UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1997 Commission File Number 0-22787
FOUR OAKS FINCORP, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-2028446
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
6144 U S 301 South
Four Oaks, North Carolina
(Address of principal executive offices)
27524
(Zip Code)
Registrant's telephone number, including area code: (919) 963-2177
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $1.00 per share
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days: |X|YES |_| NO
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. |_|
$23,696,192
(Aggregate market value of voting stock held by nonaffiliates of the registrant)
884,958
(Number of shares of Common Stock, par value $1.00 per share,
outstanding as of March 9, 1998)
Documents Incorporated by Reference Where Incorporated
(1) Annual Report to Shareholders for Part II and IV
Fiscal Year Ended December 31, 1997
(2) Proxy Statement for the Annual Part III
Meeting of Shareholders to be held
April 27, 1998.
PART I
Item 1 - Business.
On February 5, 1997, Four Oaks Bank & Trust Company (the "Bank") formed
Four Oaks Fincorp, Inc. ( the "Company") for the purpose of serving as a
holding company for the Bank. Thereafter, the Bank caused the Company to
form a wholly-owned subsidiary interim North Carolina banking corporation,
New Four Oaks Bank (the "Interim Bank"), to facilitate the reorganization.
On July 1, 1997, the Interim Bank merged with and into the Bank (the
"Merger"). The Bank is the survivor of the Merger and, as of the date of the
Merger, the Interim Bank no longer exists. The effect of the Merger is that the
Company is a holding company for the Bank and is the sole shareholder of the
Bank. The Company has no significant assets other than the capital stock of the
Bank. The corporate offices of the Company and the Bank are located at 6144 US
301 South, Four Oaks, North Carolina 27524.
Pursuant to the Merger, the Bank's Common Stock has been converted on a
share-for-share basis into Common Stock of the Company that have rights,
privileges and preferences identical to those of the Bank. The Common Stock of
the Company is registered under Section 12(g) of the Securities Exchange Act of
1934, as amended (the "1934 Act") pursuant to Rule 12g-3 promulgated under the
1934 Act.
Effective July 1, 1997, the Bank no longer files reports with the Federal
Deposit Insurance Corporation pursuant to Section 12(i) of the 1934 Act.
Effective such date, the Company has been filing reports with the Securities and
Exchange Commission (the "Commission") pursuant to the 1934 Act.
The Bank was incorporated under the laws of the State of North Carolina in
1912. The Bank is not a member of the Federal Reserve System. In addition to the
main office, the Bank has a branch office in Four Oaks located at 111 North Main
Street, one in Clayton, North Carolina at 102 East Main Street, two in
Smithfield, North Carolina at 128 North Second Street, and 403 South Bright Leaf
Boulevard, one in Garner, North Carolina at 200 Glen Road and one in Benson,
North Carolina at 200 E. Church Street.
The Bank is a community bank engaged in the general commercial banking
business in Johnston County, North Carolina which is located in Eastern North
Carolina. Johnston County is contiguous to Wake, Wayne, Wilson, Harnett, Sampson
and Nash counties.
As of December 31, 1997, the Bank had assets of $190,071,000, net loans
outstanding of $138,099,000 and deposits of $167,988,000. The Bank has enjoyed
considerable growth over the past five years as evidenced by the 107% increase
in assets, the 129% increase in net loans outstanding, and the 108% increase in
deposits since December 31, 1992.
The Bank provides a full range of banking services, including such services
as checking accounts, savings accounts, NOW accounts, money market accounts,
certificates of deposit, a student checking and savings program; loans for
businesses, agriculture, real estate, personal uses, home improvement and
automobiles; equity lines of credit; credit cards; individual retirement
accounts; discount brokerage services; safe deposit boxes; bank money orders;
electronic funds transfer services, including wire transfers; traveler's checks;
and free notary services to all Bank customers. In addition, the Bank provides
automated teller machine access to its customers for cash withdrawals through
the services of the HONOR and CIRRUS networks which offer customers access to
automated teller machines nationwide. At present, the Bank does not provide the
services of a trust department.
