<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g)
OF THE SECURITIES EXCHANGE ACT OF 1934
APPALACHIAN BANCSHARES, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Georgia 58-2242407
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(State of incorporation or organization) (I.R.S. Employer
Identification No.)
315 Industrial Boulevard
Ellijay, Georgia 30540
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(Address of principal executive offices) (Zip code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be so registered
------------------- ------------------------------------
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Common Stock, $5.00 par value
If this Form relates to the registration of a class of debt securities and is
effective upon filing pursuant to General Instruction A.(c)(1), please check
the following box. [ ]
If this Form relates to the registration of a class of debt securities and is
to become effective simultaneously with the effectiveness of a concurrent
registration statement under the Securities Act of 1933 pursuant to General
Instruction A.(c)(2), please check the following box. [ ]
<PAGE> 2
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
This Registration Statement relates to the registration with the
Securities and Exchange Commission of shares of Common Stock, $5.00 par value
per share (the "Common Stock"), of Appalachian Bancshares, Inc., a Georgia
corporation (the "Registrant"). The Registrant is authorized by its Articles
of Incorporation to issue 20,000,000 shares of Common Stock. As of the date
hereof, the Registrant has 568,000 shares of Common Stock issued and
outstanding, all of which were issued to the shareholders of Gilmer County
Bank, a Georgia banking corporation (the "Bank") in connection with the
reorganization of the Bank (the "Reorganization"), in which each of the
outstanding shares of common stock of the Bank were converted into one share of
Common Stock of the Registrant. The shares of common stock of the Bank were
registered with the Federal Deposit Insurance Corporation pursuant to Section
12(g) of the Securities Exchange Act of 1934 on FDIC Form F-1 (FDIC Certificate
No. 33989), which was declared effective June 28, 1996. As a result of the
Reorganization, the Bank became a wholly-owned subsidiary of the Registrant,
and the Registrant became a one-bank holding company with assets and ownership
identical to the Bank immediately prior to the Reorganization.
All shares of Common Stock are entitled to share equally in dividends
from funds legally available therefor, when, as and if declared by the Board of
Directors of the Registrant, and upon liquidation or dissolution of the
Registrant, whether voluntary or involuntary, to share equally in the assets of
the Registrant available for distribution to shareholders. Each holder of
Common Stock is entitled to one vote for each share on all matters submitted to
the shareholders.
There is no cumulative voting, redemption right, sinking fund
provision, or right of conversion in existence with respect to the Common
Stock. The Registrant's Articles of Incorporation do not provide for
preemptive rights to acquire additional shares of Common Stock when issued.
All of the outstanding shares of Common Stock are, upon payment therefor, fully
paid and non-assessable.
ANTI-TAKEOVER EFFECTS OF PROVISIONS OF REGISTRANT'S BYLAWS
The Bylaws of the Registrant provide that, except as provided below,
no offer or solicitation to purchase the Common Stock by any owner of 10% or
more of the outstanding Common Stock of the Registrant or any proposal for the
merger or consolidation of the Registrant with any other financial institution
or financial institution holding company can be brought before the shareholders
unless the proposal is first approved by at least two-thirds of the directors
of the Registrant. Proposals which have not been approved by two-thirds of the
directors may be brought before the shareholders upon petition to the Board of
Directors signed by at least 33% of the outstanding shares of Common Stock of
the Registrant provided that such petition must be received by the Board of
Directors of the Registrant at least 30 days prior to the regularly scheduled
date of the shareholders meeting at which the proposed transaction will be
considered. A vote of the holders of 75% of the Common Stock is required to
approve a proposed transaction to be considered by petition.
For any acquisition, merger or consolidation which is presented to the
shareholders other than by petition, a vote of at least two-thirds of the
outstanding shares of Common Stock is required to approve such transaction. In
considering any proposed merger or combination, in addition to considering the
effects of any transaction on the Registrant and its shareholders, the Board of
Directors may consider the interests of the employees, customers, suppliers and
creditors of the Registrant, the communities in which offices, branches or
other establishments of the Registrant are located and all other factors the
directors consider pertinent, including the per share value of any offer, the
financial structure of the offer, the character and reputation of the offeror
and the financial stability of the offeror. The foregoing Bylaw
<PAGE> 3
provisions may be changed only by a vote of the holders of at least two-thirds
of the outstanding shares of Common Stock of the Registrant.
The Bylaws provide that the Board of Directors shall consist of no
less than four (4) nor more than twenty-five (25) persons, with the exact
number to be fixed by resolution of the Board of Directors or by resolution of
the shareholders; provided however, that the Board of Directors may not
increase or decrease the number of directors to serve on the Board by more than
two (2) in any one year.
ITEM 2. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
<S> <C>
3.1 Articles of Incorporation of Registrant
3.2 Bylaws of Registrant
99.1 Specimen of Certificate Representing Registrant's Common Stock
99.2 Financial Statements of Gilmer County Bank for
the year ended December 31, 1995
99.3 Financial Statements (unaudited) of Gilmer County Bank
for the quarter ended March 31, 1996
99.4 Financial Statements (unaudited) of Gilmer County Bank
for the quarter ended June 30, 1996
</TABLE>
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
APPALACHIAN BANCSHARES, INC.
By: /s/ Tracy R. Newton
--------------------------------
Tracy R. Newton, President
Dated: September 16, 1996
4
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation of Registrant 6
3.2 Bylaws of Registrant 8
99.1 Specimen of Certificate representing Registrant's Common Stock 26
99.2 Financial Statements of Gilmer County Bank for the year 28
ended December 31, 1996
99.3 Financial Statements (unaudited) of Gilmer County Bank 46
for the quarter ended March 31, 1996
99.4 Financial Statements (unaudited) of Gilmer County Bank 50
for the quarter ended June 30, 1996.
</TABLE>
5
<PAGE> 1
EXHIBIT 3.1
ARTICLES OF INCORPORATION
OF
APPALACHIAN BANCSHARES, INC.
I.
The name of the corporation is Appalachian Bancshares, Inc. (the
"Corporation").
II.
The Corporation is authorized to issue 20,000,000 shares of common
stock, $5.00 par value per share.
III.
The initial registered office of the Corporation is in Gilmer County,
Georgia, at 315 Industrial Boulevard, Ellijay, Georgia 30540 and the
Corporation's initial registered agent at such office is Tracy R. Newton.
IV.
The name and address of the incorporator is:
Walter E. Jospin
Troutman Sanders LLP
600 Peachtree Street, N.E.
Suite 5200
Atlanta, Georgia 30308
V.
The mailing address of the initial principal office of the
Corporation is:
315 Industrial Boulevard
Ellijay, Georgia 30540
VI.
To the fullest extent permitted by the Georgia Business Corporation
Code as the same exists or may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
shareholders for monetary damages for breach of duty of care or other duty as a
director, provided that this provision shall not eliminate or limit the
liability of a director:
<PAGE> 2
(A) For any appropriation, in violation of his duties, of any
business opportunity of the Corporation;
(B) For acts or omissions which involve intentional misconduct or
a knowing violation of law;
(C) For the types of liability set forth in Section 14-2-832 of
the Georgia Business Corporation Code; or
(D) For any transaction from which the director received an
improper personal benefit.
Any repeal, amendment, or modification of this Article VI by the
shareholders of the Corporation shall not adversely affect any right, benefit,
or protection of a director of the Corporation existing at the time of such
repeal, amendment, or modification.
IN WITNESS WHEREOF, the undersigned has executed these Articles of
Incorporation on this 24th day of May, 1996.
/s/ Walter E. Jospin
--------------------------------
Walter E. Jospin, Incorporator
<PAGE> 1
EXHIBIT 3.2
BY-LAWS
OF
APPALACHIAN BANCSHARES, INC.
<PAGE> 2
BY-LAWS
OF
APPALACHIAN BANCSHARES, INC.
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
ARTICLE ONE - REGISTERED OFFICE AND REGISTERED AGENT
Section 1.1 Registered Office and Agent 1
Section 1.2 Other Offices 1
ARTICLE TWO - SHAREHOLDERS' MEETINGS
Section 2.1 Place of Meetings 1
Section 2.2 Annual Meetings 1
Section 2.3 Special Meetings 1
Section 2.4 Substitute Annual Meeting 1
Section 2.5 Notice of Meetings 2
Section 2.6 Quorum and Voting Requirements For
Voting Groups 2
Section 2.7 Voting of Shares 2
Section 2.8 Proxies 2
Section 2.9 Corporation's Acceptance or Rejection
of Votes or Proxies 3
Section 2.10 Acquisition, Merger, or Consolidation
Offers 3
Section 2.11 Adjournments 3
Section 2.12 Action of Shareholders
Without a Meeting 4
ARTICLE THREE - THE BOARD OF DIRECTORS
Section 3.1 General Powers 5
Section 3.2 Number of Directors 5
</TABLE>
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<TABLE>
Page
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<S> <C>
Section 3.3 Election of Directors 5
Section 3.4 Term of Directors 5
Section 3.5 Vacancies 5
Section 3.6 Compensation 5
Section 3.7 Committees 6
Section 3.8 Removal 6
ARTICLE FOUR - MEETINGS OF THE BOARD OF DIRECTORS
Section 4.1 Regular Meetings 6
Section 4.2 Special Meetings 6
Section 4.3 Place of Meetings 7
Section 4.4 Notice of Meetings 7
Section 4.5 Quorum 7
Section 4.6 Vote Required for Action 7
Section 4.7 Action by Directors Without
a Meeting 7
Section 4.8 Adjournments 7
Section 4.9 Telephone Conference Calls 7
ARTICLE FIVE - NOTICE AND WAIVER
Section 5.1 Procedure 8
Section 5.2 Waiver 8
ARTICLE SIX - OFFICERS
Section 6.1 Number 8
Section 6.2 Election and Term 9
Section 6.3 Compensation 9
Section 6.4 Removal of Officers 9
Section 6.5 Powers and Duties 9
Section 6.6 Additional Powers and Duties 9
Section 6.7 Reimbursement by Officers 10
</TABLE>
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<PAGE> 4
<TABLE>
<CAPTION>
Page
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<S> <C>
ARTICLE SEVEN - DISTRIBUTIONS
Section 7.1 Share Dividends 10
ARTICLE EIGHT - SHARES
Section 8.1 Authorization and Issuance
of Shares 10
Section 8.2 Form and Content of Certificates 10
Section 8.3 Rights of Corporation with Respect
to Registered Owners 11
Section 8.4 Transfers of Shares 11
Section 8.5 Lost, Stolen or Destroyed
Certificates 11
Section 8.6 Fixing of Record Date 11
Section 8.7 Record Date if None Fixed 11
ARTICLE NINE - INDEMNIFICATION AND INTERESTED
PARTIES
Section 9.1 Indemnification 12
Section 9.2 Payments of Expenses in Advance 12
Section 9.3 Insurance 12
Section 9.4 Rights Not Exclusive 13
ARTICLE TEN - MISCELLANEOUS
Section 10.1 Inspection of Books and Records 13
Section 10.2 Seal 13
Section 10.3 Annual Statements 13
Section 10.4 Execution of Documents 13
ARTICLE ELEVEN - AMENDMENTS
Section 11.1 Power to Amend By-Laws 14
Section 11.2 Conditions 14
</TABLE>
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<PAGE> 5
BY-LAWS
OF
APPALACHIAN BANCSHARES, INC.
ARTICLE ONE
Registered Office and Registered Agent
1.1 Registered Office and Agent. Appalachian Bancshares, Inc.
(the "Corporation") shall at all times maintain a registered office in the
State of Georgia.
1.2 Other Offices. The Corporation may have offices at such place
or places, within or without the State of Georgia, as the Board of Directors
may from time to time appoint or the business of the Corporation may require or
make desirable.
