-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D1Uo8xu0IKYUjtWaN398nNn9mXAZ8ItdmZcG/bigrxu8dYz7udwC0YYRA+p1S7Zp nxWgRFH+S4RBaFGMWPqHFQ== 0000813613-96-000001.txt : 19960403 0000813613-96-000001.hdr.sgml : 19960403 ACCESSION NUMBER: 0000813613-96-000001 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960402 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BUTTON GWINNETT FINANCIAL CORP CENTRAL INDEX KEY: 0000813613 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 581766331 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24008 FILM NUMBER: 96543538 BUSINESS ADDRESS: STREET 1: P O BOX 1230 CITY: LAWRENCEVILLE STATE: GA ZIP: 30246-1230 BUSINESS PHONE: 4049636665 MAIL ADDRESS: STREET 1: P O BOX1230 CITY: LAWRENCEVILLE STATE: GA ZIP: 30246-1230 FORMER COMPANY: FORMER CONFORMED NAME: BUTTON GWINNETT BANCORP INC DATE OF NAME CHANGE: 19920703 10KSB 1 U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) _ |X| Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 [Fee required] For fiscal year ended December 31, 1995 Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 [No fee required] For the transition period from ___________ to ____________ Commission file number 0-24008 BUTTON GWINNETT FINANCIAL CORPORATION (Name of Small Business Issuer in Its Charter) Georgia 58-1766331 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organizaiton Identification No.) 2230 Scenic Highway, Snellville, Georgia 30278 (Address of Principal Executive Offices) (Zip Code) (770) 978-3242 (Issuer's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(b) of the Act: None. Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.01 par value Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days. Yes X No_________ Check if disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [] (Cover page continued) State issuer's revenues for its most recent fiscal year: $14,815,250 Aggregate market value of the voting stock held by non- affiliates computed by reference to the price at which the stock was sold, or the average bid and asked prices of such stock, as of a specified date within the past 60 days: $8,260,977 as of March 25, 1996. APPLICABLE ONLY TO CORPORATE REGISTRANTS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: 1,380,487 as of March 25, 1996. Transitional Small Business Disclosure Format (check one): Yes No X DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's 1995 Annual Report to Shareholders are included by reference into Part II. Portions of the Registrant's Proxy Statement for the 1996 Annual Meeting of Shareholders are incorporated by reference into Part III. PART I ITEM 1. DESCRIPTION OF BUSINESS The Company Button Gwinnett Financial Corporation (the "Company") is the surviving corporation resulting from the merger (the "Merger") of Button Gwinnett Bancorp, Inc. ("BGB"), a Georgia corporation, and The Gwinnett Financial Corporation ("GFC"), a Georgia corporation, on January 25, 1994. Following the Merger, the Company held all of the common stock of two subsidiary banks, The Bank of Gwinnett County (the "Bank"), a banking corporation chartered by the State of Georgia, and Button Gwinnett National Bank ("BGNB"), a national banking association. On September 25, 1993, the Bank acquired one of the two offices of BGNB which was located at 2230 Scenic Highway, Snellville, Georgia, and the Company sold the assets and liabilities associated with the other office of BGNB which was located at 4640 Jimmy Carter Boulevard, Norcross, Georgia, to Mountain Holding Corporation. This acquisition and sale is referred to herein as the "Reorganization." The Company was organized to facilitate the Bank's ability to serve its customers' requirements for financial services. The holding company structure also provides flexibility for expansion of the Company's banking business through the possible acquisition of other financial institutions and the provision of additional banking-related services that a traditional commercial bank may not provide under present laws. It is expected that the Company may make additional acquisitions in the future in the event that such acquisitions are deemed to be in the best interests of the Company and its shareholders. Such acquisitions, if any, will be subject to certain regulatory approvals and requirements. The Company is not presently involved in any such negotiations, but can enter into such negotiations from time to time. See Item 1 "Description of Business - Supervision and Regulation." From time to time, management of the Company reviews the permissible nonbanking activities in which the Company could engage, but currently has no specific plans with respect to any nonbanking activities. The Company's future nonbanking activities may include financial and other activities permitted by law, and such activities could be conducted by subsidiary corporations that have not yet been organized. Commencement of nonbanking operations by subsidiaries, if they are organized, will be contingent upon the approval by the Board of Directors of the Company and by appropriate regulatory authorities. The Bank The Bank is a full-service commercial bank. The Bank offers personal and business checking accounts, interest- bearing checking accounts, and various types of certificates of deposit. The Bank also provides financing for commercial transactions, makes secured and unsecured loans and provides other financial services to its customers. Market Area and Competition Gwinnett County, the Bank's primary service area, is located 25 miles northeast of downtown Atlanta, Georgia. Gwinnett County was chartered by the Georgia legislature in 1818 and was named for Button Gwinnett, a signer of the Declaration of Independence. Gwinnett county has 13 municipalities, including Lawrenceville, Snellville, Buford, Lilburn, Duluth and Norcross. The County Seat is Lawrenceville. The banking industry in Georgia is highly competitive. In recent years, intense market demands, economic pressures, rapidly 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. The Bank faces strong competition in attracting deposits and making loans. Its most direct competition for deposits comes from savings institutions, commercial banks, 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 Bank's competition for deposits. Competition for loans comes from savings institutions, commercial banks, insurance companies, consumer finance companies, credit unions and other institutional lenders. The Bank competes for loan originations through the interest rates and loan fees it charges and the efficiency and quality of services it provides. 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. Deposits The Bank offers a wide range of commercial and consumer deposit accounts, including noninterest bearing checking accounts, money market checking accounts (consumer and commercial), negotiable order of withdrawal ("NOW") accounts, individual retirement accounts, time certificates of deposit, and regular savings accounts. The sources of deposits typically are residents and businesses and their employees within the Bank's market area, and are obtained through personal solicitation by the Bank's officers and directors, direct mail solicitation, and advertisements published in the local media. The Bank pays competitive interest rates on time and savings deposits and has implemented a service charge fee schedule competitive with other financial institutions in the Bank's market area, covering such matters as maintenance fees on checking accounts, per item processing fees on checking accounts, returned check charges, and the like. Lending Activities The Bank makes primarily real estate-construction; commercial loans; and to a lesser extent consumer loans. As of December 31, 1995 such loans constituted 29.1%, 56.5% and 14.4%, respectively, of the loans. Real Estate Loans The Bank makes single-family residential construction loans for one-to four-unit structures. The Bank requires a first lien position on the land associated with the construction projects and offers these loans only to qualified residential building contractors. Loan disbursements require on-site inspections to assure the project is on budget and that the loan proceeds are being used in accordance with the plans, specifications and survey for the construction project and not being diverted to another project. The loan to value ratio for such loans is predominately 75% of the appraised value based on plans and specifications, and is a maximum of 80% if the loan is amortized. Loans for construction can present a high degree of risk to the lender, depending on, among other things, whether the builder can sell the home to a buyer, whether the buyer can obtain permanent financing, whether the transaction produces income in the interim, and the nature of changing economic conditions. The Bank also makes acquisition and development loans to Bank-approved developers for the purpose of developing acreage into single-family lots on which houses will be built. Loan disbursements require on-site inspections to assure the project is on budget and that the loan proceeds are being used for the development project and not being diverted to another project. The loan-to-value ratio for such loans does not exceed 75% of the discounted value, as defined in the appraisal report. Loans for acquisition and development can present a high degree of risk to the lender, depending upon, among other things, whether the developer can find builders to buy the lots, whether the builder can obtain financing, whether the transaction produces income in the interim and the nature of changing economic conditions. Commercial Loans Commercial lending is directed principally towards businesses whose demand for funds falls within the Bank's legal lending limits and are existing or potential deposit customers of the Bank. This category includes loans made to individual, partnership or corporate borrowers obtained for a variety of purposes. Risks associated with these loans can be significant. Risks include, but are not limited to, fraud, bankruptcy, economic downturn, deteriorated or non- existing collateral and changes in interest rates. Additionally, the Bank offers first mortgage loans on commercial real estate for owner occupied or investment real estate. Almost all conventional first mortgage loans originated by the Bank have a loan-to-value that does not exceed 80% with a maximum term of 20 years and call provisions every three to five years. Such loans carry fixed or adjustable interest rates. Risks involved with commercial mortgage lending include, but are not limited to, title defects, fraud, general real estate market deterioration, inaccurate appraisals, violation of banking protection laws, interest rate fluctuations and financial deterioration of borrower. The Bank also makes commercial loans to small businesses with respect to which the U.S. Small Business Administration ("SBA") guarantees repayment on varying percentages of the loan amount, subject to certain other limitations. The Bank may sell the guaranteed portion of these loans to institutional investors in the secondary markets. The Bank also participates in other SBA loan programs. Risks associated with these loans include, but are not limited to, credit risk, e.g., fraud, bankruptcy, economic downturn, deteriorated or non-existing collateral and changes in interest rates, and operational risk, e.g., failure of the Bank to adhere to SBA funding and servicing requirements in order to secure and maintain the SBA guarantees and servicing rights. Consumer Loans The Bank makes consumer loans, consisting primarily of installment loans to individuals for personal, family and household purposes, including loans for automobiles and investments, first mortgage residential loans and home equity lines of credit. Risks associated with these loans include, but are not limited to, fraud, bankruptcy, deteriorated or non-existing collateral, general economic downturn, interest rate fluctuations and customer financial problems. Investment Activities After establishing necessary cash reserves and funding loans, the Bank invests its remaining liquid assets in investments allowed under banking laws and regulations. The Bank invests primarily in obligations of the United States or obligations guaranteed as to principal and interest by the United States, and other taxable securities and in certain obligations of states and municipalities. The Bank also engages in Federal Funds transactions with its principal correspondent banks and primarily acts as a net seller of such funds. The sale of Federal Funds amounts to a short-term loan from the Bank to another bank. Risks associated with these investments include, but are not limited to, mismanagement in terms of interest rate, maturity and concentration. Asset/Liability Management It is the objective of the Bank to manage its assets and liabilities to provide a satisfactory, consistent level of profitability within the framework of established cash, loan, investment, borrowing and capital policies. Certain officers of the Bank are charged with the responsibility for developing and monitoring policies and procedures that are designed to insure acceptable composition of the asset/liability mix. It is the overall philosophy of management to support asset growth primarily through growth of core deposits, which include deposits of all categories made by individuals, partnerships and corporations. Management of the Bank seeks to invest the largest portion of the Bank's assets in small- to medium-sized business loans and real estate related loans. The Bank's asset/liability mix is monitored on a timely basis with a report reflecting interest-sensitive assets and interest- sensitive liabilities being prepared and presented to the Bank's Asset/Liability Committee on a monthly basis. The objective of this policy is to manage interest-sensitive assets and liabilities so as to minimize the impact of substantial movements and interest rates on the Bank's earnings. See "Selected Financial Data" in the Company's Annual Report to Shareholders, which is included in Exhibit 13.1 to this Annual Report on Form 10-KSB and is incorporated herein by reference. Employees As of December 31, 1995, the Bank had 47 full-time employees and 8 part time employees. The Bank is not a party to any collective bargaining agreement, and, in the opinion of management, enjoys excellent relations with its employees. The Company does not have any employees who are not also employees of the Bank. SELECTED STATISTICAL INFORMATION OF BUTTON GWINNETT FINANCIAL CORPORATION The following statistical information is provided for the Company for the years ended December 31, 1995 and 1994. The data is presented using daily average balances. This data should be read in conjunction with the financial statements incorporated into this Annual Report. Average Balances and Net Income Analysis The following tables set forth the amount of the Company'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.
