Back to GetFilings.com
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission file number: 0-16181
ABC BANCORP (A GEORGIA CORPORATION)
I.R.S. EMPLOYER IDENTIFICATION NUMBER 58-1456434
310 FIRST STREET, S.E., MOULTRIE, GEORGIA 31768
TELEPHONE NUMBER: (912) 890-1111
Securities registered pursuant to Section 12(b) of the Act
None
Securities registered pursuant to Section 12(g) of the Act
Common Stock, Par Value $1 Per Share
Check whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
--------- _________
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of March 1, 1996, registrant had outstanding 3,379,192 shares of common
stock, $1 par value per share, which is registrant's only class of common stock.
The aggregate market value of the voting stock held by nonaffiliates of the
registrant was approximately $38,004,800.
DOCUMENTS INCORPORATED BY REFERENCE
The information required by Part III of this Annual Report is incorporated by
reference from the Registrant's definitive proxy statement to be filed with the
Securities and Exchange Commission pursuant to Regulation 14A not later than 120
days after the end of the fiscal year covered by this Annual Report.
PART I
ITEM 1. BUSINESS OF THE COMPANY AND SUBSIDIARY BANKS
On August 21, 1981, ABC Bancorp ("ABC" or the "Company") was organized
as a registered bank holding company under the Federal Bank Holding Company Act
of 1956, as amended, and the bank holding company laws of Georgia.
On that date, American Banking Company ("American Bank") was merged
with a subsidiary of ABC created for the purpose of organizing American Bank
into a one-bank holding company structure. Since that time, American Bank has
operated as a wholly-owned subsidiary of ABC.
In 1985, ABC acquired all of the outstanding common stock of another
one-bank holding company, Quitman Bancshares, Inc., in exchange for ABC common
stock. In connection with that acquisition, ABC acquired all of the outstanding
common stock of The Bank of Quitman ("Quitman Bank") which was a wholly-owned
subsidiary of Quitman Bancshares, Inc. Pursuant to terms of the Reorganization
Agreement and the Merger Agreement, Quitman Bancshares, Inc. ceased to exist as
a separate entity and Quitman Bank thus became a wholly-owned subsidiary of ABC.
On July 1, 1986, ABC acquired all of the outstanding common stock of
Bank of Thomas County ("Thomas Bank") for cash and Thomas Bank became a wholly-
owned subsidiary of ABC.
In December 1986, ABC acquired all of the outstanding common stock of
The Citizens Bank of Tifton ("Tifton Bank") in exchange for cash and ABC common
stock.
On October 1, 1992, ABC acquired all of the outstanding common stock
of Cairo Banking Company ("CBC") for cash and CBC became a wholly-owned
subsidiary of ABC.
ABC is a bank holding company and does not engage in any substantial
business other than the normal banking services conducted by its five wholly-
owned bank subsidiaries, which are sometimes hereinafter collectively referred
to as the "Banks."
AMERICAN BANK
American Bank was incorporated on August 3, 1971 and operates a full-
service banking business in Moultrie, Colquitt County, Georgia, providing such
banking services as checking and savings accounts, various other types of time
deposits and money transfers. As of December 31, 1995, American Bank ranked, on
the basis of total deposits, as the smallest of three banks in Colquitt County.
1
American Bank finances various commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. American Bank offers several credit card
products to its customers. American Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. American Bank also offers individual trust
services.
At December 31, 1995, American Bank had correspondent relationships
with eight other commercial banks in Georgia. American Bank's principal
correspondent bank is SunTrust Bank, Atlanta, Georgia. These correspondent banks
provide certain services to American Bank such as processing checks and other
items, buying and selling Federal funds, handling money transfers and exchanges,
shipping coin and currency, providing security and safekeeping of funds or other
valuable items, and furnishing limited management information and advice. As
compensation for these services, American Bank maintains certain balances with
its correspondents in noninterest-bearing accounts.
QUITMAN BANK
Quitman Bank was founded on December 26, 1888, and operates a full-
service banking business in Quitman and Brooks County, Georgia. On December 31,
1995, Quitman Bank ranked, on the basis of total deposits, as the largest of
four banks in Brooks County.
Among the services provided by Quitman Bank are checking accounts and
savings accounts, certificates of deposit and money transfers. Quitman Bank
finances a variety of agricultural, commercial and consumer transactions and
also makes secured and unsecured loans, including loans secured by real estate,
to individuals, firms and corporations and purchases installment obligations
from retailers without recourse. Quitman Bank also offers several credit card
products to its customers. Quitman Bank does not conduct trust activities.
As of December 31, 1995, Quitman Bank had correspondent relationships
with seven other commercial banks. Quitman Bank's principal correspondent bank
is SunTrust Bank, Atlanta, Georgia. These correspondent banks provide certain
services to American Bank such as processing checks and other items, buying and
selling Federal funds, handling money transfers and exchanges, shipping coin and
currency, providing security and safekeeping of funds or other valuable items,
and furnishing limited management information and advice. As compensation for
these services, American Bank maintains certain balances with its correspondents
in noninterest-bearing accounts.
THOMAS BANK
Thomas Bank was incorporated in 1911 and operates a full service
banking business in Coolidge, Thomasville and Thomas County, Georgia, providing
such banking services as checking and savings accounts, other types of time
deposits and money transfers. As of December 31, 1995, Thomas Bank ranked, on
the basis of total deposits, as the fifth largest of eight banks in Thomas
County.
2
Thomas Bank finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Thomas Bank also offers several credit card
products to its customers. Thomas Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. Thomas Bank does not conduct trust activities.
At December 31, 1995, Thomas Bank had a correspondent relationship
with three other commercial banks. Thomas Bank's principal correspondent bank is
SunTrust Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Thomas Bank, such as processing checks and other items, buying and
selling Federal funds, handling money transfers and exchanges, shipping coin and
currency, providing security and safekeeping of funds or other valuable items
and furnishing limited management information and advice. As compensation for
these services, Thomas Bank maintains certain balances with its correspondents
in noninterest-bearing accounts.
TIFTON BANK
Tifton Bank was incorporated in 1945 and operates a full service
banking business in Tifton and Tift County, Georgia, providing such banking
services as checking and savings accounts, other types of time deposits and
money transfers. As of December 31, 1995, Tifton Bank ranked, on the basis of
total deposits, as the third largest of six banks in Tift County.
Tifton Bank finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Tifton Bank also offers several credit card
products to its customers. Tifton Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. Tifton Bank does not conduct trust activities.
At December 31, 1995, Tifton Bank had correspondent relationships with
seven other commercial banks. Tifton Bank's principal correspondent bank is
SunTrust Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Tifton Bank, such as processing checks and other items, buying and
selling Federal funds, handling money transfers and exchanges, shipping coin and
currency, providing security and safekeeping of funds or other valuable items
and furnishing limited management information and advice. As compensation for
these services, Tifton Bank maintains certain balances with its correspondents
in noninterest-bearing accounts.
CAIRO BANK
Cairo Bank was incorporated in 1900 and operates a full-service
banking business in Cairo and Grady County and Thomas County, Georgia, providing
such banking services as checking and savings accounts, other types of time
deposits and money transfers. As of December 31, 1995, Cairo Bank ranked as the
second largest of five banks in Grady County.
3
Cairo Bank also finances commercial, agricultural and consumer
transactions and makes and services both secured and unsecured loans to
individuals, firms and corporations. Cairo Bank offers several credit card
products to its customers. Cairo Bank makes a variety of residential,
industrial, commercial and agricultural loans secured by real estate, including
interim construction financing. Cairo Bank does not conduct trust activities.
At December 31, 1995, Cairo Bank had correspondent relationships with
five other commercial banks. Cairo Bank's principal correspondent is Georgia
Bankers Bank, Atlanta, Georgia. These correspondent banks provide certain
services to Cairo Bank, such as processing checks and other items, buying and
selling Federal funds, providing security and safekeeping of funds or other
valuable items and furnishing limited management information and advice. As
compensation for these services, Cairo Bank maintains certain balances with its
correspondents in noninterest-bearing accounts.
MARKET AREA AND COMPETITION
The Company's market area is a contiguous twelve-county area located
within an approximately 60-mile radius of Moultrie in south central Georgia. I-
75 runs through the Company's market area, which is bordered on the south by the
Georgia-Florida state line. The Banks have offices in Colquitt County, Tift
County, Thomas County, Brooks County and Grady County. As reported by the United
States Bureau of Census, this five-county area had a population in 1990 of
approximately 146,000.
ABC's eleven banking facilities are located in communities whose
economies are based primarily on agriculture, manufacturing and light industry.
Textiles, meat processing and aluminum processing are among the leading
manufacturing industries in the Company's market area, represented by such firms
as Riverside Manufacturing Co., Sipco, Reynolds Metal Company, Tifton
Manufacturing, Wells Aluminum, Inc., W. B. Roddenberry, Inc., Wright's Nursery
and Flowers, Inc.
The banking industry in Georgia is highly competitive. In recent
years, intense market demands, economic pressures, fluctuating interest rates
and increased customer awareness of product and service differences among
financial institutions have forced banks to diversify their services and become
more cost effective. Each of the Banks faces strong competition in attracting
deposits and making loans. Their most direct competition for deposits comes from
other commercial banks, thrift institutions, credit unions and issuers of
securities such as shares in money market funds. Interest rates, convenience of
office locations and marketing are all significant factors in the Banks'
competition for deposits.
Competition for loans comes from other commercial banks, thrift
institutions, savings banks, insurance companies, consumer finance companies,
credit unions and other institutional lenders. The Banks compete for loan
originations through the interest rates and loan fees they charge and the
efficiency and quality of services they provide. Competition is affected by the
general availability of lendable funds, general and local economic conditions,
current interest rate levels and other factors that are not readily predictable.
Management expects that competition will become more intense in the
future due to changes in state and Federal laws and regulations and the entry of
additional bank and nonbank competitors. See SUPERVISION AND REGULATION.
4
PROPERTIES
The table below sets forth the location, size and other information
with respect to the Company's real properties. All properties are owned by the
Company or its subsidiaries and are unencumbered.
APPROXIMATE
SQUARE
OFFICES USED BY FOOTAGE
- ---------------------------------------- -------------- -----------
310 First Street, S.E., Moultrie ABC Bancorp 7,000
225 South Main Street, Moultrie American Bank 9,000
1707 First Avenue, S.E., Moultrie American Bank 5,500
137 Broad Street, Doerun American Bank 3,860
1000 West Screven Street, Quitman Quitman Bank 11,530
Eastern Brooks County Quitman Bank 1,100
529 Pine Avenue, Coolidge Thomas Bank 4,000
113 E. Eighth Street, Tifton Tifton Bank 5,800
Second Street at Magnolia Avenue, Tifton Tifton Bank 2,000
201 South Broad Street, Cairo Cairo Bank 10,000
12 East Depot Street, Meigs Cairo Bank 2,700
2242 East Pinetree Boulevard, Thomasville Thomas Bank 3,000
EMPLOYEES
At December 31, 1995, ABC Bancorp and its subsidiaries employed 182
full-time employees and 17 part-time employees. ABC Bancorp considers its
relationship with its employees to be excellent.
ABC has adopted a simplified employee pension plan covering
substantially all employees. The Company and the Banks made contributions for
all eligible employees in 1995. ABC also maintains a comprehensive employee
benefits program providing, among other benefits, hospitalization and major
medical insurance and life insurance. Management considers these benefits to be
competitive with those offered by other financial institutions in south Georgia.
The Company's employees are not represented by any collective bargaining group.
5
CERTAIN REGULATORY CONSIDERATIONS RELATING TO ABC
GENERAL
As a bank holding company, ABC is subject to the regulation and
supervision of the Federal Reserve Board and the Georgia Department of Banking
and Finance (the "DBF"). The Subsidiary Banks are subject to supervision and
examination by applicable state and Federal banking agencies, including the
Federal Reserve Board and the FDIC. The Subsidiary Banks are also subject to
various requirements and restrictions under Federal and state law, including
requirements to maintain reserves 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 Subsidiary Banks. In addition to the impact of
regulation, commercial banks are affected significantly by the actions of the
Federal Reserve Board as it attempts to control the money supply and credit
availability in order to influence the economy.
The BHCA requires every bank holding company to obtain the prior
approval of the Federal Reserve Board before (i) it may acquire direct or
indirect ownership or control of more than 5% of the voting shares of any bank
that it does not already control; (ii) it or any of its subsidiaries, other than
a bank, may acquire all or substantially all of the assets of a bank; and (iii)
it may merge or consolidate with any other bank holding company. I addition, a
bank holding company is generally prohibited from engaging in, or acquiring,
direct or indirect control of the voting shares of any company engaged in non-
banking activities. This prohibition does not apply to activities found by the
Federal Reserve Board, by order or regulation, to be so closely related to
banking or managing or controlling banks as to be a proper incident thereto.
Some of the activities that the Federal Reserve Board has determined by
regulation or order to be closely related to banking are: making or servicing
loans and certain types of leases; performing certain data processing services;
acting as fiduciary or investment or financial advisor; providing discount
brokerage services; underwriting bank eligible securities; underwriting debt and
equity securities on a limited basis through separately capitalized
subsidiaries; and making investments in corporations or projects designed
primarily to promote community welfare.
In addition, the DBF requires information with respect to the
financial condition, operations, management and intercompany relationships of
ABC and the Subsidiary Banks and related matters. The DBF may also require such
other information as is necessary to keep itself informed as to whether the
provisions of Georgia law and the regulations and orders issued thereunder by
the DBF have been complied with, and the DBF may examine ABC. ABC is an
"affiliate" of the Subsidiary Banks under the Federal Reserve Act, which imposes
certain restrictions on (i) loans by the Subsidiary Banks to ABC; (ii)
investments in the stock or securities of ABC by the Subsidiary Banks; (iii) the
Subsidiary Bank's taking the stock or securities of an "affiliate" as collateral
for loans by the Subsidiary Banks to a borrower; and (iv) the purchase of assets
from ABC by the Subsidiary Banks. Further, a bank holding company and its
subsidiaries are prohibited from engaging in certain tie-in arrangements in
connection with any extension of credit, lease or sale of property or furnishing
of services.
6
PAYMENT OF DIVIDENDS AND OTHER RESTRICTIONS
ABC is a legal entity separate and distinct from its subsidiaries.
There are various legal and regulatory limitations under Federal and state law
on the extent to which ABC's subsidiaries can pay dividends or otherwise supply
funds to ABC.
