60,181,688
Less:
Allowance for loan losses (1,043,079) (925,288)
Unearned discount and net deferred loan
fees and costs (124,553) (108,491)
----------- -----------
$82,285,741 $59,147,909
=========== ===========
While the loan portfolio is diversified among the various categories presented
above, the Bank's lending activities are intentionally restricted to borrowers
located primarily in Central Florida. Consequently, the ability of the Bank's
borrowers to honor their contractual obligations to repay is significantly
influenced by the general economic conditions of this area.
A concentration of credit risk results when the Bank has a significant credit
exposure to an individual or a group engaged in similar activities or having
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions. At December 31, 1999 and 1998, no concentration of loans within any
portfolio category to any group of borrowers engaged in similar activities or in
a similar business, exceeded 10% of total loans, except that as of these dates
loans collateralized by mortgages on real estate represented 83% and 88%,
respectively, of the loan portfolio and were to borrowers in varying activities
and businesses.
Related parties include directors, officers, and shareholders who own more than
10% of the Bank's outstanding shares and their affiliates. Loans to related
parties approximated $977,000 at December 31, 1999 and $812,000 at December 31,
1998. Such loans were made in the ordinary course of business on substantially
the same terms and conditions, including interest rates and collateral, as those
prevailing at the time for comparable transactions with unaffiliated customers.
In the opinion of management, these loans do not involve more than normal credit
risk or possess other unfavorable features. As of December 31, 1999 and 1998,
these individuals and entities had approximately $1,022,000 and $831,000
respectively, of funds on deposit in the Bank.
C-14
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
An analysis of the changes in the allowance for loan losses follows:
December 31,
----------------------
1999 1998
----------- ---------
Balance at beginning of year $ 925,288 $935,593
Provision charged to operations 152,500 -
Loans charged off (34,946) (29,321)
Recoveries 237 19,016
---------- --------
Balance at end of year $1,043,079 $925,288
========== ========
As discussed in Note 1, the Company has adopted the provisions of SFAS 114, as
amended by SFAS 118, related to impaired loans. As of December 31, 1999 and
1998, the total recorded investment in impaired loans approximated $287,000 and
$411,000, respectively. As of December 31, 1999 and 1998, the Bank had recorded
an allowance for loan losses of approximately $35,000 and $39,000 related to
$231,000 and $257,000 of its impaired loans, respectively. No specific allowance
for loan losses had been recorded for the remaining $56,000 and $154,000 of
impaired loans as of December 31, 1999 and 1998, respectively.
The recorded investment in impaired loans averaged $344,000 and $330,000 during
the years ended December 31, 1999 and 1998, respectively. Approximately $15,435
and $500 of interest income was recognized on impaired loans during the years
ended December 31, 1999 and 1998, respectively.
NOTE 5 - PREMISES AND EQUIPMENT:
Major classifications of premises and equipment are summarized as follows:
December 31,
--------------------------
1999 1998
------------ ------------
Buildings and improvements $ 1,386,809 $ 1,409,809
Land and improvements 495,950 495,950
Computer equipment 1,170,179 1,138,733
Furniture and equipment 1,069,919 989,002
----------- -----------
4,122,857 4,033,494
Less accumulated depreciation and amortization (1,837,193) (1,495,421)
----------- -----------
$ 2,285,664 $ 2,538,073
=========== ===========
Depreciation and amortization expense related to premises and equipment totalled
$322,282 in 1999 and $318,907 in 1998.
C-15
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 6 - DEPOSITS:
As of December 31, 1999, time deposits included contractual maturities as
follows:
Year ending Amount
December 31, Maturing
------------ --------
2000 $31,513,764
2001 11,221,498
2002 2,106,883
2003 167,189
2004 108,096
-----------
Total time deposits $45,117,430
===========
Deposit accounts with negative balances aggregating $94,730 and $69,074 as of
December 31, 1999 and December 31, 1998, respectively, are included in consumer
loans.
Included in deposits are time deposits issued in amounts of $100,000 or more
totalling $11,709,298 and $6,233,119 at December 31, 1999 and 1998,
respectively.
Interest paid on deposits totalled $2,773,399 in 1999 and $2,500,624 in 1998.
NOTE 7 - SECURITIES SOLD UNDER REPURCHASE AGREEMENTS:
The Bank enters into agreements to sell and subsequently repurchase the same
U.S. Agency securities from customers. The amounts advanced under these
agreements represent short-term borrowings and are reflected as a liability in
the statement of financial condition. The securities underlying the agreements
remain under the custody and control of the Bank and are included in the
investment portfolio.
At December 31, 1999 and 1998, these agreements had an outstanding balance of
$1,855,471 and $152,702 respectively, matured daily and had a weighted average
interest rate of 2.8% and 3.5%. At those dates the underlying securities had a
fair value of $2,865,671 and $495,124, respectively.
The month-end average of securities sold under agreements to repurchase was
approximately $910,000 and $12,725, and the maximum amount outstanding at any
month-end was $1,855,471 and $152,702 during 1999 and 1998, respectively.
