<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 15, 1996.
REGISTRATION NO. 333-10909
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
PRE-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
FORSYTH BANCSHARES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
GEORGIA 6022 58-2231953
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
425 TRIBBLE GAP ROAD
CUMMING, GEORGIA 30130
(770) 886-9500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
DAVID H. DENTON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
425 TRIBBLE GAP ROAD
CUMMING, GEORGIA 30130
(770) 886-9500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
COPIES OF ALL COMMUNICATIONS, INCLUDING COPIES OF ALL COMMUNICATIONS
SENT TO AGENT FOR SERVICE, SHOULD BE SENT TO:
DAVID H. DENTON JEFFREY A. ALLRED, ESQ.
FORSYTH BANCSHARES, INC. W. THOMAS CARTER III, ESQ.
425 TRIBBLE GAP ROAD L. SCOTT ASKINS, ESQ.
CUMMING, GEORGIA 30130 ALSTON & BIRD
(770) 886-9500 ONE ATLANTIC CENTER
(770) 781-6303 (FAX) 1201 WEST PEACHTREE STREET
ATLANTA, GEORGIA 30309-3424
(404) 881-7000
(404) 881-7777 (FAX)
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_] 333-
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] 333-
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SUCH
SECTION 8(A), MAY DETERMINE.
===============================================================================
<PAGE>
PROSPECTUS
FORSYTH BANCSHARES, INC.
A HOLDING COMPANY FOR
THE CITIZENS BANK OF FORSYTH COUNTY
800,000 SHARES OF COMMON STOCK
---------------
This Prospectus relates to the offer of a minimum of 665,000 and a maximum
of 800,000 shares of common stock, no par value (the "Common Stock"), to be
issued by FORSYTH BANCSHARES, INC., a Georgia corporation (the "Company"),
which has been organized to own and control all of the capital stock of THE
CITIZENS BANK OF FORSYTH COUNTY (the "Bank"). The Company's mailing address
and telephone number are currently 425 Tribble Gap Road, Cumming, Georgia
30130, (770) 886-9500. The organizers of the Company and the bank (the
"Organizers") obtained preliminary approval of the Bank's application for
charter as a state-chartered nonmember bank from the Department of Banking and
Finance of the State of Georgia (the "DBF") on June 5, 1996 and preliminary
approval of the Bank's application for deposit insurance from the Federal
Deposit Insurance Corporation (the "FDIC") on July 3, 1996.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
COMMON STOCK OFFERED HEREBY.
---------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
===============================================================================
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC(1) AND COMMISSIONS(2) THE COMPANY(3)
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................. $10 None $10.00
- -------------------------------------------------------------------------------------------------------
Total(Minimum)............................ $6,650,000 None $6,650,000
(Maximum)................................. $8,000,000 None $8,000,000
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(1) The offering price has been arbitrarily established by the Company. See
"Risk Factors--Offering Price."
(2) This offering is expected to be made on behalf of the Company by its
directors and executive officers, to whom no commission or other
compensation will be paid on account of such activity, although they will
be reimbursed for reasonable expenses incurred in the offering. The
Company believes such officers and directors will not be deemed brokers
under the Securities Exchange Act of 1934 (the "Exchange Act") based on
reliance on Rule 3a4-1 of the Exchange Act. See "The Offering."
(3) Before deducting expenses related to this offering and the organization of
the Company, estimated to be approximately $100,000. See "Use of
Proceeds--By the Company."
INVESTMENT IN THESE SECURITIES INVOLVES SIGNIFICANT RISK. AFTER COMPLETION
OF THE OFFERING, BUT PRIOR TO THE COMPANY OBTAINING ALL FINAL REGULATORY
APPROVALS FOR THE BANK TO COMMENCE BANKING OPERATIONS AND RECEIPT OF ITS
CHARTER, IT IS POSSIBLE THAT THE BANK MAY NOT BE ABLE TO COMMENCE BANKING
OPERATIONS, AND IN SUCH EVENT UPON LIQUIDATION OF THE COMPANY SHAREHOLDERS
COULD RECEIVE LESS THAN THEIR ORIGINAL SUBSCRIPTION PRICE. SEE "RISK FACTORS--
RETURN OF LESS THAN SUBSCRIPTION AMOUNT."