The principal source of ABC's cash revenues is dividends from its
subsidiaries and there are certain limitations under Federal, Georgia and
Georgia law on the payment of dividends by such subsidiaries. The prior approval
of the Federal Reserve Board or the applicable state commissioner, as the case
may be, is required if the total of all dividends declared by any state member
bank of the Federal Reserve System in any calendar year exceeds the Bank's net
profits (as defined) for that year combined with its retained net profits for
the preceding two calendar years, less any required transfers to surplus or a
fund for the retirement of any preferred stock. The relevant Federal and state
regulatory agencies also have authority to prohibit a state member bank or bank
holding company, which would include ABC and the Subsidiary Banks (including
Central Bank) from engaging in what, in the opinion of such regulatory body,
constitutes an unsafe or unsound practice in conducting its business. The
payment of dividends could, depending upon the financial condition of the
subsidiary, be deemed to constitute such an unsafe or unsound practice.
Under Georgia law (which would apply to any payment of dividends by
the Subsidiary Banks to ABC), the prior approval of the Georgia Commissioner of
Banking and Finance is required before any cash dividends may be paid by a state
bank if: (i) total classified assets at the most recent examination of such bank
exceed 80% of the equity capital (as defined, which includes the reserve for
loan losses) of such bank; (ii) the aggregate amount of dividends declared or
anticipated to be declared in the calendar year exceeds 50% of the net profits
(as defined) for the previous calendar year; or (iii) the ratio of equity
capital to adjusted total assets is less than 6%.
Retained earnings of the Subsidiary Banks available for payment of
cash dividends under all applicable regulations without obtaining governmental
approval were approximately $2.38 million as of December 31, 1995.
In addition, the Subsidiary Banks are subject to limitations under
Section 23A of the Federal Reserve Act with respect to extensions of credit to,
investments in, and certain other transactions with, ABC. Furthermore, loans and
extensions of credit are also subject to various collateral requirements.
7
CAPITAL ADEQUACY
The Federal Reserve Board has adopted risk-based capital guidelines
for bank holding companies. The minimum ratio of total capital ("Total Capital")
to risk-weighted assets (including certain off-balance sheet items, such as
standby letters of credit, is 8%). At least half of the Total Capital is to be
composed of common stock, minority interests in the equity accounts of
consolidated subsidiaries, noncumulative perpetual preferred stock and a limited
amount of perpetual preferred stock, less goodwill ("Tier I Capital"). The
remainder may consist of subordinated debt, other preferred stock and a limited
amount of loan loss reserves.
In addition, the Federal Reserve Board has established minimum
leverage ratio guidelines for bank holding companies. These guidelines for a
minimum ratio of Tier I Capital to total assets, less goodwill (the "Leverage
Ratio") of 3% for bank holding companies that meet certain specified criteria,
including those having the highest regulatory rating. All other bank holding
companies generally are required to maintain a Leverage Ratio of at least 3%
plus an additional cushion of 100 to 200 basis points. The guidelines also
provide that bank holding companies experiencing internal growth or making
acquisitions will be expected to maintain strong capital positions substantially
above the minimum supervisory levels without significant reliance on intangible
assets. Furthermore, the Federal Reserve Board has indicated that it will
consider a "tangible Tier I capital leverage ratio" (deducting all intangibles)
and other indicia of capital strength in evaluating proposals for expansion or
new activities.
Effective December 19, 1992, a new Section 38 to the Federal Deposit
Insurance Act implemented the prompt corrective action provisions that Congress
enacted as a part of the Federal Deposit Insurance Corporation Improvement Act
of 1991 (the "1991 Act"). The "prompt corrective action" provisions set forth
five regulatory zones in which all banks are placed largely based on their
capital positions. Regulators are permitted to take increasingly harsh action as
a Bank's financial condition declines. Regulators are also empowered to place in
receivership or require the sale of a bank to another depository institution
when a bank's capital leverage ratio reaches two percent. Better capitalized
institutions are generally subject to less onerous regulation and supervision
than banks with less amounts of capital.
The FDIC has adopted regulations implementing the prompt corrective
action provisions of the 1991 Act, which place financial institutions in the
following five categories based upon capitalization ratios: (1) a "well
capitalized" institution has a total risk-based capital ratio of at least 10%, a
Tier I risk-based ratio of at least 6% and a leverage ratio of at least 5%; (2)
an "adequately capitalized" institution has a total risk-based capital ratio of
at least 8%, a Tier I risk-based ratio of at least 4% and a leverage ratio of at
least 4%; (3) an "undercapitalized" institution has a total risk-based capital
ratio of under 8%, a Tier I risk-based ratio of under 4% or a leverage ratio of
under 4%; (4) a "significantly undercapitalized" institution has a total risk-
based capital ratio of under 6%, a Tier I risk-based ratio of under 3% or a
leverage ratio of under 3%; and (5) a "critically undercapitalized" institution
has a leverage ratio of 2% or less. Institutions in any of the three
undercapitalized categories would be prohibited from declaring dividends or
making capital distributions. The FDIC regulations also establish procedures for
"downgrading" an institution to a lower capital category based on supervisory
factors other than capital. Under the FDIC's regulations, all of the Subsidiary
Banks are "well capitalized" institutions.
8
The following table reflects the Company's and the Banks' compliance
with regulatory capital requirements at December 31, 1995 on a consolidated
basis:
ACTUAL REQUIRED EXCESS
------------------- --------------------- ---------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- --------- -------- --------- -------- ---------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------------
Leverage capital $33,260 10.37 % $12,824 4.00 % $20,436 6.37 %
Risk-based capital:
Core capital 33,260 15.23 8,733 4.00 24,527 11.23
Total capital 36,008 16.49 17,466 8.00 18,542 8.49
Each Bank also met its individual regulatory capital requirements at
December 31, 1995.
A banking organization's qualifying total capital consists of two
components: Tier I Capital (core capital) and Tier 2 Capital (supplementary
capital). Tier 1 Capital is an amount equal to the sum of: (i) common
shareholders' equity (including adjustments for any surplus or deficit); (ii)
qualifying noncumulative perpetual preferred stock (plus, for bank holding
companies, qualifying cumulative perpetual preferred stock in an amount up to
25% of Tier 1 Capital); and (iii) the minority interests in the equity accounts
of consolidated subsidiaries.
Intangible assets (other than goodwill) may be included in Tier 1
Capital for bank holding companies to an extent banking examiners consider
appropriate with the following factors, among others, taken into consideration:
(i) the reliability and predictability of any cash flows associated with the
asset and the degree of certainty that can be achieved in periodically
determining the asset's useful life and value; (ii) the existence of an active
and liquid market for the asset; and (iii) the feasibility of selling the asset
apart from the banking organization or from the bulk of its assets. At least 50%
of the banking organization's total regulatory capital must consist of Tier 1
Capital.
Tier 2 Capital is an amount equal to the sum of (i) the allowance for
possible loan and lease losses in an amount up to 1.25% of risk-weighted assets,
(ii) cumulative perpetual preferred stock and long-term preferred stock (which
for bank holding companies must have an original maturity of 20 years or more)
and related surplus; (iii) hybrid instruments (instruments with characteristics
of both debt and equity), perpetual debt and mandatory convertible debt
securities; and (iv) eligible term subordinated debt and intermediate-term
preferred stock with an original maturity of five years or more, including
related surplus, in an amount up to 50% of Tier 1 Capital. The inclusion of the
foregoing elements of Tier 2 Capital are subject to certain further requirements
and limitations of the Federal bank regulatory agencies.
9
SUPPORT OF SUBSIDIARY BANKS
Under the Federal Reserve Board policy, ABC is expected to act as a
source of financial strength to, and to commit resources to support, each of the
Subsidiary Banks. This support may be required at times when, absent such
Federal Reserve Board policy, ABC may not be inclined to provide it. In the
event of a bank holding company's bankruptcy, any commitment by the bank holding
company to a Federal bank regulatory agency to maintain the capital of a
subsidiary bank will be assumed by the bankruptcy trustee and entitled to a
priority of payment.
As a result of the enactment of Section 206 of the Financial
Institutions Reform, Recovery and Enforcement Act ("FIRREA") on August 9, 1989,
a depository institution insured by the FDIC can be held liable for any loss
incurred by, or reasonably expected to be incurred by, the FDIC after August 9,
1998 in connection with (i) the default of a commonly controlled FDIC-insured
depository institution or (ii) any assistance provided by the FDIC to any
commonly controlled FDIC-insured depository institution "in danger of default"
is defined generally as the existence of certain conditions indicating that a
default is likely to occur in the absence of regulator assistance.
FDIC INSURANCE ASSESSMENTS
The Subsidiary Banks are subject to FDIC deposit insurance assessments
for the Bank Insurance Fund (the "BIF"). Since 1989, the annual FDIC deposit
insurance assessments increased from $.083 per $100 of deposits to a minimum
level of $.23 per $100, an increase of 177 percent. The FDIC implemented a risk-
based assessment system whereby banks are assessed on a sliding scale depending
on their placement in nine separate supervisory categories, from $.23 per $100
of deposits for the healthiest banks (those with the highest capital, best
management and best overall condition) to as much as $.31 per $100 of deposits
for the less-healthy institutions, for an average $.259 per $100 of deposits.
On August 8, 1995, the FDIC lowered the BIF premium for "healthy"
banks 83% from $.23 per $100 in deposits to $.04 per $100 in deposits, while
retaining the $.31 level for the riskiest banks. The average assessment rate was
therefore reduced from $.232 to $.044 per $100 of deposits. The new rate took
effect on September 29, 1995. On November 14, 1995, the FDIC again lowered the
BIF premium for "healthy" banks from $.04 per $100 of deposits to zero for the
highest rated institutions (92% of the industry). As a result, each of the
Subsidiary Banks pay only the legally required annual minimum payment of $2,000
per year for insurance as of January 1996.
10
RECENT LEGISLATIVE AND REGULATORY ACTION
On April 19,1995, the four Federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community Reinvestment
Act (the "CRA"), which are intended to set distinct assessment standards for
financial institutions. The revised regulations contains three evaluation tests:
(i) a lending test which will compare the institution's market share of loans in
low- and moderate-income areas to its market share of loans in its entire
service area and the percentage of a bank's outstanding loans to low-and
moderate-income areas or individuals; (ii) a services test which will evaluate
the provisions of services that promote the availability of credit to low- and
moderate-income areas; and (iii) an investment test, which will evaluate an
institution's record of investments in organizations designed to foster
community development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is designed to reduce some paperwork requirements of the current
regulations and provide regulators, institutions and community groups with a
more objective and predictable manner with which to evaluate the CRA performance
of financial institutions. The rule became effective on January 1, 1996, at
which time evaluation under streamlined procedures were schedule to begin for
institutions with assets of less than $250 million that are owned by a holding
company with total assets of less than $1 billion. Until the regulators release
guidelines for examiners that interpret the rules, it is unclear what effect, if
any, these regulations will have on ABC and the Subsidiary Banks. Congress and
various Federal agencies (including, in addition to the bank regulatory
agencies, the Department of Housing and Urban Development, the Federal Trade
Commission and the Department of Justice) (collectively, the "Federal Agencies")
responsible for implementing the nation's fair lending laws have been
increasingly concerned that prospective home buyers and other borrowers are
experiencing discrimination in their efforts to obtain loans. In recent years,
the Department of Justice has filed suit against financial institutions, which
it determined had discriminated, seeking fines and restitution for borrowers who
allegedly suffered from discriminatory practices. Most, if not all, of these
suits have been settled (some for substantial sums) without a full adjudication
on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and specify the factors the agencies will
consider in determining if lending discrimination exists, announced a policy
statement detailing specific discriminatory practices prohibited under the Equal
Opportunity Act and the Fair Housing Act. In the policy statement, three methods
of proving lending discrimination were identified: (1) over evidence of
discrimination, when a lender blatantly discriminates on a prohibited basis; (2)
evidence of disparate treatment, when a lender treats applicants differently
based on a prohibited factor even where there is no showing that the treatment
was motivated by prejudice or a conscious intention to discriminate against a
person; and (3) evidence of disparate impact, when a lender applies a practice
uniformly to all applicants, but the practice has a discriminatory effect, even
where such practices are neutral on their face and are applied equally, unless
the practice can be justified on the basis of business necessity.
11
On September 23, 1994, President Clinton signed the Reigle Community
Development and Regulatory Improvement Act of 1994 (the "Regulatory Improvement
Act"). The Regulatory Improvement Act contains funding for community development
projects through banks and community development financial institutions and also
numerous regulatory relief provisions designed to eliminate certain duplicative
regulations and paperwork requirements. On September 29, 1994, President Clinton
signed the Reigle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "Federal Interstate Bill") which amended Federal law to permit bank holding
companies to acquire existing banks in any state effective September 29, 1995,
and to permit any interstate bank holding company to merge its various bank
subsidiaries into a single bank with interstate branches after May 31, 1997.
States have the authority to authorize interstate branching prior to June 1,
1997, or, alternatively, to opt out of interstate branching prior to that date.
The Georgia Financial Institutions Code was amended in 1994 to permit the
acquisition of a Georgia bank or bank holding company by out-of-state bank
holding companies beginning July 1, 1995. On September 29, 1995, the interstate
banking provisions of the Georgia Financial Institutions Code were superseded by
the Federal Interstate Bill.
In February 1996, the Georgia legislature adopted the "Georgia
Interstate Branching Act," which when signed by the Governor, will permit
Georgia-based banks and bank holding companies owning or acquiring banks outside
of Georgia and all non-Georgia banks and bank holding companies owning or
acquiring banks in Georgia the right to merge any lawfully acquired bank into an
interstate branch network. The Georgia Interstate Branching Act also allows
banks to establish de novo branch banks on a limited basis beginning July 1,
1996. Beginning July 1, 1998, the number of de novo bank branches which may be
established will no longer be limited.
12
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company.
NAME, AGE AND POSITION WITH THE PRINCIPAL OCCUPATION FOR THE LAST FIVE
TERM AS OFFICER REGISTRANT YEARS AND OTHER DIRECTORSHIPS
- ---------------------- ----------------------- ---------------------------------------------
Willard E. Lasseter, Chairman Chairman of the board of ABC Bancorp since 1995.
66, Director since Vice Chairman of the Board of ABC Bancorp from
1982 1992 to 1995. Chairman of the Board since 1990 and
Director of American Bank since 1971. Mr. Lasseter
also served as Vice Chairman of the Board of
American Bank from 1984 to 1990. Mr. Lasseter also
serves as a Director of Cairo Bank and Thomas
Bank. Since 1959, Mr. Lasseter has owned and
operated Lasseter Tractor Company, a John Deere
dealership. He is also engaged in agricultural
operations.