ARTICLE TWO
Shareholders' Meetings
2.1 Place of Meetings. Meetings of the shareholders may be held
on the call of the President or the Board of Directors at any place within or
without the State of Georgia as set forth in the notice thereof or in the event
of a meeting held pursuant to waiver of notice, as may be set forth in the
waiver, or if no place is so specified, at the principal office of the
Corporation.
2.2 Annual Meetings. The annual meeting of shareholders shall be
held on such date as shall be designated by the Board of Directors for the
purpose of electing directors and transacting any and all business that may
properly come before the meeting.
2.3 Special Meetings. Special meetings of shareholders or a
special meeting in lieu of the annual meeting of shareholders shall be called
by the Corporation upon the written request of the holders of twenty-five
percent (25%) or more of all the shares of capital stock of the Corporation
entitled to vote in an election of directors. Special meetings of the
shareholders or a special meeting in lieu of the annual meeting of shareholders
may be called at any time by the President, Chairman of the Board, or the Board
of Directors.
2.4 Substitute Annual Meeting. In the event that an annual
meeting is not held on the day designated pursuant to Section 2.2 hereof, the
Board of Directors shall cause a meeting in lieuthereof to be held as soon as
conveniently may be thereafter, and any business transacted or elections held
at such meeting shall be as valid as if transacted or held at the annual
meeting.
<PAGE> 6
Such subsequent meeting shall be called in the same manner as provided for
special shareholders' meetings.
2.5 Notice of Meetings. Unless waived as contemplated in Section
5.2 hereof or by attendance at the meeting, either in person or by proxy, for
any purpose other than to state, at the beginning of the meeting, an objection
or objections to the transaction of business, a written or printed notice of
each shareholders' meeting stating the place, day and hour of the meeting shall
be delivered not less than twenty (20) days nor more than fifty (50) days
before the date thereof except as may otherwise be required by law, either
personally or by mail, by or at the direction of the President or Secretary or
other person calling the meeting, to each shareholder of record entitled to
vote at such meeting. In the case of an annual or substitute annual meeting,
the notice of the meeting need not state the purpose or purposes of the meeting
unless the purpose or purposes constitute a matter which the Georgia Business
Corporation Code (the "Code") requires to be stated in the notice of the
meeting. In the case of a special meeting, the notice of meeting shall state
the purpose or purposes for which the meeting is called.
2.6 Quorum and Voting Requirements For Voting Groups. Unless
otherwise provided by the Articles of Incorporation, at all meetings of the
shareholders, the presence, in person or by proxy, of the holders of more than
fifty percent (50%) of the shares outstanding and entitled to vote shall
constitute a quorum. The shareholders at a meeting at which a quorum is
present may continue to transact business until adjournment, notwithstanding
the withdrawal of enough shareholders to leave less than a quorum, unless the
meeting is adjourned under circumstances where a new record date is or must be
set pursuant to Section 2.10 hereof. A shareholder who makes a special
appearance for purposes of objecting to the lack of notice or defective notice
or objecting to holding the meeting or transacting business at the meeting
shall not be counted for purposes of determining a quorum. If a quorum is not
present to organize a meeting, the meeting may be adjourned pursuant to Section
2.10 hereof.
2.7 Voting of Shares. Each outstanding share having voting rights
shall be entitled to one vote on each matter submitted to a vote at a meeting
of shareholders. Voting on all matters shall be by voice vote or by show of
hands unless any qualified voter, prior to the voting on any matter, demands
vote by ballot, in which case each ballot shall state the name of the
shareholder voting and the number of shares voted by him, and if such ballot
be cast by proxy, it shall also state the name of such proxy. If a quorum is
present, a majority of the shares represented at the meeting and entitled to
vote on the subject matter shall determine any matter coming before the
meeting, unless a different vote is required by the Code, the Articles of
Incorporation, or these By-Laws.
2.8 Proxies. A shareholder entitled to vote pursuant to Section 2.7
may vote in person or by proxy executed in writing by the shareholder or by his
attorney-in-fact. A proxy shall not be valid after eleven (11) months from the
date of its execution, unless a longer period is expressly stated therein.
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<PAGE> 7
2.9 Corporation's Acceptance or Rejection of Votes or Proxies. The
Corporation is entitled to reject a vote, consent, waiver or proxy appointment
if the Secretary or other officer or agent authorized to tabulate the votes,
acting in good faith, has reasonable basis for doubt about the validity of the
signature on it or about the signatory's authority to sign for the shareholder.
The Corporation and its officer or agent who accepts or rejects a vote,
consent, waiver or proxy appointment in good faith and in accordance with Code
Section 14-2-724 are not liable in damages to the shareholder for the
consequences of the acceptance or rejection.
2.10 Adjournments. Any meeting of the shareholders, whether or not a
quorum is present, may be adjourned by the holders of a majority of the voting
shares represented at the meeting to reconvene at a specific time and place.
It shall not be necessary to give any notice of the reconvened meeting or of
the business to be transacted, if the time and place of the reconvened meeting
are announced at the meeting which was adjourned, except that if the meeting is
adjourned to a date more than 120 days after the date of the original meeting,
the Board of Directors must fix a new record date and provide notice of the
adjourned meeting to persons who are shareholders of the Corporation on the new
record date. At any such reconvened meeting at which a quorum is represented
or present, any business may be transacted which could have been transacted at
the meeting which was adjourned.
2.11 Acquisition, Merger or Consolidation Offers.
A. No offer or solicitation to purchase the common stock
of the Corporation by any owner of ten percent (10%) or more of the outstanding
common stock of the Corporation (including any shares held by any affiliates
of, and members of a group with, such owner and including the number of shares
proposed to be purchased by all of them), or any proposal for the merger,
consolidation or acquisition of the Corporation with or by, as the case may be,
any other financial institution or financial institution holding company shall
be brought before the shareholders unless (i) such transaction would not be
prohibited under Section 7-1-608 of the Financial Institutions Code of Georgia
or any other applicable law and (ii) such proposal is first approved by the
vote of not less than two-thirds of the directors of the Corporation. Such
proposal must be submitted to the Board of Directors in writing, and must
provide for the same terms and conditions with respect to all shareholders. In
no event shall the payment to any shareholder be less than the highest price
paid by a proposed purchaser (or any affiliate or member of a group) for shares
previously acquired in one or more transactions.
B. Proposed transactions not in conformance with
Paragraph A of this Section 2.11 may be brought before the shareholders upon
petition to the Board of Directors signed by the holders of not less than
thirty-three percent (33%) of the outstanding shares of common stock of the
Corporation, provided that such petition must be received by the Board of
Directors of the Corporation at least thirty (30) days prior to the regularly
scheduled date of the annual shareholders meeting or, in the event such
petition relates to a meeting of the shareholders called thereby, at least
thirty (30) days prior to the date of such shareholders meeting. At any
meeting
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<PAGE> 8
at which a proposed transaction is to be considered by petition as provided
herein, a vote of the holders of seventy-five percent (75%) of the outstanding
shares of common stock shall be required to approve the proposal.
C. The provisions of this Section 2.11 of the By-Laws,
having been adopted by the unanimous vote of the holders of outstanding shares
of the Corporation, may only be changed by a vote of the holders of two-thirds
or more of the outstanding shares of common stock of the Corporation.
D. In considering any proposed transaction as required
in Paragraph A of this Section 2.11, the Board of Directors, in addition to
considering the effects of any transaction on the Corporation or its
shareholders, may consider the interests of the employees, customers, suppliers
and creditors of the Corporation or any of its subsidiaries, the communities in
which offices, branches or other establishments of the Corporation or of any
subsidiary of the Corporation are located, and all other factors such directors
consider pertinent, including, without limitation, the per share value of any
offer, the financial structure of the offer, the character and reputation of
the offeror and the financial stability of the offeror; provided, however, that
the directors' authority granted pursuant to this Section 2.11 shall be deemed
solely to grantdiscretionary authority to the directors, and shall not be
deemed to provide any constituency the right to be considered.
E. Except as provided in Paragraph B of this Section
2.11, once an acquisition, merger or consolidation offer is presented to the
shareholders of the Corporation for voting purposes, the affirmative vote of
not less than two-thirds of the outstanding shares of common stock will be
required to approve such offer.
F. Any purchases, attempts to purchase and offers not
made in accordance with this Section 2.11 shall be null and void and shall not
be recognized as effective by the Corporation.
2.12 Action of Shareholders Without a Meeting. Any action which may
be taken, or is required to be taken, at a meeting of the shareholders may be
taken without a meeting if a written consent, setting forth the action so
taken, shall be signed by each of the shareholders entitled to vote with
respect to the subject matter thereof. Upon filing with the officer of the
Corporation having custody of its books and records, such consent shall have
the same force and effect as a unanimous vote of the shareholders at a meeting
called for the purpose of considering the action authorized.
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ARTICLE THREE
The Board of Directors
3.1 General Powers. The business and affairs of the Corporation
shall be managed by the Board of Directors. In addition to the powers and
authority expressly conferred upon it by these By-laws, the Board of Directors
may exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law, by any legal agreement among shareholders, by the
Articles of Incorporation or by these By-laws directed or required to be
exercised or done by the shareholders.
3.2 Number of Directors. The Board of Directors of the
Corporation shall consist of not less than 4 nor more than 25 persons, with the
exact number to be fixed and determined from time to time by resolution of the
Board of Directors, or by resolutions of the shareholders at any annual or
special meeting of the shareholders. The number of directors may be changed
from time to time by the shareholders or by resolution of the Board of
Directors; provided, however, that the Board of Directors may not increase or
decrease the number of directors by more than two (2) in any one year.
3.3 Election of Directors. After initial election or appointment
pursuant to Code Section 14-2-205 and unless otherwise set forth in the
Articles of Incorporation, directors shall be elected at each annual
shareholders' meeting. Except as provided in Section 3.5, the directors shall
be elected by the affirmative vote of a majority of shares represented at the
annual meeting of shareholders.
3.4 Term of Directors. The terms of the initial directors of the
Corporation shall expire at the first shareholders' meeting at which new
directors are elected. Except in the case of death, resignation, retirement,
disqualification or removal, all other directors shall serve as such for one
year and thereafter until his respective successor shall have been elected and
qualified.
3.5 Vacancies. Unless otherwise provided in the Articles of
Incorporation, a vacancy occurring on the Board of Directors, may be filled for
the unexpired term by the majority vote of the Board of Directors.
3.6 Compensation. Directors may receive such compensation for
their services as directors as may from time to time be fixed by vote of the
Board of Directors or the shareholders. A director may also serve the
Corporation in a capacity other than that of director and receive compensation,
as determined by the Board of Directors, for services rendered in that other
capacity.
-5-
<PAGE> 10
3.7 Committees. The Board of Directors may, by resolution or
resolutions passed by a majority of all the members of the Board, designate one
or more other committees, each consisting of three or more directors. Unless
otherwise specifically permitted by the Board of Directors, the provisions of
these By-Laws which govern meetings, actions without meetings, notice and
waiver of notice and quorum and voting requirements of the Board of Directors,
shall apply to meetings of committees and their members as well. To the extent
specified by the Board of Directors or in the Articles of Incorporation, each
committee shall have and may exercise all the power of the Board of Directors
specified in these By-Laws; however, notwithstanding anything to the contrary
herein, committees established by the Board shall have no power: (1) to
approve or propose to shareholders action that is required by the Code or these
By-Laws to be approved by shareholders (including, but not limited to,
fundamental corporate changes such as merger, share exchange, dissolution and
asset sales); (2) to fill vacancies on the Board of Directors or any of its
committees; (3) to amend the Articles of Incorporation or these By-Laws; (4) to
approve a plan of merger, consolidation, or sale of all or substantially all of
the Corporation's assets; or (5) to voluntarily dissolve the Corporation.