Sale of the Common Stock will commence on or about , 1996. This is a
"best efforts" offering by the Company, and it will be terminated by the
Organizers upon the sale of 800,000 shares or December 31, 1996, whichever
occurs first, unless the offering is extended, at the discretion of the
Company, for additional periods ending no later than August 31, 1997. However,
the Organizers reserve the right to terminate the offering at any time after
the sale of the minimum offering of 665,000 shares. Subscriptions are binding
on subscribers and may not be revoked by subscribers without the consent of
the Company until the earlier of the termination of the offering or August 31,
1997.
Prospective investors should carefully review the Prospectus before
subscribing for shares. SUBSCRIBERS MUST WARRANT IN THE SUBSCRIPTION AGREEMENT
THAT THEY HAVE RECEIVED A COPY OF THIS PROSPECTUS. See "The Offering--How to
Subscribe." The Company has established a minimum subscription of 200 shares
and a maximum subscription by any subscriber of 5% of the total number of
shares sold in the offering. However, the Organizers reserve the right to
waive these limits without notifying any subscriber. In addition, the
Organizers reserve the right to purchase up to 100% of the shares of stock
being offered hereunder if necessary to complete the offering.
Proceeds of the offering will be deposited in an escrow account at The
Bankers Bank, Atlanta, Georgia, escrow agent, pending receipt of subscriptions
and subscription proceeds for a minimum of 665,000 shares and satisfaction of
certain other conditions of the offering. Any subscription proceeds accepted
after satisfaction of the conditions set forth above but before termination of
this offering will not be deposited in escrow but will be available for
immediate use by the Company to fund offering and organizational expenses and
for working capital. See "The Offering--Conditions of the Offering and Release
of Funds." If the offering is terminated prior to completion, subscription
payments will be promptly returned by the Company to the subscribers without
interest. The Company will retain any interest earned to repay the expenses
incurred by the Organizers in organizing the Company and the Bank. Any
expenses not repaid with such interest will be paid by the Organizers.
---------------
THE DATE OF THIS PROSPECTUS IS OCTOBER 1996.
<PAGE>
REPORTS TO SHAREHOLDERS
The Company is currently not a reporting company as defined by the
Securities and Exchange Commission (the "Commission"). The Company will
furnish its shareholders with annual reports containing audited financial
information for each fiscal year on or before the date of the annual meeting
of shareholders as required by Rule 80-6-1-.05 of the DBF. The Company's
fiscal year ends on December 31. The Company will also furnish such other
reports as it may determine appropriate or as otherwise may be required by
law. Upon the effective date of the Registration Statement, the Company will
be subject to the reporting requirements of the Securities and Exchange Act of
1934 (the "Exchange Act"), which include requirements to file annual and
quarterly reports and other information with the Commission. This reporting
obligation will exist for at least one year and will continue for fiscal years
thereafter, except that such reporting obligations may be suspended for any
subsequent fiscal year if at the beginning of such year the Common Stock of
the Company is held of record by less than 300 persons.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act of 1933 (the "Securities Act") with respect to
the Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement. For further information
with respect to the Company and the Common Stock, please see the Registration
Statement and the exhibits thereto. The Registration Statement may be
inspected without charge at, and copies of the Registration Statement may be
obtained at prescribed rates from, the Public Reference Section of the
Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Commission's regional offices at Seven World Trade Center, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
In addition, the Commission maintains a site on the World Wide Web at
http://www.sec.gov that contains reports, proxy and information statements and
other information regarding the Company and other registrants that file
electronically with the Commission.