Kenneth J. Hunnicutt; President, Chief Chief Executive Officer of ABC Bancorp since 1994
59; Officer since 1981 Executive Officer and and President since 1981. Mr. Hunnicutt served as
Director Senior President of American Bank from 1989 to
1991 and as President of American Bank from 1975
to 1989 and currently serves as a Director of each
of the Company's subsidiary banks. Mr. Hunnicutt
is the Chairman of the Board of Thomas Bank and
Cairo Bank.
W. Edwin Lane, Jr; Executive Vice Executive Vice President and Chief Financial
42: Officer since President and Chief Officer of ABC Bancorp since January 1, 1995. Mr.
January 1, 1995 Financial Officer Lane served as Controller of First Liberty Bank,
Macon, Georgia from August 1992 to December 1994.
Mr. Lane was associated with Mauldin & Jenkins,
Certified Public Accountants, from 1985 to 1992,
where he served as an audit manager from 1989 to
1992.
Officers serve at the discretion of the Board of Directors.
13
ITEM 2. PROPERTIES
The principal properties of the Company consist of the properties of
the Banks. For a description of the properties of the Banks, see "Item 1 -
Business of the Company and Subsidiary Banks - Properties" included elsewhere in
this Annual Report.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor any of its subsidiary banks is a party to, nor
is any of their property the subject of, any material pending legal proceedings,
other than ordinary routine proceedings incidental to the business of the Banks,
nor to the knowledge of the management of the Company are any such proceedings
contemplated or threatened against it or its subsidiaries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of the Company's shareholders
during the fourth quarter of 1995.
14
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
(a) In May 1994, the Company sold 747,500 shares of the Company's common stock,
par value $1.00 per share at a price of $12.25 per share pursuant to a
registered public offering (the "Offering"). Simultaneous with the
Offering, the common stock was approved for listing on the Nasdaq National
Market System ("Nasdaq -NMS") under the symbol ABCB.
Prior to the Offering, quotations for the common stock were not reported on
any market, and there was no established public trading market for the
common stock.
The following table sets forth: (a) the high and low bid prices for the
common stock as quoted on Nasdaq-NMS during the periods since the common
stock was listed; and (b) the amount of quarterly dividends declared on the
common stock during the periods indicated.
Calendar Period Bid Prices Cash
----------------------------- ----------------------------- Dividends
1995 Low High Declared
----------------------------- ------------ ------------- ------------
First quarter $ 9 $ 10-1/8 $ .07-1/2
Second quarter 9-1/2 11-5/8 .07-1/2
Third quarter 11-3/8 14-1/2 .10
Fourth quarter 13-1/2 14-3/4 .10
Calendar Period Bid Prices Cash
----------------------------- ----------------------------- Dividends
1994 Low High Declared
----------------------------- ------------ ------------- ------------
Second quarter $ 12-1/4 $ 13-3/4 $ .07-1/4
Third quarter 12-3/4 14 .07-1/4
Fourth quarter 12 13-3/4 .07-1/4
(b) As of March 1, 1996, there were approximately 800 holders of record of the
Common Stock.
(c) The Company paid an annual dividend on its Common Stock of $.35 and $.29
per share for fiscal years 1995 and 1994, respectively.
15
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following table presents selected consolidated financial
information for the Company. The data set forth below are derived from the
audited consolidated financial statements of the Company. The selected financial
data should be read in conjunction with, and are qualified in their entirety by,
the Consolidated Financial Statements and the Notes thereto and Management's
Discussion and Analysis of Financial Condition and Results of Operations
included elsewhere herein.
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
------------------------------------------------------------------------
SELECTED BALANCE SHEET DATA:
Total assets $ 341,505 $ 292,799 $ 268,616 $ 259,386 $ 180,548
Total loans 214,251 192,124 161,747 150,945 100,648
Total deposits 300,988 256,869 238,225 234,470 158,543
Investment securities 50,260 46,505 45,937 35,161 30,272
Shareholders' equity 33,935 30,450 19,959 19,405 18,654
SELECTED INCOME STATEMENT DATA:
Interest income $ 26,703 $ 21,328 $ 19,697 $ 15,668 $ 15,861
Interest expense 10,673 7,828 7,732 6,692 8,457
---------- ---------- ---------- ---------- ----------
Net interest income 16,030 13,500 11,965 8,976 7,404
Provision for loan losses 848 638 1,191 1,129 451
Other income 3,276 3,025 2,867 2,097 1,781
Other expenses 12,228 11,547 10,535 8,030 6,677
----------- ----------- ----------- ---------- ----------
Income before tax 6,230 4,340 3,106 1,914 2,057
Income tax expense 1,889 1,240 814 429 487
----------- ----------- ----------- ---------- ----------
Net income before cumulative effect 4,341 3,100 2,292 1,485 1,570
Cumulative effect - - 346 - -
---------- ---------- ---------- ---------- ----------
Net income $ 4,341 $ 3,100 $ 2,638 $ 1,485 $ 1,570
========== ========== ========== ========== ==========
PER SHARE DATA:
Net income before cumulative effect $ 1.29 $ 1.05 $ 0.91 $ 0.58 $ 0.61
Net income 1.29 1.05 1.04 0.58 0.61
Book value 10.04 9.10 8.49 7.64 7.05
Tangible book value 9.43 8.41 7.39 6.54 5.84
Dividends 0.35 0.29 0.29 0.29 0.26
PROFITABILITY RATIOS:
Net income to average total assets 1.43 % 1.15 % 1.03 % 0.78 % 0.92 %
Net income to average stockholders'
equity 13.44 13.99 13.60 8.00 8.80
Net interest margin 5.94 5.62 5.34 5.49 5.14
LOAN QUALITY RATIOS:
Net charge-offs to average total loans 0.16 0.25 1.02 0.91 0.24
Reserve for loan losses to total loans
and OREO 1.99 1.96 2.20 2.64 1.25
Nonperforming assets to total loans
and OREO 1.08 2.04 2.66 4.66 1.26
Reserve for loan losses to nonperforming
loans 184 96 104 65 117
Reserve for loan losses to total
nonperforming assets 184 93 83 57 99
16
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION (Continued)
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNT)
------------------------------------------------------------------------
LIQUIDITY RATIOS:
Loans to total deposits 71 % 75 % 68 % 64 % 63 %
Loans to average earnings assets 78 78 70 89 67
Noninterest-bearing deposits to
total deposits 19 19 16 15 16
CAPITAL ADEQUACY RATIOS:
Common stockholders' equity to
total assets 9.9 10.4 7.4 7.5 10.3
Total stockholders' equity to total assets 9.9 10.4 7.4 7.5 10.3
Dividend payout ratio 27 29 25 50 43
17
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Liquidity management involves the matching of the cash flow
requirements of customers who may be either depositors desiring to withdraw
funds or borrowers needing assurance that sufficient funds will be available to
meet their credit needs and the ability of the Company and the Banks to meet
those needs. The Company and the Banks seek to meet liquidity requirements
primarily through management of short-term investments (principally Federal
funds sold) and monthly amortizing loans. Another source of liquidity is the
repayment of maturing single payment loans. Also, the Banks maintain
relationships with correspondent banks which could provide funds to them on
short notice, if needed.
The liquidity and capital resources of the Company and the Banks are
monitored on a periodic basis by state and Federal regulatory authorities. As
determined under guidelines established by these regulatory authorities, the
Banks' liquidity ratios at December 31, 1995 were considered satisfactory. At
that date, the Banks' short-term investments were adequate to cover any
reasonably anticipated immediate need for funds. At December 31, 1995, the
Company's and the Banks' capital asset ratios were considered adequate based on
guidelines established by regulatory authorities. During 1995, the Company
increased its capital by $125,000, representing proceeds from exercise of common
stock options. It also increased its capital by retaining net earnings of
$3,162,000 after payment of dividends. After recording an increase in capital of
$198,000 for unrealized gains on securities, net of taxes, total capital
increased during 1995 by $3,485,000. At December 31, 1995, total capital of the
Company amounted to $33,935,000.
At December 31, 1995, there were no binding outstanding commitments
for capital expenditures. However, the Company anticipates that expenditures of
approximately $1,500,000 will be required for expansion or relocation of
properties which it plans to implement in 1996 in order to serve its customers
and meet the needs of the citizens in the communities served by its Banks. In
addition, the Company has entered into definitive merger agreements for the
acquisition of two bank holding companies in early 1996, pending approval by
regulatory authorities and shareholders of the companies being acquired. It is
expected that approximately $6,000,000 will be required to consummate these two
acquisitions.
18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS
The Company's results of operations are determined by its ability to
effectively manage interest income and expense, to minimize loan and investment
losses, to generate noninterest income and to control noninterest expense. Since
interest rates are determined by market forces and economic conditions beyond
the control of the Company, the ability to generate net interest income is
dependent upon the Banks' ability to obtain an adequate spread between the rate
earned on interest-earning assets and the rate paid on interest-bearing
liabilities. Thus, the key performance measure for net interest income is the
interest margin or net yield, which is taxable-equivalent net interest income
divided by average earning assets.
The primary component of consolidated earnings is net interest income,
or the difference between interest income on interest-earning assets and
interest paid on interest-bearing liabilities. The net interest margin is net
interest income expressed as a percentage of average interest-earning assets.
Interest-earning assets consist of loans, investment securities and Federal
funds sold. Interest-bearing liabilities consist of deposits, of which
approximately 17% are noninterest-bearing. A portion of interest income is
earned on tax-exempt investments, such as state and municipal bonds. In an
effort to state this tax-exempt income and its resultant yields on a basis
comparable to all other taxable investments, an adjustment is made to analyze
this income on a taxable-equivalent basis.
The net interest margin increased by 32 basis points or 5.69% to 5.94%
in 1995 as compared to 5.62% in 1994. This increase in net interest margin was
achieved by an increase of 103 basis points on average yield earned on interest-
earning assets accompanied by an increase of 94 basis points in average rate
paid on interest-bearing liabilities. Net interest income on a taxable-
equivalent basis was $16,314,000 in 1995 as compared to $13,814,000 in 1994,
representing an increase of 18.10%. Net interest income on a taxable-equivalent
basis was $13,814,000 in 1994 as compared to $12,273,000 in 1993, representing
an increase of 12.56%. Net interest margin increased by 5.24% to 5.62% in 1994
from 5.34% in 1993 because average interest-earning assets increased by 5.34% in
1994 as compared to 1993.
Average interest-earning assets increased by $28,559,000 or 11.62% to
$274,428,000 in 1995 from $245,869,000 in 1994. Average loans increased by
$24,341,000; average investments increased by $2,516,000; and average Federal
funds sold increased by $1,702,000. The increase in average interest-earning
assets was funded by an increase in average deposits of $22,869,000 or 9.52% to
$263,046,000 in 1995 from $240,177,000 in 1994. By comparison, average interest-
earning assets increased by $15,912,000 or 6.92% to $245,869,000 in 1994 from
$229,957,000 in 1993. During 1994, average deposits increased by $9,424,000 or
4.08%, to $240,177,000 from $230,753,000 in 1993. Approximately 17% of the
average deposits were noninterest-bearing deposits in 1995 as compared to 16%
noninterest-bearing deposits in 1994.
19
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
The allowance for loan losses represents a reserve for potential
losses in the loan portfolio. The adequacy of the allowance for loan losses is
evaluated periodically based on a review of all significant loans, with a
particular emphasis on nonaccruing, past due and other loans that management
believes require attention.
The provision for loan losses is a charge to earnings in the current
period to replenish the allowance and maintain it at a level management has
determined to be adequate. The provision for loan losses charged to earnings
amounted to $848,000 in 1995, $638,000 in 1994 and $1,191,000 in 1993. The
increase in the provision for loan losses in 1995 of $210,000, or 32.92%, as
compared with 1994 was accompanied by an increase of 11.52% in total loans in
1995 and an increase in the allowance for loan losses of 13.71%. Net charge-offs
represented 39.27% of the provision for loan losses in 1995 as compared to
70.85% in 1994. The decrease in loan charge-offs in 1995 resulted from an
improvement in the quality of the collateral held as security on loans and the
ability of the creditors to service their debt. The loan charge-offs for 1995
represented .16% of average loans outstanding during the year as compared to
.25% for 1994. At December 31, 1995, the allowance for loan losses was 1.99% of
total loans outstanding as compared to an allowance for loan losses of 1.96% of
total loans outstanding at December 31, 1994. The determination of the allowance
rests upon management's judgment about factors affecting loan quality and
assumptions about the local and national economy. Management considers the year-
end allowance for loan losses adequate to cover potential losses in the loan
portfolio.
Following is a comparison of noninterest income for 1995, 1994 and
1993.
1995 1994 1993
----------- ----------- -----------
Service charges on deposit accounts $2,595,000 $2,456,000 $2,299,000
Other service charges, commissions and fees 301,000 224,000 230,000
Other income 380,000 345,000 338,000
----------- ----------- -----------
$3,276,000 $3,025,000 $2,867,000
=========== =========== ===========
The most significant increase in noninterest income was an increase in
service charges on deposit accounts of $139,000 in 1995 over 1994, representing
an increase of 5.66%. This increase in service charges was achieved by an
increase in average deposits of $22,869,000 during 1995 as compared to 1994.
Total other income increased $158,000 or 5.51% in 1994 attributable to an
increase of $157,000 in service charges on deposits.
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Following is an analysis of noninterest expense for 1995, 1994 and
1993.
1995 1994 1993
------------- ------------- -------------
Salaries and employee benefits $ 6,210,000 $ 5,711,000 $ 5,238,000
Occupancy and equipment expense 1,830,000 1,754,000 1,567,000
Deposit insurance premiums 301,000 559,000 551,000
Data processing fees 372,000 448,000 290,000
Other expense 3,515,000 3,075,000 2,889,000
------------- ------------- -------------
$12,228,000 $11,547,000 $10,535,000
============= ============= =============
Salaries and employee benefits increased $499,000, or 8.74% in 1995
over 1994. Salaries increased $297,000; bonuses increased $74,000; and employee
benefits increased $127,000. The increase in employee benefits was attributable
to an increase of $54,000 or 10.82% in retirement benefits as compared to 1994.
Deposit insurance premiums decreased $258,000 or 46.15% in 1995 as a result of
the decrease in assessments by the Federal Insurance Deposit Corporation which
became effective in early 1995. The most significant increase in noninterest-
expense in 1994 as compared to 1993 was an increase of $158,000 or 54.48% in
data processing fees which was attributable to a major data processing
conversion completed in the first quarter of 1994.
Average total assets increased $34,700,000 or 12.92% to $303,190,000
in 1995 as compared to $268,490,000 in 1994. The increase in average total
assets was accompanied by an increase in average deposits of $22,869,000 or
9.52%. Average total assets increased $11,843,000 or 4.61% to $268,490,000 in
1994 as compared to $256,647,000 in 1993 and was accompanied by an increase in
average total deposits of $9,424,000 or 4.08% to $240,177,000 in 1994 from
$230,753,000 in 1993.
