-----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, IM3stgzvw7wR9r1O5rvcMLS9eT3nYQgoa3MGKPj1X8awM3AyjTnNljwTft+qs0TT 2dhPgiq2YlxmmObgjcmJkg== 0000950168-97-003389.txt : 19971117 0000950168-97-003389.hdr.sgml : 19971117 ACCESSION NUMBER: 0000950168-97-003389 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FOUR OAKS FINCORP INC CENTRAL INDEX KEY: 0001040799 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 562028446 STATE OF INCORPORATION: NC FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-22787 FILM NUMBER: 97721176 BUSINESS ADDRESS: STREET 1: 6144 US 301 SOUTH STREET 2: P O BOX 309 CITY: FOUR OAKS STATE: NC ZIP: 27524 BUSINESS PHONE: 9199632177 10-Q 1 FORM 10-Q US SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT Pursuant to Section 13 of the Securities Exchange Act of 1934 for the Quarterly Period Ended September 30, 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 incorporation or organization) Identification Number) 6144 U. S. 301 South Four Oaks, N. C. 27524 ---------------------- (Address of principal executive offices) Registrant Telephone Number, including area code 919-963-2177 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 the number of shares outstanding of each of the issuer's classes of Common Stock as of the latest practicable date: Common Stock, par value $1.00 per share 851,072 - ------------------------- ----------------------------- (Title of Class) (Number of shares outstanding as of September 30, 1997) PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS - UNAUDITED
(All amounts in thousands) September 30, December 31, 1997 1996 -------- ------- ASSETS Cash and due from banks $ 5,897 5,047 Interest bearing bank balances 4,460 1,562 -------- ------- Total cash and cash equivalents 10,357 6,609 Investment securities (approximate market value of $32,239 and $37,092 respectively) 32,239 37,092 Loans, net 135,142 108,036 Accrued interest receivable 2,597 2,052 Bank premises and equipment, net 5,131 4,450 Other real estate owned 147 147 Intangible assets 173 183 Prepaid expenses and other assets 797 544 -------- ------- Total assets $186,583 159,113 ======== ======= LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Deposits: Demand - noninterest bearing $ 27,028 21,073 NOW accounts 13,850 14,707 Savings 16,834 15,727 Time $100,000 and over 35,731 27,339 Other time 70,112 63,997 -------- ------- Total deposits 163,555 142,843 Accrued interest payable 1,672 1,509 Other borrowed money 5,000 -- Other liabilities 411 398 -------- ------- Total liabilities 170,638 144,750 -------- ------- Shareholders' equity: Capital stock: Common stock, $1.00 par value, 5,000,000 shares authorized, 851,072 and 837,949 issued and outstanding at September 30, 1997 and December 31, 1996 respectively 851 838 Surplus 5,155 4,872 Retained earnings 9,910 8,604 Net unrealized gain (loss) on marketable equity securities 29 49 -------- ------- Total shareholders' equity 15,945 14,363 -------- ------- Total liabilities and shareholders' equity $186,583 159,113 ======== =======
The accompanying notes are an integral part of the consolidated financial statements. 2 CONSOLIDATED STATEMENTS OF INCOME - UNAUDITED
(In thousands except per share data) For the three For the nine months ended months ended September 30, September 30, 1997 1996 1997 1996 --------------- --------------- Interest income: Interest and fees on loans $3,396 2,705 9,282 7,495 Interest on investment securities: US Government and agencies 412 348 1,269 1,142 Municipalities 71 66 219 198 Other investment securities 24 16 71 47 Interest on overnight investments 6 24 23 67 ------ ----- ------ ----- Total interest income 3,909 3,159 10,864 8,949 Interest expense: Interest on deposits 1,743 1,397 4,888 4,077 Interest on borrowed money 120 53 259 109 ------ ----- ------ ----- Total interest expense 1,863 1,450 5,147 4,186 ------ ----- ------ ----- Net interest income 2,046 1,709 5,717 4,763 Provision for loan losses 126 101 388 302 ------ ----- ------ ------ Net interest income after provision for loan losses 1,920 1,608 5,329 4,461 ------ ----- ------ ----- Other income: Service charges 267 157 703 459 Credit life commissions 21 16 64 54 Other operating income 76 72 256 191 Securities gains (losses) 6 2 16 2 ------ ----- ------ ----- Total noninterest income 370 247 1,039 706 ------ ----- ------ ----- Other expenses: Salaries 598 498 1,696 1,426 Employee benefits 109 76 311 247 Occupancy expenses 63 45 175 132 Equipment expenses 69 64 230 192 Other operating expenses 548 452 1,514 1,236 ------ ----- ------ ----- Total noninterest expense 1,387 1,135 3,926 3,233 ------ ----- ------ ----- Income before income taxes 903 720 2,442 1,934 Income taxes 291 229 777 591 ------ ----- ------ ----- Net income $ 612 491 1,665 1,343 ====== ===== ====== ===== Net income per share $ 0.72 0.59 1.98 1.62 ====== ===== ====== ===== Cash dividend paid per share $ 0.14 0.13 0.42 0.38 ====== ===== ====== ===== Weighted average shares outstanding 845 834 842 831 ====== ===== ====== =====