---------------------- YEARS ENDED DECEMBER 31----------------------------- ------------1995-------------- - ---------1994------------------ AVERAGE AVERAGE INTEREST YIELD/ INTEREST YIELD AVERAGE INCOME/ RATE AVERAGE INCOME/ RATE BALANCE EXPENSE PAID BALANCE EXPENSE PAID (Dollars in Thousands) ASSETS Interest-earning assets: Loans, net of unearned income $ 99,937 $ 11,397 11.40% $ 78,283 $ 8,300 10.60% Federal Funds Sold 14,368 831 5.78% 8,589 345 4.02% Taxable investments 18,767 1,083 5.77% 14,919 816 5.47% Tax-exempt investments 4,364 211 4.84% 4,579 207 4.52% Interest-bearing deposits in banks 280 14 5.00% 1,095 50 4.57% Total interest-earning assets $137,716 $ 13,536 9.83% $107,465 $ 9,718 9.04% Noninterest-earning assets: Cash $ 6,809 $ 5,213 Allowance for loan losses (1,688) (1,299) Other Assets 6,053 7,357 Total noninterest-earning assets $ 11,174 $ 11,271 TOTAL ASSETS $148,890 $ 13,536 $118,736 $ 9,718 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: Interest-bearing demand deposits $ 33,349 $ 1,117 3.35% $ 30,145 $ 883 2.93% Savings and time deposits 67,256 3,690 5.49% 49,273 2,098 4.26% Debt 11 0 -- 0 0 -- Total interest-bearing liabilities $100,616 $ 4,807 4.78% $ 79,418 $ 2,981 3.75% Noninterest-bearing liabilities and stockholders' equity: Demand deposits $ 30,662 $ 22,690 Other liabilities 2,169 2,606 Stockholders' equity 15,443 14,022 Total noninterest-bearing liabilities and stockholders' equity $ 48,274 $ 39,318 Total liabilities and stockholders' equity $148,890 $ 4,807 $118,736 $ 2,981 Interest rate spread 5.05% 5.29% Net interest income $ 8,729 $ 6,737 Net interest margin 6.34% 6.27%
(1) Interest income on loans includes $1,368,493 and $1,340,913 of loan fee income for the years ended December 31, 1995 and 1994, respectively. Interest income on loans also includes $459 and $7,627 of interest income recognized on non accrual and renegotiated loans for the years ended December 31, 1995 and 1994, respectively. 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. The change in interest attributable to rate has been determined by applying the change in rate between the two years indicated 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.
----------------Years Ended December 31 ---------------- 1995 1994 Increase Changes Due To Increase Changes Due to (Decrease) Rate Volume (Decrease) Rate Volume Increase (decrease) in: Income from earning assets: Interest and fees on loans $3,097 $ 801 $2,296 $ 628 $ 331 $ 297 Interest on taxable investments 267 57 210 39 92 (53) Interest on tax-exempt investments 3 14 (11) 66 (81) 147 Interest on Federal Funds Sold 486 254 232 48 21 69 Interest on deposits in banks (36) 1 (37) (2) (31) 29 Total interest income $3,817 $1,127 $2,690 $ 779 $ 290 $ 489 Expense from interest-bearing liabilities: Interest on interest-bearing demand $ 234 $ 140 $ 94 $ 56 $ (14) $ 70 Interest on time and savings deposits 1,592 826 766 (143) (89) (54) Interest on debt 0 0 0 0 0 0 Total interest expense $1,826 $ 966 $ 860 $ (87) $ (103) $ 16 Net interest income $1,991 $ 161 $1,830 $ 866 $ (393) $ 473
Asset/Liability Management The following table sets forth the distribution of the repricing of the Company's earning assets and interest- bearing liabilities as of December 31, 1995, the cumulative interest rate sensitivity gap (i.e., interest rate sensitive assets less interest rate sensitive liabilities) and the cumulative interest rate sensitivity gap ratio (i.e., interest rate sensitive assets divided by interest rate sensitive liabilities). 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 Bank's 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. The Bank uses this tables as a tool to manage interest rate sensitivity and risk on certain products. What is not taken into consideration is the Company's strong capital position of 10% of the aggressive marketing and officer calling program that maintains 23% of the total deposits in non-interest bearing accounts, thus maintaining some of the highest returns on average assets for our peer group, as well as some of the highest net interest margins.
Within Within Within After Six One Five Five Months Year Years Years Interest-earning assets: Loans, net of unearned income $ 64,044 $ 70,522 $ 97,647 $100,698 Federal Funds sold 19,625 19,625 19,625 19,625 Taxable Investments 5,250 11,180 21,544 21,544 Tax-exempt investments 385 685 3,068 4,368 Interest-bearing deposits in banks 0 200 200 200 $ 89,304 $102,212 $142,084 $146,435 Interest Bearing Liabilities: Interest-bearing deposits $ 35,691 $ 35,691 $ 35,691 $ 35,691 Savings 6,132 6,132 6,132 6,132 Time Deposits 44,865 54,270 62,101 62,131 $ 86,688 $ 96,093 $103,924 $103,954 Cumulative Interest Rate Sensitivity Gap $ 2,616 $ 6,119 $ 38,160 $ 42,481 Cumulative Interest Rate Sensitivity Gap Ratio 103% 106% 137% 141%
The Company actively manages the mix of asset and liability maturities to control the effects of changes in the general level of interest rates on net interest income. 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 70% of the loan portfolio is comprised of loans which are variable rate terms or short-term obligations. 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, 71% of average other earning assets mature within one year. INVESTMENT PORTFOLIO
Types of Investments The carrying value and estimated market value of investment securities are as follows: Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Securities Held for Investment: December 31, 1995 U. S. Government and agency securities $21,543,639 $100,693 $ (61,439) $21,582,893 State and municipal securities 4,367,921 71,662 (13,300) 4,426,283 $25,911,560 $172,355 $ (74,739) $26,009,176 Securities Held for Investment: December 31, 1994 U. S. Government and agency securities $19,005,532 $ 2,175 $ (615,191) $18,392,516 State and municipal securities 4,656,082 39,572 (169,551) 4,526,103 $23,661,614 $ 41,747 $ (784,742) $22,918,619
Maturities The amounts of investment securities in each category as of December 31, 1995 and 1994 are shown in the following table according to 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.
---------Year Ended December 31 ----------- 1995 1994 U. S. Treasury and Other U. S. Government Agencies and Corporations (Dollars in Thousands) Amount Yield Amount Yield (1) (1) (2) Maturity: One year or less $ 7,180 6.00% $ 5,374 5.57% After one year through five years 13,364 5.53% 12,633 5.44% After five years through ten years 1,000 6.17% 999 6.13% After ten years -- -- $ 21,544 $19,006 State and Political Subdivisions (Dollars in Thousands) Amount Yield Amount Yield (1) (1) (2) Maturity: One year or less $ 685 3.96% $ 800 3.65% After one year through five years 2,383 4.68% 2,309 4.46% After five years through ten years 1,300 5.14% 1,350 5.10% After ten years -- 197 5.95% $ 4,368 $ 4,656
(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 municipal securities are not stated on a tax equivalent basis. LOAN PORTFOLIO Types of Loans The amount of loans outstanding at the indicated dates is shown in the following table according to type of loans and concentration of loans which exceed 10% of total loans. December 31 1995 1994 (Dollars in Thousands) Commercial and business $ 27,356 $ 23,283 Business loans secured by real estate 30,814 22,613 Real estate - construction 29,989 27,635 Real estate - mortgage 8,838 7,848 Consumer installment loans 5,906 6,028 Loans to other financial institutions -- -- Other loans 83 167 $102,986 $ 87,574 Deferred fees (334) (346) Reserve for loan losses (1,953) (1,464) Loans, net $100,699 $ 85,764 Maturities and Sensitivity to Changes in Interest Rates Total loans as of December 31, 1995 and 1994 are shown in the following table according to maturity classifications (1) one year or less, (2) after one year through five years, and (3) after five years. December 31 1995 1994 (Dollars in Thousands) Maturity: One year or less 64,574 $ 86,840 After one year through five years 34,204 17,493 After five years 4,208 1,241 $102,986 $ 87,574 The following table summarizes loans at December 31, 1995 with due dates after one year which (1) have predetermined interest rates and (2) have floating or adjustable interest rates. 1 - 5 Over 5 Years Years Total (Dollars in Thousands) Predetermined interest rates $ 27,558 $ 3,113 $ 30,671 Floating or adjustable rates 6,646 1,095 7,741 $ 34,204 $ 4,208 $ 38,412 Nonperforming Loans The following table presents, at December 31, 1995 and 1994, the aggregate of nonperforming loans for the categories indicated.