Following is a condensed summary of the increase in net income in 1995
as compared to 1994.
Increase
(Decrease)
in Net
1995 1994 Income
------------ ------------ ------------
Net interest income $16,030,000 $13,500,000 $ 2,530,000
Provision for loan losses 848,000 638,000 (210,000)
Other income 3,276,000 3,025,000 251,000
Other expense 12,228,000 11,547,000 (681,000)
------------ ------------ ------------
Income before income taxes 6,230,000 4,340,000 1,890,000
Applicable income taxes 1,889,000 1,240,000 (649,000)
------------ ------------ ------------
Net income $ 4,341,000 $ 3,100,000 $ 1,241,000
============ ============ =============
21
SELECTED STATISTICAL INFORMATION OF ABC BANCORP
The following statistical information should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operation" and the financial statements and related notes included elsewhere in
this Annual Report and in the documents incorporated herein by reference.
AVERAGE BALANCES AND NET INCOME ANALYSIS
The following tables set forth the amount of the ABC's interest income or
interest expense for each category of interest-earning assets and interest-
bearing liabilities and the average interest rate for total interest-earning
assets and total interest-bearing liabilities, net interest spread and net yield
on average interest-earning assets. Federally tax-exempt income is presented on
a taxable-equivalent basis assuming a 34% Federal tax rate.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993
--------------------------------- -------------------------------- ---------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
----------- ---------- ----------- --------- --------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------------------------------------------
ASSETS
Interest-earning assets:
Loans, net of unearned
interest $ 205,023 $ 22,647 11.05 % $ 180,682 $ 18,017 9.97 % $ 159,976 $ 16,278 10.18 %
Investment securities:
Taxable 38,781 2,271 5.86 35,099 1,928 5.49 32,851 1,997 6.08
Nontaxable 9,595 835 8.70 10,761 924 8.59 9,265 905 9.77
Federal funds sold 21,029 1,234 5.87 19,327 773 4.00 27,865 825 2.96
---------- ---------- --------- ------------ ---------- -------- ------------ ---------- ----------
Total interest-earning
assets 274,428 26,987 9.83 245,869 21,642 8.80 229,957 20,005 8.70
---------- ---------- ------------ ---------- ------------ ----------
Noninterest-earning assets:
Cash 15,741 16,132 16,035
Allowance for loan losses (4,072) (3,951) (2,950)
Unrealized gain on avail-
able for sale securities 61
Other assets 17,032 10,440 13,605
---------- ------------ ------------
Total noninterest-earning
assets 28,762 22,621 26,690
---------- ------------ ------------
Total assets $ 303,190 $ 268,490 $ 256,647
========== ============ ============
22
AVERAGE BALANCES AND NET INCOME ANALYSIS (CONTINUED)
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------------
1995 1994 1993
-------------------------------- -------------------------------- ---------------------------------
INTEREST AVERAGE INTEREST AVERAGE INTEREST AVERAGE
AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/ AVERAGE INCOME/ YIELD/
BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID BALANCE EXPENSE RATE PAID
---------- ---------- ----------- --------- --------- ----------- --------- --------- -----------
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------------------------------------------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
Savings and interest-bearing
demand deposits $ 81,137 $ 2,484 3.06 % $ 88,482 $ 2,539 2.87 % $ 87,867 $ 2,686 3.06 %
Time deposits 138,036 7,887 5.71 112,730 5,064 4.49 108,288 4,808 4.44
Other short-term borrowings 5,308 302 5.69 2,557 68 2.66 - - -
Debt - - 1,931 157 8.13 3,654 238 6.51
---------- --------- -------- ----------- ---------- -------- ----------- ---------- --------
Total interest-bearing
liabilities 224,481 10,673 4.75 205,700 7,828 3.81 199,809 7,732 3.87
---------- --------- ----------- ---------- ----------- ----------
Noninterest-bearing liabilities
and stockholders' equity:
Demand deposits 43,873 38,965 34,598
Other liabilities 2,533 1,659 2,915
Stockholders' equity 32,303 22,166 19,325
---------- ----------- -----------
Total noninterest-bearing
liabilities and
stockholders' equity 78,709 62,790 56,838
---------- ----------- -----------
Total liabilities and
stockholders' equity $ 303,190 $ 268,490 $ 256,647
========== =========== ===========
Interest rate spread 5.08 % 4.99 % 4.83 %
======== ======== ========
Net interest income $ 16,314 $ 13,814 $ 12,273
========= ========== ==========
Net interest margin 5.94 % 5.62 % 5.34 %
======== ======== ========
23
RATE AND VOLUME ANALYSIS
The following table reflects the changes in net interest income
resulting from changes in interest rates and from asset and liability volume.
Federally tax-exempt interest is presented on a taxable-equivalent basis
assuming a 34% Federal tax rate. The change in interest attributable to rate
has been determined by applying the change in rate between years to average
balances outstanding in the later year. The change in interest due to volume
has been determined by applying the rate from the earlier year to the change in
average balances outstanding between years. Thus, changes that are not solely
due to volume have been consistently attributed to rate.
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------
1995 VS. 1994 1994 VS. 1993
---------------------------------- --------------------------------
INCREASE CHANGES DUE TO INCREASE CHANGES DUE TO
--------------------- --------------------
(DECREASE) RATE VOLUME (DECREASE) RATE VOLUME
------------ --------- ----------- ---------- --------- ----------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------------
Increase (decrease) in:
Income from earning assets:
Interest and fees on loans $ 4,630 $ 2,203 $ 2,427 $ 1,739 $ (368) $ 2,107
Interest on securities:
Taxable 343 141 202 (69) (206) 137
Nontaxable (89) 11 (100) 19 (127) 146
Interest on Federal funds sold 461 393 68 (52) 201 (253)
----------- --------- --------- ---------- --------- ---------
Total interest income 5,345 2,748 2,597 1,637 (500) 2,137
----------- --------- --------- ---------- --------- ---------
Expense from interest-bearing liabilities:
Interest on savings and interest-
bearing demand deposits (55) 156 (211) (147) (166) 19
Interest on time deposits 2,823 1,686 1,137 256 59 197
Interest on short-term borrowings 234 161 73 68 - 68
Interest on debt (157) - (157) (81) 31 (112)
----------- --------- --------- ---------- --------- ---------
Total interest expense 2,845 2,003 842 96 (76) 172
----------- --------- --------- ---------- --------- ---------
Net interest income $ 2,500 $ 745 $ 1,755 $ 1,541 $ (424) $ 1,965
=========== ========= ========= ========== ========= =========
24
ASSET/LIABILITY MANAGEMENT
A principal objective of the ABC's asset/liability management strategy
is to minimize its exposure to changes in interest rates by matching the
maturity and repricing horizons of interest-earning assets and interest-bearing
liabilities. This strategy is overseen in part through the direction of the
Asset and Liability Committee (the "ALCO Committee") of each Bank, which
establishes policies and monitors results to control interest rate sensitivity.
Management's strategy is to maintain a balanced interest rate risk
position to protect its net interest margin from market fluctuations. To this
end, the ALCO Committee of each Bank reviews, on a monthly basis, the maturity
and repricing of assets and liabilities. The Company has adopted a goal of
achieving and maintaining a one-year gap ratio between rate sensitive assets to
rate sensitive liabilities of 80% to 120%. Management believes that the type
and amount of the Company's interest rate-sensitive liabilities (a significant
portion of which are composed of money market, NOW and savings accounts whose
yields, to a certain extent, are subject to the discretion of management) may
reduce the potential impact that a rise in interest rates might have on the
Company's net interest income.
As of December 31, 1995, the Company's cumulative one-year interest
rate sensitivity gap ratio was 128%. This indicates that the Company's
interest-earning assets will reprice during this period at a rate slightly
faster than the Company's interest-bearing liabilities. Certain assumptions
regarding the interest sensitivity of these assets and liabilities have been
incorporated into this analysis. The Company believes that it has positioned
itself to maintain its net interest margin in the event of changes in interest
rates. There can be no assurance, however, that this strategy will be
successful.
25
The following table sets forth the distribution of the repricing of
ABC's earning assets and interest-bearing liabilities as of December 31, 1995,
the interest rate sensitivity gap (i.e., interest rate sensitive assets less
interest rate sensitive liabilities), the cumulative interest rate sensitivity
gap ratio (i.e., interest rate sensitive assets divided by interest rate
sensitivity liabilities) and the cumulative sensitivity gap ratio. The table
also sets forth the time periods in which earning assets and liabilities will
mature or may reprice in accordance with their contractual terms. However, the
table does not necessarily indicate the impact of general interest rate
movements on the net interest margin since the repricing of various categories
of assets and liabilities is subject to competitive pressures and the needs of
the Banks' customers. In addition, various assets and liabilities indicated as
repricing within the same period may in fact reprice at different times within
such period and at different rates.
AT DECEMBER 31, 1995
-------------------------------------------------------------------
MATURING OR REPRICING WITHIN
-------------------------------------------------------------------
ZERO TO THREE ONE
THREE MONTHS TO YEAR TO OVER
MONTHS ONE YEAR FIVE YEARS FIVE YEARS TOTAL
---------- ------------ ------------ ------------ -----------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------------------
EARNING ASSETS:
Federal fund sold $ 41,025 $ - $ - $ - $ 41,025
Investment securities 2,135 10,683 29,355 8,087 50,260
Loans 87,283 20,548 84,858 21,562 214,251
---------- ----------- ----------- ---------- ----------
130,443 31,231 114,213 29,649 305,536
---------- ----------- ----------- ---------- ----------
Interest-bearing liabilities:
Interest-bearing demand deposits (1) - 17,638 54,195 - 71,833
Savings (1) - - 22,318 - 22,318
Certificates less than $100,000 22,344 52,575 35,715 - 110,634
Certificates, $100,000 and over 15,541 15,040 7,192 - 37,773
Other short-term borrowings 3,487 - - - 3,487
---------- ----------- ----------- ---------- ----------
41,372 85,253 119,420 - 246,045
---------- ----------- ----------- ---------- ----------
Interest rate sensitivity gap $ 89,071 $ (54,022) $ (5,207) $ 29,649 $ 59,491
========== =========== =========== ========== ==========
Cumulative interest rate sensitivity gap $ 89,071 $ 35,049 $ 29,842 $ 59,491
========== =========== =========== ==========
Interest rate sensitivity gap ratio 3.15 0.37 0.96 N/A
========== =========== =========== ==========
Cumulative interest rate sensitivity gap ratio 3.15 1.28 1.12 1.24
========== =========== =========== ==========
(1) The Company has found that NOW checking accounts and savings deposits are
generally not sensitive to changes in interest rates and, therefore, it has
placed such liabilities in the "One to Five Years" category. It has also
found that the money-market checking deposits reprice between three months
to one year, on the average.
26
INVESTMENT PORTFOLIO
The Company manages the mix of asset and liability maturities in an effort
to control the effects of changes in the general level of interest rates on net
interest income. See "--Asset/Liability Management." Except for its effect on
the general level of interest rates, inflation does not have a material impact
on the Company due to the rate variability and short-term maturities of its
earning assets. In particular, approximately 50% of the loan portfolio is
comprised of loans which mature or reprice within one year or less. Mortgage
loans, primarily with five to fifteen year maturities, are also made on a
variable rate basis with rates being adjusted every one to five years.
Additionally, 25% of the investment portfolio matures within one year.
TYPES OF INVESTMENTS
The amortized cost and fair value of investments in securities at the dates
indicated are summarized as follows:
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ------------ ------------- ------------
(Dollars in Thousands)
-------------------------------------------------------
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1995:
U. S. GOVERNMENT AND AGENCY SECURITIES $ 37,174 $ 285 $ (93) $ 37,366
MORTGAGE-BACKED SECURITIES 2,282 69 (8) 2,343
OTHER SECURITIES 300 - (18) 282
----------- ---------- --------- ------------
$ 39,756 $ 354 $ (119) $ 39,991
=========== ========== ========= ============
December 31, 1994:
U. S. Government and agency securities $ 1,664 $ - $ (14) $ 1,650
Other securities 300 - (40) 260
----------- ---------- --------- ------------
$ 1,964 $ - $ (54) $ 1,910
=========== ========== ========= ============
SECURITIES HELD TO MATURITY
DECEMBER 31, 1995:
STATE AND MUNICIPAL SECURITIES $ 10,269 $ 258 $ (65) $ 10,462
=========== ========== ========= ============
December 31, 1994:
U. S. Government and agency securities $ 32,159 $ 19 $ (1,196) $ 30,982
State and municipal securities 9,819 114 (471) 9,462
Mortgage-backed securities 2,617 22 (59) 2,580
----------- ---------- --------- ------------
$ 44,595 $ 155 $ (1,726) $ 43,024
=========== ========== ========= ============
27
MATURITIES
The amounts of investments in securities in each category as of
December 31, 1995 are shown in the following table according to contractual
maturity classifications (1) one year or less, (2) after one year through five
years, (3) after five years through ten years, and (4) after ten years.
U. S. TREASURY
AND OTHER U.S.
GOVERNMENT AGENCIES STATE AND
AND CORPORATIONS POLITICAL SUBDIVISIONS
YIELD YIELD
AMOUNT (1) AMOUNT (1) (2)
------------ --------- ------------ -----------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------
Maturity:
One year or less $ 11 ,848 5.75 % $ 727 6.12 %
After one year through five years 28,143 6.22 2,734 6.63
After five years through ten years - - 5,722 7.72
After ten years - - 1,086 8.37
------------- --------- ---------- --------------
$ 39,991 6.08 % $ 10,269 7.39 %
============= ========= ========== ==============
(1) Yields were computed using coupon interest, adding discount accretion or
subtracting premium amortization, as appropriate, on a ratable basis over
the life of each security. The weighted average yield for each maturity
range was computed using the acquisition price of each security in that
range.
(2) Yields on securities of state and political subdivisions are stated on a
taxable-equivalent basis, using a tax rate of 34%.
28
LOAN PORTFOLIO
TYPES OF LOANS
Management believes that the Company's loan portfolio is adequately
diversified. The loan portfolio contains no foreign or energy-related loans or
significant concentrations in any one industry, with the exception of
agricultural-related loans, which constituted approximately 26% of the Company's
loan portfolio as of December 31, 1995. The amount of loans outstanding at the
indicated dates is shown in the following table according to type of loans.