The majority of the Bank's customers are individuals and small to
medium-size businesses located in Johnston County and surrounding areas. The
deposits and loans are well diversified with no material concentration in a
single industry or group of related industries. There are no seasonal factors
that would have any material adverse effect on the Bank's business, and the Bank
does not rely on foreign sources of funds or income.
From its headquarters located in Four Oaks and its six offices located in
Four Oaks, Clayton, Smithfield, Garner and Benson, the Bank serves a major
portion of Johnston County. Johnston County has a diverse economy and is not
dependent on any one particular industry. The leading industries in the area
include electronics, pharmaceutical, textile, agriculture, livestock, and
poultry.
2
Commercial banking in North Carolina is extremely competitive due in large
part to statewide branching. The Bank competes in its market area with some of
the largest banking organizations in the state and other financial institutions
such as federally and state-chartered savings and loan institutions and credit
unions as well as consumer finance companies, mortgage companies and other
lenders engaged in the business of extending credit. Many of the Bank's
competitors have broader geographic markets and higher lending limits than the
Bank and are also able to provide more services and make greater use of media
advertising.
Interstate banking in North Carolina and other Southeastern states has
greatly increased the size and financial resources of some of the Bank's
competitors. In addition, as a result of interstate banking, out-of-state
commercial banks may compete in North Carolina by acquiring North Carolina banks
and thus increase the prospects for additional competition in North Carolina.
See "Holding Company Regulation" below.
Despite the competition in its market area, the Bank believes that it has
certain competitive advantages which distinguish it from its competition. The
Bank believes that its primary competitive advantages are its strong local
identity and affiliation with the community and its emphasis on providing the
very best service possible at reasonable and competitive prices. The Bank
believes that it offers customers modern, high-tech banking services without
forsaking community values such as prompt, personal service and friendliness.
Amounts spent on research activities relating to the development or improvement
of services have been immaterial over the past five years. At December 31, 1997,
the Bank employed 81 full time equivalent employees.
The following table sets forth certain financial data and ratios with
respect to the Bank for the years ended December 31, 1997, 1996, and 1995. This
information should be read in conjunction with and is qualified in its entirety
by reference to the more detailed audited financial statements and notes thereto
which accompany this report:
1997 1996 1995
---- ---- ----
(In thousands, except ratios)
Net Income $2,122 $1,821 $1,524
Average equity capital accounts $15,495 $13,580 $12,132
Ratio of net income to average equity
capital accounts 13.69% 13.41% 12.56%
Average daily total deposits $154,397 $129,775 $110,395
Ratio of net income to average daily
total deposits 1.37% 1.40% 1.38%
Average daily loans $130,376 $103,559 $85,223
Ratio of average daily loans to average
daily total deposits 84.44% 79.80% 77.20%
Governmental Regulation
Holding companies, banks and many of their non-bank affiliates are
extensively regulated under both federal and state law. The following is a brief
summary of certain statutes, rules and regulations affecting the Company and the
Bank. This summary is qualified in its entirety by reference to the particular
statutory and regulatory provisions referred to below and is not intended to be
an exhaustive description of the statutes or regulations applicable to the
Company's or the Bank's business. Supervision, regulation and examination of the
Company and the Bank by bank regulatory agencies is intended primarily for the
protection of the Bank's depositors rather than holders of the Common Stock of
the Company.
Holding Company Regulation
General. The Company is a holding company registered with the Federal
Reserve under the Bank Holding Company Act of 1956 (the "BHCA"). As such, the
Company and the Bank are subject to the supervision, examination and reporting
requirements contained in the BHCA and the regulation of the Federal Reserve.
The BHCA requires that a bank holding company obtain the prior approval of the
Federal Reserve before (i) acquiring direct or indirect ownership or control of
more than five percent of the voting shares of any bank, (ii) taking any
3
action that causes a bank to become a subsidiary of the bank holding company,
(iii) acquiring all or substantially all of the assets of any bank or (iv)
merging or consolidating with any other bank holding company.