December 31 1995 1994 (Dollars in Thousands) Loans accounted for on a nonaccrual basis $ 95 $ 147 Installment loans and term loans 138 13 contractually past due ninety days or more as to interest or principal payments and still accruing 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 Loans now current about which there are -- -- serious doubts as to the ability of the borrower to comply with present loan repayment terms Interest income that would have been recorded on 11 19 nonaccrual and restructured loans under original terms Interest income that was recorded on a nonaccrual 1 8 and restructured loans The accrual of interest income on loans is discontinued when the loan become over 90 days past due. Interest previously accrued but not collected is charged against current period interest income when such loans are placed on nonaccrual status. Interest accruals are recorded on such loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to both principal and interest. 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. Effective January 1, 1995, the Company adopted Statement of Financial Accounting Standards No. 114 and, as amended, No. 188, "Accounting by Creditors for Impairment of a Loan". The statement prescribes that impaired loans be measured 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. The statement had no material effect on the financial statements of the Company as of December 31, 1995. Commitments and Lines of Credit In the ordinary course of business, the Bank has granted commitments to extend credit to approved customers. The Bank has 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 Bank uses the same credit and collateral policies for these off balance sheet commitments as it does 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. The following is a summary of the commitments outstanding at December 31, 1995 and 1994. December 31 1995 1994 (Dollars in Thousands) Commitments to extend credit $ 32,781 $ 30,939 Standby letters of credit 1,540 1,619 $ 34,321 $ 32,558 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 an other relevant factors. The Company's allowance for loan losses was approximately $1,953,189 at December 31, 1995, representing 1.90% of year end total loans outstanding, compared with $1,464,057 at December 31, 1994, which represented 1.68% of year end total loans outstanding. The allowance for loan losses is reviewed continuously 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 40% of the allowance should be allocated to real estate loans, 45% to commercial, financial and agricultural loans and 15% to consumer/installment loans as of December 31, 1995. Since the Bank was having excellent profits during 1995, management and the Board of Directors made the decision to put additional money into loan loss reserve. The economy seems to be sending mixed signals which contributed to this decision. The following table presents an analysis of the Company's loan loss experience for the year ended December 31, 1995.
December 31 1995 1994 (Dollars in Thousands) Average amount of loans outstanding $ 99,937 $ 78,283 Balance of reserve for possible loan losses at beginning of period $ 1,464 $ 1,249 Charge-offs: Commercial, financial and agricultural $ (76) $ (1) Real estate (28) (55) Consumer (17) (11) Recoveries: Commercial, financial and agricultural 0 5 Real estate 3 12 Consumer 7 10 Net charge-offs $ (111) $ (40) Additions to reserve charged to operating expenses $ 600 $ 255 Balance of reserve for possible loan losses $ 1,953 $ 1,464 Ratio of net loan charge-offs to average loans 0.11% .05%
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 years ended December 31, 1995 and 1994 is presented below.
December 31 1995 1994 Amount Rate Amount Rate (Dollars in Thousands) Noninterest-bearing demand deposits $ 30,662 ---% $ 22,690 - ---% Interest-bearing demand deposits 33,349 3.35% 30,145 2.93% Savings 6,430 2.68% 6,995 2.80% Time deposits 60,826 5.78% 42,278 4.50% Total deposits $131,267 $102,108
The amounts of time certificates of deposit issued in amounts of $100,000 or more as of December 31, 1995 and 1994, 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. December 31 1995 1994 Amount Amount (Dollars in Thousands) Three months or less $ 7,267 $ 3,583 Over three through six months 5,140 4,113 Over six through twelve months 2,556 3,197 Over twelve months 3,300 3,216 Total $ 18,263 $ 14,109 RETURN ON ASSETS AND SHAREHOLDERS' EQUITY The following rate of return information for the years ended December 31, 1995 and 1994 is presented below. December 31 1995 1994 Return on assets (1) 2.21% 1.93% Return on equity (2) 21.35% 16.39% Dividend payout ratio (3) 15.28% 18.99% Equity to assets ratio (4) 10.37% 11.81% (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. SUPERVISION AND REGULATION Bank holding companies and banks are extensively regulated under both Federal and state law. The following is a brief summary of certain statutes and rules and regulations affecting the Company and the Bank. This summary is qualified in its entirety by reference to the particular statute and regulatory provision referred to below and is not intended to be an exhaustive description of the statutes or regulations applicable to the business of the Company and the Bank. Supervision, regulation and examination of the Company and the Bank by the bank regulatory agencies are intended primarily for the protection of depositors rather than shareholders of the Company. Bank Holding Company Regulation The Company is a registered holding company under the Bank Holding Company Act of 1956, as amended (the "Federal Bank Holding Company Act"), and the Georgia Bank Holding Company Act (the "Georgia Bank Holding Company Act") and is regulated under such acts by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and by the Georgia Department of Banking and Finance (the "Georgia Department"), respectively. As a bank holding company, the Company is required to file annual reports with the Federal Reserve and the Georgia Department and such additional information as the applicable regulator may require pursuant to the Federal and Georgia Bank Holding Company Acts. The Federal Reserve and the Georgia Department may also conduct examinations of the Company to determine whether the institution is in compliance with both Bank Holding Company Acts and the regulations promulgated thereunder. The Federal Bank Holding Company Act also requires every bank holding company to obtain prior approval from the Federal Reserve before acquiring direct or indirect ownership or control of more than 5% of the voting shares of any bank which is not already majority owned or controlled by that bank holding company. Acquisitions of any additional banks would also require prior approval from the Georgia Department. On September 29, 1994, the President of the United States signed the "Riegel-Neal Interstate Banking and Branching Efficiency Act of 1994" (the "Interstate Branching Act"). The Interstate Branching Act amends Federal law to permit bank holding companies to acquire existing banks in any state effective September 29, 1995, subject to certain deposit - percentage, aging requirements and other restrictions. In addition, the Interstate Branching Act provides that any interstate bank holding company is permitted to merge its various bank subsidiaries into a single bank with interstate branches effective June 1, 1997. By adopting legislation prior to that date, a state has the authority either to "opt in" and accelerate the date after which interstate branching is permissible or to "opt out" and prohibit interstate branching altogether. In response to the Interstate Branching Act, the Georgia legislature adopted the "Georgia Interstate Branching Act." effective July 1, 1995, which provides that (1) interstate acquisitions by institutions located in Georgia will be permitted in states which also allow national interstate acquisitions, and (2) interstate acquisitions of institutions located in Georgia will be permitted by institutions located in states which also allow national interstate acquisitions; provided, however, that if the board of directors of a Georgia bank or bank holding company adopts a resolution to except such bank or bank holding company from being acquired pursuant to the provisions of the Georgia Interstate Banking Act and properly files a certified copy of such resolution with the Georgia Department, such bank or bank holding company may not be acquired by an institution located outside of the State of Georgia. Additionally, 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, 1996, the number of de novo bank branches which may be established will no longer be limited. In addition to having the right to acquire ownership or control of other banks, the Company is authorized to acquire ownership or control of nonbanking companies, provided the activities of such companies are so closely related to banking or managing or controlling banks that the Federal Reserve considers such activities to be proper to the operation and control of banks. Regulation Y, promulgated by the Federal Reserve, sets forth those activities which are regarded as closely related to banking or managing or controlling banks and, thus, are permissible activities for bank holding companies, subject to approval by the Federal Reserve in individual cases. Federal Reserve policy requires a bank holding company to act as a source of financial strength and to take measures to preserve and protect bank subsidiaries in situations where additional investments in a troubled bank may not be warranted. Under these provisions, a bank holding company may be required to loan money to its subsidiaries in the form of capital notes or other instruments which qualify for capital under regulatory rules. Any loans by the holding company to such subsidiary banks are likely to be unsecured and subordinated to such bank's depositors and perhaps to its other creditors. The Company is also subject to various federal securities laws, including the Securities Act of 1988 (the "1933 Act") and the Securities Exchange Act of 1934 (the "1934 Act"). The 1933 Act regulates the distribution or public offering of securities, while the 1934 Act regulates trading in securities that are already issued and outstanding. Both Acts provide civil and criminal penalties for misrepresentations and omissions in connection with the sale of securities, and the 1934 Act also prohibits market manipulation and insider trading. Pursuant to the 1934 Act, the Company files annual, quarterly and current reports with the Securities and Exchange Commission. In addition, the Company and its directors, executive officers and 5% shareholders are subject to certain additional reporting requirements, including requirements governing the submission of proxy statements and reports of beneficial ownership of the Company's securities. Bank Regulation The Bank operates as a bank organized under the laws of the State of Georgia subject to examination by the Georgia Department. The Georgia Department regulates all areas of the Bank's commercial banking operations including reserves, loans, mergers, payment of dividends, interest rates, establishment of branches, and other aspects of operations. The Bank is also insured and regulated by the Federal Deposit Insurance Corporation (the "FDIC"). The major functions of the FDIC with respect to insured banks include paying depositors to the extent provided by law in the event an insured bank is closed without adequately providing for payment of the claims of depositors, acting as a receiver of state banks placed in receivership when so appointed by state authorities, and preventing the continuance or development of unsound and unsafe banking practices. In addition, the FDIC is authorized to examine insured banks which are not members of the Federal Reserve to determine the condition of such banks for insurance purposes. The FDIC also approved conversions, mergers, consolidations and assumption of deposit liability transactions between insured banks and noninsured banks or institutions to prevent capital or surplus diminution in such transactions where the resulting, continued or assumed bank is an insured nonmember state bank. Subsidiary banks of a bank holding company are subject to certain restrictions imposed by the Federal Bank Holding Company Act on any extension of credit to the bank holding company or any of its subsidiaries, on investments in the stock or other securities of the bank holding company or its subsidiaries, and on the taking of such stock or securities as collateral for loans to any borrower. In addition, a bank holding company and its subsidiaries are prohibited from engaging in certain tie-in arrangements in connection with any extension of credit or provision of any property or services. Under Georgia law, a bank must obtain the approval of the Georgia Department before cash dividends may be paid if (1) the total classified assets at the most recent examination of such bank exceeded 80% of the equity capital, (2) the aggregate amount of dividends declared or anticipated to be declared in the calendar year exceeds 50% of the net profits, after taxes but before dividends, for the previous calendar year or (3) the ratio of equity capital to adjusted assets is less than 6%. The Bank is also subject to the provisions of the Community Reinvestment Act of 1977, which requires the appropriate federal bank regulatory agency, in connection with its regular examination of a bank, to assess the Bank's record in meeting the credit needs of the communities served by the Bank, including