The Company and the Organizers have filed or will file various applications
with the FDIC, the Federal Reserve Bank of Atlanta (the "Federal Reserve") and
the DBF. Prospective investors should rely only on information contained in
this Prospectus and in the Company's related Registration Statement in making
an investment decision. To the extent that other available information not
presented in this Prospectus, including information available from the Company
and information in public files and records maintained by the FDIC, the
Federal Reserve and the DBF, is inconsistent with information presented in
this Prospectus, such other information is superseded by the information
presented in this Prospectus. Projections appearing in the applications were
based on assumptions that the Organizers believed were reasonable, but as to
which no assurances can be made. The Company specifically disaffirms those
projections for purposes of this Prospectus and cautions prospective investors
against placing reliance on them for purposes of making an investment
decision.
2
<PAGE>
SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, contained
elsewhere in this Prospectus.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS
ACCOUNTS OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE
FDIC OR ANY OTHER GOVERNMENTAL AGENCY.
THE COMPANY
Forsyth Bancshares, Inc., a Georgia corporation (the "Company"), was
incorporated primarily to hold all of the capital stock of a state-chartered
nonmember bank organized under the laws of the State of Georgia, The Citizens
Bank of Forsyth County (the "Bank"). The Company may not acquire the capital
stock of the Bank without the prior approval of the Federal Reserve, as
delegate of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), and the DBF. The Company filed applications for this approval
with the Federal Reserve on September 11, 1996 and with the DBF on September
12, 1996. The Company initially will engage in no business other than owning
and managing the Bank.
THE BANK
The Organizers (as defined below) filed an application with the DBF on
November 8, 1995, subsequently amended on February 19, 1996, to charter the
Bank as a state nonmember bank. The Organizers obtained preliminary approval of
the Bank's application for charter from the DBF on June 5, 1996. On November 8,
1995, the Organizers also filed an application with the FDIC for insurance by
the FDIC of the deposits of the Bank (such application was forwarded to the
FDIC by the DBF once the DBF accepted the application). The Organizers obtained
preliminary approval of the Bank's application for insurance from the FDIC on
July 3, 1996. The Bank may not conduct any banking business until the DBF
grants final approval of the Bank's application and issues the Bank a charter
and the FDIC grants deposit insurance to the Bank. The issuance of a charter
will depend, among other things, upon compliance with certain legal
requirements that may be imposed by the DBF or the FDIC, including
capitalization of the Bank at not less than $6,500,000. In order to receive
deposit insurance, the Bank must also comply with certain legal requirements
that may be imposed by the FDIC. See "The Offering" and "Use of Proceeds."
Additionally, the Company must obtain the approval of the Federal Reserve and
the DBF to become a bank holding company before acquiring the capital stock of
the Bank.
The Bank will engage in a general commercial and retail banking business,
emphasizing the needs of small- to medium-sized businesses, professional
concerns and individuals, primarily in Cumming, Georgia and the surrounding
area (the "Forsyth County Area"). The Bank will initially consist of a
principal facility located in Cumming, Georgia in Forsyth County. The facility
will primarily serve the central area of Forsyth County. The Bank initially
will not have trust powers. The Bank may in the future offer a full-service
trust department, but it cannot do so without the prior approval of the DBF.
See "Proposed Business." David H. Denton, the President and Chief Executive
Officer of the Company and the Bank, has over 30 years of banking experience,
including former lending responsibilities with three community banks located in
Georgia, two of which were located in the city of Cumming. See "Management."
The Organizers believe that the combined banking experience of the Bank's
President and Chief Executive Office and the extensive business experience and
contacts of the Organizers in the Forsyth County Area should create immediate
business opportunities for the Bank. The Organizers presently are engaged in
completing the tasks necessary to open the Bank by December 1, 1996, although
no assurances can be given that the Bank will open for business or that the
projected opening date can be achieved. The Bank currently has no plans to
establish any branch offices.
3
<PAGE>
The principal executive offices of both the Company and the Bank will be
located at 501 Tri-County Plaza, Highways 9 and 20, Cumming, Georgia 30130.
Pending commencement of operations, the Company's interim address and telephone
number are 425 Tribble Gap Road, Cumming, Georgia 30130, (770) 886-9500.
THE ORGANIZERS
The Organizers of the Company and the Bank are Catherine M. Amos, Jeffrey S.