The BHCA generally prohibits a bank holding company, with certain
exceptions, from engaging in activities other than banking, or managing or
controlling banks or other permissible subsidiaries, and from acquiring or
retaining direct or indirect control of any company engaged in any activities
other than those activities determined by the Federal Reserve to be closely
related to banking, or managing or controlling banks, as to be a proper incident
thereto. In determining whether a particular activity is permissible, the
Federal Reserve must consider whether the performance of such an activity can
reasonably be expected to produce benefits to the public, such as greater
convenience, increased competition or gains in efficiency, that outweigh
possible adverse effects, such as undue concentration of resources, decreased or
unfair competition, conflicts of interest or unsound banking practices. For
example, banking, operating a thrift institution, acquiring or servicing loans,
leasing personal property, conducting discount securities brokerage activities,
performing certain data processing services, acting as agent or broker in
selling credit life insurance and certain other types of insurance underwriting
activities have all been determined by regulations of the Federal Reserve to be
permissible activities.
Pursuant to delegated authority, the Federal Reserve Bank of Richmond has
authority to approve certain activities of holding companies within its
district, including the Company, provided the nature of the activity has been
approved by the Federal Reserve. Despite prior approval, the Federal Reserve has
the power to order a holding company or its subsidiaries to terminate any
activity or to terminate its ownership or control of any subsidiary when it has
reasonable cause to believe that continuation of such activity or such ownership
or control constitutes a serious risk to the financial safety, soundness or
stability of any bank subsidiary of that bank holding company.
The Riegle-Neal Interstate Banking and Branching Efficiency Act of 1994
(the "IBBEA") permits interstate acquisitions of banks and bank holding
companies without geographic limitation, subject to any state requirement that
the bank has been organized for a minimum period of time, not to exceed five
years, and the requirement that the bank holding company, prior to, or following
the proposed acquisition, controls no more than ten percent of the total amount
of deposits of insured depository institutions in the U.S. and no more than 30%
of such deposits in any state (or such lesser or greater amount set by state
law).
In addition, the IBBEA permits a bank to merge with a bank in another state
as long as neither of the states has opted out of interstate branching prior to
May 31, 1997. The state of North Carolina has "opted in" to such legislation,
effective June 22, 1995. In addition, a bank may establish and operate a de novo
branch in a state in which the bank does not maintain a branch if that state
expressly permits de novo interstate branching. As a result of North Carolina's
opt-in law, North Carolina law permits unrestricted interstate de novo
branching.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the Federal Reserve on any extensions of credit to the
bank holding company or any of its subsidiaries, investments in the stock or
securities thereof and the acceptance of such stock or securities as collateral
for loans to any borrower. A bank holding company and its subsidiaries are also
prevented from engaging in certain tie-in arrangements in connection with any
extension of credit, lease or sale of property or furnishing of services.
The Federal Reserve may issue cease and desist orders against bank holding
companies and non-bank subsidiaries to stop actions believed to present a
serious threat to a subsidiary bank. The Federal Reserve also regulates certain
debt obligations, changes in control of bank holding companies and capital
requirements.
Under the provisions of the North Carolina law, the Company is registered
with and subject to supervision by the North Carolina Commissioner of Banks (the
"Commissioner").
Capital Requirements. The Federal Reserve has established risk-based
capital guidelines for bank holding companies and state member banks based on
the capital framework for international banking organizations developed by the
Basle Committee on Banking Regulations and Supervisory Practices. The minimum
standard for the ratio of capital to risk-weighted assets (including certain off
balance sheet obligations, such as standby letters of credit) is eight percent.
At least half of this capital must consist of common equity, retained earnings
and a limited amount of perpetual preferred stock and minority interests in the
equity accounts
4
of consolidated subsidiaries, less certain goodwill items ("Tier 1 capital").
The remainder ("Tier 2 capital") may consist of mandatory convertible
debt securities and a limited amount of other preferred stock, subordinated
debt and loan loss reserves.
In addition, the Federal Reserve has established minimum leverage ratio
guidelines for bank holding companies. These guidelines provide for a minimum
leverage ratio of Tier 1 capital to adjusted average quarterly assets less
certain amounts ("Leverage Ratio") equal to three percent for bank holding
companies that meet certain specified criteria, including having the highest
regulatory rating. All other bank holding companies will generally be required
to maintain a Leverage Ratio of between four percent and five percent.