low- and moderate-income neighborhoods. Capital Requirements General Regulatory agencies measure capital adequacy within a framework that makes capital requirements sensitive to the risk profile of the individual banking institutions. The guidelines define capital as either Tier 1 capital (primarily shareholders equity) or Tier 2 capital (certain debt instruments and a portion of the reserve for loan losses). There are two measures of capital adequacy for bank holding companies and their subsidiary banks: the Tier 1 leverage ratio and the risk-based capital requirements. Bank holding companies and their subsidiary banks must maintain a minimum Tier 1 leverage ratio of 4%. In addition, Tier 1 capital must equal 4% of risk-weighted assets, and total capital (Tier 1 plus Tier 2) must equal 8% of risk-weighted assets. These are minimum requirements, however, and institutions experiencing internal growth or making acquisitions, as well as institutions with supervisory or operational weaknesses, will be expected to maintain capital positions well above these minimum levels. At December 31, 1995, the Bank had a Tier 1 leverage ratio of 10.62%, a Tier 1 risk-based ratio of 14.18%, and a Total risk-based ratio of 15.42%. Prompt Corrective Action The Federal Deposit Insurance Corporation Improvement Act of 1991 (the "FDIC Act") imposes a regulatory matrix which requires the federal banking agencies to take prompt corrective action to deal with depository institutions that fail to meet their minimum capital requirements or are otherwise in a troubled condition. The prompt corrective action provisions require undercapitalized institutions to become subject to an increasingly stringent array of restrictions, requirements and prohibitions, as their capital levels deteriorate and supervisory problems mount. Should these corrective measures prove unsuccessful in recapitalizing the institution and correcting its problems, the FDIC Act mandates that the institutions be placed in receivership. Pursuant to regulations promulgated under the FDIC Act, the corrective actions that the banking agencies either must or may take are tied primarily to an institution's capital levels. In accordance with the framework adopted by the FDIC Act, the banking agencies have developed a classification system, pursuant to which all banks and thrifts will be placed into one of five categories: well- capitalized institutions, adequately capitalized institutions; undercapitalized institutions, significantly undercapitalized institutions and critically undercapitalized institutions. The capital thresholds established for each of the categories are as follows:
Tier 1 Risk-Based Tier 1 Risk- Capital Category Capital Capital Based Capital Other Well Capitalized 5% or more 10% or more 6% or more Not subject to a capital directive Adequately 4% or more 8% or more 4% or more -- Capitalized Undercapitalized less than 4% less than 8% less than 4% -- Significantly less than 3% less than 6% less than 3% -- Undercapitalized Critically 2% of less Undercapitalized tangible equity -- -- --
The undercapitalized, significantly undercapitalized and critically undercapitalized categories overlap; therefore, a critically undercapitalized institution would also be an undercapitalized institution and a significantly undercapitalized institution. This overlap ensures that the remedies and restrictions prescribed for undercapitalized institutions will also apply in the lowest two categories. The down-grading of an institution's category is automatic in two situations: (1) whenever an otherwise well- capitalized institution is subject to any written capital order or directive, and (2) where an undercapitalized institution fails to submit or implement a capital restoration plan or has its plan disapproved. The Federal banking agencies may treat institutions in the well- capitalized, adequately capitalized and under capitalized categories as if they were in the next lower capital level based on safety and soundness considerations relating to factors other than capital levels. All insured institutions regardless of their level of capitalization are prohibited by the FDIC Act from paying any dividend or making any other kind of capital distribution or paying any management fee to any controlling person if following the payment or distribution the institution would be undercapitalized. While the prompt corrective action provisions of the FDIC Act contain no requirements or restrictions aimed specifically at adequately capitalized institutions, other provisions of the FDIC Act and the agencies' regulations relating to deposit insurance assessments, brokered deposits and interbank liabilities treat adequately capitalized institutions less favorably than those that are well-capitalized. At December 31, 1995, the Company and the Bank had the requisite capital levels to qualify as well-capitalized. The FDIC has adopted or currently proposes to adopt other rules pursuant to the FDIC Act that include: (1) real estate lending standards for banks, which would provide guidelines concerning loan-to-value ratios for various types of real estate loans; (2) revision to the risk-based capital rules to account for interest rate risk, concentration of credit risk and the risks proposed by "non-traditional activities"; (3) rules requiring depository institutions to develop and implement internal procedures to evaluate and control credit and settlement exposure to their correspondent banks; (4) a rule restricting the ability of depository institutions that are not well capitalized from accepting brokered deposits; (5) rules addressing various "safety and soundness" issues, including operations and managerial standards for asset quality, earnings and stock valuations, and compensation standards for the officers, directors, employees and principal shareholders of the depository institutions; (6) rules mandating enhanced financial reporting and audit requirements; and (7) rules restricting the ability of a state bank, or a subsidiary thereof, to engage as principal in activities not permissible for a national bank or make any investment not permissible for a national bank. FDIC Insurance Assessments In July 1993, the FDIC adopted a new risk-based assessment system for insured depository institutions that takes into account the risks attributable to different categories and concentrations of assets and liabilities. The new system, which went into effect on January 1, 1994, and replaced a transitional system that the FDIC had used for the 1993 calendar year, assigns an institution to one of three capital categories: (1) well-capitalized; (2) adequately capitalized; and (3) undercapitalized. These three categories are substantially similar to the prompt corrective action categories described above, with the undercapitalized category including institutions that are undercapitalized, significantly undercapitalized, and critically undercapitalized for prompt corrective action purposes. An institution is also assigned by the FDIC to one of three supervisory subgroups is based on a supervisory evaluation provided to the FDIC by the institution's primary federal regulator and information which the FDIC determines to be relevant to the institution's financial condition and the rise posed to the deposit insurance funds (which may include, if applicable, information provided by the institution's state supervisor). An institution's insurance assessment rate is then determined based on the capital category and supervisory category to which it is assigned. Under the final risk-based assessment system, as well as the prior transitional system, there are nine assessment risk classifications (i.e., combinations of capital groups and supervisory subgroups) to which different assessment rates are applied. Assessment rates for members of both the Bank Insurance Fund ("BIF") and the Savings Association Insurance Fund ("SAIF") for the first half of 1995, as they had during 1994, ranged from 23 basis points (0.23% of deposits) for an institution in the highest category (i.e., "well capitalized" and "healthy") to 31 basis points (0.31% of deposits) for an institution in the lowest category (i.e., "undercapitalized" and "substantial supervisory concern"). These rates were established for both funds to achieve a designated ratio of reserves to insured deposits (i.e., 1.25%) within a specified period of time. Once the designated ratio for the BIF was reached, which appears to have occurred some time during May 1995, the FDIC was authorized to reduce the minimum assessment rate below 23 basis points and to set future assessment rates at such levels that would maintain a fund's reserve ratio at the designated level. In August 1995, the FDIC adopted final regulations reducing the assessment rates for BIF-member banks. Under the revised schedule, BIF-member banks, starting with the second half of 1995, will not pay assessments ranging from 4 basis points to 41 basis points, with an average assessment ratio of 4.5 basis points. Refunds, with interest, were paid for assessments for the month(s) after the month in which the designated reserve ratio for the BIF was reached, as well as for the quarterly payment made on September 30, 1995, assuming that the designated reserve ratio was achieved prior to June 30, 1995. At the same time, the FDIC elected to retain the existing assessment rate of 23 to 31 basis points for SAIF members for the foreseeable future given the undercapitalized nature of that insurance fund. More recently, on November 14, 1995, the FDIC announced that,beginning in 1996, it would further reduce the deposit insurance premiums for 92% of all BIF members that are in the highest capital and supervisory categories to $2,000 per year, regardless of deposit size. On July 28, 1995, the FDIC, the Treasury Department, and the OTS released statements outlining a proposed plan to recapitalize the SAIF, certain features of which were subsequently agreed upon by members of the Banking Committees of the U. S. House of Representatives and the Senate on November 7, 1995 in negotiations to reconcile differences in bills on the issue that had been introduced or partially adopted by each body. Under the agreement, all SAID-member institutions would pay a special assessment to the SAIF of approximately 80 basis points, the amount that would enable the SAIF to attain its designated reserve of 1.25%. The special assessment would be payable on January 1, 1996, based on the amount of deposits held as of March 31, 1995. BIF-insured institutions holding SAIF-assessed deposits would receive a 20% reduction in the assessment rate and would pay a one-time assessment of 64 basis points. The agreement also provides that the assessment base for the bonds issued in the late 1980s by the Financing Corporation to recapitalize the now defunct Federal Savings and Loan Insurance Corporation would be expanded to include deposits of both BIF- and SAIF-insured institutions, with BIF members paying approximately 75% of the interest on such obligations. The committee members further agreed that the BIF and SAIF should be merged on January 1, 1998, with such merger being conditioned upon the prior elimination of the thrift charter. At this time, the Company is not able to predict if the recapitalization will take place, the timing or exact amount of any SAIF special assessment that might be required. However, if, for example an 80 basis point assessment were levied against the SAIF deposits of the Bank, the aggregate SAIF assessments of the Bank (on a pre- tax basis) would be approximately $326,504. Under the Federal Deposit Insurance Act, insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC. CRA On April 19, 1995, the 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 regulation contains three evaluation tests: (a) 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, (b) a services test which will evaluate the provision of services that promote the availability of credit to low- and moderate-income areas, and (c) 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 the 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 began for institutions with assets of less than $250 million that are owned by a holding company with total assets of less than $1 billion. Fair Lending Congress and various Federal agencies (including, in addition to the bank regulator 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 of the merits. On March 8, 1994, the Federal Agencies, in an effort to clarify what constitutes lending discrimination and to specify the factors the agencies will consider in determining if lending discrimination exists, announced a joint policy statement detailing specific discriminatory practices prohibited under the Equal Credit Opportunity Act and the Fair Housing Act. In the policy statement, three methods of proving lending discrimination were identified: (1) overt 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 fact and are applied equally, unless the practice can be justified on the basis of business necessity. Future Requirements Statutes and regulations are regularly introduced which contain wide-ranging proposals for altering the structures, regulations and competitive relationships of the nation's financial institutions. It cannot be predicted whether or what form any proposed statute or regulation will be adopted or the extent to which the business of the Company and the Bank may be affected by such statute or regulation. Monetary Policy The earnings of the Company are affected by domestic and foreign economic conditions, particularly by the monetary and fiscal policies of the United States government and its agencies. The Federal Reserve has had, and will continue to have, an important impact on the operating results of commercial banks through its power to implement national monetary policy in order, among other things, to mitigate recessionary and inflationary pressures by regulating the national money supply. The techniques used by the Federal Reserve include setting the reserve requirements of member banks and establishing the discount rate on member bank borrowings. The Federal Reserve also conducts open market transactions in United States government securities. ITEM 2. DESCRIPTION OF PROPERTIES The Company's main office is currently located at 2230 Scenic Highway, Snellville, Georgia 30278. The Bank currently has three banking offices which it owns without encumbrance. They are as follows: Main Office 150 S. Perry Street Lawrenceville, Georgia 30245 Lilburn Office 4700 U.S. Highway 29 Lilburn, Georgia 30247 Snellville Office 2230 Scenic Highway Snellville, Georgia 30278 The Bank also has one additional property, which is located at 234 Luckie Street, Lawrenceville, Georgia 30245 and is currently leased to RE/MAX Gwinnett, Inc. Other than normal real estate and commercial lending activities of the Bank, the Company generally does not invest in real estate, interests in real estate, real estate mortgages, or securities of or interests in persons primarily engaged in real estate activities. ITEM 3. LEGAL PROCEEDINGS There are no material pending proceedings to which the Company or the Bank is a party or to which any of their properties are subject other than routine litigation incidental to the Bank's business; nor are there material proceedings known to the Company to be contemplated by any governmental authority; nor are there material proceedings known to the Company, pending or contemplated, in which any director, officer or affiliate or any principal security holder of the Company, or any associate of any of the foregoing, is a party or has an interest adverse to the Company. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information set forth under the caption "Market for Registrants Common Equity and Related Stockholder Matters" in the Annual Report to Shareholders utilized in connection with the Company's 1996 Annual Shareholders Meeting, which is included as Exhibit 13.1 to this Annual Report on Form 10-KSB, is incorporated herein by reference. ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The information set forth under the caption "Management's Discussion and Analysis of Results of Operations and Financial Condition" in the Annual Report to Shareholders utilized in connection with the Company's 1996 Annual Shareholders Meeting, which is included as Exhibit 13.1 to this Annual Report on Form 10-KSB, is incorporated herein by reference. ITEM 7. FINANCIAL STATEMENTS The information set forth in the Annual Report to Shareholders utilized in connection with the Company's 1996 Annual Shareholders Meeting, which is included as Exhibit 13.1 to this Annual Report on Form 10-KSB, is incorporated herein by reference. ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT The information set forth under the caption "Election of Directors" in the Proxy Statement utilized in connection with the Company's 1996 Annual Shareholders Meeting is incorporated herein by reference. ITEM 10. EXECUTIVE COMPENSATION The information set forth under the caption "Executive Compensation" in the Proxy Statement utilized in connection with the Company's 1996 Annual Shareholders Meeting is incorporated herein by reference. ITEM 11 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information set forth under the caption "Principal Shareholders and Management" in the Proxy Statement utilized in connection with the Company's 1996 Annual Shareholders Meeting is incorporated herein by reference. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information set forth under the caption "Certain Transactions" in the Proxy Statement utilized in connection with the Company's 1996 Annual Shareholders Meeting is incorporated herein by reference. ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Exhibit 3.1 (1) Articles of Incorporation. 3.2 (1) Bylaws. 4.1 (1) Instruments Defining the Rights of Security Holders. (See Articles of Incorporation at Exhibit 3.1 hereto and Bylaws at Exhibit 3.2 hereto.) 10.1 (1) (2) Button Gwinnett Financial Corporation 1994 Stock Incentive Plan. 10.2 (1) (2) Button Gwinnett Financial Corporation Non-Qualified Stock Option Award (granted under the Button Gwinnett Financial Corporation 1994 Stock Incentive Plan). 10.3 (1) (2) Form of Button Gwinnett Financial Corporation Incentive Stock Award (granted under the Button Gwinnett Financial Corporation 1994 Stock Incentive Plan). 10.4 (2) Employment Agreement, dated as of September 9, 1994,between Glenn S. White and The Bank of Gwinnett County and Button Gwinnett Financial Corporation. 10.5 (2) Employment Agreement, dated as of September 9, 1994, between Andrew R. Pourchier and The Bank of Gwinnett County and Button Gwinnett Financial Corporation. 11.1 (1) Statement re: computation of per share earnings. 13.1 Annual Report as of and for the year ended December 31, 1995 furnished to shareholders for which certain specified pages are specifically incorporated herein by reference. 21.1 (1) Subsidiary of Button Gwinnett Financial Corporation 24.1 Power of Attorney (appears on the signature pages to this Report on Form 10-KSB). 27.1 Financial Data Schedule 99 Registrants Proxy Statement for the 1996 Annual Meeting of Shareholders to be held on April 15, 1996. Only those portions of this proxy statement that are specifically incorporated by reference on Form 10-KSB shall be deemed filed with the Securities and Exchange Commission. ____________________ (1) Incorporated herein by reference to Exhibit of the same number in the Company's Form 10-KSB for the year ended December 31, 1993. (2) Incorporated herein by reference to Exhibit of the same number in the Company's Form 10-KSB for the year ended December 31, 1994. (b) Reports on Form 8-K filed in the fourth quarter of 1995: None. 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. BUTTON GWINNETT FINANCIAL CORPORATION By:_____________________________________ Glenn S. White President Date: March 18, 1996 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears on the signature page to this Report constitutes and appoints Glenn S. White or Andrew R. Pourchier, and each of them, his or her true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for the undersigned and in his or her name, place, and stead, in any and all capacities, to sign any and all amendments to this Report, and to file the same, with all exhibits hereto, and other documents in connection herewith with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in- fact and agents or any of them, or their or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. Signature Title Date David R. Bowen Director March 18, 1996 Robert A. Bradshaw Director March 18, 1996 James F. Brannan, Jr. Director March 18, 1996 James R. Brown Director March 18, 1996 W. Emmett Clower Director March 18, 1996 Jean A. Coppage Director March 18, 1996 Edwin F. Forrext Director March 18, 1996 David G. Hanna Director March 18, 1996 J. Richard Norton, Sr. Director March 18, 1996 Andrew R. Pourchier Vice President/ March 18, 1996 Secretary/Treasurer Director (Principal Financial and Accounting Officer) John D. Stephens Chairman of the Board/ Director March 18, 1996 Judy A. Waters Director March 18, 1996 Warren O. Wheeler Director March 18, 1996 Glenn S. White President/Director March 18, 1996 (Principal Executive Officer Bobby W. Williams Director March 18, 1996 EX-99 2 Button Gwinnett Financial Corporation 1995 Annual Report to Shareholders 2230 Scenic Highway Snellville, Georgia 30278 GENERAL INFORMATION Button Gwinnett Financial Corporation is a one-bank holding company, owning 100% of the stock of The Bank of Gwinnett County. The Bank of Gwinnett County ("The Bank") has three locations located within the Lawrenceville, Lilburn and Snellville city limits. The Bank opened for business in April 1988 as a state chartered bank. Gwinnett County has been one of the fastest growing counties in the country and State of Georgia for the last ten years, with the population growing from some 225,000 to over 400,000 in 1995. FINANCIAL HIGHLIGHTS BUTTON GWINNETT FINANCIAL CORPORATION SELECTED FINANCIAL DATA Selected Balance Sheet Data For Year End December 31 (Ending Balances) 1995 1994 ___________________________ ______________________________ Total Assets $159,199,966 $126,802,444 Total Deposits 140,804,199 111,051,445 Shareholders Equity 16,914,803 14,924,750 Allowance for Loan Losses 1,953,189 1,464,057 Financial Ratios Stockholder Equity as a Percent of Total Assets 10.6% 11.8% Book Value Per Share $12.23 $10.33 Dividends Per Share 0.35 0.30 Net Interest Margin 6.34% 6.27% Net Income Per Share $ 2.29 $ 1.58 Return on Average Equity 21.35 16.39 Return on Average Assets 2.21 1.93 Loan Loss Reserve to Total Loans 1.90 1.68 Selected Income Data Total Interest Income $ 13,536,217 $ 9,718,521 Total Interest Expense 4,807,424 2,980,811 Provision for Loan Loss 600,000 255,000 Other Expenses 4,312,416 3,850,994 Net Income $ 3,297,321 $ 2,297,206 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 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 Bank to meet those needs. The Company and the Bank 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 Bank maintains relationships with correspondent banks which could provide funds to them on a short notice, if needed. The liquidity and capital resources of the Company and the Bank are monitored on a periodic basis by Federal and state regulatory authorities. As determined under guidelines established by those regulatory authorities, the Bank's liquidity ratios at December 31, 1995 were considered satisfactory. At that date, the Bank's short-term investments were adequate to cover any reasonably anticipated immediate need for funds. The Company and the Bank were not aware of any events or trends likely to result in a material change in their liquidity. At December 31, 1995, the Company's and the Bank's capital to asset ratios were considered adequate based on guidelines established by the regulatory authorities. During 1995, the Company increased its capital by retaining net earnings of $1,990,053, which is net income for the year plus stock options exercised, less treasury stock and dividends paid. At December 31, 1995, total capital of the Company amounted to $16,914,803. At December 31, 1995, there were no outstanding commitments for any major capital expenditures. Management is not aware of any current recommendations by the regulatory authorities which, if they were to be implemented, would have a material effect on the Company's liquidity, capital resources or operations. Results of Operations 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 Bank's ability to obtain an adequate spread between the rate earned on 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, divided by average earning assets. The primary component of consolidated earnings is net interest income, or the difference between interest income on earning assets and interest paid on supporting liabilities. The net interest margin is net interest income expressed as a percentage of average earning assets. Earning assets consist of loans, investment securities, Federal funds sold and interest- bearing deposits in banks. Supporting liabilities consist of deposits, of which approximately 23% are noninterest-bearing. The net interest margin increased by 1.12% to 6.34% in 1995 as compared to 6.27% in 1994. The yield on average earning assets increased in 1995 to 9.83% from 9.04% in 1994 or 8.74% and the rate of interest paid on average interest-bearing liabilities increased from 3.75% in 1994 to 4.78% in 1995 or 27.47%. Net interest income was $8,728,793 in 1995 as compared to $6,737,710 in 1994, representing an increase of 29.55% Average earning assets increased by $30,251,000 or 28.15% to $137,716,000 in 1995 from $107,465,000 in 1994. Average loans increased by $21,654,000; average investments increased by $3,633,000; and average interest-bearing deposits in banks decreased by $815,000. Average deposits increased $29,170,000 or 28.56% to $131,267,000 in 1995 from $102,108,000 in 1994. Approximately 23% of the average deposits were noninterest- bearing deposits in 1995. Average assets increased $30,154,000 or 25.40% to $148,890,000 as compared to $118,736,000 in 1994. The allowance for loan losses represents a reserve for potential losses in the loan portfolio. The adequacy of the allowance for loan losses in 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 $600,000 in 1995 and $255,000 in 1994. Management chose to increase its provision for loan losses during 1995 as the economy was sending mixed signals. Net charge-offs increased by $71,386 in 1995 as compared to 1994. Net loan charge-offs as a percentage of the provision for loan losses amounted to 18% in 1995 and 15% in 1994. The allowance for loan losses as a percentage of total loans outstanding at December 31, 1995 and 1994 amounted to 1.90% and 1.68%, respectively. The determination of the amounts allocated for loan losses is based upon management's judgment concerning factors affecting loan quality and assumptions about the local and national economy. Management considers the year- end allowances adequate to cover potential losses in the loan portfolio. Following is a comparison of noninterest income for 1995 and 1994.