Bagley, Bill H. Barnett, Danny M. Bennett, Michael P. Bennett, Bryan L. Bettis,
Talmadge W. Bolton, Thomas L. Bower III, Charles R. Castleberry, David H.
Denton, Charles D. Ingram, Herbert A. Lang, Jr., John P. McGruder, James J.
Myers, Danny L. Reid, Charles R. Smith, Wyatt L. Willingham and Jerry M. Wood.
Additional individuals may be added as Organizers, subject to regulatory
approval. All of the Organizers will serve as directors of the Company, and Ms.
Amos and Messrs. Bagley, D. Bennett, M. Bennett, Bolton, Denton, Ingram, Lang,
McGruder, Myers, Reid, Smith and Willingham will serve as directors of the
Bank. See "Management."
The Organizers (together with members of their immediate families) intend to
purchase an aggregate of at least 140,500 shares of the Common Stock to be sold
in this offering at a purchase price of $10.00 per share. Subject to prior
regulatory approval, the Organizers may subscribe for up to 100% of the shares
in the offering if necessary to help the Company achieve the minimum
subscription level necessary to release subscription proceeds from escrow, and
some Organizers may decide to purchase additional shares even if the minimum
subscription amount has been achieved. All shares purchased by the Organizers
will be purchased for investment and not with a view to the resale of such
shares. Because purchases by the Organizers may be substantial, investors
should not place any reliance on the sale of a specified minimum offering
amount as an indication of the merits of this offering or that an Organizer's
investment decision is shared by unaffiliated investors. See "The Offering" and
"Management."
THE OFFERING
Securities Offered ......... Common Stock of the Company, no par value
Offering Price ............. $10.00 per share
Number of Shares Offered ... Minimum 665,000
Maximum 800,000
Use of Proceeds ............ The Company will use the net proceeds of the
offering to capitalize the Bank at a minimum of
$6,500,000 and a maximum of $7,850,000 through
the purchase of all of the capital stock of the
Bank, subject to regulatory approval; to pay
organizational expenses of the Company and the
expenses of this offering, estimated to be
approximately $100,000; and to provide working
capital. If sufficient proceeds are available,
the Company may choose to capitalize the Bank at
a level in excess of $6,500,000. The Company
plans to retain sums in excess of the minimum
necessary to capitalize the Bank at the Company
and initially invest such monies in United
States government securities or as a deposit at
the Bank.
IF THE CONDITIONS FOR RELEASING SUBSCRIPTION
FUNDS FROM ESCROW ARE MET AND SUCH FUNDS ARE
RELEASED BUT FINAL REGULATORY APPROVAL TO
COMMENCE BANKING OPERATIONS IS NOT OBTAINED FROM
THE DBF, OR THE BANK DOES NOT OPEN FOR ANY OTHER
4
<PAGE>
REASON, IT IS POSSIBLE THAT UPON LIQUIDATION
SUBSCRIBERS COULD BE RETURNED AN AMOUNT LESS
THAN THEIR ORIGINAL INVESTMENT. See "Risk
Factors--Return of Less Than Subscription
Amount." The Bank will use the proceeds received
from the sale of its stock to the Company to pay
organizational and pre-opening expenses of the
Bank; to renovate and furnish a building for the
Company and the Bank's main office; and to
provide working capital to be used for business
purposes, including paying officers' and
employees' salaries and making loans and
investments. See "Use of Proceeds."