The guidelines also provide that bank holding companies experiencing
internal growth or making acquisitions will be expected to maintain strong
capital positions substantially above the minimum supervisory levels without
significant reliance on intangible assets. Furthermore, the guidelines indicate
that the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board") will continue to consider a "tangible Tier 1 Leverage Ratio" (deducting
all intangibles) in evaluating proposals for expansion or new activity. The
Federal Reserve has not advised the Company of any specific minimum Leverage
Ratio or tangible Tier 1 Leverage Ratio applicable to it.
As of December 31, 1997 the Company had Tier 1 risk-adjusted, total
regulatory capital and leverage capital of approximately 11.7%, 12.9% and 8.5%,
respectively, all in excess of the minimum requirements.
Bank Regulation
The Bank is subject to numerous state and federal statutes and regulations
that affect its business, activities, and operations, and is supervised and
examined by the Commissioner and the Federal Reserve. The Federal Reserve and
the Commissioner regularly examine the operations of banks over which they
exercise jurisdiction. They have the authority to approve or disapprove the
establishment of branches, mergers, consolidations, and other similar corporate
actions, and to prevent the continuance or development of unsafe or unsound
banking practices and other violations of law. The Federal Reserve and the
Commissioner regulate and monitor all areas of the operations of banks and their
subsidiaries, including loans, mortgages, issuances of securities, capital
adequacy, loss reserves, and compliance with the Community Reinvestment Act of
1977 (the "CRA") as well as other laws and regulations. Interest and certain
other charges collected and contracted for by banks are also subject to state
usury laws and certain federal laws concerning interest rates.
The deposit accounts of the Bank are insured by the Bank Insurance Fund
(the "BIF") of the Federal Deposit Insurance Corporation (the "FDIC") up to a
maximum of $100,000 per insured depositor. The FDIC issues regulations and
conducts periodic examinations, requires the filing of reports, and generally
supervises the operations of its insured banks. This supervision and regulation
is intended primarily for the protection of depositors. Any insured bank that is
not operated in accordance with or does not conform to FDIC regulations,
policies, and directives may be sanctioned for noncompliance. Civil and criminal
proceedings may be instituted against any insured bank or any director, officer,
or employee of such bank for the violation of applicable laws and regulations,
breaches of fiduciary duties, or engaging in any unsafe or unsound practice. The
FDIC has the authority to terminate insurance of accounts pursuant to procedures
established for that purpose.
Although the Company is not subject to any direct legal or regulatory
restrictions on dividends (other than the requirements under the North Carolina
corporation laws that a distribution may not be made if after giving it effect
the Company would not be able to pay its debts as they become due in the usual
course of business or the Company's total assets would be less than its
liabilities), the Company's ability to pay cash dividends is dependent upon the
amount of dividends paid by its subsidiary. The ability of the Bank to pay
dividends to the Company is subject to statutory and regulatory restrictions on
the payment of cash dividends, including the requirement under the North
Carolina banking laws that cash dividends be paid only out of undivided profits
and only if the bank has surplus of a specified level. Federal bank regulatory
agencies also have the general authority to limit the dividends paid by insured
banks and bank holding companies if such payment is deemed to constitute an
unsafe and unsound practice.
5
Like the Company, the Bank is required by federal regulations to maintain
certain minimum capital levels. The levels required of the Bank are the same as
required for the Corporation. At December 31, 1997, the Bank had Tier 1
risk-adjusted, total regulatory capital and leverage capital of approximately
11.5%, 12.7% and 8.5%, respectively, all in excess of the minimum requirements.
The Bank is subject to insurance assessments imposed by the FDIC. Effective
January 1, 1997, the FDIC adopted a risk-based assessment schedule providing for
annual assessment rates ranging from 0% to .27% of an institution's average
assessment base, applicable to institutions insured by both the BIF and the
Savings Association Insurance Fund ("SAIF"). The actual assessment to be paid by
each insured institution is based on the institution's assessment risk
classification, which is based on whether the institution is considered "well
capitalized," "adequately capitalized" or "under capitalized," as such terms are
defined in the applicable federal regulations, and whether the institution is
considered by its supervisory agency to be financially sound or to have
supervisory concerns. The FDIC also is authorized to impose one or more special
assessments in any amount deemed necessary to enable repayment of amounts
borrowed by the FDIC from the United States Treasury Department and, beginning
in 1997, all banks are required to pay additional annual assessments at the rate
of .013%. Effective January 1, 1999, there will be a merger of the SAIF and the
BIF insurance funds of the FDIC.