3.8 Removal. The entire Board of Directors or any individual
director may be removed from office with or without cause by the affirmative
vote of the holders of a majority of the shares entitled to vote at an election
of directors. In addition, the Board of Directors may remove a director from
office (i) if such director is adjudicated an incompetent by a court, (ii) if
he is convicted of a felony, (iii) if he files for protection from creditors
under bankruptcy laws, (iv) if he does not, within sixty (60) days of his
election, accept the office in writing or by attendance at a meeting of the
Board of Directors and fulfill any other requirements for holding the office of
director, (v) if he fails to attend regular meetings of the Board of Directors
for six (6) consecutive meetings without having been excused by the board of
Directors, or (vi) if he was an employee or duly elected officer of the
Corporation and was discharged or resigned at the request of the Board of
Directors for reasons relating to the performance of duties as an employee or
officer of the Corporation.
ARTICLE FOUR
Meetings of the Board of Directors
4.1 Regular Meetings. A regular meeting of the Board of Directors
shall be held immediately after each annual meeting of shareholders or any
meeting held in lieu thereof. In addition, the Board of Directors may schedule
other meetings to occur at regular intervals throughout the year.
4.2 Special Meetings. Special meetings of the Board of Directors
may be called by or at the request of the President, or in his absence by the
Secretary of the Corporation, or by any two directors in office at that time.
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<PAGE> 11
4.3 Place of Meetings. Directors may hold their meetings at any
place within or without the State of Georgia as the Board of Directors may from
time to time establish for regular meetings or as is set forth in the notice of
special meetings or, in the event of a meeting held pursuant to waiver of
notice, as may be set forth in the waiver.
4.4 Notice of Meetings. No notice shall be required for any
regularly scheduled meeting of the directors of the Corporation. Unless a
director waives his right to notice as contemplated in Section 5.2 hereof, the
President or Secretary of the Corporation or any director thereof shall give at
least four (4) business days' notice to each director of each special meeting
stating the date, time and place of the meeting as set forth in Sections
14-2-141 and 14-2-822 of the Code.
4.5 Quorum. Unless otherwise provided in the Articles of
Incorporation, the presence of at least a majority of the directors of the
Corporation in office immediately before the meeting begins shall constitute a
quorum necessary for the transaction of business at any meeting of directors.
4.6 Vote Required for Action. Except as otherwise provided by the
Code, the Articles of Incorporation or these By-Laws, the affirmative vote of a
majority of the directors present at a meeting at which a quorum is present at
the time shall be the act of the Board of Directors.
4.7 Action by Directors Without a Meeting. Any action required or
permitted to be taken at any meeting of the Board of Directors, or any meeting
of a committee of directors, may be taken without a meeting if a written
consent thereto shall be signed by all the directors, or all the members of the
committee, and such written consent shall be delivered to the Secretary of the
Corporation for the purpose of inclusion in the corporate records. Such
consent shall have the same force and effect as a unanimous vote of the Board
of Directors or committee and may be evidenced by one or more written consents
describing the action taken.
4.8 Adjournments. A meeting of the Board of Directors, whether or
not a quorum is present, may be adjourned by a majority of the directors
present to reconvene at a specific time and place. It shall not be necessary
to give notice of the reconvened meeting or of the business to be transacted,
other than by announcement at the meeting which was adjourned. At any such
reconvened meeting at which a quorum is present, any business may be transacted
which could have been transacted at the meeting which was adjourned.
4.9 Telephone Conference Calls. Unless otherwise prohibited by
the Articles of Incorporation, members of the Board of Directors, or any
committee designated by such Board, may participate in a meeting of such Board
or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting
-7-
<PAGE> 12
can hear each other, and participation in a meeting pursuant to this Section
4.10 shall constitute presence in person at such meeting.
ARTICLE FIVE
Notice and Waiver
5.1 Procedure. Whenever these By-Laws require notice to be given
to any shareholder or director, the notice shall be given as prescribed in
Sections 2.5 or 4.4 hereof for any shareholder or director, respectively.
Whenever notice is given to a shareholder or director by mail, the notice shall
be sent first-class mail by depositing the same in a post office or letter box
in a postage prepaid sealed envelope addressed to the shareholder or director
at his address as it appears on the books of the Corporation, and such notice
shall be deemed to have been given at the time it is deposited in the United
States mail.
5.2 Waiver. Whenever any notice is required to be given to any
shareholder or director by law, by the Articles of Incorporation, or these
By-Laws, the right to receive such notice shall be deemed waived and the notice
need not be given if (i) there is a waiver thereof in writing, signed by the
shareholder or director entitled to such notice, or by the proxy of such
shareholder, whether before or after the meeting to which the waiver pertains,
or (ii) the shareholder or director entitled to such notice, or the proxy of
such shareholder, attends the meeting which is the subject of the notice;
provided, however, that no such waiver shall apply by its terms to more than
one required notice.
ARTICLE SIX
Officers
6.1 Number. The Officers of the Corporation shall consist of a
Chairman of the Board, a President, one or more Vice Presidents, a Secretary
and a Treasurer as determined or designated by the Board of Directors. The
Board of Directors shall from time to time create and establish the duties of
such other officers and elect or provide for the appointment of such other
officers or assistant officers as it deems necessary for the efficient
management of the Corporation, but the Corporation shall not be required to
have at any time any officers other than a President, Secretary and Treasurer.
In the event that no Chairman of the Board is elected, the President shall
perform all of the duties and assume all of the responsibilities assigned to
the office of Chairman of the Board. Any two (2) or more offices may be held
by the same person.
-8-
<PAGE> 13
6.2 Election and Term. All Officers shall be elected by the Board
of Directors and shall serve at the will of the Board of Directors and until
their successors have been elected and have qualified or until their earlier
death, resignation, removal, retirement or disqualification.
6.3 Compensation. The compensation of all Officers of the
Corporation shall be fixed by the Board of Directors.
6.4 Removal of Officers. The Board of Directors may remove any
officer at any time with or without cause.
6.5 Powers and Duties. The Officers of the Corporation shall each
have such powers and duties as generally pertain to their respective offices,
as well as such powers and duties as from time to time may be conferred by the
Board of Directors. The Vice President or Vice Presidents, the Assistant
Secretary or Assistant Secretaries and the Assistant Treasurer or Assistant
Treasurers shall, in the order of their respective seniorities, in the absence
or disability of the President, Secretary or Treasurer, respectively, perform
the duties of such offices and shall generally assist the President, Secretary
or Treasurer, respectively.
Without limitation upon any of the foregoing:
(a) The Chairman of the Board shall preside at the
meetings of shareholders and at the meetings of the Board of Directors
and shall have such other duties and responsibilities as may be
specified in these By-laws and as shall be directed from time to time
by the Board of Directors.
(b) The President shall be the chief executive officer of
the Corporation and shall have general supervision of the affairs of
the Corporation and full control of and responsibility for said
affairs.
(c) The Secretary shall issue notices for and keep
minutes of all corporate meetings and shall have charge of the
corporate seal and of all corporate books, stock books and other like
records of the Corporation. The Secretary shall have authority to
give any notices required by law or these By-Laws.
(d) The Treasurer shall have custody and control of all
funds and of all financial records of the Corporation.
6.6 Additional Powers and Duties. In addition to the foregoing
especially enumerated powers and duties, the several officers of the
Corporation shall have such other powers and duties as are provided for them in
these By-laws or as may, fromtime to time, be prescribed by the Board of
Directors or a committee thereof or the Chairman of the Board.
-9-
<PAGE> 14
6.7 Reimbursement by Officers. Any payments made to an officer of
the Corporation such as salary, commission, bonus, interest or rent, or
entertainment expense incurred by him, which shall be disallowed in whole or in
part as a deductible expense by the Internal Revenue Service, shall be
reimbursed by such officer to the Corporation to the full extent of such
disallowance. It shall be the duty of the Board of Directors to enforce
payment of each such amount disallowed; provided, however, that notwithstanding
any provision to the contrary herein contained, no reimbursement shall be
required by such officer pursuant to this Section 6.8 for any deduction
disallowed by the Internal Revenue Service if, in the discretion of the Board
of Directors, such expense is a legitimate cost of doing business. In lieu of
payment by the officer, subject to the determination of the Board of Directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the Corporation has been recovered.
ARTICLE SEVEN
Distributions
7.1 Share Dividends. Unless otherwise provided in the Articles of
Incorporation, shares may be issued as a share dividend pro rata and without
consideration to the shareholders of the Corporation or to the shareholders of
one or more classes or series. Shares of one class or series may not be issued
as a share dividend in respect of another class or series unless authorized by
the Articles of Incorporation or unless a majority of the votes entitled to be
cast by the class or series to be issued approve the issue or unless there are
no issued and outstanding shares of the class or series to be issued.
ARTICLE EIGHT
Shares
8.1 Authorization and Issuance of Shares. The classes of shares
and the maximum number of shares of each class of the Corporation which may be
issued and outstanding shall be as set forth from time to time in the Articles
of Incorporation of the Corporation. The Board of Directors may increase or
decrease the number of issued and outstanding shares of the Corporation within
the maximum authorized and minimum required by the Articles of Incorporation.
8.2 Form and Content of Certificates. The shares of the
Corporation shall be evidenced by a certificate or certificates representing
shares of the Corporation which shall be in such form as the Board of Directors
may from time to time adopt in accordance with Georgia law. Share certificates
shall be consecutively numbered, shall be in registered form, and shall
-10-
<PAGE> 15
indicate the date of issue and all such information shall be entered on the
Corporation's books. Each certificate shall be signed, either manually or in
facsimile, by the President or a Vice President and the Secretary or an
Assistant Secretary and shall be sealed with the seal of the Corporation or a
facsimile thereof; provided, however, that if a share certificate is signed in
facsimile, then it must be countersigned, either manually or in facsimile, by a
transfer agent or registered by a registrar other than the Corporation itself
or an employee of the Corporation. If the person who signed a share
certificate, either manually or in facsimile, no longer holds office when the
certificate is issued, then the certificate is nevertheless valid.
8.3 Rights of Corporation with Respect to Registered Owners.
Prior to due presentation for transfer of registration of its shares, the
Corporation may treat the registered owner of the shares as the person
exclusively entitled to vote such shares, to receive any distribution with
respect to such shares, and for all other purposes, and the Corporation shall
not be bound to recognize any equitable or other claim to or interest in such
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by law.
8.4 Transfers of Shares. Transfers of shares shall be made upon
the transfer books of the Corporation, kept at the office of the transfer agent
designated to transfer the shares, only upon direction of the person named in
the certificate, or by an attorney lawfully constituted in writing, and before
a new certificate is issued, the old certificate shall be surrendered for
cancellation or, in the case of a certificate alleged to have been lost,
stolen, or destroyed, the provisions of Section 8.5 of these By-Laws shall have
been complied with.
8.5 Lost, Stolen or Destroyed Certificates. Any person claiming a
share certificate to be lost, stolen or destroyed shall make an affidavit or
affirmation of the fact in such manner as the Board of Directors may require
and shall, if the Board of Directors so requires, give the Corporation a bond
of indemnity in form and amount, and with one or more sureties satisfactory to
the Board of Directors, as the Board of Directors may require, whereupon an
appropriate new certificate may be issued in lieu of the one alleged to have
been lost, stolen or destroyed.
8.6 Fixing of Record Date. The Board of Directors may fix an
advance date as the record date for one or more voting groups in order to
determine the shareholders entitled to a distribution, to notice of a
shareholders' meeting, to demand a special meeting, to vote or to take any
other action.