The accompanying notes are an integral part of the consolidated financial statements. 3 CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY - UNAUDITED
Common Stock Capital Retained Valuation Shares Amount Surplus Earnings Allowance December 31, 1995 Balance ............... 828,279 $828,279 $4,668,285 $7,208,025 $ 214,617 Cash dividends ........... (316,049) Net change in unrealized gain or loss on securities available for sale ............... (329,084) Sale of common stock ..... 2,651 2,651 47,654 Dividend Reinvestment Plan ................... 5,128 5,128 111,300 Net income ............... 1,343,377 ---------- -------- ---------- ---------- --------- September 30, 1996 Balance ............... 836,058 $836,058 $4,827,239 $8,235,353 $(114,467) ========== ======== ========== ========== ========= December 31, 1996 Balance ............... 837,949 $837,949 $4,871,624 $8,604,139 $ 48,941 Cash dividends ........... (359,498) Net change in unrealized gain or loss on securities available for sale .............. (20,163) Sale of common stock ..... 7,458 7,458 138,090 Dividend Reinvestment Plan .................. 5,665 5,665 145,344 Net income ............... 1,664,985 ---------- -------- ---------- ---------- --------- September 30, 1997 Balance ............... 851,072 $851,072 $5,155,058 $9,909,626 $ 28,778 ========== ======== ========== ========== =========
The accompanying notes are an integral part of the consolidated financial statements. 4 CONSOLIDATED STATEMENTS OF CASH FLOWS - UNAUDITED
For the nine months ended September 30, September 30, (All amounts in thousands) 1997 1996 ---- ---- Operating activities Net income $ 1,665 1,343 Adjustments to reconcile net income to cash provided by operations: Provision for loan losses 390 302 Provision for depreciation 212 152 (Gain) loss on sale of securities (16) (2) (Gain) loss on sale of repossessed\foreclosed assets 28 54 Write off of loans, net of recoveries (85) (112) (Increase) Decrease in prepaid & other assets (376) 2 (Increase) Decrease in interest receivable (545) (539) Increase (Decrease) in other liabilities 43 153 Increase (Decrease) in interest payable 174 45 Net amortization of bond premiums & discounts (5) 1 -------- ------- Net cash provided from (used by) operating activities 1,485 1,399 -------- ------- Investing activities Proceeds from sales of investment securities 13,534 11,033 Purchase of investment securities (8,660) (7,181) Net increase in loans outstanding (27,411) (18,379) Capital expenditures (859) (1,252) Proceeds from sale of assets acquired in settlement of loans 76 282 Acquisition of assets acquired in settlement of loans (66) (433) -------- ------- Net cash used by investment activities (23,386) (15,930) -------- ------- Financing activities Net increase (decrease) in short-term borrowings 5,000 -- Net increase in deposit accounts 20,712 20,329 Proceeds from issuance of common stock 297 166 Cash dividends (359) (316) -------- ------- Net cash provided by financing activities 25,650 20,179 -------- ------- Increase (Decrease) in cash and cash equivalents 3,749 5,648 Cash and cash equivalents at beginning of period 6,608 6,045 -------- ------- Cash and cash equivalents at end of period $ 10,357 11,693 ======== =======
The accompanying notes are an integral part of the consolidated financial statements. 5 FOUR OAKS FINCORP, INC. Notes to Financial Statements 1. Cash and Due From Banks. Cash and due from banks consists of non-interest bearing balances due from other banks and cash. The Federal Reserve requires Four Oaks Fincorp, Inc. (the "Company") to maintain average reserve balances of $500,000. 2. Investment Securities. The book value and market value of securities at September 30, 1997 and December 31, 1996 are as follows: U. S. Treasuries and Agencies State & Local Other September 30, 1997: Book and Market value $ 25,250,843 $5,516,097 $ 1,471,686 Unrealized gains(losses) (6,849) 155,195 (60,267) December 31, 1996: Book and Market value $ 30,208,120 $5,991,326 $ 892,769 Unrealized gains(losses) 35,104 149,921 (62,084) All of the Company's investments have been categorized Available for Sale under the Mark-to-Market accounting rules and the unrealized gains and losses are recorded in shareholder's equity. 3. Loans Receivable. Loans, net, consist of:
September 30, December 31, 1997 1996 ------------ ------------ Total Gross Loans $136,886,786 $109,476,023 Allowance for Possible Loan Losses 1,745,000 1,440,000 ------------ ------------ Loans, net $135,141,786 $108,036,023 ============ ============ Loan balances by category are as follows: (in thousands) Loans secured by real estate: Construction and land development $ 17,832 15,118 Secured by farmland 6,181 6,914 Secured by 1-4 family residential properties 40,492 29,619 Secured by multifamily residential properties 2,193 1,636 Secured by nonfarm nonresidential properties 12,852 10,781 Agricultural loans 10,934 5,980 Commercial and industrial loans 22,691 19,956 Loans to individuals for household, family and other personal expenses 22,804 18,698 Loans to State and Local government 173 109 All other loans 657 669 Lease Financing Receivables 203 95 LESS: Any unearned income on loans 125 99 ------------ ------------ Total loans $ 136,887 109,476 ============ ============