Banks are also subject to the CRA, which requires the appropriate federal
bank regulatory agency, in connection with its examination of a bank, to assess
such bank's record in meeting the credit needs of the community served by that
bank, including low and moderate-income neighborhoods. The regulatory agency's
assessment of the bank's record is made available to the public. Further, such
assessment is required of any bank which has applied to (i) charter a national
bank, (ii) obtain deposit insurance coverage for a newly chartered institution,
(iii) establish a new branch office that will accept deposits, (iv) relocate an
office or (v) merge or consolidate with, or acquire the assets or assume the
liabilities of, a federally regulated financial institution. In the case of a
bank holding company applying for approval to acquire a bank or other bank
holding company, the Federal Reserve will assess the record of each subsidiary
bank of the applicant bank holding company, and such records may be the basis
for denying the application.
Monetary Policy and Economic Controls
The Company and the Bank are directly affected by governmental policies and
regulatory measures affecting the banking industry in general. Of primary
importance is the Federal Reserve Board, whose actions directly affect the money
supply and, in general, affect banks' lending abilities by increasing or
decreasing the cost and availability of funds to banks. The Federal Reserve
Board regulates the availability of bank credit in order to combat recession and
curb inflationary pressures in the economy by open market operations in United
States government securities, changes in the discount rate on member bank
borrowings, changes in reserve requirements against bank deposits, and
limitations on interest rates that banks may pay on time and savings deposits.
Deregulation of interest rates paid by banks on deposits and the types of
deposits that may be offered by banks have eliminated minimum balance
requirements and rate ceilings on various types of time deposit accounts. The
effect of these specific actions and, in general, the deregulation of deposit
interest rates has generally increased banks' cost of funds and made them more
sensitive to fluctuations in money market rates. In view of the changing
conditions in the national economy and money markets, as well as the effect of
actions by monetary and fiscal authorities, no prediction can be made as to
possible future changes in interest rates, deposit levels, loan demand, or the
business and earnings of the Bank or the Company. As a result, banks, including
the Bank, are facing a significant challenge to maintain acceptable net interest
margins.
6
Executive Officers of the Company.
The following table sets forth certain information with respect to
the executive officers of the Company:
Positions and Offices with Company
Year first and business experience
Name Age employed during past five years
---- --- -------- ----------------------
Ayden R. Lee, Jr. 49 1980 Chief Executive Officer, President and
Director of the Company and the Bank
Clifton L. Painter 48 1986 Senior Executive Vice President, Chief
Operating Officer of the Company and the
Bank, City Executive of the Bank
Nancy S. Wise 42 1991 Senior Vice President, Chief Financial
Officer of the Company and the Bank
W. Leon Hiatt, III 30 1994 Senior Vice President of the Company and the
Bank, Loan Administrator of the Bank. From
March 1990 until joining the Bank, Mr. Hiatt
served as a Financial Institutions Examiner
for the FDIC
Item 2 - Properties.
The Bank owns its main office which is located at 6144 U S 301 South, Four
Oaks, North Carolina. The main office which was constructed by the Bank in 1985
is a 12,000 square foot facility on 1.64 acres of land. The Bank leases an
additional branch office in downtown Four Oaks located at 111 North Main Street
from M.S. Canaday, a director of the Company and the Bank. Under the terms of
the lease, which the Bank believes to be arms-length, the Bank paid $780
per month in rent in 1997. The term of the lease is currently five years
beginning January 1, 1994 with annual increases based on the Consumer Price
Index. The Bank owns a 5,000 square foot facility renovated in 1992 on 1.15
acres of land located at 5987 U S 301 South, Four Oaks, North Carolina which
houses the training center and the Bank's wide area network central link. In
addition, the Bank owns the following:
Location Year Built Present Function Square Feet
- -------- ---------- ---------------- -----------
102 East Main Street 1986 Branch Office 4,200
Clayton, North Carolina
200 E. Church Street 1987 Branch Office 2,000
Benson, North Carolina
128 North Second Street 1991 Branch Office 3,400
Smithfield, North Carolina
6365 U. S. 301 South (1) (1) 1,202
Four Oaks, North Carolina
403 S. Bright Leaf Blvd. 1995(2) Limited-Service Facility 720
Smithfield, North Carolina
200 Glen Road 1996 Branch Office 3,600
Garner, North Carolina
- -----------------------------
(1) This office was closed in 1995.