1995 1994 Service Charges on deposit accounts $ 702,150 $650,874 Other 260,847 243,461 Gain on sale of assets 316,036 -- $1,279,033 $894,335
Noninterest income increased approximately $385,000 in 1995 as compared to 1994. This increase was primarily due to the gain on the sale of a tract of land the Bank had purchased as a potential future branch site. Following is an analysis of noninterest expense for 1995 and 1994.
1995 1994 Salaries and employee benefits $2,169,080 1,845,026 Equipment 280,299 316,391 Occupancy expense 226,839 253,915 Data processing 128,165 118,081 FDIC/OAKAR assessment 433,462 227,628 Other real estate expenses 11,145 180,275 Other 1,063,426 909,678 $4,312,416 $3,850,994
Noninterest expense increased approximately $460,000 in 1995. There was a increase of $324,000 in salaries and employee benefits as a result of the addition of commercial lending officers and other personnel. A decrease of approximately $36,000 in equipment expense was due to the reduction of depreciation expense incurred in 1995 as compared to 1994. There was also a decrease in occupancy expense of $19,000 during 1995 which was a result of rental expense paid in 1994 on a branch site that was closed in 1993. An increase of $10,000 in data processing expense was the result of an increase in the number of new accounts. An increase of approximately $205,000 for FDIC/OAKAR assessment is attributed to OAKAR fees that have been accrued to transfer certain insured deposits from the SAIF fund to the BIF fund. There was a decrease of approximately $169,000 in other real estate expense as compared to the same period in 1994, which was primarily the write-down on a closed branch bank office that was sold during 1994. There was also an increase of $153,000 in other expenses; $75,000 of this was incurred as a result of a lawsuit which arose and was settled during 1995; approximately $50,000 of this increase is attributed to the purchase of office supplies and postage expenses incurred from increased account volume; and approximately $16,000 is atributed to the increase in check printing charges incurred by the Bank for customers who transferred deposit relationships from other financial institutions. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock, $.01 par value ("Common Stock"), is not traded on an established trading market, and there is only very limited trading. The following table sets forth high and low bid information for the Common Stock for each of the quarters in which trading has occurred since January 1, 1994. The prices set forth below have been volunteered by shareholders and reflect only information that has come to management's attention.
Sales Price Dividends Calendar Period High Low 1995 First quarter $13.25 $13.25 Second quarter 15.00 12.90 $0.35 Third quarter 14.50 14.50 Fourth quarter 14.50 14.50 1994 First quarter $10.00 $ 8.75 $0.30 Second quarter 9.30 9.15 Third quarter 10.65 10.45 Fourth quarter 13.25 10.75
As of December 31, 1995, there were 493 holders of record of Common Stock. The Company paid a dividend of $.35 per share on April 1, 1995. Currently, the Company's sole source of dividends is the Bank. The Bank is subject to regulation by the Department of Banking and Finance of Georgia (the "DBF"). Statutes and regulations enforced by the DBF include parameters which defined when the Bank may or may not pay dividends. On December 31, 1995, there was approximately $1,640,000 available to be paid as dividends to the Company by the Bank without prior approval from the DBF. BUTTON GWINNETT FINANCIAL CORPORATION AND SUBSIDIARY CONSOLIDATED FINANCIAL REPORT DECEMBER 31, 1995 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Button Gwinnett Financial Corporation Lawrenceville, Georgia We have audited the accompanying consolidated balance sheets of Button Gwinnett Financial Corporation and subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for the years ended December 31, 1995, 1994 and 1993. 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 Button Gwinnett Financial Corporation and subsidiary as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the years ended December 31, 1995, 1994 and 1993, in conformity with generally accepted accounting principles. Atlanta, Georgia January 26, 1996
Assets 1995 1994 Cash and due from banks $ 6,582,328 $ 8,086,110 Securities held to maturity, at cost (estimated fair value of $26,009,176 and $22,918,619) 25,911,560 23,661,614 Bank owned certificates of deposit 200,000 300,000 Federal funds sold 19,625,000 2,945,000 Loans, net 100,698,574 85,764,011 Premises and equipment, net 3,848,195 4,461,750 Other assets 2,334,309 1,583,959 $159,199,966 $126,802,444 Liabilities and Stockholders' Equity Deposits Noninterest-bearing demand $ 36,850,139 $ 31,159,784 Interest-bearing demand 35,691,143 28,130,476 Savings 6,131,845 6,639,704 Time, $100,000 and over 18,263,816 14,443,881 Other time 43,867,176 30,677,600 Total deposits 140,804,119 111,051,445 Accrued expenses and other liabilities 1,481,044 826,249 Total liabilities 142,285,163 111,877,694 Commitments and contingent liabilities Stockholders' equity Preferred stock, par value $.01, 5,000,000 shares authorized; none issued Common stock, par value $.01; 5,000,000 shares authorized, 1,527,639 and 1,527,539 shares issued, respectively 15,276 15,275 Surplus 13,354,771 13,353,647 Retained earnings 5,109,869 2,297,206 18,479,916 15,666,128 Less cost of 145,002 and 82,828 shares acquired for the treasury 1,565,113 741,378 Total stockholders' equity 16,914,803 14,924,750 $159,199,966 $126,802,444
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 Interest income Interest and fees on loans $ 11,396,642 $ 8,299,919 $ 7,672,695 Interest on taxable securities 1,082,895 815,958 749,883 Interest on nontaxable securities 211,158 207,488 159,108 Interest on bank deposits and other investments 14,646 50,391 51,931 Interest on Federal funds sold 830,876 344,765 305,786 13,536,217 9,718,521 8,939,403 Interest expense on deposit accounts 4,807,424 2,980,811 3,068,031 Net interest income before provision for loan losses 8,728,793 6,737,710 5,871,372 Provision for loan losses 600,000 255,000 290,326 Net interest income after provision for loan losses 8,128,793 6,482,710 5,581,046 Other income Service charges on deposit accounts 702,150 650,874 691,937 Other 260,847 243,461 209,587 Gain on sale of land 316,036 -- -- Gain on sale of assets -- -- 525,000 1,279,033 894,335 1,426,524 Other expense Salaries and employee benefits 2,169,080 1,845,026 1,875,720 Equipment expense 280,299 316,391 322,642 Occupancy expense 226,839 253,915 409,658 Data processing 128,165 118,081 203,814 FDIC insurance premiums 173,462 227,628 226,053 Other real estate expenses 11,145 180,275 80,805 OAKAR deposit assessment expense 260,000 -- -- Other 1,063,426 909,678 1,212,242 4,312,416 3,850,994 4,330,934 Income before applicable income taxes $ 5,095,410 $ 3,526,051 $ 2,676,636 Applicable income taxes 1,798,089 1,228,845 748,153 Net income $ 3,297,321 $ 2,297,206 $ 1,928,483 Per share of common and common equivalent share Net income $ 2.29 $ 1.58 $ 1.31
See Notes to Consolidated Financial Statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 Common Stock Par Shares Value Surplus Balance, December 31, 1992 1,525,798 $ 15,258 $ 11,098,485 Net income Purchase of treasury stock -- -- -- Cash dividends paid, $.30 per share -- -- -- Balance, December 31, 1993 1,525,798 15,258 11,098,485 Net income -- -- -- Common stock issued for cash upon the exercise of stock options 1,741 17 13,545 Purchase of treasury stock -- -- -- Cash dividends paid, $.30 per share -- -- -- Transfer to surplus -- -- 2,241,617 Balance, December 31, 1994 1,527,539 15,275 13,353,647 Net income -- -- -- Common stock issued for cash upon the exercise of stock options 100 1 1,124 Purchase of treasury stock -- -- -- Cash dividends paid, $.35 per share -- -- -- Balance, December 31, 1995 1,527,639 $ 15,276 $ 13,354,771 Treasury Stock Retained Shares Cost Earnings Total Balance, December 31, 1992 2,200 $ (174,000) $ 1,186,150 $12,125,893 Net income -- -- 1,928,483 1,928,483 Purchase of treasury stock - 50,573 (422,022) -- (422,022) Cash dividends paid, $.30 per share -- -- (436,508) (436,508) Balance, December 31, 1993 70,773 (596,022) 2,678,125 13,195,846 Net income -- -- 2,297,206 2,297,206 Common stock issued for cash upon the exercise of stock options -- -- 13,562 Purchase of treasury stock 12,055 (145,356) -- (145,356) Cash dividends paid, $.30 per share -- -- (436,508) (436,508) Transfer to surplus -- -- (2,241,617) -- Balance, December 31, 1994 82,828 (741,378) 2,297,206 14,924,750 Net income -- -- 3,297,321 3,297,321 Common stock issued for cash upon the exercise of stock options -- -- -- 1,125 Purchase of treasury stock 62,174 (823,735) -- (823,735) Cash dividends paid, $.35 per share -- -- (484,658) (484,658) Balance, December 31, 1995 145,002 $(1,565,113) $ 5,109,869 $16,914,803
See Notes to Consolidated Financial Statements. CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,297,321 $ 2,297,206 $ 1,928,483 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 271,187 331,443 294,274 Provision for loan losses 600,000 255,000 290,326 OAKAR deposit assessment expense accrual 260,000 -- -- Gain of sale of land (316,036) -- -- Gain on sale of assets -- -- (525,000) Deferred taxes (55,625) (65,365) (126,560) Increase (decrease) in taxes payable (81,929) (45,475) 47,150 (Increase) decrease in interest receivable (147,804) (323,072) 93,171 Increase in interest payable 490,372 88,811 70,037 Other prepaids, deferrals and accruals, net (560,569) 118,248 (421,414) Total adjustments 459,596 359,590 (278,016) Net cash provided by operating activities 3,756,917 2,656,796 1,650,467 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of securities held to maturity (9,165,000) (11,850,000) (6,033,214) Proceeds from maturities of securities held to maturity 6,915,054 3,161,744 6,651,253 Net (increase) decrease in Federal funds sold (16,680,000) 9,905,000 (8,275,000) Net increase in loans (15,534,563) (12,728,559) (2,287,479) Proceeds from the sale of assets 721,452 -- 890,000 Proceeds from Government Corporation Bank stock -- -- 385,600 Net decrease (increase) in bank owned certificates of deposit 100,000 1,989,000 (1,390,000) Purchase of premises and equipment, net (63,048) (108,894) (242,101) Net cash used in investing activities (33,706,105) (9,631,709) (10,300,941)