DECEMBER 31,
-----------------------------------------------------------------------
1995 1994 1993 1992 1991
------------ ------------- --------------- ------------- --------------
(DOLLARS IN THOUSANDS)
-----------------------------------------------------------------------
Commercial and financial $ 23,733 $ 23,531 $ 20,849 $ 19,650 $ 11,379
Agricultural 15,124 17,079 9,767 10,789 8,109
Real estate - construction 1,836 1,828 3,387 2,130 1,421
Real estate - mortgage, farmland 40,053 34,887 29,489 24,922 14,129
Real estate - mortgage, commercial 41,438 35,242 27,402 22,284 12,506
Real estate -mortgage, residential 52,377 44,064 41,902 43,500 31,343
Consumer instalment loans 38,973 34,213 27,231 25,979 19,007
Other 717 1,280 1,720 1,691 2,754
----------- ----------- ------------ ----------- ------------
214,251 192,124 161,747 150,945 100,648
Less reserve for possible loan losses 4,272 3,757 3,571 4,013 1,257
----------- ----------- ------------ ----------- ------------
Loans, net $ 209,979 $ 188,367 $ 158,176 $ 146,932 $ 99,391
=========== =========== ============ =========== ============
MATURITIES AND SENSITIVITY TO CHANGES IN INTEREST RATES
Total loans as of December 31, 1995 are shown in the following table
according to maturity or repricing opportunities (1) one year or less, (2) after
one year through five years, and (3) after five years.
(DOLLARS IN
THOUSANDS)
----------
MATURITY OR REPRICING WITHIN:
One year or less $ 107,831
After one year through five years 84,858
After five years 21,562
------------
$ 214,251
============
29
The following table summarizes loans at December 31, 1995 with the due
dates after one year which (1) have predetermined interest rates and (2) have
floating or adjustable interest rates.
(DOLLARS IN
THOUSANDS)
-----------
Predetermined interest rates $ 106,420
Floating or adjustable interest rates -
------------
$ 106,420
============
Records were not available to present the above information in each
category listed in the first paragraph above and could not be reconstructed
without undue burden.
NONPERFORMING LOANS
The following table presents, at the dates indicated, the aggregate of
nonperforming loans for the categories indicated.
DECEMBER 31,
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------------------------------------------
Loans accounted for on a
nonaccrual basis $ 2,259 $ 3,460 $ 3,119 $ 5,605 $ 511
Instalment loans and term loans
contractually past due ninety
days or more as to interest or
principal payments and still
accruing 27 103 316 595 563
Loans, the terms of which have
been renegotiated to provide a
reduction or deferral of interest
or principal because of
deterioration in the financial
position of the borrower - 358 - - -
Loans now current about which
there are serious doubts as to
the ability of the borrower
to comply with present loan
repayment terms - - - - -
30
In the opinion of management, any loans classified by regulatory
authorities as doubtful, substandard or special mention that have not been
disclosed above do not (i) represent or result from trends or uncertainties
which management reasonably expects will materially impact future operating
results, liquidity or capital resources, or (ii) represent material credits
about which management is aware of any information which causes management to
have serious doubts as to the ability of such borrowers to comply with the loan
repayment terms. Any loans classified by regulatory authorities as loss have
been charged off.
COMMITMENTS AND LINES OF CREDIT
In the ordinary course of business, the Banks have granted commitments
to extend credit to approved customers. Generally, these commitments to extend
credit have been granted on a temporary basis for seasonal or inventory
requirements and have been approved by the Banks' Board of Directors. The Banks
have also granted commitments to approved customers for standby letters of
credit. These commitments are recorded in the financial statements when funds
are disbursed or the financial instruments become payable. The Banks use the
same credit policies for these off balance sheet commitments as they do for
financial instruments that are recorded in the consolidated financial
statements. Commitments generally have fixed expiration dates or other
termination clauses and may require payment of a fee. Since many of the
commitment amounts expire without being drawn upon, the total commitment amounts
do not necessarily represent future cash requirements.
Following is a summary of the commitments outstanding at December 31,
1995 and 1994.
1995 1994
------------- --------------
(DOLLARS IN THOUSANDS)
----------------------------
Commitments to extend credit $ 36,024 $ 22,344
Credit card commitments 2,883 2,345
Standby letters of credit 905 590
----------- -----------
$ 39,812 $ 25,279
=========== ===========
31
SUMMARY OF LOAN LOSS EXPERIENCE
The provision for possible loan losses is created by direct charges to
operations. Losses on loans are charged against the allowance in the period in
which such loans, in management's opinion, become uncollectible. Recoveries
during the period are credited to this allowance. The factors that influence
management's judgment in determining the amount charged to operating expense are
past loan experience, composition of the loan portfolio, evaluation of possible
future losses, current economic conditions and other relevant factors. The
Company's allowance for loan losses was approximately $4,272,000 at December 31,
1995, representing 1.99% of year end total loans outstanding, compared with
$3,757,000 at December 31, 1994, which represented 1.96% of year end total loans
outstanding. The allowance for loan losses is reviewed quarterly based on
management's evaluation of current risk characteristics of the loan portfolio,
as well as the impact of prevailing and expected economic business conditions.
Management considers the allowance for loan losses adequate to cover possible
loan losses on the loans outstanding.
Management has not allocated the Company's allowance for loan losses
to specific categories of loans. Based on management's best estimate,
approximately 10% of the allowance should be allocated to real estate loans, 65%
to commercial, financial and agricultural loans and 25% to consumer/instalment
loans as of December 31, 1995.
The following table presents an analysis of the Company's loan loss
experience for the periods indicated:
DECEMBER 31,
----------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
----------------------------------------------------------------
Average amount of loans outstanding $ 205,023 $ 180,682 $ 159,976 $ 118,313 $ 98,737
========== ========== ========== ========== ==========
Balance of reserve for possible loan losses at
beginning of period $ 3,757 $ 3,571 $ 4,013 $ 1,257 $ 1,046
---------- ---------- ---------- --------- ----------
Charge-offs:
Commercial, financial and agricultural (96) (431) (428) (406) (214)
Real estate (103) (144) (1,851) (698) (200)
Consumer (531) (396) (374) (318) (41)
Recoveries:
Commercial, financial and agricultural 90 74 273 26 44
Real estate 127 265 554 210 166
Consumer 180 180 193 113 5
---------- ---------- ---------- --------- ----------
Net charge-offs (333) (452) (1,633) (1,073) (240)
---------- ---------- ---------- --------- ----------
Additions to reserve charged to operating expenses 848 638 1,191 1,129 451
---------- ---------- ---------- --------- ----------
Allowance for loan losses of acquired subsidiary - - - 2,700 -
---------- ---------- ---------- --------- ----------
Balance of reserve for possible loan losses $ 4,272 $ 3,757 $ 3,571 $ 4,013 $ 1,257
========== ========== ========== ========= ==========
Ratio of net loan charge-offs to average loans 0.16% 0.25% 1.02% 0.91% 0.24%
========== ========== ========== ========= ==========
32
DEPOSITS
Average amount of deposits and average rate paid thereon, classified
as to noninterest-bearing demand deposits, interest-bearing demand and savings
deposits and time deposits, for the periods indicated are presented below.
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994
-------------------- ---------------------
AMOUNT RATE AMOUNT RATE
----------- -------- ----------- ---------
(DOLLARS IN THOUSANDS)
------------------------------------------
Noninterest-bearing demand deposits $ 43,873 - % $ 38,965 - %
Interest-bearing demand and savings deposits 81,137 3.06 88,482 2.87
Time deposits 138,036 5.71 112,730 4.49
----------- ----------
Total deposits $ 263,046 $ 240,177
=========== ==========
The amounts of time certificates of deposit issued in amounts of
$100,000 or more as of December 31, 1995, are shown below by category, which is
based on time remaining until maturity of (1) three months or less, (2) over
three through twelve months and (3) over twelve months.
(DOLLARS IN
THOUSANDS)
----------
Three months or less $ 15,541
Over three through twelve months 15,040
Over twelve months 7,192
-----------
Total $ 37,773
===========
33
RETURN ON ASSETS AND SHAREHOLDERS' EQUITY
The following rate of return information for the periods indicated is
presented below.
YEAR ENDED DECEMBER 31,
-------------------------------------
1995 1994 1993
---------- ---------- ----------
Return on assets (1) 1.43 % 1.15 % 1.03 %
Return on equity (2) 13.44 13.99 13.65
Dividends payout ratio (3) 27.13 28.57 25.96
Equity to assets ratio (4) 10.65 8.26 7.53
(1) Net income divided by average total assets.
(2) Net income divided by average equity.
(3) Dividends declared per share divided by net income per share.
(4) Average equity divided by average total assets.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following consolidated financial statements of the Company and its
subsidiaries are included on pages F-1 through F-30 of this Annual Report on
Form 10-K:
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income - Years ended December 31, 1995, 1994 and
1993
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994
and 1993
Notes to Consolidated Financial Statements.
34
ITEM 9. DISAGREEMENT ON ACCOUNTING AND FINANCIAL DISCLOSURE
During 1995 the Company did not change its accountants and there was
no disagreement on any matter of accounting principles or practices for
financial statement disclosure that would have required the filing of a current
report on Form 8-K.
35
PART III
ITEM 10. DIRECTORS. EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The information required by this Item is incorporated by reference to
the Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A within 120 days after the end of
the fiscal year covered by this Annual Report ("ABC's Proxy Statement").
Information concerning the Company's executive officers is included in
Item 1 of Part I of this Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to
ABC's Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to
ABC's Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to
ABC's Proxy Statement.
36
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Item 13(a) 1., 2. and 3.
(a) The following documents are filed as part of this report:
1. Financial statements:
(a) ABC Bancorp and Subsidiaries:
(i) Consolidated Balance Sheets - December 31, 1995 and
1994
(ii) Consolidated Statements of Income - Years ended
December 31, 1995 1994 and 1993
(iii) Consolidated Statements of Stockholders' Equity - Years
ended December 31, 1995 1994 and 1993
(iv) Consolidated Statements of Cash Flows - Years ended
December 31, 1995 1994 and 1993
(v) Notes to Consolidated Financial Statements
(b) ABC Bancorp (Parent Company Only):
Parent Company only financial information has been included
in Note 12 of Notes to Consolidated financial statements.
2. Financial statement schedules:
All schedules are omitted as the required information is
inapplicable or the information is presented in the financial
statements or related notes.
37
3. Exhibits required by Item 601 of Regulation S-B:
Exhibit
No. Description
------ -----------------
3.1 Articles of Incorporation, as amended (filed as
Exhibit 2.1 to the Registrant's Regulation A
Offering Statement on Form 1-A (File No. 24A-
2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
3.2 By-laws of the Registrant, as amended (filed as
Exhibit 2.2 to the Registrant's Regulation A
Offering Statement on Form 1-A (File No. 24A-
2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.1 * 1985 Incentive Stock Option Plan (filed as Exhibit
5.1 to the Registrant's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and
incorporated herein by reference).
10.2 * Incentive Stock Option Agreement with Kenneth J.
Hunnicutt dated October 17, 1985 (filed as Exhibit
5.2 to the Registrant's Regulation A Offering
Statement on Form 1-A (File No. 24A-2630), filed
with the Commission on August 14, 1987 and
incorporated herein by reference).
10.3 * Deferred Compensation Agreement for Kenneth J.
Hunnicutt dated December 16, 1986 (filed as
Exhibit 5.3 to the Registrant's Regulation A
Offering Statement on Form 1-A (File No. 24A-
2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.4 Security Deed in favor of M.I.A., Co. dated
December 31, 1984 (filed as Exhibit 5.4 to the
Registrant's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630), filed with the
Commission on August 14, 1987 and incorporated
herein by reference).
10.5 Loan Agreement and Master Term Note dated December
30, 1986 (filed as Exhibit 5.5 to the Registrant's
Regulation A Offering Statement on Form 1-A (File
No. 24A-2630), filed with the Commission on August
14, 1987 and incorporated herein by reference).
38
Exhibit
No Description
------- ------------------
10.6 * Executive Salary Continuation Agreement dated
February 14, 1984 (filed as Exhibit 10.6 to the
Registrant's Annual Report on Form 10-K (File
Number 2-71257), filed with the Commission on
March 27, 1989 and incorporated herein by
reference).
10.7 * 1992 Incentive Stock Option Plan and Option
Agreement for K. J. Hunnicutt (filed as Exhibit
10.7 to the Registrant's Annual Report on Form 10-
K (File Number 0-16181), filed with the Commission
on March 30, 1993 and incorporated herein by
reference).
10.8 * Executive Employment Agreement with Kenneth J.
Hunnicutt dated September 20, 1994 (filed as
Exhibit 10.8 to the Registrant's Annual Report on
Form 10-K (File Number 0-16181), filed with the
Commission on March 30, 1995 and incorporated
herein by reference).
10.9.* Executive Consulting Agreement with Eugene M.
Vereen dated September 20, 1994 (filed as Exhibit
10.9 to the Registrant's Annual Report on Form 10-
K (File Number 0-16181), filed with the Commission
on March 30, 1995 and incorporated herein by
reference).
10.10 Agreement and Plan of Merger by and between the
Company and Southland Bancorporation dated as of
December 18, 1995.
10.11 Agreement and Plan of Merger by and between the
Company and Central Bankshares, Inc. dated as of
December 29, 1995.
22.1 Subsidiaries of the Company (filed as Exhibit 22.1
to the Registrant's Annual Report on Form 10-K
(File Number 0-16181), filed with the Commission
on March 30, 1993 and incorporated herein by
reference).
25.1 Power of Attorney relating to this Form 10-K is
set forth on the signature pages to this Form
10-K.
* Identifies management contracts, compensatory plans or other
remunerative arrangements with the Registrant's executive officers.
(b) The Registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
39
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
ABC BANCORP
Date: March 19, 1996 By: /s/ Kenneth J. Hunnicutt
-------------- -------------------------------------------------
Kenneth J. Hunnicutt, President, Chief Executive
Officer and Director
Date: March 19, 1996 By: /s/ W. Edwin Lane, Jr.
-------------- -------------------------------------------------
W. Edwin Lane, Jr., Executive Vice President
and Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Kenneth J. Hunnicutt as his attorney-in-fact,
acting will full power of substitution for him in his name, place and stead, in
any and all capacities, to sign any amendments to this Form 10-K and to file the
same, with exhibits thereto, and any other documents in connection therewith,
with the Securities and Exchange Commission and hereby ratifies and confirms all
that said attorney-in-fact, or his substitute or substitutes, may do or cause to
be done by virtue thereof.
Pursuant to the requirements of the Exchange Act, this Form 10-K has been
signed by the following persons in the capacities and on the dates indicated.
Date: March 19, 1996 /s/ Kenneth J. Hunnicutt
-------------- -----------------------------------------------------
Kenneth J. Hunnicutt, President, Chief Executive
Officer and Director
Date: March 19, 1996 /s/ W. Edwin Lane, Jr.