8.7 Record Date if None Fixed. If no record date is fixed, as
provided in Section 8.6 of these By-Laws, then the record date for (a)
determining shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting is the close of business on the day before the
first notice is delivered to shareholders; (b) for determining shareholders
entitled to a distribution (other than one involving a purchase, redemption, or
other acquisition of the Corporation's shares) is the date the Board of
Directors authorizes the distribution; and (c) for
-11-
<PAGE> 16
any other action the consummation of which requires a determination of
shareholders is the date such action is to be taken.
ARTICLE NINE
Indemnification and Interested Parties
9.1 Indemnification. Any person, his heirs, executors, or
administrators, may be indemnified or reimbursed by the Corporation for any
reasonable expense actually incurred in connection with any threatened, pending
or completed action, suit or proceeding (including settlements thereof and
appeals therefrom), whether civil, criminal, administrative or investigative,
to which he shall be made a party or prospective party by reason of the fact
that he is or was a director, trustee, officer, employee, or agent of the
Corporation, or that he is or was serving, at the request of the Corporation,
as a director, trustee, officer, employee, or agent of another firm,
corporation, trust or other organization or enterprise. Provided, however,
that (a) such person shall be entitled to indemnification only upon a
resolution of the Board of Directors then holding office, excluding the votes
of any directors who are parties to the same or substantially the same action,
suit, or proceeding, finding that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Corporation and, in addition, with respect to any criminal
action, suit or proceeding, that such person did not have reasonable cause to
believe that his conduct was unlawful; (b) no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit or proceeding as to
which he shall finally be adjudged to have been guilty of or liable for gross
negligence, willful misconduct or criminal acts in the performance of his
duties to the Corporation, or to such other firm, corporation, trust,
organization or enterprise; and (c) no person shall be so indemnified or
reimbursed in relation to any matter in such action, suit, or proceeding which
has been the subject of a compromise settlement, except with the approval of
(i) a court of competent jurisdiction, (ii) the holders of record of a majority
of the outstanding shares of capital stock of the Corporation, or (iii) a
majority of the members of the Board of Directors then holding office,
excluding the votes of any directors who are parties to the same or
substantially the same action, suit or proceeding.
9.2 Payment of Expenses in Advance. Expenses incurred in
defending any action, suit, or proceeding referred to above may be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors in the specific case upon
receipt of an undertaking by or on behalf of the director, trustee, officer,
employee or agent to repay such amount unless it shall ultimately be determined
that he is entitled to be indemnified by the Corporation as provided above.
9.3 Insurance. The Corporation, upon the affirmative vote of a
majority of its Board of Directors, may purchase and maintain insurance on
behalf of any person who is or was a
-12-
<PAGE> 17
director, trustee, officer, employee or agent of the Corporation, or is or was
serving, at the request of the Corporation, as a director, trustee, officer,
employee or agent of another firm, corporation, trust or other organization or
enterprise, against liability asserted against him and incurred by him in any
such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the foregoing provisions of these By-Laws.
9.4 Rights Not Exclusive. The foregoing rights of indemnification
or reimbursement shall not be exclusive of other rights to which the persons
referred to above, or their heirs, executors, or administrators, may be
entitled as a matter of law, and the Corporation may indemnify such persons to
the extent permitted by the Georgia Business Corporation Code, as such laws may
be amended from time to time, and any other applicable laws.
ARTICLE TEN
Miscellaneous
10.1 Inspection of Books and Records. The Board of Directors shall
have power to determine which accounts, books and records of the Corporation
shall be open to the inspection of shareholders, except such as may by law be
specifically open to inspection, and shall have power to fix reasonable rules
and regulations not in conflict with the applicable law for the inspection of
accounts, books and records which by law or by determination of the Board of
Directors shall be open to inspection.
10.2 Seal. The seal of the Corporation shall consist of an
impression bearing the name of the Corporation around the perimeter and the
word "Seal" and such other information in the center thereof as is desired. In
lieu thereof, the Corporation may use an impression or writing bearing the
words "CORPORATE SEAL" enclosed in parentheses or scroll, which shall also be
deemed the seal of the Corporation.
10.3 Annual Statements. Not later than four months after the close
of each fiscal year, and in any case prior to the next annual meeting of
shareholders, the Corporation shall prepare (a) a balance sheet showing in
reasonable detail the financial condition of the Corporation as of the close of
its fiscal year, and (b) a profit and loss statement showing the results of its
operations during its fiscal year. Upon receipt of written request, the
Corporation promptly shall mail to any shareholder of record a copy of the most
recent such balance sheet and profit and loss statement.
10.4 Execution of Documents. No attestation by the Secretary or an
Assistant Secretary shall be necessary to make any contract, conveyance or
other document valid and legally binding which has been executed by and on
behalf of the Corporation by an officer or officers thereunto duly authorized
in the manner provided for in these By-Laws.
-13-
<PAGE> 18
ARTICLE ELEVEN
Amendments
11.1 Power to Amend By-Laws. Except as otherwise provided in
Section 2.11, the Board of Directors shall have power to alter, amend or repeal
these By-Laws or adopt new by-laws, but any by-laws adopted by the Board of
Directors may be altered, amended or repealed, and new by-laws adopted, by the
shareholders. The shareholders may prescribe that any by-law or by-laws
adopted by them shall not be altered, amended or repealed by the Board of
Directors.
11.2 Conditions. Except as otherwise provided herein, any action
taken by the shareholders with respect to by-laws shall be taken by an
affirmative vote of a majority of all shares entitled to elect directors, and
action by the Board of Directors with respect to by-laws shall be taken by an
affirmative vote of a majority of all directors then holding office.
-14-
<PAGE> 1
EXHIBIT 99.1
STOCK CERTIFICATE - SPECIMEN
Number
Shares
PICTURE
APPALACHIAN BANCSHARES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF GEORGIA
TOTAL AUTHORIZED ISSUE
20,000,000 SHARES PAR VALUE $5.00 EACH
COMMON STOCK
THIS IS TO CERTIFY THAT
is the owner of
fully paid and non-assessable shares of the above Corporation transferable only
on the books of the Corporation by the holder hereof in person or by duly
authorized Attorney upon surrender of this Certificate properly endorsed.
WITNESS, the seal of the Corporation and the signatures of its duly authorized
officers.
DATED:
/s/ P. Joe Sisson
Secretary
SEAL
/s/ Tracy R. Newton
President
<PAGE> 2
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship
and not as tenants in common
UNIF GIFT MIN ACT ..... Custodian .....
(Cust) (Minor)
under Uniform Gifts to Minors
Act............
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ------- hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
/ /
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF
ASSIGNEE)
shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
Attorney to transfer the said Shares on the books of the within named
Corporation with full power of substitution in the premises.
Dated 19---
In presence of
- ----------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT
ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE> 1
EXHIBIT 99.2
Schauer, Taylor, Cox & Edwards, P.C.
Certified Public Accountants
150 Olde Towne Road
Birmingham, Alabama 35216
Douglas B Schauer, CPA Telephone (205) 822-3488 Dudley A. Blevins, CPA
Edward R. Taylor, CPA (800) 466-3488 Fred R. First, CPA
W. Ernest Cox, CPA Fax (205) 822-3541 Jenny D. Hudson, CPA
David S. Edwards, CPA Brad K. Paramore, CPA
Raymond A. Patton, CPA
T. Paul Sanford, CPA
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Shareholders
of Gilmer County Bank
We have audited the statements of financial condition of Gilmer County Bank as
of December 31, 1995 and 1994, and the related statements of income,
shareholders' equity and cash flows for the year ended December 31, 1995 and
for the period from May 26, 1994 (inception) to December 31, 1994. These
financial statements are the responsibility of the Bank's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Gilmer County Bank as of
December 31, 1995 and for the period from May 26, 1994 (inception) to December
31, 1994, in conformity with generally accepted accounting principles.
Birmingham, Alabama
April 11, 1996
/s/ Schauer Taylor Cox & Edwards, P.C.
Schauer, Taylor, Cox & Edwards, P.C.
<PAGE> 2
STATEMENT OF FINANCIAL CONDITION
GILMER COUNTY BANK
<TABLE>
<CAPTION>
December 31,
------------------------------------
1995 1994
---- ----
<S> <C> <C>
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 244,111 $ 138
Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,545,987 -0-
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . 1,970,000 650,000
Securities available for sale . . . . . . . . . . . . . . . . . . . . 14,050,902 731,929
Securities held to maturity, estimated
fair value of $3,124,888 for 1994 . . . . . . . . . . . . . . . . . -0- 3,193,445
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,168,696 -0-
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . (324,599) -0-
------------ ------------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . 31,844,097 -0-
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . 1,672,504 884,828
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . 392,793 26,662
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228,401 74,916
------------ ------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . $ 51,948,795 $ 5,561,918
============ ============
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . $ 2,774,362 $ -0-
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . 39,354,469 -0-
------------ ------------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . . 42,128,831 -0-
Securities sold under agreements to repurchase . . . . . . . . . . . 4,311,916 -0-
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . 95,352 -0-
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 49,366 30
------------ ------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . . 46,585,465 30
------------ ------------
Shareholders' equity
Common stock, par value $5 per share,
2,000,000 shares authorized, 568,000
shares issued and outstanding . . . . . . . . . . . . . . . . . . . 2,840,000 2,840,000
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,829,314 2,829,314
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (348,143) (101,431)
Unrealized gains (losses) on investment securities
available for sale, net of deferred tax or tax benefit . . . . . . 42,159 (5,995)
------------ ------------
Total Shareholders' Equity . . . . . . . . . . . . . . . . . 5,363,330 5,561,888
------------ ------------
Total Liabilities and Shareholders' Equity . . . . . . . . . $ 51,948,795 $ 5,561,918
============ ===========
</TABLE>
See notes to financial statements
<PAGE> 3
STATEMENT OF INCOME
GILMER COUNTY BANK
<TABLE>
<CAPTION>
For the Year For the Period
Ending May 26, 1994
Dec 31, 1995 to Dec 31, 1994
------------ ---------------
<S> <C> <C>
Revenue From Earning Assets
Interest and fees on loans . . . . . . . . . . . . . . . . . . . . . . . $1,654,502 $ -0-
Interest on investment securities:
Taxable securities . . . . . . . . . . . . . . . . . . . . . . . . . . 493,281 62,147
Interest on federal funds sold . . . . . . . . . . . . . . . . . . . . . 180,420 3,331
Interest on deposits in other banks . . . . . . . . . . . . . . . . . . . -0- 12,658
---------- ----------
Total Revenue From Earning Assets . . . . . . . . . . . . . . . . 2,328,203 78,136
---------- ----------
Interest Expense
Interest on deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,225,610 -0-
Interest on federal funds purchased and
securities sold under agreements to repurchase . . . . . . . . . . . . 52,565 -0-
Interest on notes payable . . . . . . . . . . . . . . . . . . . . . . . . -0- 12,031
---------- ----------
Total Interest Expense . . . . . . . . . . . . . . . . . . . . . . 1,278,175 12,031
---------- ----------
Net Interest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,050,028 66,105
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . 330,000 -0-
---------- ----------
Net Interest Income
After Provision For Loan Losses . . . . . . . . . . . . . . . . . . . . . 720,028 66,105
Noninterest Income
Service charges on deposits . . . . . . . . . . . . . . . . . . . . . . . 54,592 -0-
Insurance commissions . . . . . . . . . . . . . . . . . . . . . . . . . . 19,410 -0-
Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . 25,107 -0-
Investment securities gains . . . . . . . . . . . . . . . . . . . . . . . 11,417 -0-