(2) This building was remodeled in 1995.
7
Item 3 - Legal Proceedings.
The Company is not involved in any material legal proceedings at the
present time.
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.
This information is incorporated by reference from Page 31, "Corporate
Information" of the Company's 1997 Annual Report to Shareholders included as
Exhibit 13.1.
Item 6 - Selected Financial Data.
This information is incorporated by reference from Page 5, "Selected
Financial Data" of the Company's 1997 Annual Report to Shareholders included as
Exhibit 13.1.
Item 7 - Management's Discussion and Analysis of Financial Condition and Results
of Operations.
This information is incorporated by reference from Pages 7-15,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" of the Company's 1997 Annual Report to Shareholders included as
Exhibit 13.1.
Item 8 - Financial Statements and Supplementary Data.
This information is incorporated by reference from Pages 16-30, of the
Company's 1997 Annual Report to Shareholders included as Exhibit 13.1.
Item 9 - Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10 - Directors and Executive Officers of the Registrant.
Director information is incorporated by reference from Pages 4 and 5,
"Election of Directors" and Pages 7 and 8, "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement for the Annual Meeting of
Shareholders to be held April 27, 1998. Information on the Company's executive
officers is included under the caption "Executive Officers of the Company" on
Page 7 of this report.
Item 11 - Executive Compensation and Transactions.
This information is incorporated by reference from Pages 6, 7 and 8,
"Executive Compensation" in the Company's Proxy Statement for the Annual Meeting
of Shareholders to be held April 27, 1998.
Item 12 - Security Ownership of Certain Beneficial Owners and Management.
This information is incorporated by reference from Pages 2 and 3, "Security
Ownership of Management and Certain Beneficial Owners" in the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held April 27, 1998.
8
Item 13 - Certain Relationships and Related Transactions.
This information is incorporated by reference from Page 7, "Executive
Compensation-Certain Transactions" in the Company's Proxy Statement for the
Annual Meeting of Shareholders to be held April 27, 1998.
PART IV
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements and Schedules.
1. The following financial statements are incorporated by reference
herein from the Company's 1997 Annual Report to Shareholders
included as Exhibit 13.1 to this Form 10-K.
1997 Annual
Report Page
-----------
(i) Report of Independent Accountants. 16
(ii) Consolidated Balance Sheets, December 31, 1997 and 1996. 17
(iii) Consolidated Statements of Operations for the years ended
December 31, 1997, 1996 and 1995. 18
(iv) Consolidated Changes in Shareholders' Equity for the years
ended December 31, 1997, 1996 and 1995. 19
(v) Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995. 20
(vi) Notes to Consolidated Financial Statements. 21-30
2. Report of predecessor accountant, Daniel G. Matthews & Associates,
Inc. concerning financial statements for 1995 presented in the
Company's 1997 Annual Report to Shareholders is filed as Exhibit 13.2
to this report.
(b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter
ending December 31, 1997.
(c) Exhibits. The following exhibits are filed as part of this annual report.
Management contracts or compensatory plans or arrangements are listed in
Exhibits 10.1, 10.2, 10.3 and 10.4 below:
Exhibit No. Description of Exhibit
----------- ----------------------
2(1) Agreement and Plan of Reorganization and Merger by and
between the Bank and the Company dated February 24, 1997
3.1(1) Articles of Incorporation of the Company
3.2(1) Bylaws of the Company
4(1) Specimen of certificate for Company's Common Stock
10.1(2) Employment Agreement with Ayden R. Lee, Jr.
10.2(2) Severance Compensation Agreement with Ayden R. Lee, Jr.
10.3(1) Nonqualified Stock Option Plan
9
10.4(1) Employee Stock Purchase and Bonus Plan
10.5(1) Dividend Reinvestment and Stock Purchase Plan
13.1 Portions of the Annual Report to Shareholders for the
fiscal year ended December 31, 1997, which are incorporated
herein by reference.