-------------- -----------------------------------------------------
W. Edwin Lane, Jr., Executive Vice President and
Chief Financial Officer
Date: March 19, 1996 /s/ J. Raymond Fulp
-------------- -----------------------------------------------------
J. Raymond Fulp, Director
Date: March 19, 1996 /s/ Willard E. Lasseter
-------------- -----------------------------------------------------
Willard E. Lasseter, Director and Chairman of the
Board
40
March 19, 1996 /s/ Bobby B. Lindsey
Date:______________ ________________________________________________________
Bobby B. Lindsey, Director
Date:______________ ________________________________________________________
Hal L. Lynch, Director
March 19, 1996 /s/ Joseph C. Parker
Date:______________ ________________________________________________________
Joseph C. Parker, Director
March 19, 1996 /s/ Eugene M. Vereen
Date:______________ ________________________________________________________
Eugene M. Vereen, Jr., Director
March 19, 1996 /s/ Doyle Weltzbarker
Date:______________ ________________________________________________________
Doyle Weltzbarker, Director and Vice Chairman of the
Board
Date:______________ ________________________________________________________
Henry Wortman, Director
41
EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
3.1 Articles of Incorporation, as amended (filed as Exhibit 2.1 to the
Registrant's Regulation A Offering Statement on Form 1-A (File No.
24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
3.1.1 Articles of Amendment to Articles of Incorporation.
3.2 By-laws of the Registrant, as amended (filed as Exhibit 2.2 to the
Registrant's Regulation A Offering Statement on Form 1-A (File No.
24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.1 1985 Incentive Stock Option Plan (filed as Exhibit 5.1 to the
Registrant's Regulation A Offering Statement on Form 1-A (File No.
24A-2630), filed with the Commission on August 14, 1987 and
incorporated herein by reference).
10.2 Incentive Stock Option Agreement with Kenneth J. Hunnicutt dated
October 17, 1985 (filed as Exhibit 5.2 to the Registrant's Regulation
A Offering Statement on Form 1-A (File No. 24A-2630), filed with the
Commission on August 14, 1987 and incorporated herein by reference).
10.3 Deferred Compensation Agreement for Kenneth J. Hunnicutt dated
December 16, 1986 (filed as Exhibit 5.3 to the Registrant's Regulation
A Offering Statement on Form 1-A (File No. 24A-2630), filed with the
Commission on August 14, 1987 and incorporated herein by reference).
10.3 Security Deed in favor of M.I.A., Co. dated December 31, 1984 (filed
as Exhibit 5.4 to the Registrant's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.5 Loan Agreement and Master Term Note dated December 30, 1986 (filed as
Exhibit 5.5 to the Registrant's Regulation A Offering Statement on
Form 1-A (File No. 24A-2630), filed with the Commission on August 14,
1987 and incorporated herein by reference).
10.6 Executive Salary Continuation Agreement dated February 14, 1984 (filed
as Exhibit 10.6 to the Annual Report on Form 10-K (File Number
2-71257), filed herewith with the Commission on March 27, 1989 and
incorporated herein by reference).
42
Exhibit
No. Description
- ------- -----------
10.7 1992 Incentive Stock Option Plan and Option Agreement for K. J.
Hunnicutt (filed as Exhibit 10.7 to the Registrant's Annual Report on
Form 10-K (File Number 0-16181), filed with the Commission on March
30, 1993 and incorporated herein by reference.)
10.8 Executive Employment Agreement with Kenneth J. Hunnicutt dated
September 20, 1994 (filed as Exhibit 10.8 to the Registrant's Annual
Report on Form 10-K (File Number 0-16181), filed with the Commission
on March 30, 1995 and incorporated herein by reference).
10.9 Executive Consulting Agreement with Eugene M. Vereen dated September
20, 1994. (filed as Exhibit 10.9 to the Registrant's Annual Report on
Form 10-K (File Number 0-16181), filed with the Commission on March
30, 1995 and incorporated herein by reference).
10.10 Agreement and Plan of Merger by and between the Company and Southland
Bancorporation dated as of December 18, 1995.
10.11 Agreement and Plan of Merger by and between the Company and Central
Bankshares, Inc. dated as of December 29, 1995.
22.1 Subsidiaries of the Company (filed as Exhibit 22.1 to the Registrant's
Annual Report on Form 10-K (File Number 0-16181, filed with the
Commission on March 30, 1993 and incorporated herein by reference).
25.1 Power of Attorney relating to this Form 10-K is set forth on the
signature pages to this Form 10-K.
27 Financial Data Schedule.
43
ABC BANCORP
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Consolidated financial statements:
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1995 and 1994
Consolidated Statements of Income - Years ended December 31, 1995 1994 and
1993
Consolidated Statements of Stockholders' Equity - Years ended December 31,
1995, 1994 and 1993
Consolidated Statements of Cash Flows - Years ended December 31, 1995, 1994
and 1993
Notes to Consolidated Financial Statements
All schedules are omitted as the required information is inapplicable or the
information is presented in the financial statements or related notes.
F-1
INDEPENDENT AUDITOR'S REPORT
- --------------------------------------------------------------------------------
TO THE BOARD OF DIRECTORS
ABC BANCORP
MOULTRIE, GEORGIA
We have audited the accompanying consolidated balance sheets of ABC
BANCORP AND SUBSIDIARIES as of December 31, 1995 and 1994, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of ABC
Bancorp and Subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements,
effective January 1, 1993, the Company changed its method of accounting for
income taxes.
/s/ Mauldin & Jenkins
Albany, Georgia
January 24, 1996
F-2
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
- --------------------------------------------------------------------------------
ASSETS 1995 1994
- ------ ---------- ----------
Cash and due from banks $ 23,612 $ 20,089
Federal funds sold 41,025 21,902
Securities available for sale, at fair value (Note 2) 39,991 1,910
Securities held to maturity, at cost (fair value $10,462
and $43,024) (Note 2) 10,269 44,595
Loans (Note 3) 214,251 192,124
Less allowance for loan losses 4,272 3,757
---------- ----------
Loans, net 209,979 188,367
---------- ----------
Premises and equipment, net (Note 4) 6,942 7,171
Other assets 9,687 8,765
---------- ----------
$ 341,505 $ 292,799
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits
Noninterest-bearing demand $ 58,430 $ 48,450
Interest-bearing demand 71,833 63,262
Savings 22,318 23,644
Time, $100,000 and over 37,773 27,291
Other time 110,634 94,222
---------- ----------
Total deposits 300,988 256,869
Securities sold under repurchase agreements 1,887 2,338
Other short-term borrowings 1,600 -
Other liabilities 3,095 3,142
---------- ----------
Total liabilities 307,570 262,349
---------- ----------
COMMITMENTS AND CONTINGENT LIABILITIES (Note 8)
STOCKHOLDERS' EQUITY (Note 10)
Common stock, par value $1; 10,000,000 shares authorized,
3,597,074 and 2,697,987 shares issued, respectively 3,597 2,698
Capital surplus 16,826 17,728
Retained earnings 14,918 11,753
Unrealized gains (losses) on securities available for sale,
net of taxes 149 (49)
---------- ----------
35,490 32,130
Less cost of shares acquired for the treasury,
217,882 and 183,412 shares, respectively (1,555) (1,680)
---------- ----------
Total stockholders' equity 33,935 30,450
---------- ----------
$ 341,505 $ 292,799
========== ==========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-3
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
- --------------------------------------------------------------------------------
1995 1994 1993
---------- ---------- ----------
INTEREST INCOME
Interest and fees on loans $ 22,647 $ 18,017 $ 16,278
Interest on taxable securities 2,271 1,863 1,892
Interest on nontaxable securities 551 610 597
Interest on deposits in other banks - 65 105
Interest on Federal funds sold 1,234 773 825
---------- ---------- ----------
26,703 21,328 19,697
---------- ---------- ----------
INTEREST EXPENSE
Interest on deposits 10,371 7,603 7,476
Interest on securities sold under repurchase agreements 77 68 18
Interest on other borrowings 225 157 238
---------- ---------- ----------
10,673 7,828 7,732
---------- ---------- ----------
Net interest income 16,030 13,500 11,965
PROVISION FOR LOAN LOSSES (Note 3) 848 638 1,191
---------- ---------- ----------
Net interest income after provision for loan losses 15,182 12,862 10,774
---------- ---------- ----------
OTHER INCOME
Service charges on deposit accounts 2,595 2,456 2,299
Other service charges, commissions and fees 301 224 230
Other 380 345 338
---------- ---------- ----------
3,276 3,025 2,867
---------- ---------- ----------
OTHER EXPENSES
Salaries and employee benefits (Note 5) 6,210 5,711 5,238
Equipment expense 1,074 1,091 723
Occupancy expense 756 663 844
Amortization of intangible assets 268 268 279
Data processing fees 372 448 290
Directors fees 314 291 270
FDIC premiums 301 559 551
Other operating expenses (Note 6) 2,933 2,516 2,340
---------- ---------- ----------
12,228 11,547 10,535
---------- ---------- ----------
F-4
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
1995 1994 1993
------------ ----------- -----------
Income before income taxes and cumulative
effect of accounting change $ 6,230 $ 4,340 $ 3,106
APPLICABLE INCOME TAXES (Note 7) 1,889 1,240 814
------------ ----------- -----------
Income before cumulative effect of
accounting change 4,341 3,100 2,292
CUMULATIVE EFFECT OF CHANGE IN METHOD OF ACCOUNTING
FOR INCOME TAXES - - 346
------------ ----------- -----------
Net income $ 4,341 $ 3,100 $ 2,638
============ =========== ===========
INCOME PER COMMON SHARE:
Income before cumulative effect of accounting change $ 1.29 $ 1.05 $ 0.91
Cumulative effect of accounting change - - 0.13
------------ ----------- -----------
Net income (Note 1) $ 1.29 $ 1.05 $ 1.04
============ =========== ===========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-5
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
COMMON STOCK CAPITAL RETAINED
------------------------
SHARES PAR VALUE SURPLUS EARNINGS
---------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1992 1,950,487 $ 1,950 $ 10,152 $ 7,571
Net income - - - 2,638
Cash dividends paid, $.29 per share - - - (672)
Purchase of 143,024 shares of treasury stock - - - -
---------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1993 1,950,487 1,950 10,152 9,537
Net income - - - 3,100
Cash dividends declared, $.29 per share - - - (884)
Proceeds from sale of stock, net of stock
offering expense 747,500 748 7,576 -
Net change in unrealized losses on
securities available for sale, net of taxes - - - -
---------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1994 2,697,987 2,698 17,728 11,753
Net income - - - 4,341
Cash dividends declared, $.35 per share - - - (1,176)
Four-for-three common stock split 899,087 899 (899) -
Purchase of fractional shares - - (3) -
Stock issued under stock option purchase plan - - - -
Net change in unrealized gains on
securities available for sale, net of taxes - - - -
---------- ------------ ------------ ------------
BALANCE, DECEMBER 31, 1995 3,597,074 $ 3,597 $ 16,826 $ 14,918
========== ============ ============ ============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
UNREALIZED
GAINS (LOSSES)
ON SECURITIES
AVAILABLE
FOR SALE, TREASURY STOCK
---------------------------
NET OF TAXES SHARES COST TOTAL
- -------------- ------------ ------------- ------------
$ - 40,388 $ (268) $ 19,405
- - - 2,638
- - - (672)
- 143,024 (1,412) (1,412)
- -------------- ------------ ------------- -----------
- 183,412 (1,680) 19,959
- - - 3,100
- - - (884)
- - - 8,324
(49) - - (49)
- -------------- ------------ ------------- -----------
(49) 183,412 (1,680) 30,450
- - - 4,341
- - - (1,176)
- 61,137 - -
- - - (3)
- (26,667) 125 125
198 - - 198
- -------------- ------------ ------------- -----------
$ 149 217,882 $ (1,555) $ 33,935
============== ============ ============= ===========
F-6
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
1995 1994 1993
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 4,341 $ 3,100 $ 2,638
---------- ---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 936 809 638
Amortization of intangible assets 268 268 279
Provision for loan losses 848 638 1,191
Provision for deferred taxes (160) (22) (170)
Write-downs of other real estate owned - 53 -
(Increase) decrease in interest receivable (775) (804) 100
Increase (decrease) in interest payable 190 104 (90)
Increase (decrease) in taxes payable (29) 184 76
Other prepaids, deferrals and accruals, net (653) 798 (178)
---------- ---------- ----------
Total adjustments 625 2,028 1,846
---------- ---------- ----------
Net cash provided by operating activities 4,966 5,128 4,484
---------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Decrease in interest-bearing deposits in banks - 1,257 100
Purchases of securities available for sale (21,690) (1,664) -
Purchases of securities held to maturity (1,654) (7,524) (24,502)
Proceeds from maturities of securities available for sale 4,086 - -
Proceeds from maturities of securities held to maturity 15,778 8,531 13,587
(Increase) decrease in Federal funds sold (19,123) 9,673 9,565
Increase in loans, net (22,460) (30,829) (12,435)
Purchase of premises and equipment (717) (2,303) (382)
Proceeds from the sale of premises and equipment 24 22 26
---------- ---------- ----------
Net cash used in investing activities (45,756) (22,837) (14,041)
---------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in deposits 44,119 18,644 3,755
Increase (decrease) in repurchase agreements (451) (842) 3,117
Proceeds from other borrowings 1,600 - 1,412
Repayment of long-term debt - (4,677) (15)
Dividends paid (1,077) (645) (672)
Proceeds from stock offering, net - 8,324 -
Proceeds from exercise of stock options 125 - -
Purchase of fractional shares (3) - -
Purchase of shares of stock for the treasury - - (1,412)
---------- ---------- ----------
Net cash provided by financing activities 44,313 20,804 6,185
---------- ---------- ----------
F-7
ABC BANCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(DOLLARS IN THOUSANDS)
================================================================================
1995 1994 1993
----------- ----------- -----------
Net increase (decrease) in cash and due from banks $ 3,523 $ 3,095 $ (3,372)
Cash and due from banks at beginning of year 20,089 16,994 20,366
----------- ----------- -----------
Cash and due from banks at end of year $ 23,612 $ 20,089 $ 16,994
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 10,483 $ 7,724 $ 7,822
Income taxes $ 2,078 $ 1,078 $ 562
NONCASH TRANSACTIONS
Net change in unrealized gains (losses)
on securities available for sale $ 289 $ (54) $ -
Property transferred from premises and equipment
to other real estate owned $ - $ 103 $ -
Dividends declared $ 338 $ 239 $ -
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
F-8
ABC BANCORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF FINANCIAL STATEMENT PRESENTATION
ABC Bancorp, headquartered in Moultrie, Georgia, is the holding
company (the "Company") for five community banks ("the Banks")
located in the south Georgia cities of Moultrie, Quitman, Tifton,
Cairo and Thomasville. The Banks operate 11 banking offices and two
drive-through facilities within ABC Bancorp's market area. Through
its Banks, ABC Bancorp operates a full service banking business and
offers a broad range of retail and commercial banking services to
its customers. The Company and the Banks are subject to the
regulations of certain Federal and state agencies and are
periodically examined by those regulatory agencies.