6 4. Allowance for Possible Loan Losses are as follows: (All amounts in thousands) September 30, 1997 1996 ---- ---- Balance, beginning $1,440 $1,220 Provision charged to operating expense 388 302 Recoveries of amounts charged off 26 19 ------ ------ 1,854 1,541 Amounts charged off 109 131 ------ ------ Balance, ending $1,745 $1,410 ====== ====== 5. Interest and dividend income on securities by source is as follows: September 30, 1997 1996 ---- ---- U. S. Treasuries and Agencies $1,269,085 $1,142,233 States and Political Subdivisions $ 219,369 $ 198,423 Other $ 71,145 $ 46,645 6. Interest expense on time certificates of deposit of $100,000 or more was $1,397,467 and $1,060,978 at September 30, 1997 and 1996, respectively. Interest expense on all other deposits was $3,491,030 and $3,016,610 at September 30, 1997 and 1996 respectively. 7. Standby letters of credit were $1,382,000 and $652,000 at September 30, 1997 and 1996, respectively. Unfunded commitments were $25,889,000 and $18,755,000 at September 30, 1997 and 1996, respectively. 8. The significant accounting policies followed by the Company for interim financial reporting are consistent with the accounting policies followed for annual financial reporting. These unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X, and in management's opinion, all adjustments of a normal recurring nature necessary for a fair presentation have been included. The accompanying financial statements do not purport to contain all the necessary financial disclosures that might otherwise be necessary in the circumstances and should be read in conjunction with the consolidated financial statements and notes thereto in the Four Oaks Bank & Trust Company annual report for the year ended December 31, 1996. The results of operations for the nine month period ended September 30, 1997 are not necessarily indicative of the results to be expected for the full year. 9. The accompanying unaudited consolidated financial statements include the accounts of the Company and its wholly owned subsidiary Four Oaks Bank & Trust Company. All significant intercompany items have been eliminated. 7 10. Earnings Per Share: Earnings per share are calculated by dividing net income by the weighted average number of common and dilutive common equivalent shares outstanding. Common equivalent shares consist of stock options issued and outstanding. In determining the number of equivalent shares outstanding, the treasury stock method was applied. This method assumes that the number of shares issuable upon exercise of the stock options is reduced by the number of common shares assumed purchased at market prices with a portion of the proceeds from the assumed exercise of the common stock options. The Company will adopt Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share" on December 31, 1997. SFAS No. 128 requires the Company to change its method for computing, presenting and disclosing earnings per share information. Upon adoption, all prior period data presented will be restated to conform to the provisions of SFAS No. 128. If the Company had adopted SFAS No. 128 for the period ended September 30, 1997, the following computation would have been presented on the consolidated statements of income: Nine Months Ended September 30, 1997 ------------------ Basic income per common share: Net Income 1,665,000 Weighted average common shares outstanding 845,000 Basic income per common share 1.98 Dilutive income per common share: Net income 1,665,000 Weighted average common shares outstanding 845,000 Dilutive effect of stock options 21,110 Total shares 866,110 Dilutive income per common share 1.93 11. In June 1997, SFAS 130, "Reporting Comprehensive Income" was issued and is effective for fiscal years beginning after December 15, 1997. SFAS 130 establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains, and losses) in a full set of general-purpose financial statements. SFAS 130 requires the disclosure of an amount that represents total comprehensive income and the components of comprehensive income in a financial statement. The adoption of SFAS 130 is not expected to have a material impact on the financial statements of the Company. In June 1997, SFAS 131, "Disclosures about Segments of an Enterprise and Related Information" was issued and is effective for financial statements for periods beginning after December 15, 1997. SFAS 131 establishes standards for determining an entity's operating segments and the type and level of financial information to be disclosed in both annual and interim financial statements. It also establishes standards for related disclosures about products and services, geographic areas, and major customers. The adoption of SFAS 131 is not expected to have a material impact on the financial statements of the Company. 