C-16
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 8 - INCOME TAXES:
Income tax expense included in the accompanying statements of income consists of
the following:
For the years ended
December 31,
----------------------
1999 1998
---------- ----------
Current:
Federal $ 568,611 $ 236,676
State 100,189 47,729
Deferred (88,523) 64,323
--------- ---------
$ 580,277 $ 348,728
========= =========
The Bank's deferred tax assets and liabilities consist of the following:
December 31,
---------------------
1999 1998
--------- ---------
Gross deferred tax assets $ 372,673 $ 169,240
Gross deferred tax liabilities (175,446) (186,250)
--------- ---------
$ 197,227 $ (17,010)
========= =========
Income taxes totalling $600,358 and $329,508 were paid in 1999 and 1998,
respectively.
NOTE 10 - DEFERRED COMPENSATION AND EMPLOYEE BENEFIT PLANS:
During 1998 the Bank adopted a series of non-qualified deferred compensation and
incentive retirement plans (the "Plans"), which provide defined benefits to
certain members of management and all members of the Board of Directors upon
retirement, death or disability. The Plans are not funded and the Bank provides
for the projected benefit obligation by charges to earnings over the estimated
service lives of the participants.
The Plans also provide for lump sum payment of benefits in the event of a change
of control of the Bank as defined in the Plans. Total amount of the payment
would be based upon the deferral account balances, book value of the Bank and
the price of the Bank stock on the date of change of control.
C-17
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
Activity related to the Plans consisted of the following:
December 31,
---------------------
1999 1998
--------- ---------
Beginning benefit obligation $ 41,758 $ -
Participant contributions 54,444 20,788
Employer contributions 15,627 20,430
Plan earnings 8,597 540
--------- ---------
Present value of accumulated
and projected benefit obligations $ 120,426 $ 41,758
========= =========
The actuarial present value of the accumulated and projected benefit obligation
is based on a 10% discount rate. Participant contributions are completely
vested and employer contributions become vested equally over a period of 10
years. These amounts are included in other liabilities in the accompanying
statements of financial condition.
In connection with the above Plans, the Bank has life insurance policies in
force on all plan participants, with the Bank as the sole beneficiary of the
policies. The aggregate cash surrender value of the policies at December 31,
1999 and 1998 was $1,712,063 and $1,617,446, respectively. The increase in cash
surrender value of these policies for 1999 and 1998 was approximately $39,000
and $25,000, respectively, and has been included in other operating income.
The Bank has a defined contribution 401(k) salary savings plan which covers
substantially all employees age twenty or over who have completed six months of
service. Eligible employees may elect to contribute a portion of their earnings
to the plan. The Bank matches 50% of the employee contributions up to a maximum
of 6% of annual wages. Those matching contributions, along with additional
contributions to the salary savings plan totalled approximately $30,000 and
$26,000 for the years ended December 31, 1999 and 1998, respectively.
During 1993, the Bank terminated and made final distributions for its then
existing defined benefit pension plan. Since that plan was top-heavy, the Bank
was required to make minimum contributions of 3% of total wages to the existing
plan each year through 1998. These minimum contributions totalled approximately
$30,000 for the year ended December 31, 1998.
C-18
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 11 - COMMITMENTS AND CONTINGENT LIABILITIES:
Financial instruments with off-balance-sheet risk
In the normal course of business, the Bank is party to financial instruments not
reflected in the accompanying financial statements. These financial instruments
consist of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
1999 1998
---------- ----------
<S> <C> <C>
Unfunded loan commitments $9,061,120 $6,717,421
Performance and financial standby letters of credit 959,228 1,230,009
</TABLE>
These financial instruments are recorded in the financial statements when they
are funded or related fees are incurred or receivable. The Bank's exposure to
credit loss in the event of nonperformance by the other party to these financial
instruments is represented by the contractual amount of those instruments. The
credit and collateral policies in extending these commitments are essentially
the same as those required by the Bank for the financial instruments which are
included in the accompanying statements of financial condition.
The Bank evaluates each customer's creditworthiness on a case-by-case basis.
The amount of collateral obtained by the Bank, if any, is based upon
management's credit evaluation of the borrower. Such collateral may include
real estate, receivables, inventory, vehicles and equipment or other types of
assets.
Since the Bank's loan commitments often expire without being drawn upon, the
total amount of these commitments does not necessarily represent a required
future use of the Bank's cash or cash equivalents.
Legal matters
The Bank is party to various legal actions and claims arising in the normal
course of business. Management believes that the resolution of these matters
will not have a material adverse effect on the results of operations or
financial position of the Bank.
Year 2000 issues
Overview: The Year 2000 issue is the result of computer programs being written
---------
using two digits rather than four to define the applicable year. As a result,
date-sensitive software and/or hardware may recognize a date using "00" as the
year 1900 rather than the year 2000. This could result in a system failure or
other disruption of operations and may impede normal business activities.
C-19
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
State of Readiness: In accordance with FDIC guidelines, the Bank has completed
-------------------
a five-phase comprehensive plan which resulted in timely and adequate
modifications of its systems and technology to address its Year 2000 issues.
To determine the readiness of its customers, the Bank sent a questionnaire to,
and received responses from, its significant borrowers to determine the extent
of risk created by any failure by them to remediate their own Year 2000 issues.
The Bank's strategic plan provides, if necessary, a Year 2000 contingency
reserve of approximately $72,000 for borrowers with high Year 2000 risks.
To determine the readiness of its vendors, the Bank has sent out a letter to
each significant vendor inquiring about their compliance with Year 2000. For
those vendors who responded that they were Year 2000 compliant and that the Bank
has determined to not have a material impact on its operations, no further work
was performed. Vendors who did not demonstrate compliance by a certain date
were replaced with Year 2000 compliant vendors.