The accounting and reporting policies of the Company conform to
generally accepted accounting principles and general practices
within the financial services 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 balance sheet and revenues and expenses for the period.
Actual results could differ from those estimates.
The principles which significantly affect the determination of
financial position, results of operations and cash flows are
summarized below.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and due from banks
includes cash on hand and amounts due from banks (including cash
items in process of clearing). Cash flows from loans originated by
the Banks, deposits, interest-bearing deposits and Federal funds
purchased and sold are reported net.
The Company maintains amounts due from banks which, at times, may
exceed Federally insured limits. The Company has not experienced any
losses in such accounts.
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
SECURITIES AVAILABLE FOR SALE
Securities classified as available for sale are those debt
securities that the Company intends to hold for an indefinite period
of time, but not necessarily to maturity. Any decision to sell a
security classified as available for sale would be based on various
factors, including significant movements in interest rates, changes
in the maturity mix of the Company's assets and liabilities,
liquidity needs, regulatory capital considerations and other similar
factors. Securities available for sale are carried at fair value.
Unrealized gains or losses are reported as increases or decreases in
stockholders' equity, net of the related deferred tax effect.
Realized gains or losses, determined on the basis of the cost of
specific securities sold, are included in earnings.
SECURITIES HELD TO MATURITY
Securities classified as held to maturity are those debt securities
the Company has both the intent and ability to hold to maturity
regardless of changes in market conditions, liquidity needs or
changes in general economic conditions. These securities are carried
at cost adjusted for amortization of premium and accretion of
discount, computed by the interest method over their contractual
lives. The sale of a security within three months of its maturity
date or after collection of at least 85 percent of the principal
outstanding at the time the security was acquired is considered a
maturity for purposes of classification and disclosure.
A decline in the fair value below cost of any available for sale or
held to maturity security that is deemed other than temporary is
charged to earnings resulting in the establishment of a new cost basis
for the security.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS AND INTEREST INCOME
Loans are stated at principal amounts outstanding less unearned
income and the allowance for loan losses. Interest income on loans
is credited to income based on the principal amount outstanding at
the respective rate of interest except for add-on interest on
certain instalment loans for which interest is recognized on the
sum-of-the-months method.
Accrual of interest income is discontinued on loans when, in the
opinion of management, collection of such interest income becomes
doubtful. When a loan is placed on nonaccrual status, all interest
previously accrued but not collected is reversed against current
interest income. Accrual of interest on such loans is resumed when,
in management's judgment, the collection of interest and principal
becomes probable.
Fees on loans and costs incurred in origination of loans are
recognized at the time the loan is placed on the books. Because loan
fees are not significant and the majority of loans have maturities
of one year or less, the results on operations are not materially
different than the results which would be obtained by accounting for
loan fees and costs in accordance with generally accepted accounting
principles.
The allowance for loan losses is established through a provision for
loan losses charged to expense. Loans are charged against the
allowance for loan losses when management believes that
collectibility of the principal is unlikely. The allowance is an
amount that management believes will be adequate to absorb estimated
losses on existing loans that may become uncollectible, based on
evaluation of the collectibility of loans and prior loss experience.
This evaluation also takes into consideration such factors as
changes in the nature and volume of the loan portfolio, overall
portfolio quality, review of specific problem loans and current
economic conditions that may affect the borrower's ability to pay.
Certain estimates are susceptible to change in the near term. Such
estimates include the creditworthiness of significant borrowers and
the collateral value of delinquent loans. While management uses the
best information available to make its evaluation, future
adjustments to the allowance may be necessary if there are
significant changes in economic conditions. In addition, regulatory
agencies, as an integral part of their examination process,
periodically review the Company's allowance for loan losses, and may
require the Company to record additions to the allowance based on
their judgment about information available to them at the time of
their examinations.
F-11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
LOANS AND INTEREST INCOME (CONTINUED)
Impaired loans are 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 collateral if the loan is collateral
dependent. A loan is impaired when it is probable the creditor will
be unable to collect all contractual principal and interest payments
due in accordance with the terms of the loan agreement. Accrual of
interest on an impaired loan is discontinued when management
believes, after considering collection efforts and other factors,
that the borrower's financial condition is such that collection of
interest is doubtful. Cash collections on impaired loans are
credited to the loans receivable balance, and no interest income is
recognized on those loans until the principal balance has been
collected.
PREMISES AND EQUIPMENT
Premises and equipment are stated at cost less accumulated
depreciation. Depreciation is computed principally by the straight-
line method over the following estimated useful lives:
Years
---------
Buildings and improvements 15-40
Furniture and equipment 5-7
OTHER REAL ESTATE OWNED
Other real estate owned (OREO) represents properties acquired
through foreclosure or other proceedings. OREO is held for sale and
is recorded at the lower of the recorded amount of the loan or fair
value of the properties less estimated costs of disposal. Any write-
down to fair value at the time of transfer to OREO is charged to the
allowance for loan losses. Property is evaluated regularly to ensure
the recorded amount is supported by its current fair value and
valuation allowances to reduce the carrying amount to fair value
less estimated costs to dispose are recorded as necessary.
Subsequent decreases in fair value and increases in fair value, up
to the value established at foreclosure, are recognized as charges
or credits to noninterest expense. OREO is reported net of allowance
for losses in the Company's financial statements.
F-12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets, arising from excess of purchase price over net
assets acquired of purchased banks, are being amortized on the
straight-line method over various periods not exceeding 25 years.
INCOME TAXES
The Company and its subsidiaries file a consolidated income tax
return. Each subsidiary provides for income taxes based on its
contribution to income taxes (benefits) of the consolidated group.
As of January 1, 1993, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes". SFAS No. 109 requires a balance sheet approach to accounting
for income taxes and requires that deferred tax assets and
liabilities be adjusted in the period of enactment for the effect of
an enacted change in tax laws or rates. The adoption of SFAS No. 109
resulted in an income tax benefit of $345,937, which has been
included in the consolidated statement of income for the year ended
December 31, 1993 as a cumulative effect.
Deferred taxes are provided on a liability method whereby deferred
tax assets are recognized for deductible temporary differences and
operating loss and tax credit carryforwards and deferred tax
liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax
assets are reduced by a valuation allowance when, in the opinion of
management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effect of changes in tax laws
on the date of enactment.
F-13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
FAIR VALUE OF FINANCIAL INSTRUMENTS
Financial Accounting Standards Board Statement No. 107, "Disclosures
About Fair Value of Financial Instruments," requires disclosure of
fair value information about financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to
estimate that value. In cases where quoted market prices are not
available, fair values are based on estimates using present value or
other valuation techniques. Those techniques are significantly
affected by the assumptions used, including the discount rate and
estimates of future cash flows. In that regard, the derived fair
value estimates cannot be substantiated by comparison to independent
markets and, in many cases, could not be realized in immediate
settlement of the instrument. Statement No. 107 excludes certain
financial instruments from its disclosure requirements. Accordingly,
the aggregate fair value amounts presented do not represent the
underlying value of the Company.
The following methods and assumptions were used by the Company in
estimating the fair value of its financial instruments:
Carrying amounts approximate fair values for the following
instruments:
Cash and due from banks
Federal funds sold
Securities available for sale
Variable rate loans that reprice frequently
Credit card loans and equity line loans
Variable rate money market accounts
Variable rate certificates of deposit
Short-term borrowing
Accrued interest receivable
Accrued interest payable
F-14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Quoted market prices, where available, or if not available, based on
quoted market prices of comparable instruments for securities held
to maturity.
Discounted cash flows using interest rates currently being offered
on instruments with similar terms and with similar credit quality:
All loans except variable rate loans described above
Fixed rate certificates of deposit
Commitments to extend credit and standby letters of credit are not
recorded until such commitments are funded. The value of these
commitments are the fees charged to enter into such agreements.
These commitments do not represent a significant value to the
Company until such commitments are funded. The Company has
determined that such instruments do not have a distinguishable fair
value and no fair value has been assigned to these instruments.
EARNINGS PER SHARE
Earnings per share are calculated on the basis of the weighted
average number of shares outstanding. All per share data for prior
years have been adjusted to reflect the four-for-three stock split
effected in the form of a stock dividend to shareholders of record
as of July 17, 1995.
F-15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2. INVESTMENTS IN SECURITIES
Effective January 1, 1994, the Bank adopted Financial Accounting
Standards Board Statement No. 115 "Accounting for Certain Investments
in Debt and Equity Securities." Upon adoption, the Company transferred
$300,005 of marketable equity securities from securities held to
maturity to securities available for sale. The securities available
for sale were marked to fair value resulting in a net unrealized loss
of $11,986 which was included in stockholders' equity at $11,986.
Under special provisions adopted by the Financial Accounting Standards
Board in October 1995, the Company transferred $20,188,243 from
securities held to maturity to securities available for sale on
December 31, 1995, resulting in a net unrealized gain of $94,743 which
was included in stockholders' equity at $62,531 net of related taxes
of $32,212.
The amortized cost and approximate fair values of investments in
securities at December 31, 1995 and 1994 were as follows:
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
-------------------------------------------------
SECURITIES AVAILABLE FOR SALE
DECEMBER 31, 1995:
U. S. GOVERNMENT AND AGENCY SECURITIES $ 37,174 $ 285 $ (93) $ 37,366
MORTGAGE-BACKED SECURITIES 2,282 69 (8) 2,343
OTHER SECURITIES 300 - (18) 282
---------- ---------- ---------- ----------
$ 39,756 $ 354 $ (119) $ 39,991
========== ========== ========== ==========
December 31, 1994:
U. S. Government and agency securities $ 1,664 $ - $ (14) $ 1,650
Other securities 300 - (40) 260
---------- ---------- ---------- ----------
$ 1,964 $ - $ (54) $ 1,910
========== ========== ========== ==========
SECURITIES HELD TO MATURITY
DECEMBER 31, 1995:
STATE AND MUNICIPAL SECURITIES $ 10,269 $ 258 $ (65) $ 10,462
========== ========== ========== ==========
December 31, 1994:
U. S. Government and agency securities $ 32,159 $ 19 $ (1,196) $ 30,982
State and municipal securities 9,819 114 (471) 9,462
Mortgage-backed securities 2,617 22 (59) 2,580
---------- ---------- ---------- ----------
$ 44,595 $ 155 $ (1,726) $ 43,024
========== ========== ========== ==========
F-16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 2. INVESTMENTS IN SECURITIES (CONTINUED)
There were no sales of securities during 1995, 1994 or 1993.
The amortized cost and fair value of securities as of December 31,
1995 by contractual maturity are shown below. Maturities may differ
from contractual maturities in mortgage-backed securities because the
mortgages underlying the securities may be called or repaid without
any penalties. Therefore, these securities are not included in the
maturity categories in the following maturity summary.
SECURITIES AVAILABLE FOR SALE SECURITIES HELD TO MATURITY
----------------------------- ---------------------------
AMORTIZED FAIR AMORTIZED FAIR
COST VALUE COST VALUE
---------- ----------- ---------- ----------
(DOLLARS IN THOUSANDS)
------------------------------------------------------------
Due in one year or less $ 11,541 $ 11,566 $ 727 $ 724
Due from one year to five years 25,633 25,800 2,734 2,748
Due from five to ten years - - 5,722 5,891
Due after ten years - - 1,086 1,099
Mortgage-backed securities 2,282 2,343 - -
Marketable equity securities 300 282 - -
---------- ----------- ---------- ----------
$ 39,756 $ 39,991 $ 10,269 $ 10,462
========== =========== ========== ==========
Securities with a carrying value of $33,837,773 and $28,616,565 at December
31, 1995 and 1994, respectively, were pledged to secure public deposits and for
other purposes.
F-17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES
The composition of loans is summarized as follows:
DECEMBER 31,
--------------------------------
1995 1994
----------- ------------
(DOLLARS IN THOUSANDS)
--------------------------------
Commercial and financial $ 23,733 $ 23,531
Agricultural 15,124 17,079
Real estate - construction 1,836 1,828
Real estate - mortgage, farmland 40,053 34,887
Real estate - mortgage, commercial 41,438 35,242
Real estate - mortgage, residential 52,377 44,064
Consumer instalment loans 38,976 34,220
Other 717 1,280
----------- ------------
214,254 192,131
Unearned discount (3) (777)
Allowance for loan losses (4,272) (3,757)
----------- ------------
$ 209,979 $ 188,367
=========== ============
At December 31, 1995, executive officers and directors, and companies in
which they have a 10 percent or more beneficial ownership, were indebted to the
Company in the aggregate amount of $7,792,000. The interest rates on these
loans were substantially the same as rates prevailing at the time of the
transaction and repayment terms are customary for the type of loan involved.
Following is a summary of transactions:
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
BALANCE, BEGINNING OF YEAR $ 7,234 $ 8,506
Advances 5,030 4,670
Repayments (4,715) (4,890)
Transactions due to changes in directors 243 (1,052)
----------- -----------
BALANCE, END OF YEAR $ 7,792 $ 7,234
=========== ===========
F-18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Changes in the allowance for loan losses are as follows:
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
BALANCE, BEGINNING OF YEAR $ 3,757 $ 3,571
Provision charged to operations 848 638
Loans charged off (730) (971)
Recoveries 397 519
----------- -----------
BALANCE, END OF YEAR $ 4,272 $ 3,757
=========== ===========
Information with respect to impaired loans as of and for the year
ended December 31, 1995 is as follows:
(DOLLARS IN
THOUSANDS)
----------
Loans receivable for which there is a related allowance for
credit losses $ 1,006
Loans receivable for which there is no related allowance for
credit losses 1,253
----------
Total impaired loans $ 2,259
==========
Allowance provided for impaired loans included in the
allowance for loan losses $ 163
==========
Average balance $ 3,089
==========
Interest income recognized $ 161
==========
F-19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES (CONTINUED)
Loans on which the accrual of interest had been discontinued or
reduced amounted to $3,817,699 at December 31, 1994. The reduction in
interest income associated with nonaccrual and renegotiated loans for
1994 and 1993 is as follows. For 1995, nonaccrual loans have been
included in the impaired loan information above.