8 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition. For the nine month period ended September 30, 1997, interest bearing bank balances and investment securities combined decreased 5%. These funds along with funds generated by the 15% increase in deposits and $5 million in borrowings were used to fund net loan increases of 25%. The Company's loan volumes are increasing due to seasonal funding of agricultural loans as well as growth in real estate, commercial, and consumer lending. The Company's local economy continues to experience low unemployment rates and increased construction of residential and commercial properties. Accrued interest receivable has increased due to the increased volume of loans and the fact that the farm loans presently being funded are scheduled to pay both principal and interest in the fall after harvest. Other real estate owned remains unchanged from December 31, 1996. The Company presently has one property recorded at the adjusted loan value after reducing the value for amounts previously recovered. The properties anticipated value is higher than the recorded amount. Total shareholder's equity increased 11%, primarily attributable to the increase in retained earnings. Results of Operations. Net income increased 24% and 25% for the nine months and three months ended September 30, 1997, respectively, as compared to the same periods in 1996. The increases results from the effective management of the interest margin and increases in other income derived from new products and services. The 26% and 24% increase in loan income for the three months and nine months ended September 30, 1997, respectively, is due to loan growth. Interest earned on investments has increased due to higher portfolio yields. Interest expense for the three months and nine months ended September 30, 1997, respectively, increased 28% and 23% over the same periods in 1996 due to total deposit growth of 15% and increased borrowings. Other expenses have increased 22% and 21% for the three months and nine months ended September 30, 1997, respectively, over the same periods of 1996. This increase is primarily due to higher salaries and operating costs resulting from additional accounts and transactions as the Company continues to grow. A new branch location in Benson, North Carolina was opened in July 1997. The Company's delinquency rate of .98% is favorable compared to historical trends. At September 30, 1997, the Company's nonperforming loans were $577,000 or 0.42% of total gross loans. The reserve for loan loss of $1,745,000 or 1.27% of total gross loans is considered adequate to cover future credit losses in the present portfolio. 9 PART II - OTHER INFORMATION Item 1. Legal Proceedings There are no material pending legal proceedings involving the Registrant. Item 2. Changes in Securities Not Applicable. Item 3. Defaults upon Senior Securities Not Applicable. Item 4. Submission of Matters to a Vote of Security Holders Not Applicable. Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 3(i) Articles of Incorportaion of Registrant filed as Exhibit 3.1 to the Registrant's Current Report on Form 8-K (12G3), dated July 1, 1997. 3(ii) Bylaws of Registrant filed as Exhibit 3.2 to the Registrant's Current Report on Form 8-K (12G3), dated July 1, 1997. 4 Specimen of Certificate for Registrant's Common Stock filed as Exhibit 4 to the Registrant's Current Report on Form 8-K (12G3), dated July 1, 1997. 10.1 Dividend Reinvestment and Stock Purchase Plan 27 Financial Data Schedule 10 (b) Reports on Form 8-K (i) On July 2, 1997, the Registrant filed a Form 8-K(12G3) to report the reorganization of Four Oaks Bank & Trust Company ( the "Bank") into a bank holding company structure (the "Reorganization"). Pursuant to the Reorganization, the Registrant is the holding company and sole shareholder of the Bank. The Registrant has no significant assets other than the Common Stock of the Bank. Pursuant to the Reorganization, the Bank's Common Stock was converted on a share-for-share basis into Common Stock of the Registrant that have rights, privileges and preferences identical to those of the Bank. 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FOUR OAKS FINCORP, INC. Date: November 12, 1997 By: /s Ayden R. Lee, Jr. ----------------- -------------------------------- Ayden R. Lee, Jr. President and Chief Executive Officer Date: November 12, 1997 By: /s Nancy S. Wise ----------------- -------------------------------- Nancy S. Wise Senior Executive Vice President and Chief Financial Officer 12 INDEX TO EXHIBITS Exhibit Description 10.1 Dividend Reinvestment and Stock Purchase Plan 27 Financial Data Schedule 13 EX-10 2 EXHIBIT 10.1 Exhibit 10.1 FOUR OAKS FINCORP, INC. DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN 1. PURPOSE The purpose of the Plan is to provide the shareholders of record of the Company's Common Stock with a simple and convenient method of investing cash dividends and optional cash payment in shares of Common Stock. To the extent that new shares of Common Stock will be purchased from the Company, the Company will receive additional funds to finance the continuing operations of the Company. 