Costs and Risks: Most of the Bank's computer hardware and software applications
----------------
were modified or replaced in order to both upgrade its existing systems and
maintain functionality as the Year 2000 approaches. The Bank has spent
approximately $66,000 to address its Year 2000 issues and upgrade its systems in
general.
The Bank has not experienced any adverse effects related to Year 2000 issues
subsequent to December 31, 1999.
NOTE 12 - OTHER COMPREHENSIVE INCOME:
Other comprehensive income included in the accompanying statements of changes in
stockholders' equity consists of the following:
<TABLE>
<CAPTION>
Tax
Before-Tax (Expense) Net-of-Tax
Amount or Benefit Amount
----------- ----------- -----------
<S> <C> <C> <C>
1999-
Unrealized holding losses during the period $(377,386) $128,964 $(248,422)
Plus: reclassification adjustment for gains
realized in net income 6,233 (2,369) 3,864
--------- -------- ---------
Other comprehensive income $(371,153) $126,595 $(244,558)
========= ======== =========
1998-
Unrealized holding losses during the period $ (15,836) $ 2,758 $ (13,078)
Plus: reclassification adjustment for gains
realized in net income 366 (139) 227
--------- -------- ---------
Other comprehensive income $ (15,470) $ 2,619 $ (12,851)
========= ======== =========
</TABLE>
C-20
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Values of Financial Instruments, ("SFAS 107"), requires that the Bank disclose
estimated fair values of financial instruments for which it is practicable to
estimate that value. Fair value estimates, methods and assumptions are set
forth below.
Cash , Cash Equivalents and Federal Funds Sold
For these short-term instruments, the carrying amount is a reasonable estimate
of fair value.
Investment Securities
The fair value of investments, except certain state and municipal securities, is
estimated based on bid prices published in financial newspapers or bid
quotations received from securities dealers. These fair values are presented in
Note 3.
Loans
The fair value of fixed rate performing loans is estimated by discounting the
future cash flows using the current rates at which similar loans would be made
to borrowers with similar credit ratings and for the same remaining maturities.
The carrying amount of adjustable rate performing loans and nonperforming loans
is a reasonable estimate of fair value.
The following table presents information for loans at December 31, 1999:
<TABLE>
<CAPTION>
Carrying Estimated
amount fair value
----------- -----------
<S> <C> <C>
Performing:
Adjustable $51,412,456 $51,412,000
Fixed 31,754,264 30,582,000
-------------------------------------------------------------------------
83,166,720 81,994,000
Nonperforming 286,653 287,000
-------------------------------------------------------------------------
$83,453,373 $82,281,000
=========================================================================
</TABLE>
C-21
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
Deposit Liabilities
The fair value of deposits with no stated maturity, such as demand, NOW, money
market and savings is equal to the amount payable on demand as of December 31,
1999. The fair value of time deposits is based on the discounted value of
contractual cash flows. The discount rate is estimated using the rates
currently offered for deposits of similar remaining maturities.
<TABLE>
<CAPTION>
Carrying Estimated
amount fair value
----------- -----------
<S> <C> <C>
Noninterest-bearing demand $17,257,532 $17,258,000
Interest-bearing:
Demand 11,956,033 11,956,000
Savings 6,611,533 6,612,000
NOW accounts 6,153,614 6,154,000
Time 45,117,430 45,029,000
------------------------------------------------------------------------------
$87,096,142 $87,009,000
==============================================================================
</TABLE>
The fair value estimates above do not include the benefit that results from the
low-cost funding provided by the deposit liabilities compared to the cost of
borrowing funds in the market.
Securities Sold Under Agreements to Repurchase and Other Borrowed Funds
The estimated fair value of these liabilities approximates the carrying value.
Commitments to Extend Credit and Standby Letters of Credit
The fair value of commitments to extend credit is estimated using the fees
currently charged to enter into similar agreements, taking into account the
remaining terms of the agreements and the present creditworthiness of the
counterparties. For fixed rate loan commitments, fair value also considers the
difference between current levels of interest rates and the committed rates.
The fair value of financial guarantees written and letters of credit is based on
fees currently charged for similar agreements or on the estimated cost to
terminate them or otherwise settle the obligations with the counterparties.
The contract amount for commitments to extend credit and standby letters of
credit written follows:
<TABLE>
<CAPTION>
Contract Carrying Estimated
amount amount fair value
---------- -------- ----------
<S> <C> <C> <C>
Unfunded loan commitments $9,061,120 $ - $ -
Standby letters of credit 959,228 - -
</TABLE>
C-22
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO FINANCIAL STATEMENTS
(continued)
Limitations
The fair value estimates are made at a discrete point in time based on relevant
market information and information about the financial instrument. Because no
market exists for a significant portion of the Bank's financial instruments,
fair value estimates are based on judgments regarding future expected loss
experience, current economic conditions, risk characteristics of various
financial instruments, and other factors. These estimates are subjective in
nature and involve uncertainties and matters of significant judgment and
therefore cannot be determined with precision. Changes in assumptions could
significantly affect the estimates.
In addition, the fair value estimates are based on existing on- and off-balance
sheet financial instruments without attempting to estimate the value of
anticipated future business and the value of assets and liabilities that are not
considered financial instruments. Other significant assets and liabilities that
are not considered financial assets or liabilities include core deposit
intangibles, deferred tax assets, property, plant and equipment, and goodwill.