---------- ----------
Total Noninterest Income . . . . . . . . . . . . . . . . . . . . . 110,526 -0-
---------- ----------
Noninterest Expenses
Salaries and employee benefits . . . . . . . . . . . . . . . . . . . . . 658,239 126,442
Occupancy expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,578 6,409
Furniture and equipment expense . . . . . . . . . . . . . . . . . . . . . 64,820 -0-
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . 419,581 34,685
---------- ----------
Total Noninterest Expenses . . . . . . . . . . . . . . . . . . . . 1,204,218 167,536
---------- ----------
Loss before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . (373,664) (101,431)
Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,952 -0-
---------- ----------
Net Loss. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (246,712) $ (101,431)
========== ===========
Earnings (Loss) Per Common Share - Primary
and Fully Diluted
Net loss per common share . . . . . . . . . . . . . . . . . . . . . . . . $ (.43) $ (.18)
Weighted average common shares outstanding . . . . . . . . . . . . . . . 568,000 568,000
</TABLE>
See notes to financial statements
<PAGE> 4
STATEMENT OF SHAREHOLDERS' EQUITY
GILMER COUNTY BANK
For the Year Ending December 31, 1995
and For the Period May 26, 1994 (inception) to December 31, 1994
<TABLE>
<CAPTION>
Unrealized
Common Capital Accumulated Gains(Losses)
Stock Surplus Deficit On Securities Total
------ ------- ------- ------------- -----
<S> <C> <C> <C> <C> <C>
Balance at
May 26, 1994 . . . . . . . . . . . . . $ -0- $ -0- $ -0- $ -0- $ -0-
Net Loss - 1994 . . . . . . . . . . . . . -0- -0- (101,431) -0- (101,431)
Issuance of Common Stock . . . . . . . . 2,840,000 2,840,000 -0- -0- 5,680,000
Stock offering costs . . . . . . . . . . -0- (10,686) -0- -0- (10,686)
Net Change in Unrealized Gains
(Losses) on Securities . . . . . . . . -0- -0- -0- (5,995) (5,995)
---------- ---------- --------- --------- -----------
Balance at
December 31, 1994 . . . . . . . . . . 2,840,000 2,829,314 (101,431) (5,995) 5,561,888
Net Loss - 1995 . . . . . . . . . . . . . -0- -0- (246,712) -0- (246,712)
Net Change in Unrealized Gains
(Losses) on Securities . . . . . . . . -0- -0- -0- 48,154 48,154
---------- ---------- --------- --------- -----------
Balance at
December 31, 1995 . . . . . . . . . . $2,840,000 $2,829,314 $(348,143) $ 42,159 $ 5,363,330
========== ========== ========= ========= ===========
</TABLE>
See notes to financial statements
<PAGE> 5
STATEMENT OF CASH FLOWS
GILMER COUNTY BANK
<TABLE>
<CAPTION>
For the Year For the Period
Ending May 26, 1994
Dec 31, 1995 to Dec 31, 1994
------------ ---------------
<S> <C> <C>
Operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . $ (246,712) (101,431)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . 330,000 -0-
Provision for depreciation and amortization . . . . . . . 86,268 -0-
Amortization of investment security
premiums and accretion of discounts . . . . . . . . . (31,214) (6,089)
Deferred tax (benefit) . . . . . . . . . . . . . . . . . (126,952) -0-
Realized investment security gains . . . . . . . . . . . (11,417) -0-
Increase in accrued interest receivable . . . . . . . . . (366,131) (26,662)
Increase in accrued interest payable . . . . . . . . . . 95,352 -0-
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (11,660) (71,798)
------------ -----------
Net cash used in operating activities. . . . . . . . (282,466) (205,980)
------------ -----------
Investing activities:
Proceeds from sales of securities available for sale . . . . . 2,708,282 -0-
Proceeds from maturity of securities available for sale . . . 3,400,000 -0-
Purchase of securities available for sale . . . . . . . . . . (6,643,363) (738,508)
Purchase of securities held to maturity . . . . . . . . . . . (9,474,574) (3,189,860)
Net increase in loans to customers. . . . . . . . . . . . . . . (32,174,097) -0-
Capital expenditures. . . . . . . . . . . . . . . . . . . . . . (864,569) (884,828)
------------ -----------
Net cash used in investing activities . . . . . . . (43,048,321) (4,813,196)
------------ -----------
Financing activities:
Net increase in demand deposits, NOW accounts,
and savings accounts . . . . . . . . . . . . . . . . . . . . 21,127,653 -0-
Net increase in certificates of deposit . . . . . . . . . . . . 21,001,178 -0-
Net increase in securities sold under
agreement to repurchase . . . . . . . . . . . . . . . . . . . 4,311,916 -0-
Proceeds from notes payable . . . . . . . . . . . . . . . . . . -0- 600,075
Repayment of notes payable . . . . . . . . . . . . . . . . . . -0- (600,075)
Issuance of common stock . . . . . . . . . . . . . . . . . . . -0- 5,680,000
Stock issue costs . . . . . . . . . . . . . . . . . . . . . . -0- (10,686)
------------ -----------
Net cash provided by financing activities . . . . . 46,440,747 5,669,314
------------ -----------
Net increase in cash and cash equivalents . . . . . . . . . . . . 3,109,960 650,138
Cash and cash equivalents at beginning of year . . . . . . . . . . 650,138 -0-
------------ -----------
Cash and cash equivalents at end of year . . . . . . . . . . . . . $ 3,760,098 $ 650,138
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,182,823 $ 12,031
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . -0- -0-
Supplemental schedule of non-cash investing
and financing activities:
Investment securities of $13,175,783 were transferred during 1995 to securities available for sale in
accordance with the provisions of SFAS 115.
</TABLE>
See notes to financial statements
<PAGE> 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GILMER COUNTY BANK
December 31, 1995 and 1994
Note 1 - Summary of Significant Accounting Policies
Business: On May 25, 1994, Gilmer County Bank's ("the Bank") charter was
approved by the Georgia Department of Banking and Finance. On May 26, 1994,
the Bank was incorporated under the laws of the State of Georgia. The Bank
opened for business on March 3, 1995. The Bank operated as a development stage
corporation in the prior period. The Bank provides a full range of banking
services to individual and corporate customers in Gilmer County and surrounding
areas.
Investments in Securities: The Bank classifies its investments into three
categories: trading, held to maturity, and available for sale. Trading
securities are bought and held principally for the purpose of selling them in
the near term. Held to maturity securities are those for which the Bank has
the ability and intent to hold until maturity. All other securities not
included in trading or held to maturity are classified as available for sale.
Trading and available for sale securities are recorded at fair value. Held to
maturity securities are recorded at amortized cost, adjusted for the
amortization or accretion of premiums or discounts. Unrealized gains and
losses on trading securities are included in earnings. Unrealized gains and
losses, net of the related tax effect, on securities available for sale are
excluded from earnings and are reported as a separate component of
shareholders' equity until realized.
The Bank has no trading securities.
Premiums and discounts are amortized or accreted over the life of the related
security, until the earlier of the call date or maturity date, as an adjustment
of the yield using the effective interest method. Dividend and interest income
are recognized when earned. Realized gains and losses on the sale of
securities classified as available for sale and held to maturity are included
in earnings and are determined by using the specific identification method for
determining the amortized cost of the securities sold.
Revenue Recognition: Interest on loans is accrued and credited to operations
based upon the principal amount outstanding.
Accrual of interest is discontinued on a loan when management believes, after
considering economic and business conditions and collection efforts, that the
loan is impaired. Any unpaid interest previously accrued on those loans is
reversed from income. Interest income generally is not recognized on specific
impaired loans unless the likelihood of further loss is remote. Interest
payments received on such loans are applied as a reduction of the loan
principal balance. Interest income on other nonaccrual loans is recognized only
to the extent of interest payments received.
Allowance for Loan Losses: The allowance for loan losses is maintained at a
level believed adequate by management to absorb potential loan losses in the
loan portfolio. Management's determination of the adequacy of the allowance is
based on an evaluation of the portfolio, past loan loss experience, current
domestic and international economic conditions, volume, growth and composition
of the loan portfolio, and other relevant factors. Loans deemed uncollectible
are charged to the allowance. Provisions for loan losses and recoveries on
loans previously charged off are added to the allowance.
<PAGE> 7
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
December 31, 1995 and 1994
Note 1 - Summary of Significant Accounting Policies - continued
Loan Fees: The Bank accounts for loan fees and origination costs in accordance
with FASB Statement No. 91, entitled: Accounting for Nonrefundable Fees and
Costs Associated with Originating or Acquiring Loans and Direct Costs of
Leases. The basic requirement of this statement calls for the Bank to treat
loan fees, net of direct costs, as an adjustment to the yield of the related
loan over the term of the loan.
Premises and Equipment: Premises and equipment are stated at cost less
accumulated depreciation. Expenditures for additions and major improvements
that significantly extend the useful lives of the assets are capitalized.
Expenditures for repairs and maintenance are charged to expense as incurred.
The carrying value of assets traded in are used to adjust the carrying values
of the new assets acquired by trade. Assets which are disposed of are removed
from the accounts and the resulting gains or losses are recorded in operations.
Depreciation is provided generally by accelerated and straight-line methods
based on the estimated useful lives of the respective assets.
Other Real Estate: Other real estate is comprised of properties acquired
through a foreclosure proceeding or acceptance of a deed in lieu of
foreclosure. These properties are carried at the lower of cost or fair market
value based on appraised value at the date acquired. Loan losses arising from
the acquisition of such properties are charged against the allowance for loan
losses. An allowance for losses on other real estate is maintained for
subsequent valuation adjustments on a specific property basis.
Earnings Per Common Share: Earnings per common share are calculated on the
basis of the weighted average number of common shares outstanding.
Income Taxes: Provisions for income taxes are based on amounts reported in the
statement of income (after exclusion of non-taxable income such as interest on
state and municipal securities) and include deferred taxes on temporary
differences in the recognition of income and expense for tax and financial
statement purposes. Deferred tax assets and liabilities are included in the
financial statements at currently enacted income tax rates applicable to the
period in which the deferred tax assets and liabilities are expected to be
realized or settled as prescribed in SFAS No. 109, Accounting for Income Taxes.
As changes in tax laws or rates are enacted, deferred tax assets and
liabilities are adjusted through the provision for income taxes.
Employee Benefit Plan: The Bank has a 401-K profit-sharing plan covering
substantially all of its employees. Eligible participating employees may elect
to contribute tax deferred contributions. Bank contributions to the plan are
determined by the Board of Directors.
<PAGE> 8
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
December 31, 1995 and 1994
Note 1 - Summary of Significant Accounting Policies - continued
Intangibles: Intangibles consist primarily of legal, consulting and regulatory
fees charged to organizational costs. Organizational costs are generally
amortized over 5 years using the straight-line method.
Off Balance Sheet Financial Instruments: In the ordinary course of business
the Bank has entered into off-balance-sheet financial instruments consisting of
commitments to extend credit, commitments under credit card arrangements,
commercial letters of credit and standby letters of credit. Such financial
instruments are recorded in the financial statements when they become payable.
The Bank also has available as a source of short-term financing the purchase of
federal funds from another commercial bank from an available line of up to
$500,000.
Cash Flow Information: For purposes of the statements of cash flows, the Bank
considers cash, due from banks and federal funds sold as cash and cash
equivalents.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Material estimates that are particularly susceptible to significant change
relate to the determination of the allowance for losses on loans. While
management uses available information to recognize losses on loans, future
additions to the allowances may be necessary based on changes in local economic
conditions. In addition, regulatory agencies, as an integral part of their
examination process, periodically review the Bank's allowance for losses on
loans. Such agencies may require the Bank to recognize additions to the
allowances based on their judgments about information available to them at the
time of their examination.
Effect of New Financial Accounting Standards: The Financial Accounting
Standards Board issued Statement of Financial Accounting Standards ("SFAS") No.