2. FEATURES Participants in the Plan: (bullet) Will have cash dividends on their shares of Common Stock automatically reinvested in additional shares of Common Stock; (bullet) May elect to make optional cash payments from $20.00 to $500.00 per quarter for additional Common Stock purchases; (bullet) Will receive full investment use of funds because the Plan provides for crediting of fractional shares (calculated to three decimal places) and reinvestment in additional shares; (bullet) Will pay no accountant fees for the reinvestment of dividends or optional cash payments; (bullet) Will receive quarterly statements from the Agent reflecting total dividends and optional cash payments, the price paid for shares purchased, and the total shares held in the participant's account; and (bullet) Will enjoy safekeeping of shares purchased pursuant to the Plan, including protection against loss, theft, or inadvertent destruction of certificates. 3. ADMINISTRATION Branch Banking and Trust Company will Administer the Plan and serve as agent (the "Agent") for Plan participants. The Agent keeps records, sends statements of account to each participant, and performs other duties related to the Plan. Shares purchased under the Plan are registered in the name of the Agent or in the name of its nominee, and credited to the accounts of the participants in the Plan. Questions and communications regarding the Plan should include your account number and should be directed to: Branch Banking and Trust Company Trust Operations Post Office Box 2887 Wilson, North Carolina 27894 919-246-4316 4. PARTICIPATION A. ELIGIBILITY Any holder of record of the Company's Common Stock is eligible to participate in the Plan at any time. Beneficial owners of shares of Common Stock whose shares are registered in names other than their own (for example, in the name of a broker, bank, or other nominee) and who wish to participate in the Plan must become owners of record by having the number of shares they wish to enroll in the Plan transferred into their names. Tentatively, they must make arrangements for the nominees or other holders of record to participate in the Plan on behalf of such beneficial owners. B. ENROLLMENT IN THE PLAN An eligible shareholder may join the Plan at any time by completing an Authorization Card and returning it to the Agent at the above address. Authorization Cards may be obtained at any time by contacting the Agent. For new enrollees, participation will commence with the next dividend payable after receipt of authorization provided it is received by the Agent by the fifth business day prior to the record date for the dividend. If an Authorization Card is received after the fifth business day prior to the record date established for a particular dividend, the reinvestment of dividends under the Plan will begin with the next succeeding dividend. The Company expects to set quarterly dividend and record payment dates for Common Stock on or about the following dates: Approximate Record Date Approximate Payment Date February 28 March 8 May 3 June 8 August 31 September 8 November 30 December 8 To participate in the optional cash payment feature, a check or money order payable to Branch Banking and Trust Company should be sent together with the payment form which is attached to the quarterly statement participants receive after their initial dividend has been invested. Cash payments can only be made for participants who have had at least one dividend reinvested pursuant to the Plan. Shareholders enrolled in the Plan will remain enrolled unless they terminate their participation by giving written notice to the Agent as described below. 2 5. NUMBER OF SHARES SUBJECT TO THE PLAN Shareholders of record may participate in the Plan with respect to all or any portion of the shares of Common Stock registered in their name. If a shareholder wishes to participate in the Plan with less than all of such shareholder's shares, the shareholder must notify the Agent in writing to that effect. Otherwise, it will be assumed that the shareholder intends to participate in the Plan with respect to all shares owned. Also, if a participant wishes to change the number of shares of Common Stock subject to the Plan, the participant must notify the Agent in writing to that effect. Any such notification received by the Agent after the fifth business day prior to a dividend payment date will not be effective until the next quarter. 6. COSTS The Agent will provide the service of reinvesting a participant's dividends paid on the Company's Common Stock or optional cash payments at no cost to the shareholder. All administrative costs of the Plan will be paid by the Company. No brokerage cornmissions or fees will be charged for purchases of shares made under the Plan by the Agent directly from the Company, out of authorized but unissued shares of the Company. The Company presently intends to bear the costs of brokerage commissions or fees incurred as a result of any purchases made under the Plan on the open market. The Company may change or eliminate this policy entirely upon written notice to participants. The reinvestment of dividends does not relieve the participant of any income tax that may be payable on the dividends or on any brokerage commissions or fees paid by the Company. 