Conditions to Offering ..... This offering will be terminated and all
subscription funds (without interest) will be
returned promptly to subscribers unless on or
before December 31, 1996 (or such later date if
the offering is extended by the Company for
additional periods not to extend beyond August
31, 1997): (i) the Company has accepted
subscriptions and payment in full for a minimum
of 665,000 shares; and (ii) the Company has
obtained approval of the Federal Reserve and the
DBF to acquire the capital stock of the Bank and
thereafter to become a bank holding company. It
is the DBF's policy to encourage community
support and make distribution of stock ownership
of de novo banks such as the Bank. In
furtherance of that policy, the DBF will require
as a condition to granting the Bank's charter
that the Company has at least 100 shareholders
with 75% of both the number of shareholders and
the total number of shares to be owned by
subscribers residing or working in the proposed
Bank's market area. The Company anticipates that
it will meet these conditions. If these
conditions are not met, the Company will seek
regulatory approval from the DBF for a waiver of
these requirements. Subscription proceeds for
shares subscribed for will be deposited promptly
in an escrow account with The Bankers Bank,
Atlanta, Georgia, as escrow agent (the "Escrow
Agent"), under the terms of an escrow agreement
(the "Escrow Agreement"), pending the
satisfaction of the conditions set forth above
or the termination of the offering. Upon
satisfaction of the conditions set forth above,
all subscription funds held in escrow, including
any interest actually earned thereon, shall be
released to the Company for its immediate use.
Any subscription proceeds accepted after
satisfaction of the conditions set forth above
but before termination of this offering will not
be deposited in escrow but will be available for
immediate use by the Company to fund offering
and organizational expenses and for working
capital. See "The Offering."
Plan of Distribution ....... It is expected that offers of the Common Stock
will be made on behalf of the Company by certain
of its officers and directors. The officers and
directors will receive no commissions or other
remuneration in connection with such activities,
but they will be
5
<PAGE>
reimbursed for reasonable expenses incurred in
the offering. Subscriptions are binding on
subscribers and may not be revoked by
subscribers except with the consent of the
Company until the earlier of the termination of
the offering or August 31, 1997. The Company
may, in its sole discretion, allocate shares
among subscribers in the event of an over
subscription for the shares. In determining
which subscriptions to accept, in whole or in
part, the Company may take into account any
factors it considers relevant, including the
order in which subscriptions are received, a
subscriber's potential to do business with, or
to direct customers to, the Bank and the
Company's desire to have a broad distribution of
stock ownership.
RISK FACTORS
An investment in the shares offered hereby involves certain risks, including,
among others, the possibility of the return of less than the subscription
amount, lack of an operating history, dependence on key employees of the Bank,
significant control of the Company by the Organizers, absence of an existing
market for the Common Stock and lack of assurance that an active trading market
in the Common Stock will develop, competition from a number of other financial
institutions with substantially greater financial and other resources than the
Bank, the highly regulated environment in which the Company and Bank will
operate, the Bank's dependence on economic development in its market area and
no intention to pay dividends in the foreseeable future. See "Risk Factors."
6
<PAGE>
RISK FACTORS
An investment in the shares offered hereby involves certain risks. A
subscription for shares should be made only after careful consideration of the
risk factors set forth below and elsewhere in this Prospectus and should be
undertaken only by persons who can afford an investment involving such risks.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT DEPOSITS OR SAVINGS ACCOUNTS
OR SAVINGS DEPOSITS AND ARE NOT INSURED OR GUARANTEED BY THE FDIC OR ANY OTHER
GOVERNMENTAL AGENCY.
RETURN OF LESS THAN SUBSCRIPTION AMOUNT
The amounts paid by subscribers in this offering will be held in escrow
until: (i) the Company has accepted subscriptions and payment in full for a
minimum of 665,000 shares; and (ii) the Company has obtained approval of the
Federal Reserve and the DBF to acquire the capital stock of the Bank and
thereafter to become a bank holding company. If these conditions are not met
by December 31, 1996, or by such subsequent date, not beyond August 31, 1997,
to which the offering may be extended by the Company, all subscriptions will
be returned promptly in full, without interest. If these conditions are
satisfied, the subscription amounts held in escrow may be paid to the Company
and shares issued to subscribers, and all interest earned on the subscription
proceeds will be retained by the Company. Once the Company has met the
conditions for the offering, the Escrow Agreement will be terminated and any
subscription proceeds accepted after satisfaction of the conditions set forth
above but before termination of this offering will not be deposited in escrow
but will be available for immediate use by the Company to fund offering and
organizational expenses and for working capital. When subscription amounts are
received by the Company, the Company will use a portion of the proceeds to
repay borrowings under a loan, guaranteed by the Organizers, incurred for
organizational and offering expenses. The Company will then fund future
expenses out of the subscription amounts received.