114 ,Accounting by Creditors for Impairment of a Loan. SFAS No. 114, as amended
by SFAS No. 118, became effective January 1, 1995 and requires that impaired
loans that are within the scope of this Statement be measured based on the
present value of expected future cash flows discounted at the loan's effective
interest rate, or, as a practical expedient, at the loans observable market
price or the fair value of the collateral if the loan is collateral dependent.
The adoption of SFAS No. 114 did not have a material effect on financial
position and results of operations.
<PAGE> 9
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 2 - Restrictions On Cash And Due From Bank Accounts
The Bank is required to maintain average reserve balances either in vault cash
or on deposit with the Federal Reserve Bank. At December 31, 1995, the Bank
was in compliance with these requirements.
Note 3 - Investment Securities
During 1995, the Financial Accounting Standards Board issued a report
clarifying several provisions of SFAS 115. The report authorized entities to
"reassess the appropriateness of the classifications of all securities" that
were held when the current rule took effect, without risking the classification
of other securities, for a limited period of time from November 15, 1995 to
December 31, 1995. On November 30, 1995, the Bank transferred securities with
a carrying value of $8,985,745 and fair value of $9,015,431 from held to
maturity to available for sale. All securities were classified as available
for sale as of December 31, 1995.
At December 31, 1995, the Bank's available-for-sale securities reflected net
unrealized gains of $64,159, which resulted in an increase in stockholders'
equity of $42,159, net of deferred tax liability, as opposed to net unrealized
losses of $9,083, and a resultant decrease in stockholders' equity of $5,995,
net of deferred tax benefit, at December 31, 1994.
The carrying amounts of investment securities as shown in the statement of
financial condition of the Bank and their approximate fair values at December
31, 1995 and 1994 are presented below.
<TABLE>
<CAPTION>
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
As of December 31, 1995:
Securities Available for Sale:
U. S. government and agency securities . . . . $13,986,743 $71,022 $ 6,863 $14,050,902
=========== ======= =========== ===========
As of December 31, 1994:
Securities Available for Sale:
U. S. government and agency securities . . . . $ 741,012 $ -0- $ 9,083 $ 731,929
=========== ======= =========== ===========
Securities Held to Maturity:
U. S. government and agency securities . . . . $ 3,193,445 $ -0- $ 68,557 $ 3,124,888
=========== ======= =========== ===========
</TABLE>
<PAGE> 10
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 3 - Investment Securities - continued
The contractual maturities of securities available for sale at December 31,
1995 are shown below. Expected maturities will differ from contractual
maturities because borrowers may have the right to call or prepay obligations
with or without call or prepayment penalties.
<TABLE>
<CAPTION>
Estimated
Amortized Fair
Cost Value
------------- ------------
<S> <C> <C>
As of December 31, 1995:
Securities Available for Sale:
Due in one year or less . . . . . . . . . . . . . . . . . . . . $ 500,000 $ 501,345
Due after one year through five years . . . . . . . . . . . . . 12,486,743 12,543,932
Due after five year through ten years . . . . . . . . . . . . . 1,000,000 1,005,625
Due after ten years . . . . . . . . . . . . . . . . . . . . . . - -
------------- ------------
$ 13,986,743 $ 14,050,902
============= ============
</TABLE>
Gross realized gains and losses on investments in debt securities
available for sale for the periods ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Gross realized gains . . . . . . . . . . . . . . . $ 11,417 $ -0-
Gross realized losses . . . . . . . . . . . . . . . -0- -0-
</TABLE>
The carrying value of investment securities pledged to secure public funds on
deposit, securities sold under agreements to repurchase, and for other purposes
as required by law amounted to approximately $4,989,000 at December 31, 1995.
At December 31, 1994, no investment securities were required to be pledged.
Approximately sixty days subsequent to the Bank opening on March 3, 1995,
management evaluated its investment securities portfolio for purposes of proper
categorization between held-to-maturity and available-for-sales in
consideration of the existing maturities and rates of the loans and deposits
acquired in the first two months of operation. As a result of this evaluation,
held-to-maturity securities with a carrying value of $4,190,038 and fair value
of $4,197,772 were transferred to available-for-sale.
Note 4 - Loans
The Bank grants loans to customers primarily in the North Georgia area. The
major classifications of loans as of December 31, 1995 were as follows:
<TABLE>
<S> <C>
Commercial, financial and agricultural . . . . . . . . . . . . . . . . . . . . . . $ 10,892,707
Real estate - construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,633,719
Real estate - mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,671,555
Consumer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,117,308
Other loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 853,407
--------------
32,168,696
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 324,599
--------------
Net loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 31,844,097
==============
</TABLE>
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 4 - Loans - continued
As of December 31, 1995, there were no loans which the Bank had specifically
classified as impaired. Other nonaccrual loans at December 31, 1995 amounted to
approximately $46,000. For the year ended December 31, 1995 the difference
between gross interest income that would have been recorded in such period if
nonaccruing loans had been current in accordance with their original terms and
the amount of interest income on those loans that was included in such period's
net income was negligible.
The Bank has no commitments to loan additional funds to the borrowers of
nonaccrual loans.
Note 5 - Allowance for Loan Losses
Changes in the allowance for loan losses for the year ended December 31, 1995
were as follows:
<TABLE>
<S> <C>
Balance at beginning of year. . . . . . . . . . . . . . . . $ -0-
Charge-offs . . . . . . . . . . . . . . . . . . . . . . . . 5,401
Recoveries . . . . . . . . . . . . . . . . . . . . . . . -0-
----------
Net charge-offs. . . . . . . . . . . . . . . . . . . . . 5,401
Provision for loan losses . . . . . . . . . . . . . . . . . 330,000
----------
Balance at end of year. . . . . . . . . . . . . . . . . . . $ 324,599
==========
</TABLE>
Note 6 - Premises and Equipment
Premises and equipment were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 329,900 $ 329,900
Construction in progress . . . . . . . . . . . . . . . . . . . . . . -0- 401,473
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . 877,584 -0-
Furniture and equipment . . . . . . . . . . . . . . . . . . . . . . 537,149 153,455
------------ ------------
1,744,633 884,828
Less allowance for depreciation . . . . . . . . . . . . . . . . . . 72,129 -0-
------------ ------------
$ 1,672,504 $ 884,828
============ ============
</TABLE>
The provision for depreciation charged to occupancy and furniture and
equipment expense for the year ended December 31, 1995 was $72,129. No
depreciation expenses was recognized for the period May 26, 1994 through
December 31, 1994.
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 7 - Deposits
The major classifications of deposits as of December 31, 1995 were as follows:
<TABLE>
<S> <C>
Noninterest-bearing demand . . . . . . . . . . . . . . . . . . . $ 2,774,362
Interest-bearing demand . . . . . . . . . . . . . . . . . . . . 11,526,025
Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,827,266
Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,304,240
Certificates of deposit of $100,000 or more . . . . . . . . . . 5,696,938
--------------
$ 42,128,831
==============
</TABLE>
The maturities of time certificates of deposit and other time deposits
of $100,000 or more issued by the Bank at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
Time
Certificates
of Deposit
-----------
<S> <C>
Three months or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 954,403
Over three through six months. . . . . . . . . . . . . . . . . . . . . . . . . 1,783,338
Over six through twelve months . . . . . . . . . . . . . . . . . . . . . . . . 638,983
Over twelve months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,320,214
-------------
$ 5,696,938
=============
</TABLE>
Note 8 - Securities Sold Under Agreement To Repurchase
Securities sold under agreements to repurchase amounted to $4,311,916 as
of December 31, 1995. The weighted average maturity of the agreements was 86
days. The weighted average rate was 4.8 percent.
Securities sold under agreements to repurchase averaged $1,029,265
during 1995. The maximum amount outstanding at any month end during 1995 was
$4,552,816.
<PAGE> 13
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 9 - Other Operating Expenses
Other operating expenses consist of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 78,660 $ 7,028
Checking account expense. . . . . . . . . . . . . . . . . . . . . . . . 21,980 -0-
Data processing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,676 -0-
Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,764 1,587
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,818 18,058
Postage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,221 924
Professional fees . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,657 1,702
Stationery and supplies . . . . . . . . . . . . . . . . . . . . . . . . 89,501 5,386
Taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . . . . 15,304 -0-
----------- ----------
$ 419,581 $ 34,685
=========== ==========
</TABLE>
Note 10 - Income Taxes
There were no current taxes receivable or payable as of December 31, 1995.
The components of the net deferred income tax asset included in other assets
are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax asset:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 141,601 $ 3,088
Deferred tax liability:
Federal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (36,649) -0-
----------- --------
Net deferred income tax asset . . . . . . . . . . . . . . . . . . . . . . . $ 104,952 3,088
=========== ========
</TABLE>
The tax effects of each type of income and expense item that gave rise
to deferred taxes are:
<TABLE>
<S> <C> <C>
Net operating loss carryover . . . . . . . . . . . . . . . . . . . . . . $ 71,542 $ 34,486
Net unrealized gains on securities
available for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,000) 3,088
Depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,649) -0-
Provision for loan losses . . . . . . . . . . . . . . . . . . . . . . . . 72,902 -0-
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,843) -0-
Less : Valuation reserve . . . . . . . . . . . . . . . . . . . . . . . . -0- (34,486)
----------- ---------
$ 104,952 $ 3,088
=========== =========
</TABLE>
The net change in the valuation allowance for the year ended December 31, 1995
was $34,486.
Income tax benefit as reflected on the statement of income for the year
ended December 31, 1995 consisted solely of deferred federal tax benefit of
$126,952.
<PAGE> 14
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 10 - Income Taxes - continued
The principal sources of temporary differences resulting in deferred
income taxes included in the accompanying Statement of income and the tax effect
of each are as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net operating loss carryover................................... $ (71,542) $ -0-
Depreciation................................................... 14,649 -0-
Provision for loan losses...................................... (72,902) -0-
Other.......................................................... 2,843 -0-
----------- --------
$ (126,952) $ -0-
=========== ========
</TABLE>
Tax effects of securities transactions resulted in a decrease in income
tax benefit for 1995 of $3,882.
The effective tax rate of 34 percent is the same as the federal
statutory rate. There were no significant items causing increases or decreases
from the statutory rate.
The carryforward period of net operating losses for tax purposes will
expire beginning the year 2009.
Note 11 - Commitments and Contingencies
In the normal course of business, the Bank offers a variety of financial
products to its customers to aid them in meeting their requirements for
liquidity, credit enhancement, and interest rate protection. Generally accepted
accounting principles recognize these transactions as contingent liabilities
and, accordingly, they are not reflected in the accompanying financial
statements. Commitments to extend credit, credit card arrangements, commercial
letters of credit, and standby letters of credit all include exposure to some
credit loss in the event of nonperformance of the customer. The Bank's credit
policies and procedures for credit commitments and financial guarantees are the
same as those for extension of credit that are recorded on the statement of
financial condition. Because these instruments have fixed maturity dates, and
because many of them expire without being drawn upon, they do not generally
present any significant liquidity risk to the Bank. The Bank's has not been
required to perform on any financial guarantees nor has it incurred any losses
on its commitments in 1995 or 1994. Following is a discussion of these
commitments:
Standby Letters of Credit: These agreements are used by the Bank's
customers as a means of improving their credit standings in their dealings with
others. Under these agreements, the Company agrees to honor certain financial
commitments in the event that its customers are unable to do so. As of
December 31, 1995, the Bank has issued standby letters of credit of
approximately $5,000. The Bank had no standby letters of credit outstanding at
December 31, 1994.
Management conducts regular reviews of these instruments on an
individual customer basis, and the results are considered in assessing the
adequacy of the Bank's allowance for loan losses. Management does not
anticipate any material losses as a result of these letters of credit.