7. PURCHASES UNDER THE PLAN A. METHOD OF PURCHASE The Agent automatically will receive the full amount of dividends paid on both the shares held by participants and any additional full or fractional shares acquired under the Plan, as well as any optional cash payments made by participants. The Agent will use these funds to purchase shares of the Company's Common Stock for Plan participants from the Company's authorized but unissued shares. Purchases also may be made on any securities exchange where such shares are traded, in the over-the-counter market, or in negotiated transactions. B. NUMBER OF SHARES PURCHASED The number of shares purchased under the Plan for each participant will depend on the amount of dividends reinvested and optional cash payments made to the participant's account, and the purchase price of the Common Stock. Therefore, each participant's account will be credited with the number of shares, including a fractional share computed to three decimal places, equal to the total amount invested under the Plan by the participant (dividends and optional cash payment), divided by the applicable purchase price per share of the Common Stock. C. TIMING OF PURCHASES The Agent will purchase shares as soon as practicable after cash dividends are paid in the quarters when such payments are made. In other quarters, the Agent generally will purchase shares on the first business day of the quarter. Purchases will include dividends to be reinvested and optional cash payments as of the date of purchase, as applicable. The Agent will use every reasonable effort to reinvest all dividends promptly after receipt and in no event later than 30 days after receipt unless such investments are restricted by any applicable state or federal securities laws. No interest will be paid on dividends or optional cash payments pending reinvestment. 3 If for any reason the Agent is precluded from acquiring shares for 90 consecutive days, the Agent will promptly remit all cash dividends and optional cash payments held in the participant's Plan account to the participant after such 90th day. D. PURCHASE PRICE The purchase price of original issue shares of Common Stock purchased directly from the Company will be determined once each quarter by the Board of Directors of the Company based on an annual appraisal and trading activity. The appraisal will be conducted by an independent appraisal firm selected by the Board of Directors. The purchase price for the first quarter shall be based on the first such appraisal. Each quarter thereafter, the Board of Directors of the Company shall set the purchase price based on a review of the most recent annual appraisal and trading activity during the preceding quarter. No brokerage commissions or fees will be charged for purchases made through the Plan directly from the Company. Shares purchased on the open market under the Plan will be purchased at the price per share payable to the broker-dealer(s) involved. The Company presently intends to bear any brokerage commission or fees incurred in connection with open market purchases. 8. OPTIONAL CASH PAYMENTS A. METHOD OF PAYMENTS Once a participant has received the first Dividend Reinvestment Statement (described below) for dividends reinvested the participant may elect to make optional cash payments to his account for additional Common Stock purchases. Each optional cash payment must be accompanied by a payment form, which is furnished by the Agent with each Dividend Reinvestment Statement. The Agent will commingle all optional cash payments credited to a participant's account with cash dividends and optional cash payment credited to all accounts under the Plan and all such funds will be applied to the purchase of Common Stock as provided above. Optional cash payments received by the fifth business day before a dividend payment date will be combined with and invested by the Agent at the time cash dividends are reinvested and in any event will be invested with funds received by the fifth business day before purchases are made in other quarters, as provided above. Any optional cash payments received by the Agent after the fifth day prior to a dividend payment date will be invested in the next quarter. The Agent will hold the participant's optional cash payments in non-interest bearing accounts. No interest will be paid on any optional cash payments for the period following receipt by the Agent but prior to investment. Participants are encouraged to transmit optional cash payments so as to be received by the Agent as close as possible to the fifth day prior to a dividend payment date to avoid unnecessary accumulations of funds. A participant may obtain a refund of his or her uninvested optional cash payments upon written request to the Agent received not less than two business days prior to the investment of such payments. A participant is under no obligation to make an optional cash payment in any quarter, and the same amount of money does not need to be sent each quarter. 