In addition, the tax ramifications related to the realization of the unrealized
gains and losses on investment securities can have a significant effect on fair
value estimates and have not been considered in the estimates.
C-23
<PAGE>
Accountant's Report
To the Board of Directors and Stockholders
of Peoples State Bank of Groveland
We have compiled the accompanying statements of financial condition of Peoples
State Bank of Groveland as of September 30, 2000 and 1999, and the related
statements of income, changes in stockholders' equity and cash flows for the
nine months then ended, in accordance with Statements on Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. We have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
/s/ Beemer, Pricher, Kuehnhackl & Heidbrink, P.A.
December 5, 2000
C-24
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
[CAPTION]
<TABLE>
September 30,
---------------------------
2000 1999
------------ -----------
ASSETS
<S> <C> <C>
Cash and due from banks $ 4,263,094 $ 3,031,340
Interest-bearing deposits with banks 14,383 864,424
Federal funds sold 2,149,000 518,000
Investments available-for-sale 12,601,520 8,997,404
Loans, net 97,345,847 78,062,401
Other real estate owned 126,401 48,135
Premises and equipment, net 2,090,053 2,366,007
Accrued interest receivable 751,951 583,950
Cash surrender value of life insurance 1,866,781 1,702,817
Deferred taxes 199,276 69,041
Prepaid and other assets 213,670 154,120
-------------------------------------------------------------------------------------------
TOTAL ASSETS $121,621,976 $96,397,639
===========================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
<S> <C> <C>
Demand - noninterest bearing $ 17,819,385 $14,754,408
Demand - interest bearing 14,267,492 10,558,497
Savings deposits 7,954,809 7,316,811
NOW accounts 4,657,381 5,189,715
Time deposits 57,256,102 43,363,748
-------------------------------------------------------------------------------------------
Total deposits 101,955,169 81,183,179
-------------------------------------------------------------------------------------------
Federal funds purchased and securities sold
under repurchase agreements 1,844,352 617,835
Other borrowed funds 8,000,000 6,000,000
Accrued interest payable and other liabilities 995,307 746,712
-------------------------------------------------------------------------------------------
Total liabilities 112,794,828 88,547,726
-------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $1.67 par value; 5,000,000 shares authorized;
691,200 shares issued 1,152,000 1,152,000
Additional paid-in capital 288,000 288,000
Accumulated other comprehensive income (120,730) (162,909)
Retained earnings 8,095,481 7,160,425
Treasury stock, 59,736 shares, at cost (587,603) (587,603)
-------------------------------------------------------------------------------------------
Total stockholders' equity 8,827,148 7,849,913
-------------------------------------------------------------------------------------------
Commitments and contingent liabilities - -
-------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $121,621,976 $96,397,639
===========================================================================================
</TABLE>
See accompanying notes and accountant's report.
C-25
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
----------------------------
2000 1999
---------- ----------
<S> <C> <C>
Interest income:
Loans $6,140,060 $4,622,397
Investment securities 510,831 382,071
Federal funds sold 155,293 133,748
----------------------------------------------------------------------------------------
Total interest income 6,806,184 5,138,216
----------------------------------------------------------------------------------------
Interest expense:
Deposits 2,814,098 2,032,527
Other borrowings 416,844 121,648
----------------------------------------------------------------------------------------
Total interest expense 3,230,942 2,154,175
----------------------------------------------------------------------------------------
Net interest income 3,575,242 2,984,041
Provision for loan losses 200,000 57,500
----------------------------------------------------------------------------------------
Net interest income after provision for loan losses 3,375,242 2,926,541
----------------------------------------------------------------------------------------
Noninterest income:
Charges related to deposit accounts 401,802 368,126
Noninterest income on loans 127,784 118,787
Gain on sale of securities - 6,233
Other noninterest income 385,890 312,363
----------------------------------------------------------------------------------------
Total noninterest income 915,476 805,509
----------------------------------------------------------------------------------------
Noninterest expense:
Salaries and employee benefits 1,523,495 1,409,575
Occupancy & equipment expense 507,231 467,604
Other 721,830 716,015
----------------------------------------------------------------------------------------
Total noninterest expense 2,752,556 2,593,194
----------------------------------------------------------------------------------------
Income before income taxes 1,538,162 1,138,856
Income tax expense 575,189 422,767
----------------------------------------------------------------------------------------
Net income $ 962,973 $ 716,089
========================================================================================
Basic earnings per common share $ 1.52 $ 1.13
========================================================================================
</TABLE>
See accompanying notes and accountant's report.
C-26
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
(Unaudited)
<TABLE>
<CAPTION>
Shares of Accumulated
common stock, Additional other
net of treasury Common paid-in comprehensive Retained Treasury
shares stock capital income earnings stock Total
--------------- ---------- ---------- -------------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1998 631,464 $1,152,000 $288,000 $ 4,132 $6,665,663 $(587,603) $7,522,192
----------
Comprehensive income:
Unrealized depreciation on
securities available-for-sale,
net of reclassification
adjustment and tax effects - - - (167,041) - - (167,041)
Net income - - - - 716,089 - 716,089
----------
Total comprehensive income 549,048
----------
Dividends paid, $.35 per share - - - - (221,327) - (221,327)
----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 1999 631,464 $1,152,000 $288,000 $(162,909) $7,160,425 $(587,603) $7,849,913
==================================================================================================================================
Balance at December 31, 1999 631,464 $1,152,000 $288,000 $(240,426) $7,416,665 $(587,603) $8,028,636
----------
Comprehensive income:
Unrealized appreciation on
securities available-for-sale,
net of reclassification
adjustment and tax effects - - - 119,696 - - 119,696
Net income - - - - 962,973 - 962,973
----------
Total comprehensive income 1,082,669
----------
Dividends paid, $.45 per share - - - - (284,157) - (284,157)
----------------------------------------------------------------------------------------------------------------------------------
Balance at September 30, 2000 631,464 $1,152,000 $288,000 $(120,730) $8,095,481 $(587,603) $8,827,148
==================================================================================================================================
</TABLE>
See accompanying notes and accountant's report.