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,297,321 $ 2,297,206 $ 1,928,483 CASH FLOWS FROM FINANCING ACTIVITIES Net increase in deposits $ 29,752,674 $ 11,169,868 $ 4,941,578 Purchase of treasury stock (823,735) (145,356) (422,022) Dividends paid (484,658) (436,508) (436,508) Proceeds from exercise of stock options 1,125 13,562 -- Net cash provided by financing activities 28,445,406 10,601,566 4,083,048 Net increase (decrease) in cash and due from banks (1,503,782) 3,626,653 (4,567,426) Cash and due from banks at beginning of year 8,086,110 4,459,457 9,026,883 Cash and due from banks at end of year $ 6,582,328 $ 8,086,110 $ 4,459,457 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for: Interest $ 4,317,052 $ 2,892,000 $ 2,997,994 Income taxes $ 1,935,643 $ 1,339,685 $ 827,563 NONCASH TRANSACTION, Loans transferred to other real estate $ 30,000 $ 223,451 $ 121,358
See Notes to Consolidated Financial Statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Button Gwinnett Financial Corporation was incorporated in July 1987 as Button Gwinnett Bancorp, Inc. The Company is a one-bank holding company whose business is presently conducted by its subsidiary, The Bank of Gwinnett County. The Bank of Gwinnett County (the Bank) is a commercial bank with operations in Gwinnett County, Georgia. The Bank provides a full range of banking services to individual and corporate customers in its primary market area of Lawrenceville, Georgia; Snellville, Georgia; Lilburn, Georgia; Gwinnett County and the surrounding areas. The Bank is subject to competition from other financial institutions and the regulations of certain Federal and state agencies. The Bank is periodically examined by certain regulatory authorities. The accounting and reporting policies of the Bank 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. Basis of Presentation The consolidated financial statements include the accounts of the Company and its subsidiary. Significant intercompany transactions and accounts are eliminated in consolidation. Assets held by the Bank in a fiduciary or agency capacity are not assets of the Company and are not included in the consolidated financial statements. 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 Bank, deposits, interest-bearing deposits and Federal funds purchased and sold are reported net. The Bank maintains amounts due from banks which, at times, may exceed Federally insured limits. The Bank has not experienced any losses in such accounts. Securities Available for Sale Securities classified as available for sale are those debt securities that the Bank 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 Bank's assets and liabilities, liquidity needs, regulatory capital considerations and other similar factors. Securities available for sale are carried at fair value. Unrealized gains and losses are reported as increases or decreases in stockholders' equity, net of the related deferred tax effect. Realized gains and 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 Bank 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. Realized gains and losses on the sale of securities available for sale, if any, are determined using the specific-identification method. 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. Interest on some installment loans is credited to income based on the sum-of-the- months-digits method, the results of which are not materially different from generally accepted accounting principles. Accrual of interest income is discontinued on loans when, in the opinion of management, collection of such interest becomes doubtful. Accrual of interest on such loans is resumed when, in management's judgment, the collection of interest and principal becomes probable. Nonrefundable loan fees and certain direct loan origination costs are accounted for in accordance with Statement of Financial Accounting Standards Number 91 (SFAS No. 91), "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases". SFAS No. 91 requires these fees and costs to be deferred and the net amount recognized into income over the life of the loans as a yield adjustment. 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. 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 Bank's allowance for loan losses, and may require the Bank to record additions to the allowance based on their judgment about information available to them at the time of their examinations. 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 31.50 Equipment 3-7 Income Taxes The Company and its subsidiary file a consolidated income tax return. The subsidiary provides for income taxes based on its contribution to income taxes (benefits) of the consolidated group. Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences 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. Earnings Per Share Earnings per share is calculated on the weighted average number of shares of common stock and common stock equivalents outstanding during the period. Stock options granted, as described in Note 7 are considered to be common stock equivalents for purposes of calculated net income per share. Common stock equivalents that are anti-dilutive are excluded from weighted average outstanding shares. NOTE 2. INVESTMENTS IN SECURITIES The carrying amounts of investments in securities as shown in the consolidated balance sheets and their approximate fair values at December 31, 1995 and 1994 were as follows:
Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Securities Held to Maturity December 31, 1995: U. S. Government and agency securities $ 21,543,639 $ 100,693 $ (61,439) $ 21,582,893 State and municipal securities 4,367,921 71,662 (13,300) 4,426,283 $ 25,911,560 $ 172,355 $ (74,739) $ 26,009,176 December 31, 1994: U. S. Government and agency securities $ 19,005,532 $ 2,175 $(615,191) $ 18,392,516 State and municipal securities 4,656,082 39,572 (169,551) 4,526,103 $ 23,661,614 $ 41,747 $(784,742) 22,918,619 The amortized cost and fair value of securities as of December 31,1995 by contractual maturity are shown below. Amortized Cost Fair Value Due in one year or less $ 7,865,200 $ 7,894,251 Due from one year to five years 15,751,288 15,787,509 Due from five to ten years 2,295,072 2,327,416 $25,911,560 $26,009,176
Effective January 1, 1994, the Bank adopted SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities". Due to the Bank's adequate liquidity levels and intentions to hold the securities to maturity, no securities were transferred to securities available for sale. Securities with a carrying value of $2,000,233 and $998,055 at December 31, 1995 and 1994, respectively, were pledged to secure public deposits and for other purposes. At December 31, 1995 and 1994, respectively, no securities were classified as available for sale. There were no sales of securities during 1995, 1994 or 1993. NOTE 3. LOANS AND ALLOWANCE FOR LOAN LOSSES The composition of loans is summarized as follows:
December 31, 1995 1994 Commercial and financial $ 27,356,000 $ 23,283,000 Business loans secured by real estate 30,814,000 22,613,000 Real estate - construction 29,989,000 27,635,000 Real estate - mortgage 8,838,000 7,848,000 Consumer installment loans 5,906,000 6,028,000 Other 83,143 167,417 102,986,143 87,574,417 Deferred fees (334,380) (346,349) Reserve for loan losses (1,953,189) (1,464,057) Loans, net $100,698,574 $ 85,764,011
Loans on which the accrual of interest had been discontinued or reduced amounted to $94,874 and $147,074 at December 31, 1995 and 1994, respectively. The reduction in interest income associated with nonaccrual and renegotiated loans is as follows:
Year Ended December 31, 1995 1994 1993 Income in accordance with original loan terms $ 10,933 $ 18,698 $ 31,099 Income recognized (459) (7,627) (18,164) Reduction in interest income $ 10,474 $ 11,071 $ 12,935
There were no other loans considered impaired other than the nonaccrual loans listed above. At December 31, 1995, management considered no loans impaired in accordance with Financial Accounting Standard No. 114. In the normal course of business, the Bank has made loans at prevailing interest rates and terms to directors and executive officers of the Company. The aggregate dollar amount of these loans, as defined, was $3,464,967 at December 31, 1995 and $3,124,616 at December 31, 1994. During 1995, $2,070,324 of loans were made and repayments totaled $1,729,973. None of the related party loans as of December 31, 1995 were restructured, nor were any amounts charged off during 1995. Changes in the allowance for loan losses are as follows:
Year Ended December 31, 1995 1994 1993 Balance, beginning of year $ 1,464,057 $ 1,248,539 $ 1,067,762 Provisions charged to operations 600,000 255,000 290,326 Loans charged off (121,424) (67,449) (130,424) Recoveries 10,556 27,967 45,875 Adjustment due to sale of assets (Note 11) -- -- (25,000) Balance, end of year $ 1,953,189 $ 1,464,057 $ 1,248,539
NOTE 4. PREMISES AND EQUIPMENT, NET Major classifications of these assets are summarized as follows: December 31, 1995 1994 Land $ 1,241,377 $ 1,644,793 Buildings 2,715,658 2,715,658 Furniture, fixtures and equipment 1,318,584 1,257,545 5,275,619 5,617,996 Accumulated depreciation (1,427,424) (1,156,246) $ 3,848,195 $ 4,461,750 Depreciation expense for the years ended December 31, 1995, 1994 and 1993 was $271,178, $331,443 and $294,274, respectively. NOTE 5. INCOME TAXES The total income taxes in the consolidated statements of income are as follows:
Years Ended December 31, 1995 1994 1993 Currently payable $ 1,853,714 $ 1,294,210 $ 997,622 Deferred (55,625) (65,365) (126,560) Benefit of net operating loss carryforward -- -- (122,909) $ 1,798,089 $ 1,228,845 $ 748,153
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 Tax provision at statutory rate $ 1,732,439 34 % $ 1,198,857 34 % $ 910,056 34 % Increase (decrease) resulting from: Tax-exempt interest (69,100) (1) (70,546) (2) (49,716) (2) Net operating loss deduction -- -- -- -- (122,909) (5) State income tax 115,035 2 76,721 2 -- -- Other items, net 19,715 -- 23,813 1 10,722 1 Provision for income taxes $ 1,798,089 35 % $ 1,228,845 35 % $ 748,153 28 %
Net deferred income tax assets of $396,151 and $340,526 at December 31, 1995 and 1994, respectively, are included in other assets. The components of deferred income taxes at December 31, 1995 and 1994 are as follows:
December 31, 1995 1994 Deferred tax assets: Loan loss reserves $ 580,688 $ 396,090 Other -- 6,236 580,688 402,326 Deferred tax liabilities: Depreciation and amortization 53,807 61,800 Deferred gain on sale of land 119,272 -- Other 11,458 -- 184,537 61,800 Net deferred tax assets $ 396,151 $ 340,526