4 B. LIMITATIONS Any optional cash payment must not be less than $20, and payments may not exceed $500 per quarter in the aggregate for any participant or for each beneficial owner on whose behalf a participant may be investing. Optional cash payments may be made at any time; however, only one optional cash payment may be made in each calendar month by any participant, or by each beneficial owner on whose behalf a participant may be investing, and optional cash payments are only invested quarterly, as provided above. The Company may change the minimum and maximum allowable optional cash payment amounts or eliminate cash payments entirely upon written notice to participants. Participants may not draw checks or drafts against their Plan accounts in respect of any shares or cash held therein and may not sell, assign, or transfer their account. 9. CERTIFICATES FOR SHARES Normally, certificates for shares of Common Stock purchased under the Plan will not be issued directly to participants. Shares will be held by or through the Agent, providing protection against loss, theft, or inadvertent destruction. The number of shares credited to a participant's account will be shown on the next statement of account sent to the participant. The participant, however, may obtain from the Agent certificates for full shares upon receipt by the Agent of a written request from the participant. Any request for issuance of a certificate received by the Agent less than five days prior to the record date for a dividend payment shall become effective only after dividends paid for such record date have been reinvested. Also, the Agent generally processes requests for certificates only once each month on or about the l5th day of each month. No certificate will be issued for a fractional share, although dividends on a fractional interest in a share will be credited to the participant's account. 10. REPORTS TO PARTICIPANTS As soon as practicable after the end of each quarterly period, the Agent will send a statement of account (the "Dividend Reinvestment Statement") to the participant. The Dividend Reinvestment Statement will include information regarding each purchase and other information regarding the status of the participant's account as of the date of such statement. The Dividend Reinvestment Statements will provide a record of the cost basis of shares purchased under the Plan and should be retained for tax purposes. 11. WITHDRAWALS OF SHARES PURCHASED UNDER THE PLAN A participant may withdraw all or any portion of the full shares of Common Stock held in the participant's account under the Plan by notifying the Agent in writing to that effect. A certificate for the full shares withdravn will be issued in the name of the participant and mailed to him. No certificate will be issued for a fractional share interest. Withdrawals of some or all of the full shares in a participant's account will not terminate the participant's enrollment in the Plan. 5 12. TERMINATION OF PARTICIPATION A participant may terminate his account by notifying the Agent in writing to that effect. Any notice of termination received by the Agent less than five days prior to the record date for a dividend payment shall become effective only after dividends paid for such record date have been reinvested. Upon termination, the Agent will issue to the participant a certificate for the number of full shares of Common Stock and a check for any fractional share in the participant's account. The Agent generally issues such certificates and checks only once each month, on or about the 15th day of each month. 13. OTHER FEATURES A. STOCK SPLITS, STOCK DIVIDENDS, AND RIGHTS OFFERINGS Stock splits or stock dividends on shares held in a participant's account will be credited to the account based on the number of shares (including fractional share interests) held in the account on the record date for such dividend or split. The Agent will report the amount of dividends received on shares or fractional shares held in each account. In the event the Company offers rights or warrants to purchase additional shares of Common Stock or other securities to the holders of Common Stock, such rights or warrants will be made available to participants based on the number of shares, including fractional share interests to the extent feasible held in their accounts on the record date established for determining the holders of Common Stock entitled to such rights or warrants. B. VOTING OF SHARES PURCHASED UNDER THE PLAN All full and fractional shares credited to a participant's account under the Plan will be added to the shares registered in the participant's name on the shareholder records of the Company. The participant will receive one proxy covering the total of such shares, which proxy shall be voted as the participant directs; or, if the participant so elects, the participant may vote all of such shares in person at the shareholders' meeting. 