C-27
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
----------------------------
<S> <C> <C>
2000 1999
------------ -------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 962,973 $ 716,089
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 200,000 57,500
Depreciation, amortization and accretion 247,619 280,047
Net realized gains on available-for-sale securities - (6,233)
Net realized gain on other real estate owned (1,478) (13,304)
Increase in accrued interest receivable (230,072) (125,893)
Increase in other assets (199,711) (83,041)
Increase in accrued interest payable
and other liabilities 356,152 264,564
Deferred income tax (benefit) expense (63,709) 17,328
---------------------------------------------------------------------------------------
Net cash provided by operating activities 1,271,774 1,107,057
---------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Net decrease in federal funds sold 99,000 569,000
Net increase in loans (15,260,106) (19,068,042)
Purchases of available-for-sale securities (4,121,365) (2,647,034)
Proceeds from sales of available-for-sale securities - 16,800
Proceeds from maturities and calls of
available-for-sale securities 504,414 3,048,184
Proceeds from sale of other real estate owned 55,041 61,219
Decrease in interest-bearing deposits with banks 275,443 168,032
Net additions to premises and equipment (54,953) (85,657)
---------------------------------------------------------------------------------------
Net cash used for investing activities (18,502,526) (17,937,498)
---------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Net increase in noninterest bearing deposits 561,853 1,249,500
Net increase (decrease) in interest bearing deposits 2,158,502 (1,020,911)
Net increase in time deposits 12,138,672 11,113,003
Proceeds from other borrowings 2,000,000 6,000,000
Decrease in federal funds purchased and
securities sold under repurchase agreements (11,119) (1,210,867)
Dividends paid (284,157) (221,327)
---------------------------------------------------------------------------------------
Net cash provided by financing activities 16,563,751 15,909,398
---------------------------------------------------------------------------------------
Net decrease in cash and due from banks (667,001) (921,043)
Cash and due from banks at beginning of period 4,930,095 3,952,383
Cash and due from banks at end of period $ 4,263,094 $ 3,031,340
=======================================================================================
</TABLE>
See accompanying notes and accountant's report.
C-28
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
STATEMENTS OF CASH FLOWS
(Unaudited)
(continued)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
-------------------------
<S> <C> <C>
2000 1999
--------- --------------
Supplemental schedule of non-cash investing activities:
Unrealized appreciation (depreciation) on securities
available-for-sale, net of taxes of $61,660 and
$86,369, respectively $119,696 $(167,041)
Loans transferred to other real estate owned $ - $ 96,050
</TABLE>
See accompanying notes and accountant's report.
C-29
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO UNAUDITED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
NOTE 1 - BASIS OF PRESENTATION:
The accompanying financial statements reflect all adjustments which are, in the
opinion of management, necessary to a fair statement of the results for the
interim periods presented. The results of operations for the nine months ended
September 30, 2000 are not necessarily indicative of the results to be expected
for the full year.
NOTE 2 - PROPOSED ACQUISITION OF THE BANK:
On October 10, 2000 the Board of Directors of Peoples State Bank agreed to a
merger of Peoples State Bank of Groveland with Alabama National BanCorporation.
This acquisition of Peoples State Bank by Alabama National BanCorporation is
expected to be completed in the fourth quarter of 2000 or soon thereafter and is
subject to various regulatory approvals as well as the approval of the
shareholders of Peoples State Bank.