If the conditions for releasing subscription funds from escrow are met and
such funds are released but final regulatory approval to commence banking
operations is not obtained from the DBF, or if the Bank does not open for any
other reason, the Company's Board of Directors intends to propose that the
shareholders approve a plan to liquidate the Company. Upon such a liquidation,
the Company would be dissolved and the Company's net assets (generally
consisting of the amounts received in this offering plus any interest earned
thereon, less the amount of all costs and expenses incurred by the Company and
the Bank, including the salaries of employees of the Bank and other pre-
opening expenses) would be distributed to the shareholders. In such event, the
Company will have incurred numerous expenses related to the organization of
the Company and the Bank, and the amount distributed to shareholders may be
substantially less than the subscription amount, and in an extreme case
shareholders may not be returned any amount. See "The Offering--Conditions to
the Offering and Release of Funds."
LACK OF OPERATING HISTORY
The Company and the Bank currently are in the organizational stage, and
neither has any operating history. As a consequence, prospective purchasers of
the shares have limited information on which to base an investment decision.
As a bank holding company, the Company's profitability will depend upon the
Bank's operations. The Bank's proposed operations are subject to the risks
inherent in the establishment of any new business and, specifically, of a new
bank. The Company expects that the Bank will incur substantial initial
expenses and may not be profitable for several years after commencing
business, if ever. Shareholders are likely to experience dilution in the book
value of the Common Stock due to operating losses expected to be incurred
during the initial years of the Bank's operations.
DEPENDENCE ON KEY EMPLOYEE
As a new enterprise, the Company and the Bank will be materially dependent
on the performance of David H. Denton, the President and Chief Executive
Officer of the Bank. The Company has entered into an employment agreement with
Mr. Denton which has an initial term of five years and can be extended by the
Bank at the end
7
<PAGE>
of each year of the term for an additional year, so that the remaining term
shall continue to be five years. The Company maintains a $1 million key man
life insurance policy on Mr. Denton, with $600,000 payable to the Company and
$400,000 payable to Mr. Denton's family. In addition, Mr. Denton is subject to
non-compete restrictions for a one-year period following the date of
termination. The loss of the services of Mr. Denton or his failure to perform
his management functions in the manner anticipated by the Organizers could
have a material adverse effect on the Company and the Bank. See "Management--
Employment Agreement."
CONCENTRATION OF STOCK OWNERSHIP
The Organizers, most of whom will serve as directors of both the Company and
the Bank, and members of their immediate families, intend to purchase an
aggregate of at least 140,500 shares, equal to approximately 21% of the
minimum number of shares offered hereby and approximately 18% of the maximum
number of shares offered hereby, at a purchase price of $10.00 per share.
Organizers may purchase additional shares in the offering and additional
persons may be named as Organizers, subject to regulatory approval. As a
result of the anticipated stock ownership in the Company by the Organizers,
together with the influence which may be exerted by such persons due to their
positions as directors of the Company and the Bank, the Organizers as a group
will have substantial control of the Company and the Bank following the
offering, including the election of directors and approval of significant
corporate transactions. Subject to prior regulatory approval, the Organizers
may subscribe for up to 100% of the shares in this offering if necessary to
help the Company achieve the minimum subscription level necessary to release
subscription proceeds from escrow, and some Organizers may decide to purchase
additional shares even if the minimum subscription amount has been achieved.
See "The Offering" and "Management." All shares purchased by the Organizers
will be purchased for investment and not with a view to the resale of such
shares and such purchases will be counted in determining whether the minimum
number of share purchases has been met. Investors, therefore, should not
consider that the sale of the specified minimum number of shares, or in excess
of that minimum, indicates that such sales have been made to parties with no
financial or other interest in the offering, or who otherwise are applying
independent investment discretion. Because purchases by the Organizers may be
substantial, investors should not place any reliance on the sale of a
specified minimum offering amount as an indication of the merits of this
offering or that an Organizer's investment decision is shared by unaffiliated
investors. See "The Offering--General" and "Management."