The deferred gain on sale of land is not recognized for tax purposes due to the client having the proceeds from the sale placed in an escrow account. These funds will be reinvested in like-kind property as soon as specific property is acquired. NOTE 6. EMPLOYEE BENEFIT PLAN The Bank has a contributory 401(K) retirement plan covering all employees, subject to certain minimum age and service requirements. The Bank contributed $33,712, $29,779 and $24,991 to the plan for the years ended December 31, 1995, 1994 and 1993, respectively. In 1994, the Bank adopted a deferred compensation agreement with three of its key employees which provides benefits payable at age sixty-five or if the employee becomes totally disabled. Under certain circumstances, benefits are payable to the employee's beneficiary. The present value of the estimated liability under the agreement is being accrued over the expected remaining years of employment. Deferred compensation expense for 1995 totaled $8,691. NOTE 7. EMPLOYEE STOCK OPTION PLAN The Company has adopted an Employee Stock Option Plan with 250,000 shares of common stock reserved for options to key employees. Option prices will be determined by the Company's Stock Option Plan Committee, but cannot be less than 100% of the fair value of the Company's common stock on the date of the grant. As of December 31, 1995, options have been granted as follows:
Number of Options Options Options Granted Expire Price Shares Exercised Terminated Unexercised 1988 1998 $ 7 17,881 6,000 3,000 8,881 1989 1999 8 31,545 4,741 2,250 24,554 1990 2000 8 35,570 -- 2,003 33,567 1991 2001 9 5,500 -- -- 5,500 1992 2002 9 26,329 -- 1,306 25,023 1993 2003 11 29,700 100 500 29,100 1994 2004 12 28,500 -- -- 28,500 1995 2005 15 29,206 -- -- 29,206
The Company also has outstanding options to purchase 34,828 shares of stock to one key officer. These options were granted in connection with the formation of the Bank. These options are exercisable at book value on the most recent quarterly report of condition of the Company before the exercise date. These options expire April 19, 1999. NOTE 8. COMMITMENTS AND CONTINGENT LIABILITIES In the normal course of business, the Bank 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 Bank's exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank 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 Bank's commitments is as follows: . December 31, 1995 1994 Commitments to extend credit $ 32,781,113 $ 30,939,349 Standby letters of credit 1,540,126 1,619,039 $ 34,321,239 $ 32,558,388 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 Bank evaluates each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank 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, inventory, equipment and personal property. Standby letters of credit are conditional commitments issued by the Bank 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 Bank deems necessary. The Company or the Bank does not anticipate any material losses as a result of the commitments and contingent liabilities. In the normal course of business, the Bank is involved in various legal proceedings. In the opinion of management, 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 Bank makes commercial, residential and consumer loans to customers primarily in Gwinnett County. A substantial portion of the Bank's customers' abilities to honor their contracts is dependent on the business economy in Gwinnett and surrounding areas. The Bank, as a matter of policy, does not generally extend credit to any single borrower or group of related borrowers in excess of 25% of the Bank's combined common stock and surplus accounts ($12,000,000) which amounted to $3,000,000 at December 31, 1995. A substantial portion of the Bank's loans are secured by real estate in the Bank's primary market area. Accordingly, the ultimate collectibility of a substantial portion of the Bank's loan portfolio is susceptible to changes in market conditions in the Bank's primary market area. The concentrations of credit by type of loan are set forth in Note 3. NOTE 10. STOCKHOLDERS' EQUITY 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 Bank are as follows: Actual Regulatory Requirement Leverage capital ratio 10.62 % 4.00 % Risk based capital ratios: Core capital 14.18 4.00 Total capital 15.42 8.00 Banking regulations limit the amount of dividends that may be paid without prior approval of the Bank's regulatory agency. Approximately $1,640,000 are available to be paid as dividends to the holding company by the Bank at December 31, 1995. NOTE 11. BUSINESS COMBINATION AND SALE OF ASSETS On January 25, 1993, the stockholders of the Company approved a merger with The Gwinnett Financial Corporation, Lawrenceville, Georgia. The plan of merger allowed for stockholders of The Gwinnett Financial Corporation to receive for each share of The Gwinnett Financial Corporation common stock, 1.7414 shares of the Company's common stock. The combination was accounted for as a pooling of interests and, accordingly, all prior consolidated financial statements have been restated to include The Gwinnett Financial Corporation. The Company's name was changed from Button Gwinnett Bancorp, Inc. to Button Gwinnett Financial Corporation. All per share amounts have been restated to reflect this transaction. The cash dividends paid prior to the merger were paid on the outstanding shares of The Gwinnett Financial Corporation. Also, on September 25, 1993, the Company sold approximately $5,500,000 of assets that were primarily located at its Jimmy Carter location to another bank. The purchasing bank assumed approximately $5,135,000 in deposits and paid $890,000 in cash. The Company realized a $525,000 gain on this transaction. This gain is reported in the consolidated financial statements as a gain on sale of assets. NOTE 12. 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 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, including interest-bearing deposits Federal funds sold Variable rate loans that reprice frequently Equity line loans Variable rate money market accounts and other demand deposits Variable rate certificates of deposit Accrued interest receivable Accrued interest payable Quoted market prices, where available. If quoted market prices were not available, fair values were 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. The carrying value and estimated fair values of the Company's financial instruments at December 31, 1995 are as follows:
Carrying Fair Value Value Financial assets: Cash and short-term investments $ 26,407,328 $ 26,407,328 Investment securities $ 25,911,560 $ 26,009,176 Loans $102,651,763 $102,600,000 Less allowance for loan losses 1,953,189 Loans, net $100,698,574 $102,600,000 Accrued interest receivable $ 1,062,948 $ 1,062,948 Financial liabilities: Noninterest-bearing demand $ 36,850,139 $ 36,850,139 Interest-bearing demand 35,691,143 35,691,143 Savings 6,131,845 6,131,845 Time deposits 62,130,992 62,400,000 Total deposits $140,804,119 $141,073,127 Accrued interest payable $ 1,005,238 $ 1,005,238
NOTE 13. CONDENSED FINANCIAL INFORMATION ON BUTTON GWINNETT FINANCIAL CORPORATION (PARENT COMPANY ONLY)
CONDENSED BALANCE SHEETS DECEMBER 31, 1995 AND 1994 1995 1994 Assets Interest-bearing deposits $ 815,149 $ 957,523 Investment in bank 16,100,533 13,970,183 $16,915,682 $14,927,706 Liabilities, other $ 879 $ 2,956 Stockholders' equity 16,914,803 14,924,750 Total liabilities and stockholders' equity $16,915,682 $14,927,706
CONDENSED STATEMENTS OF INCOME YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 Income Dividend $ 1,150,000 $ 436,508 $ 436,508 Interest 29,973 31,516 15,004 1,179,973 468,024 451,512 Net investment income 1,179,973 468,024 451,512 Other income Gain on sale of assets -- -- 525,000 Other income 40 80 -- 40 80 525,000 Other operating expense 13,042 40,809 75,937 Income before income tax benefits and equity in net income of subsidiary 1,166,971 427,295 900,575 Income tax benefits -- -- (5,915) Income before equity in net income of subsidiary 1,166,971 427,295 906,490 Equity in net income of subsidiary 2,130,350 1,869,911 1,021,993 Net income $ 3,297,321 $2,297,206 $1,928,483
CONDENSED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 3,297,321 $ 2,297,206 $ 1,928,483 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of organization costs -- -- 1,256 Equity in net income of subsidiary (2,130,350) (1,869,911) (1,021,993) Gain on sale of assets -- -- (525,000) Other prepaids, deferrals and accruals, net (2,077) (3,347) (17,343) Total adjustments (2,132,427) (1,873,258) (1,563,080) Net cash provided by operating activities 1,164,894 423,948 365,403 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from the sale of assets (Note 11) -- -- 890,000 Net cash provided by investing activities -- -- 890,000 CASH FLOWS FROM FINANCING ACTIVITIES Purchase of treasury stock (823,735) (145,356) (422,022) Cash dividends paid (484,658) (436,508) (436,508) Proceeds from exercise of stock options 1,125 13,562 - -- Net cash used in financing activities (1,307,268) (568,302) (858,530) Net increase (decrease) in cash and cash equivalents $(142,374) $ (144,354) $ 396,873 Cash and cash equivalents at beginning of year 957,523 1,101,877 705,004 Cash and cash equivalents at end of year $ 815,149 $ 957,523 $1,101,877 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash (received) during the year for income taxes $ -- $ -- $ (5,915)
BUTTON GWINNETT FINANCIAL CORPORATION AND THE BANK OF GWINNETT COUNTY GENERAL INFORMATION GENERAL OFFICES BOARD OF DIRECTORS 2230 Scenic Highway W. Emmett Clower Snellville, GA 30278 Emmett Clower Studio MAILING ADDRESS Jean A. Coppage Real Estate Investor P. O. Box 1230 Lawrenceville, GA 30246 Edwin F. Forrest Central Drywall, Inc. EXECUTIVE OFFICERS John D. Stephens David G. Hanna Chairman of the Board HBR Capital of Directors J. Richard Norton, Sr. Glenn S. White Norton Southeast, Inc. President and CEO Andrew R. Pourchier Andrew R. Pourchier The Bank of Gwinnett County Vice President, Secretary and Treasurer John D. Stephens John D. Stephens, Inc. BOARD OF DIRECTORS Judy W. Waters David R. Bowen Gwinnett County Board of RMT Development Company Commissioners Robert A. Bradshaw Warren O. Wheeler Bradshaw, Pope & Franklin Schreeder, Wheeler & Flint James F. Brannan, Jr. Glenn S. White Lawrenceville Auto Parts The Bank of Gwinnett County James R. Brown Bobby W. Williams Retired, Lumber Company Perimeter Investment Corp. Executive ANNUAL MEETING DATE: APRIL 15, 1996 TIME: 2:00 P.M. EST PLACE: 150 SOUTH PERRY STREET LAWRENCEVILLE, GEORGIA 30246 EX-27 3
9 YEAR DEC-31-1995 DEC-31-1995 6582328 200000 19625000 0 0 25911560 26009176 102651763 1953189 159199966 140804119 0 1841044 0 15276 0 0 16899527 159199966 11396642 2139575 0 13536217 4807424 4807424 8728793 600000 0 4312416 5095410 5095410 0 0 3297321 2.38 2.29 8.64 94874 0 0 0 1454057 111424 10556 1953189 176 0 1953013
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