13.2 Report of Daniel G. Matthews & Associates, Inc. concerning
financial statements for 1995 presented in the 1997 Annual Report
to Shareholders
21 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Daniel G. Matthews & Associates, Inc.
27 Financial Data Schedule
- ---------------------
(1) Filed as an exhibit to the Form 8-K12G3 filed with the SEC on July 1, 1997
and incorporated herein by reference.
(2) Filed as an exhibit to the Quarterly Report on Form 10-Q for the period
ended June 30, 1997 and incorporated herein by reference.
10
FORWARD LOOKING INFORMATION
Information set forth in this Annual Report on Form 10-K under the caption
"Business" and incorporated by reference herein from the Company's Annual Report
to Shareholders contains various "forward looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
1934 Act, which statements represent the Company's judgment concerning the
future and are subject to risks and uncertainties that could cause the Company's
actual operating results and financial position to differ materially. Such
forward looking statements can be identified by the use of forward looking
terminology, such as "may," "will," "expect," "anticipate," "estimate," or
"continue" or the negative thereof or other variations thereof or comparable
terminology.
The Company cautions that any such forward looking statements are further
qualified by important factors that could cause the Company's actual operating
results to differ materially from those in the forward looking statements,
including, without limitation, the effects of future economic conditions,
governmental fiscal and monetary policies, legislative and regulatory changes,
the risks of changes in interest rates on the level and composition of deposits,
the effects of competition from other financial institutions, the failure of
assumptions underlying the establishment of the allowance for possible loan
losses, the low trading volume of the Common Stock, other considerations
described in connection with specific forward looking statements and other
cautionary elements specified in documents incorporated by reference in this
Annual Report on Form 10-K.
11
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.
FOUR OAKS FINCORP, INC.
Date: March 16, 1998 By: /s/ Ayden R. Lee, Jr.
----------------------
Ayden R. Lee, Jr.
President and Chief Executive Officer
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.
Date: March 16, 1998 /s/ Ayden R. Lee, Jr.
----------------------
Ayden R. Lee, Jr.
President, Chief Executive Officer and Director
Date: March 16, 1998 /s/ Nancy S. Wise
------------------
Nancy S. Wise
Senior Vice President and Chief Financial
Officer
Date: March 16, 1998 /s/ William J. Edwards
-----------------------
William J. Edwards
Director
Date: March 16, 1998 /s/ Warren L. Grimes
---------------------
Warren L. Grimes
Director
Date: March 16, 1998 /s/ Harold J. Sturdivant
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Harold J. Sturdivant
Director
Date: March 16, 1998 /s/ Percy Y. Lee
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Percy Y. Lee
Director
Date: March 16, 1998 /s/ Merwin S. Canaday
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Merwin S. Canaday
Director
Date: March 16, 1998 /s/ Paula C. Bowman
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Paula C. Bowman
Director
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF EXHIBIT
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2(1) Agreement and Plan of Reorganization and Merger by and
between the Bank and the Company dated February 24, 1997
3.1(1) Articles of Incorporation of the Company
3.2(1) Bylaws of the Company
4(1) Specimen of certificate for Company's Common Stock
10.1(2) Employment Agreement with Ayden R. Lee, Jr.
10.2(2) Severance Compensation Agreement with Ayden R. Lee, Jr.
10.3(1) Nonqualified Stock Option Plan
10.4(1) Employee Stock Purchase and Bonus Plan
10.5(1) Dividend Reinvestment and Stock Purchase Plan
13.1 Portions of the 1997 Annual Report to Shareholders for the
fiscal year ended December 31, 1997, which are incorporated
herein by reference.
13.2 Report of Daniel G. Matthews & Associates, Inc. concerning
financial statements for 1995 presented in the 1997 Annual
Report to Shareholders
21 Subsidiaries of the Company
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of Daniel G. Matthews & Associates, Inc.
27 Financial Data Schedule
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(1) Filed as an exhibit to the Form 8-K12G3 filed with the SEC on July 1, 1997
and incorporated herein by reference.
(2) Filed as an exhibit to the Quarterly Report on Form 10-Q for the period
ended June 30, 1997 and incorporated herein by reference.