ARBITRARY OFFERING PRICE
Because the Company and the Bank are in organization, the offering price of
$10.00 per share was determined by the Organizers without reference to
traditional criteria for determining stock value such as book value or
historical or projected earnings since such criteria are not applicable to
companies with no history of operations. The price per share was set to enable
the Company to raise gross proceeds of between $6,650,000 and $8,000,000 in
this offering through the sale of a reasonable number of shares, and the price
per share is essentially equivalent to the initial book value per share prior
to the payment of the Company's and the Bank's organizational expenses. No
assurance is or can be given that any of the shares could be resold for the
offering price or any other amount.
ABSENCE OF PUBLIC MARKET
There currently is no market for the shares of Common Stock and, although
the Company has filed a registration statement with the Commission to register
the issuance of the Common Stock in the offering under the Securities Act, it
is not likely that any trading market will develop for the shares in the
future. There are no present plans for the Common Stock to be traded on any
stock exchange or in the over-the-counter market. Furthermore, the development
of any trading market for the shares may be adversely affected by purchases of
large amounts of shares in this offering by the Organizers since shares
purchased by the Organizers will generally not be freely tradable. As a
result, investors who may need or wish to dispose of all or part of their
shares may be unable to do so except in private, directly negotiated sales. In
addition, sales of substantial amounts of Common Stock after the offering, by
the Organizers or others, could adversely affect prevailing market prices. See
"Description of Capital Stock--Shares Eligible for Future Sale."
8
<PAGE>
COMPETITION; INTRASTATE BRANCHING
The banking business is highly competitive, and the Bank will encounter
strong competition from other commercial banks, savings and loan associations,
mortgage banking firms, consumer finance companies, credit unions, securities
brokerage firms, insurance companies, money market mutual funds and other
financial institutions operating in the Forsyth County Area and elsewhere. A
number of these competitors are well established in the Forsyth County Area.
Most of them have substantially greater resources and lending capabilities, as
well as a lower cost of funds, than the Bank and may offer certain services,
such as extensive and established branch networks and trust services, that the
Bank either does not expect to provide or will not provide initially. As a
result of these competitive factors, the Bank may have to pay higher rates of
interest to attract deposits. In addition, non-depository institution
competitors are generally not subject to the extensive regulations applicable
to the Company and the Bank. Recent federal legislation permits commercial
banks to establish operations nationwide, further increasing competition from
out-of-state financial institutions. Furthermore, recently enacted Georgia
legislation greatly diminishes the historical legal restrictions on
establishing branch banks across county lines in Georgia, thus creating
further opportunities for other financial institutions to compete with the
Bank. Generally, from July 1, 1996 to July 1, 1998, any bank located in
Georgia may branch into any three additional Georgia counties regardless of
the location of the parent bank. After July 1, 1998, banks may establish banks
statewide in Georgia without limitation. In addition, on-line computer banking
via the Internet or otherwise may also become an increasing source of
competition for community financial institutions such as the Bank. Although
the Organizers believe that the Bank will be able to compete effectively with
these institutions in the Bank's proposed markets, no assurances can be given
in this regard. See "Proposed Business--Competition" and "Supervision and
Regulation."
CHANGES IN GOVERNMENT REGULATION
The Company and the Bank will operate in a highly regulated environment and
will be subject to supervision by several governmental regulatory agencies,
including the DBF, the Federal Reserve, the FDIC and the Commission. The
success of the Company and the Bank depends not only on competitive factors
but also on state and federal regulations affecting banks and bank holding
companies. These regulations are primarily intended to protect depositors, not
shareholders. Regulation of the financial institutions industry is undergoing
continued changes, and the ultimate effect of such changes cannot be
predicted. In December 1991, the Federal Deposit Insurance Corporation
Improvement Act of 1991 ("FDICIA") was enacted, and its effect is still being
defined as regulations mandated by it are promulgated by the Company's and the
Bank's regulators. FDICIA and the regulations thereunder have increased the
regulatory and supervisory requirements for financial institutions, which has
resulted and will continue to result in increased operating expenses.