14. FEDERAL INCOME TAX CONSEQUENCES Dividends and other distributions by the Company to shareholders generally will be taxed as ordinary dividend income. Participants who acquire additional shares of Common Stock through the Plan directly from the Company with reinvested cash dividends will be treated for federal income tax purposes as having received a taxable stock distribution. As a result, an amount equal to the fair market value on the investment date of the shares acquired directly from the Company with reinvested cash dividends will be treated as a dividend paid to participants. The tax basis of the shares acquired directly from the Company with such reinvested dividends also will equal the fair market value of the shares on the investment date. Participants who acquire additional shares of Common Stock through the Plan through open market purchases made with reinvested cash dividends will be deemed to have received a taxable dividend equal to the amount of the cash dividend reinvested plus the amount of any brokerage fees paid by the Company with respect to such additional shares. The participant's tax basis in these shares acquired on the open market will equal the purchase price of the shares plus any brokerage fees paid with respect to the shares. 6 Participants in the Plan will not realize any taxable income at the time of investment of optional cash payments in additional shares of Common Stock acquired directly from the Company. The tax basis of shares purchased directly from the Company with an optional cash payment will be the fair market value of the shares on the investment date. Participants who acquire additional shares of Common Stock through open market purchases made with optional cash payments will be treated as receiving a cash dividend equal to the amount of any brokerage fees paid by the Company with respect to such shares. The tax basis of shares purchased on the open market with an optional cash payment will equal the purchase price of the shares, plus any brokerage fees paid by the Company with respect to such shares. The holding period of shares of Common Stock acquired through the Plan, whether purchased with reinvested dividends or optional cash payments, will begin on the day following the investment date. Participants in the Plan will not realize any taxable income when they receive certificates for full shares credited to their accounts, whether upon their written requests for such certificates, upon full shares credited to their account, or upon withdrawal from or termination of participation in the Plan. Participants, however, will realize taxable gain or loss (which for most participants, will be capital gain or loss) when full shares acquired under the Plan are sold or exchanged by the participant and when participants receive a cash payment for a fractional share credited to their account. The amount of such gain or loss will be the difference between the amount that the participant receives for his shares or fractional share (net of brokerage commissions and other costs of sale) and the tax basis thereof. For foreign participants who elect to have their cash dividends reinvested and whose dividends are subject to United States income tax withholding, and any other participant for whom federal income tax withholding on dividends is required, an amount equal to the cash dividends payable to such participants, less the amount of tax required to be withheld, will be applied to the purchase of Common Stock through the Plan. The foregoing is intended only as a general discussion of the current federal income tax consequences of participation in the Plan. It does not include a discussion of state and local income tax consequences of participation in the Plan. For specific information on the tax consequences of participation in the Plan, including any future changes in applicable law or interpretation thereof, participants should consult their own tax advisors. 15. CHANGE AND TERMINATION OF THE PLAN; INTERPRETATION OF THE PLAN The Company reserves the right to change, suspend, or terminate the Plan at any time. Participants shall be notified of any such change, suspension, or termination. Any question of interpretation arising under the Plan will be determined by the Company. The Plan and all transactions in connection with the Plan will be governed by and construed in accordance with the laws of the State of North Carolina. This Plan was adopted by the Board of Directors of Four Oaks Fincorp, Inc. effective as of July 1, 1997. /s/ Wanda C. Jones ------------------- Secretary EX-27 3 EXHIBIT 27
9 9-MOS DEC-31-1997 SEP-30-1997 5,897,000 4,460,000 0 0 32,239,000 0 0 136,887,000 1,745,000 186,583,000 163,555,000 2,000,000 2,083,000 3,000,000 0 0 851,000 5,155,000 186,583,000 9,282,000 1,559,000 23,000 10,864,000 4,888,000 5,147,000 5,717,000 388,000 16,000 3,926,000 2,442,000 2,442,000 0 0 1,665,000 1.98 1.93 4.83 191,000 386,000 0 0 1,440,000 109,000 26,000 1,745,000 0 0 1,745,000
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