DECEMBER 31,
---------------------------
1994 1993
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
Income in accordance with original loan terms $ 324 $ 201
Income recognized 37 9
----------- -----------
$ 287 $ 192
=========== ===========
NOTE 4. PREMISES AND EQUIPMENT, NET
Major classifications of these assets are summarized as follows:
DECEMBER 31,
---------------------------
1995 1994
----------- -----------
(DOLLARS IN THOUSANDS)
---------------------------
Land $ 1,563 $ 1,564
Buildings 5,446 5,271
Equipment 5,936 6,223
Construction in progress 182 -
----------- -----------
13,127 13,058
Accumulated depreciation (6,185) (5,887)
----------- -----------
$ 6,942 $ 7,171
=========== ===========
Depreciation expense for the years ended December 31, 1995, 1994 and
1993 was $886,320, $738,562 and $462,368, respectively.
F-20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 5. EMPLOYEE BENEFIT PLANS
The Company and all subsidiaries have adopted simplified employee
pension plans for substantially all employees. These plans are SEP-IRA
defined contribution plans. Contributions to these plans charged to
expense during 1995, 1994 and 1993 amounted to $540,766, $499,254 and
$484,870, respectively.
NOTE 6. DEFERRED COMPENSATION PLANS
The Company and two subsidiary Banks have entered into separate
deferred compensation arrangements with certain executive officers and
directors. The plans call for certain amounts payable at retirement,
death or disability. The estimated present value of the deferred
compensation is being accrued over the remaining expected term of
active employment. The Company and Banks have purchased life insurance
policies which they intend to use to finance this liability. Aggregate
compensation expense under the plans were $54,724, $81,295 and $83,459
for 1995, 1994 and 1993, respectively, and is included in other
operating expenses.
NOTE 7. INCOME TAXES
The total income taxes in the consolidated statements of income are as
follows:
DECEMBER 31,
----------------------------------------
1995 1994 1993
------------ ------------ ------------
(DOLLARS IN THOUSANDS)
----------------------------------------
Current $ 2,049 $ 1,262 $ 638
Deferred (160) (22) 176
------------ ------------ ------------
$ 1,889 $ 1,240 $ 814
============ ============ ============
F-21
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 7. INCOME TAXES (CONTINUED)
The Company's provision for income taxes differs from the amounts
computed by applying the Federal income tax statutory rates to income
before income taxes. A reconciliation of the differences is as
follows:
DECEMBER 31,
-------------------------------------------------------
1995 1994 1993
-------------------------------------------------------
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
-------------------------------------------------------
Tax provision at statutory rate $ 2,118 34 % $ 1,475 34 % $ 1,056 34 %
Increase (decrease) resulting from:
Tax-exempt interest (216) (3) (246) (6) (274) (9)
Amortization of excess
cost over assets acquired 32 - 37 1 49 2
Changes in valuation allowance
for deferred taxes (72) (1) (50) (1) - -
Other 27 - 24 1 (17) (1)
-------- -------- -------- -------- -------- --------
Provision for income taxes $ 1,889 30 % $ 1,240 29 % $ 814 26 %
======== ======== ======== ======== ======== ========
Net deferred income tax assets of $486,260 and $411,710 at December
31, 1995 and 1994, respectively, are included in other assets. The
components of deferred income taxes are as follows:
DECEMBER 31,
--------------------------
1995 1994
----------- ----------
(DOLLARS IN THOUSANDS)
--------------------------
DEFERRED TAX ASSETS:
Loan loss reserves $ 836 $ 640
Deferred compensation 148 138
Other real estate - 18
Other 34 68
Net operating loss tax carryforward 285 310
Less valuation allowance (228) (300)
----------- ----------
1,075 874
----------- ----------
DEFERRED TAX LIABILITIES:
Deprecation and amortization (253) (179)
Amortization of intangible assets (250) (283)
Unrealized gain on securities available for sale (86) -
----------- ----------
(589) (462)
----------- ----------
Net deferred tax assets $ 486 $ 412
=========== ==========
F-22
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES
In the normal course of business, the Company has entered into off-
balance-sheet financial instruments which are not reflected in the
financial statements. These financial instruments include commitments
to extend credit and standby letters of credit. Such financial
instruments are included in the financial statements when funds are
disbursed or the instruments become payable. These instruments
involve, to varying degrees, elements of credit risk in excess of the
amount recognized in the balance sheet.
The Company's exposure to credit loss in the event of nonperformance
by the other party to the financial instrument for commitments to
extend credit and standby letters of credit is represented by the
contractual amount of those instruments. The Company uses the same
credit and collateral policies for these off-balance-sheet financial
instruments as it does for on-balance-sheet financial instruments. A
summary of the Company's commitments is as follows:
December 31,
--------------------------
1995 1994
---------- ----------
(Dollars in Thousands)
--------------------------
Commitments to extend credit $ 36,024 $ 22,344
Credit card commitments 2,883 2,345
Standby letters of credit 905 590
---------- ----------
$ 39,812 $ 25,279
========== ==========
Commitments to extend credit generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since many
of the commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future cash
requirements. The credit risk involved in issuing these financial
instruments is essentially the same as that involved in extending
loans to customers. The Company evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained, if deemed necessary by the Company upon extension of credit,
is based on management's credit evaluation of the customer. Collateral
held varies but may include real estate and improvements, marketable
securities, accounts receivable, crops, livestock, inventory,
equipment and personal property.
F-23
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES (CONTINUED)
Credit card commitments are unsecured.
Standby letters of credit are conditional commitments issued by the
Company to guarantee the performance of a customer to a third party.
Those guarantees are primarily issued to support public and private
borrowing arrangements. The credit risk involved in issuing letters of
credit is essentially the same as that involved in extending loan
facilities to customers. Collateral held varies as specified above and
is required in instances which the Company deems necessary.
In the normal course of business, the Company is involved in various
legal proceedings. In the opinion of management and counsel for the
Company, any liability resulting from such proceedings would not have
a material adverse effect on the Company's financial statements.
NOTE 9. CONCENTRATIONS OF CREDIT
The Banks make agricultural, agribusiness, commercial, residential and
consumer loans to customers primarily in the twelve county area
surrounding Moultrie in south central Georgia.
A substantial portion of the Company's customers' abilities to honor
their contracts is dependent on the business economy in the
geographical area served by the Banks.
Although the Company's loan portfolio is diversified, there is a
relationship in this region between the agricultural economy and the
economic performance of loans made to nonagricultural customers. The
Company's lending policies for agricultural and nonagricultural
customers require loans to be well-collateralized and supported by
cash flows. Collateral for agricultural loans include equipment,
crops, livestock and land. Credit losses from loans related to the
agricultural economy is taken into consideration by management in
determining the allowance for loan losses.
A substantial portion of the Company's loans are secured by real
estate in the Company's primary market area. In addition, a
substantial portion of the real estate owned is located in those same
markets. Accordingly, the ultimate collectibility of a substantial
portion of the Company's loan portfolio and the recovery of a
substantial portion of the carrying amount of real estate owned are
susceptible to changes in market conditions in the Company's primary
market area.
F-24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 9. CONCENTRATIONS OF CREDIT (CONTINUED)
The Company has a concentration of funds on deposit at its primary
correspondent bank at December 31, 1995, as follows:
Noninterest-bearing accounts $15,448,169
Federal funds sold 25,550,000
-----------
$40,998,169
===========
NOTE 10. STOCKHOLDERS' EQUITY
The primary source of funds available to the Parent Company is the
payment of dividends by the subsidiary Banks. Banking regulations
limit the amount of dividends that may be paid without prior approval
of the Banks' regulatory agency. Approximately $2,381,100 are
available to be paid as dividends by the Bank subsidiaries at December
31, 1995.
Banking regulations also require the Company to maintain minimum
capital levels in relation to Company assets. At December 31, 1995,
the Company's capital ratios were considered adequate based on
regulatory minimum capital requirements. The minimum capital
requirements and the actual capital ratios for the Company at December
31, 1995 are as follows:
Regulatory
Actual Requirement
----------- -----------
Leverage capital ratio 10.37 % 4.00 %
Risk based capital ratios:
Core capital 15.23 4.00
Total capital 16.49 8.00
F-25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 11. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value and estimated fair value of the Company's financial
instruments are as follows:
December 31,
------------------------------------------------------
1995 1994
-------------------------- --------------------------
Carrying Fair Carrying Fair
Value Value Value Value
------------ ------------ ------------ ------------
(Dollars in Thousands)
------------------------------------------------------
FINANCIAL ASSETS:
Cash and short-term investments $ 64,637 $ 64,637 $ 41,991 $ 41,991
============ ============ ============ ============
Investments in securities $ 50,260 $ 50,453 $ 46,505 $ 44,934
============ ============ ============ ============
Loans $ 214,251 $ 205,845 $ 192,124 $ 185,314
Allowance for loan losses (4,272) - (3,757) -
------------ ------------ ------------ ------------
Loans, net $ 209,979 $ 205,845 $ 188,367 $ 185,314
============ ============ ============ ============
FINANCIAL LIABILITIES:
Noninterest-bearing demand $ 58,430 $ 58,430 $ 48,450 $ 48,450
Interest-bearing demand 71,833 71,833 63,262 63,262
Savings 22,318 22,318 23,644 23,644
Time deposits 148,407 150,186 121,513 121,595
------------ ------------ ------------ ------------
Total deposits $ 300,988 $ 302,767 $ 256,869 $ 256,951
============ ============ ============ ============
Short-term borrowings $ 3,487 $ 3,487 $ 2,338 $ 2,338
============ ============ ============ ============
F-26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
(Dollars in Thousands)
1995 1994
----------- -----------
ASSETS
Cash $ 1,027 $ 1,307
Interest-bearing deposits in banks 2,060 1,500
Investment in subsidiaries 27,607 24,461
Other assets 3,856 3,838
----------- -----------
Total assets $ 34,550 $ 31,106
=========== ===========
LIABILITIES
Other liabilities $ 615 $ 656
----------- -----------
Total liabilities 615 656
----------- -----------
STOCKHOLDERS' EQUITY 33,935 30,450
----------- -----------
Total liabilities and stockholders' equity $ 34,550 $ 31,106
=========== ===========
F-27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
(Continued)
CONDENSED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
1995 1994 1993
---------- ---------- ----------
INCOME
Dividends from subsidiaries $ 1,815 $ 1,170 $ 1,150
Interest 106 84 11
Fee and rental income 2,757 2,427 1,950
Other income 25 94 32
---------- ---------- ----------
Total income 4,703 3,775 3,143
---------- ---------- ----------
EXPENSE
Interest - 111 193
Amortization and depreciation 423 436 423
Other expense 2,944 2,644 1,926
---------- ---------- ----------
Total expense 3,367 3,191 2,542
---------- ---------- ----------
Income before income taxes (benefits)
and equity in undistributed earnings
of subsidiaries 1,336 584 601
INCOME TAXES (BENEFITS) (58) (55) 147
---------- ---------- ----------
Income before equity in undistributed
earnings of subsidiaries 1,394 639 454
EQUITY IN UNDISTRIBUTED EARNINGS
OF SUBSIDIARIES 2,947 2,461 2,184
---------- ---------- ----------
Net income $ 4,341 $ 3,100 $ 2,638
========== ========== ==========
F-28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
(Continued)
CONDENSED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income $ 4,341 $ 3,100 $ 2,638
----------- ----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 155 168 144
Amortization of intangible assets 268 268 279
Undistributed earnings of subsidiaries (2,947) (2,461) (2,184)
Increase in interest receivable (9) (6) -
Increase (decrease) in taxes payable (180) 30 19
Provision for deferred taxes 14 5 204
(Increase) decrease in due from
subsidiaries (55) 45 (49)
Other prepaids, deferrals and accruals, net (88) 50 (56)
----------- ----------- -----------
Total adjustments (2,842) (1,901) (1,643)
----------- ----------- -----------
Net cash provided by operating
activities 1,499 1,199 995
----------- ----------- -----------
CASH FLOWS FROM INVESTING
ACTIVITIES
Increase in interest-bearing deposits in banks (560) (1,500) -
Purchases of premises and equipment (281) (243) (22)
Proceeds from sale of premises 17 - -
Contribution of capital to subsidiary bank - (1,500) -
----------- ----------- -----------
Net cash used in investing activities (824) (3,243) (22)
----------- ----------- -----------
F-29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 12. CONDENSED FINANCIAL INFORMATION OF ABC BANCORP (PARENT COMPANY ONLY)
(Continued)
CONDENSED STATEMENTS OF CAS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Dollars in Thousands)
1995 1994 1993
----------- ----------- -----------
CASH FLOWS FROM FINANCING
ACTIVITIES
Proceeds from long-term debt $ - $ - $ 1,412
Repayment of long-term debt - (4,677) (15)
Proceeds from sale of stock, net of
stock offering expense - 8,324 -
Proceeds from exercise of stock options 125 - -
Purchase of treasury stock - - (1,412)
Purchase of fractional shares (3) - -
Dividends paid (1,077) (645) (672)
----------- ----------- -----------
Net cash provided by (used in)
financing activities (955) 3,002 (687)
----------- ----------- -----------
Net increase (decrease) in cash (280) 958 286
Cash at beginning of year 1,307 349 63
----------- ----------- -----------
Cash at end of year $ 1,027 $ 1,307 $ 349
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the year for interest $ - $ 111 $ 193
F-30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
================================================================================
NOTE 13. PENDING ACQUISITIONS
The Company has entered into a definitive merger agreement with
Southland Bancorporation, Dothan, Alabama pursuant to which it would
acquire all of the outstanding stock of Southland Bancorporation in
exchange for a combination of cash and the Company's common stock. The
total merger consideration will approximate $11.4 million. Total
assets of Southland Bancorporation at December 31, 1995 were
approximately $101 million. The merger is subject to approval by
Southland Bancorporation shareholders and certain regulatory
authorities and the registration of the Company's common stock to be
issued in connection with the merger. As a result of the merger,
Southland Bank, a wholly-owned subsidiary of Southland Bancorporation,
will become a wholly-owned subsidiary of the Company. The merger will
be accounted for as a purchase transaction.
The Company has also entered into a definitive merger agreement with
Central Bankshares, Inc., Cordele, Georgia whereby it would acquire
all of the outstanding common stock of Central Bankshares, Inc. in
exchange for the Company's common stock. The total merger
consideration will approximate $8.3 million. Total assets of Central
Bankshares at December 31, 1995 were approximately $51 million. The
merger is subject to approval by Central Bankshares, Inc. shareholders
and certain regulatory authorities and the registration of the
Company's common stock to be issued in connection with the merger. As
a result of the merger, Central Bank & Trust, a wholly-owned
subsidiary of Central Bankshares, Inc., will become a wholly-owned
subsidiary of the Company. The merger will be accounted for as a
pooling of interests.
F-31