Loan Commitments: As of December 31, 1995, the Bank had commitments
outstanding to extend credit totaling approximately $5,353,000. These
commitments generally require the customers to maintain certain credit
standards. Management does not anticipate any material losses as a result of
these
<PAGE> 15
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
commitments. At December 31, 1994, the Bank had no commitments
outstanding to extend credit.
Note 11 - Commitments and Contingencies - continued
Litigation: The Bank is party to litigation and claims arising in the
normal course of business. Management, after consultation with legal counsel,
believes that the liabilities, if any, arising from such litigation and claims
are not material to the financial statements.
Note 12 - Concentrations of Credit
All of the Bank's loans, commitments and standby letters of credit have
been granted to customers in the Bank's market area. Substantially all such
customers are depositors of the Bank. The concentrations of credit by type of
loan are set forth in Note 4. Additionally, there exists a substantial
concentration of loans in the poultry industry. At December 31, 1995 there
existed approximately $7 million of such loans outstanding. The commitments to
extend credit relate primarily to unused real estate draw lines.
The Bank maintains its cash accounts at various commercial banks in
Georgia. The total cash balances are insured by the FDIC up to $100,000. All
cash balances held at other commercial banks were insured at December 31, 1995
and 1994.
Note 13 - Shareholders' Equity
The Bank raised $5,680,000 in capital as part of its initial offering of
which $2,840,000 was allocated to common stock and $2,840,000 was allocated to
capital surplus. Legal, printing and other costs of issuance of stock amounting
to $10,686, were applied against capital surplus.
The Board of Directors of any state-chartered bank in Georgia may declare
and pay cash dividends on its outstanding capital stock without any request for
approval of the Bank's regulatory agency if the following conditions are met:
1. Total classified assets at the most recent examination of the Bank do
not exceed 80% of equity capital.
2. The aggregate amount of dividends declared in the calendar year does
not exceed 50% of the prior year's net income.
3. The ratio of equity capital to adjusted assets shall not be less than
6%.
As of December 31, 1995, the Bank could not declare dividends without
regulatory consent.
The Bank is also required to maintain minimum amounts of capital to
total "risk weighted" assets, as defined by the banking regulators. The Bank's
ratios as of December 31, 1995 exceeded the required amounts.
<PAGE> 16
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 14 - Employee Benefit Plan
The Bank adopted a defined contribution plan covering substantially all
employees; the plan is qualified under Section 401(k) of the Internal Revenue
Code. Under the provisions of the plan, eligible participating employees may
elect to contribute up to the maximum amount of tax deferred contribution
allowed by the Internal Revenue Code. The Bank's contribution to the plan is
determined by the Board of Directors and is currently subject to regulatory
restriction. No contributions were made by the Bank in 1995 and 1994.
Note 15 - Related Party Transactions
Loans: Certain directors, executive officers and principal shareholders,
including their immediate families and associates were loan customers of the
bank during 1995. Such loans are made in the ordinary course of business at
normal credit terms, including interest rates and collateral and do not
represent more than a normal risk of collection. Total loans to these persons
at December 31, 1995, amounted to $3,204,791. An analysis of activity during
1995 in loans to related parties resulted in additions of $3,986,768
representing new loans and reductions of $781,977, representing payments.
Land: The Bank purchased land at a cost of $150,000 from a director. The
price paid was approximately fair market value at the date of purchase.
Construction Loan: A bank director is the President of a bank which provided a
construction and organizational loan to the Bank. The Bank paid interest at
the prime rate. In September, 1994, the Bank paid off the outstanding loan
balance.
Other: The Bank utilized the services of an accounting firm, of which a
director is a partner, for internal review and various other accounting and tax
services. Amounts paid were at a rate comparable to that which could have been
obtained from unrelated parties.
Note 16 - Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
Cash and Short-Term Investments: For those short-term instruments, the
carrying amount is a reasonable estimate of fair value.
Investment Securities: For securities and marketable equity securities held
for investment purposes, fair values are based on quoted market prices or
dealer quotes. For other securities held as investments, fair value equals
quoted market price, if available. If a quoted market price is not available,
fair value is estimated using quoted market prices for similar securities.
<PAGE> 17
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
Note 16 - Fair Value of Financial Instruments - continued
Loan Receivables: For certain homogeneous categories of loans, such as some
residential mortgages, credit card receivables, and other consumer loans, fair
value is estimated using the quoted market prices for securities backed by
similar loans, adjusted for differences in loan characteristics. The fair
value of other types of loans is estimated by discounting the future cash flows
using the current rates at which similar loans would be made to borrowers with
similar credit ratings and for the same remaining maturities.
Deposit Liabilities: The fair value of demand deposits, savings accounts, and
certain money market deposits is the amount payable on demand at the reporting
date. The fair value of fixed-maturity certificates of deposit is estimated
using the rates currently offered for deposit of similar remaining maturities.
Short-term Borrowings: The fair value of short-term borrowings, including
securities sold under agreements to repurchase, is estimated to be
approximately the same as the carrying amount.
Commitments to Extend Credit, Standby Letters of Credit, and Financial
Guarantees Written: The fair value of commitments and letters of credit is
estimated to be approximately the same as the notional amount of the related
commitment.
The estimated fair values of the Company's financial instruments as of December
31, 1995 are as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
------------ -----------
(in Thousands)
<S> <C> <C>
Financial assets:
Cash and short-term investments .......... $ 3,760 $ 3,760
Investment securities .................... 14,051 14,051
Loans..................................... 32,169 32,323
--------- ----------
Total financial assets................... $ 49,980 $ 50,134
========= ==========
Financial Liabilities:
Deposits.................................. $ 42,129 $ 42,137
Short-term borrowings..................... 4,312 4,312
--------- ----------
Total financial liabilities.............. $ 46,441 $ 46,449
========= ==========
</TABLE>
<PAGE> 18
NOTES TO FINANCIAL STATEMENTS
GILMER COUNTY BANK
DECEMBER 31, 1995 AND 1994
<TABLE>
<S> <C> <C>
Unrecognized financial instruments:
Commitments to extend credit ........................ $ 5,353 $ 5,353
Standby letters of credit............................ 5 5
------------ -----------
Total unrecognized
financial instruments............................... $ 5,358 $ 5,358
============ ===========
</TABLE>
<PAGE> 1
EXHIBIT 99.3
STATEMENT OF FINANCIAL CONDITION
(UNAUDITED)
GILMER COUNTY BANK
<TABLE>
<CAPTION>
March 31,
------------------------------
1996 1995
---- ----
<S> <C> <C>
Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 290,541 $ 211,908
Due from banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 820,396 767,657
Federal funds sold . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,330,000 4,160,000
Securities available for sale . . . . . . . . . . . . . . . . . . . . . . 15,321,796 740,312
Securities held to maturity, estimated
fair value of $3,194,888 for 1994 . . . . . . . . . . . . . . . . . . . -0- 3,201,189
Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,786,109 4,228,684
Allowance for loan losses . . . . . . . . . . . . . . . . . . . . . . . . (412,460) (39,645)
------------- -------------
Net Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,373,649 4,189,039
Premises and equipment, net . . . . . . . . . . . . . . . . . . . . . . . 1,648,823 1,333,127
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . 575,918 52,418
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220,748 122,495
------------- -------------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . $ 62,581,871 $ 14,778,145
============= =============
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Noninterest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,703,993 $ 508,983
Interest-bearing . . . . . . . . . . . . . . . . . . . . . . . . . . 49,282,343 8,749,048
------------- -------------
Total Deposits . . . . . . . . . . . . . . . . . . . . . . 51,986,336 9,258,031
Securities sold under agreements to repurchase . . . . . . . . . . . . 4,939,456 -0-
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,444 10,183
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,684 18,988
------------- -------------
Total Liabilities . . . . . . . . . . . . . . . . . . . . 57,127,920 9,287,202
------------- -------------
Shareholders' equity
Common stock, par value $5 per share,
2,000,000 shares authorized, 568,000
shares issued and outstanding . . . . . . . . . . . . . . . . . . . . 2,840,000 2,840,000
Capital surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,829,314 2,829,314
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (268,503) (175,490)
Unrealized gains (losses) on investment securities
available for sale, net of deferred tax or tax benefit . . . . . . . 53,140 (2,881)
------------- -------------
Total Shareholders' Equity . . . . . . . . . . . . . . . . 5,453,951 5,490,943
------------- -------------
Total Liabilities and Shareholders' Equity . . . . . . . . $ 62,581,871 $ 14,778,145
============= =============
</TABLE>
See notes to interim financial statements
<PAGE> 2
STATEMENT OF INCOME
(UNAUDITED)
GILMER COUNTY BANK
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar 31, 1996 Mar 31, 1995
------------ ------------
<S> <C> <C>
Revenue From Earning Assets
Interest and fees on loans. . . . . . . . . . . . . . . . . $ 976,571 $ 28,470
Interest on investment securities:
Taxable securities . . . . . . . . . . . . . . . . . . . 213,426 106,619
Interest on federal funds sold. . . . . . . . . . . . . . . 24,051 17,754
---------- -----------
Total Revenue From Earning Assets . . . . . . . . . . . 1,214,048 152,843
---------- -----------
Interest Expense
Interest on deposits. . . . . . . . . . . . . . . . . . . . 646,144 23,023
Interest on federal funds purchased and
securities sold under agreements to repurchase . . . . . 50,622 1,151
Interest on notes payable . . . . . . . . . . . . . . . . .
---------- -----------
Total Interest Expense . . . . . . . . . . . . . . . . 696,766 24,174
---------- -----------
Net Interest Income . . . . . . . . . . . . . . . . . . . . . 517,282 128,669
Provision for loan losses . . . . . . . . . . . . . . . . . . 90,000 39,645
---------- -----------
Net Interest Income
After Provision For Loan Losses . . . . . . . . . . . . . . 427,282 89,024
Noninterest Income
Service charges on deposits . . . . . . . . . . . . . . . . 29,179 310
Insurance commissions . . . . . . . . . . . . . . . . . . . 3,000 -0-
Other operating income . . . . . . . . . . . . . . . . . . 9,126 2,293
Investment securities gains . . . . . . . . . . . . . . . . 9,406 -0-
---------- -----------
Total Noninterest Income . . . . . . . . . . . . . . 50,711 2,603
---------- -----------
Noninterest Expenses
Salaries and employee benefits . . . . . . . . . . . . . . 192,395 123,225
Occupancy expense . . . . . . . . . . . . . . . . . . . . . 23,596 5,826
Furniture and equipment expense . . . . . . . . . . . . . . 27,833 7,141
Other operating expenses . . . . . . . . . . . . . . . . . 113,502 67,646
---------- -----------
Total Noninterest Expenses . . . . . . . . . . . . . . 357,326 203,838
---------- -----------
Loss before income taxes . . . . . . . . . . . . . . . . . . 120,667 (112,211)
Income tax (provision) benefit . . . . . . . . . . . . . . . (41,027) 38,152
---------- -----------
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . $ 79,640 $ (74,059)
========== ===========
Earnings (Loss) Per Common Share - Primary
and Fully Diluted
Net income per common share . . . . . . . . . . . . . . . . $ .14 $ (.13)
Weighted average common shares outstanding . . . . . . . . 568,000 568,000
</TABLE>
See notes to interim financial statements
<PAGE> 3
STATEMENT OF CASH FLOWS
(UNAUDITED)
GILMER COUNTY BANK
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
Mar 31, 1996 Mar 31, 1995
------------ ------------
<S> <C> <C>
Operating activities:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . $ 79,640 $ (74,059)
Adjustments to reconcile net loss to net
cash used in operating activities:
Provision for loan losses . . . . . . . . . . . . . . . . 90,000 39,645
Provision for depreciation and amortization . . . . . . . 29,807 5,701
Amortization of investment security
premiums and accretion of discounts . . . . . . . . . (4,465) (7,744)
Deferred tax (benefit) . . . . . . . . . . . . . . . . . 41,027 (38,152)
Realized investment security gains . . . . . . . . . . . (9,406) -0-
Increase in accrued interest receivable . . . . . . . . . (183,125) (25,756)
Increase in accrued interest payable . . . . . . . . . . 2,092 10,183
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 17,631 4,262
------------ -----------
Net cash used in operating activities . . . . . . . 63,201 (85,920)
------------ -----------
Investing activities:
Proceeds from sales of securities available for sale . . . . . 2,505,313 -0-
Proceeds from maturity of securities available for sale . . . 1,000,000 -0-
Purchase of securities available for sale . . . . . . . . . . (4,751,355) -0-
Net increase in loans to customers . . . . . . . . . . . . . . (9,619,552) (4,228,684)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . (1,813) (454,000)
------------ -----------
Net cash used in investing activities . . . . . . . (10,867,407) (4,682,684)
------------ -----------
Financing activities:
Net increase in demand deposits, NOW accounts,
and savings accounts . . . . . . . . . . . . . . . . . . . . 3,585,741 5,982,039
Net increase in certificates of deposit . . . . . . . . . . . 6,271,764 3,275,992
Net increase in securities sold under
agreement to repurchase . . . . . . . . . . . . . . . . . . 627,540 -0-
Proceeds from notes payable . . . . . . . . . . . . . . . . . -0- -0-
Repayment of notes payable . . . . . . . . . . . . . . . . . . -0- -0-
Issuance of common stock . . . . . . . . . . . . . . . . . . . -0- -0-
Stock issue costs . . . . . . . . . . . . . . . . . . . . . . -0- -0-
------------ -----------
Net cash provided by financing activities . . . . . 10,485,045 9,258,031
------------ -----------
Net increase in cash and cash equivalents . . . . . . . . . . . . (319,161) 4,489,427
Cash and cash equivalents at beginning of year . . . . . . . . . . 3,760,098 650,138
------------ -----------
Cash and cash equivalents at end of year . . . . . . . . . . . . . $ 3,440,937 $ 5,139,565
============ ===========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . $ 694,674 $ 13,991
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . -0- -0-
</TABLE>
See notes to interim financial statements
<PAGE> 4
GILMER COUNTY BANK
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1996 and 1995
NOTE A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Articles 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1996 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the financial
statements and footnotes thereto included in the Bank's Annual Report on Form
F-1 for the year ended December 31, 1995.