C-30
<PAGE>
--------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
================================================================================
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(continued)
NOTE 3 - REGULATORY MATTERS:
Effective December 19, 1992, as required by the FDIC Improvement Act of 1991,
the Federal regulatory agencies of banks and bank holding companies adopted
standards for determining a financial institution's capital category for
purposes of regulatory enforcement. A financial institution will be classified
according to the lowest category in which any of its three separate capital
ratios (computed as defined in the standards) falls. Failure to meet the
minimum capital requirements can initiate mandatory and possibly additional
discretionary actions by regulators that, if undertaken, could have a direct
material effect on the Bank's financial statements and operations. The capital
categories as established by the regulatory agencies, as well as the capital
ratios of the Bank at September 30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Total Tier 1
risk based risk based Leverage
Category capital ratio ratio ratio
-------- ------------- ---------- ---------
<S> <C> <C> <C>
Well capitalized
(minimum ratios) 10% 6% 5%
Adequately capitalized
(minimum ratios) 8% 4% 4%
Undercapitalized
(less than) 8% 4% 4%
Significantly undercapitalized
(less than) 6% 3% 3%
Peoples State Bank of Groveland
September 30, 2000 11% 10% 8%
September 30, 1999 12% 11% 8%
</TABLE>
C-31
<PAGE>
-------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
===============================================================================
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(continued)
NOTE 4 - INVESTMENT SECURITIES AVAILABLE-FOR-SALE:
The amortized cost of securities and their approximate fair values at September
30, 2000 and 1999 are as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Fair
cost gain loss value
----------- ---------- ------------ --------------
<S> <C> <C> <C> <C>
2000-
U.S. Government and agency
securities $ 8,969,643 $ - $(200,735) $ 8,768,908
State and municipal securities 3,333,811 28,801 - 3,362,612
Equity securities 470,000 - - 470,000
----------- ------- --------- -----------
$12,773,454 $28,801 $(200,735) $12,601,520
=========== ======= ========= ===========
1999-
U.S. Government and agency
securities $ 7,721,091 $ - $(199,309) $ 7,521,782
State and municipal securities 1,191,859 - (36,237) 1,155,622
Equity securities 320,000 - - 320,000
----------- ------- --------- -----------
$ 9,232,950 $ - $(235,546) $ 8,997,404
=========== ======= ========= ===========
NOTE 5 - LOANS AND ALLOWANCE FOR LOAN LOSSES:
Major classifications of loans included in the loan portfolio are as follows:
September 30,
---------------------------
2000 1999
----------- -------------
Real estate $41,132,678 $35,104,002
Commercial and industrial 54,417,330 41,292,046
Consumer and personal 3,127,960 2,752,137
----------- -------------
98,677,968 79,148,185
Less:
Allowance for loan losses (1,210,840) (967,017)
Unearned discount and net deferred loan
fees and costs (121,281) (118,767)
----------- -------------
$97,345,847 $78,062,401
=========== =============
</TABLE>
C-32
<PAGE>
-------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
===============================================================================
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(continued)
While the loan portfolio is diversified among the various categories presented
above, the Bank's lending activities are intentionally restricted to borrowers
located primarily in Central Florida. Consequently, the ability of the Bank's
borrowers to honor their contractual obligations to repay is significantly
influenced by the general economic conditions of this area.
A concentration of credit risk results when the Bank has a significant credit
exposure to an individual or a group engaged in similar activities or having
similar economic characteristics that would cause their ability to meet
contractual obligations to be similarly affected by changes in economic or other
conditions. At September 30, 2000 and 1999, no concentration of loans within
any portfolio category to any group of borrowers engaged in similar activities
or in a similar business, exceeded 10% of total loans, except that as of these
dates loans collateralized by mortgages on real estate represented 42% and 44%,
respectively, of the loan portfolio and were to borrowers in varying activities
and businesses.
Related parties include directors, officers, and shareholders who own more than
10% of the Bank's outstanding shares and their affiliates. Loans to related
parties approximated $879,000 at September 30, 2000 and $1,167,000 at September
30, 1999. Such loans were made in the ordinary course of business on
substantially the same terms and conditions, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
unaffiliated customers. In the opinion of management, these loans do not
involve more than normal credit risk or possess other unfavorable features.
An analysis of the changes in the allowance for loan losses follows:
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------
2000 1999
---------- --------
<S> <C> <C>
Balance at beginning of period $1,043,079 $925,288
Provision charged to operations 200,000 57,500
Loans charged off, net of recoveries (32,239) (15,771)
---------- --------
Balance at end of period $1,210,840 $967,017
========== ========
</TABLE>
C-33
<PAGE>
-------------------------------------------------------------------------------
PEOPLES STATE BANK OF GROVELAND
===============================================================================
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(continued)
NOTE 6 - PREMISES AND EQUIPMENT:
Major classifications of premises and equipment are summarized as follows:
<TABLE>
<CAPTION>
September 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Buildings and improvements $ 1,404,524 $ 1,386,809
Land improvements 500,950 495,950
Computer equipment 1,185,728 1,170,178
Furniture and equipment 1,086,608 1,066,369
----------- -----------
4,177,810 4,119,306
Less accumulated depreciation and amortization (2,087,757) (1,753,299)
----------- -----------
$ 2,090,053 $ 2,366,007
=========== ===========
</TABLE>
Depreciation and amortization expense related to premises and equipment totalled
$250,564 for the nine months ended September 30, 2000 and $257,723 for the nine
months ended September 30, 1999.
C-34
<PAGE>
Appendix D
----------
OPINION OF THE CARSON MEDLIN COMPANY
<PAGE>
Appendix D
----------
December 7, 2000
Board of Directors
Peoples State Bank of Groveland
200 East Broad Street
Groveland, Florida 34736
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, of the consideration to be received by the shareholders of Peoples State
Bank of Groveland ("PSBG") under the terms of a certain Affiliation Agreement
dated October 10, 2000 (the "Agreement") pursuant to which PSBG will be merged
into and with Alabama National BanCorporation ("ANB") (the "Merger"). Under the
terms of the Agreement, each of the outstanding shares of PSBG Common Stock
shall be converted into approximately 1.16396 shares of ANB Common Stock. The
foregoing summary of the Merger is qualified in its entirety by reference to the
Agreement.
The Carson Medlin Company is a National Association of Securities Dealers, Inc.
(NASD) member investment banking firm, which specializes in the securities of
southeastern United States financial institutions. As part of our investment
banking activities, we are regularly engaged in the valuation of southeastern
United States financial institutions and transactions relating to their
securities. We regularly publish our research on independent community banks
regarding their financial and stock price performance. We are familiar with the
commercial banking industry in Florida and the major commercial banks operating
in that market. We have been retained by PSBG in a financial advisory capacity
to render our opinion hereunder, for which we will receive compensation.