NOTE B - Income Taxes
The effective tax rates of 34 percent at March 31, 1996 and 1995
approximates the statutory rate.
NOTE C - Investment Securities
Effective May 26, 1994, the date of incorporation, the Bank applied the
accounting and reporting requirements of Statement of Financial Accounting
Standards No. 115, Accounting for Certain Investments in Debt and Equity
Securities ("SFAS 115"). This pronouncement requires that all investments in
debt securities be classified as either held-to-maturity securities, which are
reported at amortized cost; trading securities, which are reported at fair
value, with unrealized gains and losses included in earnings; or
available-for-sale securities, which are reported at fair value, with unrealized
gains and losses excluded from earnings and reported in a separate component of
stockholders' equity (net of deferred tax effect).
At March 31, 1996, the Bank had net unrealized gains of $80,515 in
available-for-sale securities which are reflected in the presented assets and
resulted in an increase in stockholders' equity of $53,140 net of deferred tax
liability. There were no trading securities. The net increase in stockholders'
equity as a result of the SFAS 115 adjustment from December 31, 1995 to March
31, 1996 was $10,981.
NOTE D - Shareholders' Equity
The Company raised $5,680,000 in capital as part of its initial offering
of which $2,840,000 was allocated to common stock and $2,840,000 was allocated
to capital surplus. Of this amount, $10,686, relating to the actual costs of
the stock issuance, was applied against capital surplus.
<PAGE> 1
EXHIBIT 99.4
GILMER COUNTY BANK
BALANCE SHEET
<TABLE>
<CAPTION>
Six Months
ended June 30,
1996 December 31,
(Unaudited) 1995
------------------ ---------------
<S> <C> <C>
ASSETS
Cash $ 510,974 $ 244,111
Due from banks 1,302,819 1,545,987
Federal funds sold 1,140,000 1,970,000
Securities available for sale 14,855,766 14,050,902
Loans 52,196,781 32,168,696
Allowance for loan losses (518,573) (324,599)
----------- -----------
Net Loans 51,678,208 31,844,097
Premises and equipment, net 1,648,028 1,672,504
Accrued interest 674,749 392,793
Other assets 293,626 228,401
----------- -----------
TOTAL ASSETS $72,104,170 $51,948,795
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
Deposits:
Noninterest-bearing $ 3,162,002 $ 2,774,362
Interest-bearing 58,935,595 39,354,469
----------- -----------
TOTAL DEPOSITS 62,097,597 42,128,831
Securities sold under agreements to repurchase 4,460,473 4,311,916
Accrued interest 113,322 95,352
Other liabilities 151,543 49,366
----------- -----------
TOTAL LIABILITIES 66,822,935 46,585,465
----------- -----------
SHAREHOLDERS' EQUITY:
Common stock ($5 par value; 2,000,000 shares authorized,
568,000 shares issued and outstanding) 2,840,000 2,840,000
Capital surplus 2,829,314 2,829,314
Retained earnings (accumulated deficit) (137,838) (348,143)
Unrealized losses on investment securities available for sale,
net of deferred tax or tax benefit (250,241) 42,159
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 5,281,235 5,363,330
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $72,104,170 $51,948,795
=========== ===========
</TABLE>
See notes to financial statements.
-1-
<PAGE> 2
GILMER COUNTY BANK
STATEMENT OF INCOME
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------------ ----------------------------
1996 1995 1996 1995
------------- ------------- ------------- -----------
<S> <C> <C> <C> <C>
REVENUE FROM EARNING ASSETS:
Interest and fees on loans $1,213,155 $308,898 $2,189,726 $337,368
Interest on investment securities:
Taxable securities 231,901 76,919 445,327 183,538
Interest on federal funds sold 13,885 70,715 37,936 88,469
---------- -------- ---------- --------
TOTAL REVENUE FROM EARNING ASSETS 1,458,941 456,532 2,672,989 609,375
INTEREST EXPENSE:
Interest on deposits 766,510 244,251 1,412,654 267,274
Interest on federal funds purchased and
securities sold under agreements to 55,867 0 106,489 1,151
repurchase ---------- -------- ---------- --------
TOTAL INTEREST EXPENSE 822,377 244,251 1,519,143 268,425
NET INTEREST INCOME: 636,564 212,281 1,153,846 340,950
Provision for loan losses 107,000 120,355 197,000 160,000
---------- -------- ---------- --------
NET INTEREST INCOME:
After provision for loan losses 529,564 91,926 956,846 180,950
NONINTEREST INCOME:
Service charges on deposits 31,753 10,152 60,932 10,462
Insurance commissions 6,550 9,030 9,550 9,030
Other operating income 26,525 4,536 35,651 6,829
Investment securities gains 313 5,991 9,719 5,991
---------- -------- ---------- --------
TOTAL NONINTEREST INCOME 65,141 29,709 115,852 32,312
NONINTEREST EXPENSES:
Salaries and employee benefits 221,852 173,248 414,247 296,473
Occupancy expense 22,042 16,812 45,638 22,638
Furniture and equipment expense 30,506 12,983 58,339 20,124
Other operating expenses 122,327 129,235 235,829 196,881
---------- -------- ---------- -------
TOTAL NONINTEREST EXPENSES 396,727 332,278 754,053 536,116
Loss before income taxes 197,978 (210,643) 318,645 322,854
Income tax (provision) benefit (67,312) 71,618 (108,340) 109,770
---------- -------- ---------- --------
NET INCOME (LOSS) 130,666 (139,025) 210,305 (213,084)
========== ======== ======= ========
EARNINGS (LOSS) PER COMMON SHARE - PRIMARY AND
FULLY DILUTED
Net income (loss) per common share .23 (.24) .37 (.38)
Weighted average common shares outstanding 568,000 568,000 568,000 568,000
</TABLE>
See notes to financial statements.
-2-
<PAGE> 3
GILMER COUNTY BANK
STATEMENT OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30
---------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 210,305 $ (213,084)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Provision for loan losses 197,000 160,000
Provision for depreciation and amortization 57,334 25,268
Amortization of investment security premiums
and accretion of discounts (7,617) (7,977)
Deferred tax (benefit) 108,340 (109,770)
Realized investment security gains (9,719) (5,991)
Increase in accrued interest receivable (281,956) (159,528)
Increase in accrued interest payable 17,970 36,143
Other 23,885 (17,344)
----------- -----------
NET CASH PROVIDED (USED) IN OPERATING ACTIVITIES 315,542 (292,283)
INVESTING ACTIVITIES:
Proceeds from sales of securities available for sale 2,826,346 1,716,641
Purchase of securities available for sale (4,007,297) (3,138,683)
Net increase in loans to customers (20,031,111) (15,817,592)
Capital expenditures (27,108) (718,333)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (21,239,170) (17,957,967)
FINANCING ACTIVITIES:
Net increase in demand deposits, NOW accounts,
and savings accounts 7,675,034 13,532,915
Net increase in certificates of deposits 12,293,732 9,481,619
Net increase in securities sold under agreement to repurchase 148,557 0
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 20,117,323 23,014,534
----------- -----------
Net increase (decrease) in cash and cash equivalents (806,305) 4,764,284
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,760,098 650,138
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,953,793 $ 5,414,422
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest 1,537,113 232,282
Income taxes 0 0
</TABLE>
See notes to financial statements.
-3-
<PAGE> 4
GILMER COUNTY BANK
NOTES TO FINANCIAL STATEMENTS
Quarter ended June 30, 1996
(unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB and Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the six month period ended June 30, 1996 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. For further information, refer to the financial statements
for the year ended December 31, 1995, and the footnotes thereto included in the
Bank's Registration on Form F-1 filed with the FDIC on April 29, 1996.
NOTE B - INCOME TAXES
The effective tax rate of approximately 34 percent for the six months
ended June 30, 1996 approximates the statutory rate.
NOTE C - INVESTMENT SECURITIES
The Bank applies the accounting and reporting requirements of
Statement of Financial Accounting Standards No. 115, Accounting for Certain
Investments in Debt and Equity Securities ("SFAS 115"). This pronouncement
requires that all investments in debt securities be classified as either
held-to-maturity securities, which are reported at amortized cost; trading
securities, which are reported at fair value, with unrealized gains and losses
included in earnings; or available-for-sale securities, which are reported at
fair value, with unrealized gains and losses excluded from earnings and
reported in a separate component of shareholder's equity (net of deferred tax
effect).
At June 30, 1996, the Bank had net unrealized losses of $329,264 in
available-for-sale securities which are reflected in the amount presented as
available-for-sale securities on the June 30, 1996 balance sheet. The
unrealized losses resulted in a decrease in shareholder's equity of $250,241,
net of deferred tax liability. There were no trading or held-to-maturity
securities. The net decrease in shareholder's equity as a result of the SFAS
115 adjustment from December 31, 1995 to June 30, 1996 was $292,400.
NOTE D - SUBSEQUENT EVENT
On May 24, 1996, the Bank entered into a Plan of Reorganization and
Agreement of Merger with Appalachian Bancshares, Inc., a Georgia corporation
(the "Holding Company") and Gilmer Interim, Inc. ("Interim"), a wholly-owned
subsidiary of the Holding Company, which provided for the merger of Interim
with and into the Bank, with the Bank being the surviving entity. Pursuant to
the Reorganization Plan, shareholders of the Bank will exchange each of their
shares of Bank common stock for one share of common stock of the Holding
Company. The merger was consummated on August 8, 1996.
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