In reaching our opinion, we have analyzed the respective financial positions,
both current and historical, of ANB and PSBG. We have reviewed: (i) the
Agreement; (ii) the annual reports to shareholders of ANB, including audited
financial statements for the five years ended December 31, 1999; (iii) audited
financial statements of PSBG for the five years ended December 31, 1999; (iv)
unaudited interim financial statements of ANB for the nine months ended
September 30, 2000; (v) unaudited interim financial statements of PSBG for the
nine months ended September 30, 2000; and, (vi) certain financial and operating
information with respect to the business, operations and prospects of ANB and
PSBG. We also: (a) held discussions with members of the senior management of
ANB and PSBG regarding historical and current business operations, financial
condition and future prospects of their respective companies; (b) reviewed the
historical market prices and trading activity for the common stock of ANB and
compared it with those of certain publicly traded companies which we deemed to
be relevant; (c) compared the results of operations of ANB and PSBG with those
of certain banking companies which we deemed to be relevant; (d) compared the
proposed financial terms of the Merger with the financial terms, to the extent
publicly available, of certain other recent business combinations of commercial
banking organizations; (e) analyzed the pro forma financial impact of the Merger
on ANB; and (f) conducted such other studies, analyses, inquiries and
examinations as we deemed appropriate.
We have relied upon and assumed, without independent verification, the accuracy
and completeness of all information provided to us. We have not performed or
considered any independent appraisal or evaluation of the assets of ANB or PSBG.
The opinion we express herein is necessarily based upon
D-1
<PAGE>
Board of Directors
People State Bank of Groveland
December 7, 2000
Page 2
market, economic and other relevant considerations as they exist and can be
evaluated as of the date of this letter.
Based upon the foregoing, it is our opinion that the consideration provided for
in the Agreement is fair, from a financial point of view, to the shareholders of
Peoples State Bank of Groveland.
Very truly yours,
/s/ THE CARSON MEDLIN COMPANY
D-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Certificate of Incorporation, as amended, of Alabama National contains a
provision which, subject to certain exceptions described below, eliminates the
liability of a director to Alabama National or its stockholders for monetary
damages for any breach of duty as a director. This provision does not eliminate
the liability of the 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) under
Section 174 of the Delaware General Corporation Law (the "DGCL") relating to
unlawful dividends and distributions, or (iv) for any transaction from which
the director derived an improper personal benefit.
The Bylaws of Alabama National require Alabama National to indemnify any person
who was, is or is threatened to be made a named defendant or respondent in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of service by such person
as a director of Alabama National or any other corporation, including the
subsidiary banks of Alabama National, for which he served as such at the
request of Alabama National. Directors are entitled to be indemnified against
judgments, penalties, fines, settlements and reasonable expenses actually
incurred by the director in connection with the proceeding, except that no
payments may be made with respect to liability which is not eliminated pursuant
to the provision of Alabama National's Certificate of Incorporation described
in the preceding paragraph. Directors are also entitled to have Alabama
National advance any such expenses prior to final disposition of the
proceeding, upon delivery of a written affirmation by the director of his good
faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to repay the amounts advanced if it is
ultimately determined that the standard of conduct has not been met.
In addition to the Bylaws of Alabama National, Section 145(c) of the DGCL
requires Alabama National to indemnify any director who has been successful on
the merits or otherwise in defending any proceeding described above which has
arisen prior to July 1, 1997. The Delaware General Corporation Law also
provides that a court may order indemnification of a director if it determines
that the director is fairly and reasonably entitled to such indemnification.
The Board of Directors of Alabama National also has the authority to extend to
officers, employees and agents the same indemnification rights held by
directors, subject to all of the accompanying conditions and obligations. The
Board of Directors has extended indemnification rights to all of its executive
officers.
Item 21. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger dated as of October 10, 2000, is found at
Appendix A to the Proxy Statement-Prospectus included in Part I hereof.
4.1 Certificate of Incorporation, filed as Exhibit 3.1 to Registrant's
Registration Statement on Form S-1 (No. 33-83800), is incorporated herein
by reference.
4.1A Certificate of Amendment of Certificate of Incorporation; filed as
Exhibit 3.1A to the Registrant's Annual Report on Form 10-K for the year
ended December 31, 1996 (No. 0-25160), is incorporated herein by
reference.
</TABLE>
II-1
<PAGE>
<TABLE>
<C> <S>
4.1B Certificate of Merger, filed as Exhibit 3.1B to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1997 (No. 0-25160),
is incorporated herein by reference.
4.1C Certificate of Amendment of Certificate of Incorporation dated April 24,
1998, filed as Exhibit 3.1C to the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1998 (No. 0-25160), is incorporated
herein by reference.
4.2 Bylaws, filed as Exhibit 3.2 to Registrant's Registration Statement on
Form S-1 (No. 33-83800), is incorporated herein by reference.
5.1 Opinion of Maynard, Cooper & Gale, P.C. re legality dated December 7,
2000.
8.1 Opinion of Maynard, Cooper & Gale, P.C. re tax matters dated December 7,
2000.
13.1 Registrant's 1999 Annual Report on Form 10-K for the year ended December
31, 1999 (No. 0-25160), is incorporated herein by reference.
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Beemer, Pricher, Kuehnhackl & Heidbrink, P.A.
23.3 Consent of Maynard, Cooper & Gale, P.C. is included in their opinion re
legality filed as Exhibit 5.1 hereto.
23.4 Consent of Maynard, Cooper & Gale, P.C. is included in their opinion re
tax matters filed as Exhibit 8.1 hereto.
23.5 Consent of The Carson Medlin Company.
24.1 Power of Attorney (contained on signature page of the Registration
Statement).
99.1 Form of Proxy to be used at Peoples State Bank of Groveland annual
meeting.
</TABLE>
(b) Financial Statement Schedules. All Schedules to the consolidated financial
statements required by Article 9 of Regulation S-X are inapplicable and
therefore have been omitted.
(c) Information pursuant to Item 4(b) is included in the Prospectus.
Item 22. Undertakings.
(a) 1. The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent or
given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and where interim financial information required to be presented by
Article 3 of Regulation S-X are not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
2. Insofar as an indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
3. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities Exchange Act
of 1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Birmingham, Alabama, on
the 7th day of December, 2000.
Alabama National BanCorporation
/s/ John H. Holcomb, III
By: _________________________________
John H. Holcomb, III,
Chairman and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints John H. Holcomb, III and Victor E. Nichol, Jr., and
each of them, his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place and stead,
in any and all capacities, to sign any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorneys-in fact and agents, full power and authority to do and
perform each and every act and thing requisite or necessary to be done in and
about the premises, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, and each of them or their substitute or substitutes, may lawfully
do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated on the dates indicated below.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John H. Holcomb, III Chairman, Chief Executive December 7, 2000
______________________________________ Officer, and Director
John H. Holcomb, III (Principal Executive
Officer)
/s/ Victor E. Nichol, Jr. President and Chief December 7, 2000
______________________________________ Operating Officer, and
Victor E. Nichol, Jr. Director
/s/ William E. Matthews, V Executive Vice President December 7, 2000
______________________________________ and Chief Financial
William E. Matthews, V Officer (Principal
Financial Officer)
/s/ Shelly S. Williams Senior Vice President- December 7, 2000
______________________________________ Controller, (Principal
Shelly S. Williams Accounting Officer)
/s/ T. Morris Hackney Director December 5, 2000
______________________________________
T. Morris Hackney
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ John D. Johns Director December 5, 2000
______________________________________
John D. Johns
Director , 2000
______________________________________
John J. McMahon, Jr.
/s/ C. Phillip McWane Director December 5, 2000
______________________________________
C. Phillip McWane
/s/ William D. Montgomery Director December 4, 2000
______________________________________
William D. Montgomery
/s/ Drayton Nabers, Jr. Director December 6, 2000
______________________________________
Drayton Nabers, Jr.
/s/ G. Ruffner Page, Jr. Director December 5, 2000
______________________________________
G. Ruffner Page, Jr.
/s/ W. Stancil Starnes Director December 6, 2000
______________________________________
W. Stancil Starnes
/s/ Dan M. David Vice Chairman and Director December 5, 2000
______________________________________
Dan M. David
/s/ C. Lloyd Nix Director December 5, 2000
______________________________________
C. Lloyd Nix
/s/ William E. Sexton Director December 5, 2000
______________________________________
William E. Sexton
/s/ W. Ray Barnes Director December 6, 2000
______________________________________
W. Ray Barnes
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S> <C>
2.1 Agreement and Plan of Merger dated as of October 10, 2000, is
found at Appendix A to the Proxy Statement-Prospectus included
in Part I hereof.
4.1 Certificate of Incorporation, filed as Exhibit 3.1 to
Registrant's Registration Statement on Form S-1 (No. 33-83800),
is incorporated herein by reference.
4.1A Certificate of Amendment of Certificate of Incorporation; filed
as Exhibit 3.1A to the Registrant's Annual Report on Form 10-K
for the year ended December 31, 1996 (No. 0-25160), is
incorporated herein by reference.
4.1B Certificate of Merger, filed as Exhibit 3.1B to the Registrant's
Annual Report on Form 10-K for the year ended December 31, 1997
(No. 0-25160), is incorporated herein by reference.
4.1C Certificate of Amendment of Certificate of Incorporation dated
April 24, 1998, filed as Exhibit 3.1C to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 (No. 0-25160), is incorporated herein by reference.
4.2 Bylaws, filed as Exhibit 3.2 to Registrant's Registration
Statement on Form S-1 (No. 33-83800), is incorporated herein by
reference.
5.1 Opinion of Maynard, Cooper & Gale, P.C. re legality dated
December 7, 2000.
8.1 Opinion of Maynard, Cooper & Gale, P.C. re tax matters dated
December 7, 2000.
13.1 Registrant's 1999 Annual Report on Form 10-K for the year ended
December 31, 1999 (No. 0-25160), is incorporated herein by
reference.
21.1 Subsidiaries of Registrant.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2 Consent of Beemer, Pricher, Kuehnhackl & Heidbrink, P.A.
23.3 Consent of Maynard, Cooper & Gale, P.C. is included in their
opinion re legality filed as Exhibit 5.1 hereto.
23.4 Consent of Maynard, Cooper & Gale, P.C. is included in their
opinion re tax matters filed as Exhibit 8.1 hereto.
23.5 Consent of The Carson Medlin Company.
24.1 Power of Attorney (contained on signature page of the
Registration Statement).
99.1 Form of Proxy to be used at Peoples State Bank of Groveland
annual meeting.
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