Additional statutes affecting financial institutions have been proposed and
may be enacted. Regulations now affecting the Company and the Bank may be
modified at any time, and there is no assurance that such modifications will
not adversely affect the business of the Company and the Bank. See
"Supervision and Regulation."
EFFECT OF FUTURE ECONOMIC AND POLITICAL CONDITIONS
The success of the Company and the Bank will depend, to a certain extent,
upon local, regional and national economic and political conditions, as well
as governmental monetary policies. Conditions such as inflation, recession,
unemployment, high interest rates, short money supply and other factors beyond
the control of the Company and the Bank may adversely affect the Bank's
deposit levels and loan demand and, therefore, the earnings of the Bank and
the Company. Although the Organizers expect favorable economic development in
the Bank's market area, there is no assurance that favorable economic
development will occur or that the Bank's expectation of corresponding growth
will be achieved. See "Proposed Business."
DIVIDEND POLICY
The Company has no plans to pay any cash dividends to its shareholders in
the foreseeable future. Since the Company and the Bank are both start-up
operations and may incur initial losses, both the Company and the Bank intend
to retain any earnings for the period of time management believes necessary to
ensure the success of their
9
<PAGE>
operations. The Company will be dependent upon the Bank for its earnings and
funds to pay dividends on the Common Stock. The payment of dividends by the
Company and the Bank is also subject to legal and regulatory restrictions. Any
payment of dividends by the Company in the future will depend on the Bank's
earnings, capital requirements, financial condition and other factors
considered relevant by the Board of Directors. See "Dividend Policy,"
"Proposed Business" and "Supervision and Regulation."
DILUTION
Although the Company currently does not have any specific plans, after the
offering, the Company may adopt a stock option plan which would permit the
Company to grant options to officers, directors, key employees, advisers and
consultants of the Company and the Bank. Any such plan would be subject to
shareholder approval or ratification, and the Organizers anticipate that the
number of shares issuable pursuant to such a plan would not exceed 20% of the
number of shares of Common Stock outstanding at the time the plan is adopted
(expected to be 133,000 shares if the minimum number of shares are sold in the
offering and 160,000 if the maximum number are sold). If a plan is adopted,
exercise of options under the plan could have a dilutive effect on the
shareholders' interest in the Company's earnings and book value. In addition,
the Company may issue additional shares of Common Stock or preferred stock in
the future. Any such stock offering by its nature could be dilutive to the
holdings of purchasers in this offering.
ANTI-TAKEOVER CONSIDERATIONS; PROVISIONS OF GEORGIA LAW AND THE COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS
The Company's Articles of Incorporation, Bylaws and the Georgia Business
Corporation Code (the "Corporation Code") contain certain provisions that
could have the effect of making it more difficult for a party to acquire, or
of discouraging a party from attempting to acquire, control of the Company
without approval of the Company's Board of Directors, including: (i) certain
provisions relating to meetings of shareholders; (ii) the ability of the Board
of Directors to issue additional shares of common stock and preferred stock
authorized in the Articles of Incorporation without shareholder approval;
(iii) certain nomination requirements for directors; (iv) the Company's
adoption of the Georgia "Fair Price" statutes; and (v) the Company's adoption
of the Georgia "Business Combination" statute. See "Description of Capital
Stock--Certain Anti-Takeover Provisions."
THE COMPANY AND THE BANK
The Company was incorporated under the laws of the State of Georgia on
February 14, 1996, for the purpose of becoming a bank holding company by
acquiring all of the capital stock of the Bank upon its formation. The Bank is
being organized as a state-chartered nonmember bank under the laws of the
State of Georgia. The Organizers of the Bank filed an application for a
charter for the Bank with the DBF and an application for insurance of the
deposits of the Bank with the FDIC on November 8, 1995 subsequently amended on
February 19, 1996. The Organizers obtained preliminary approval of the Bank's
application for a charter from the DBF on June 5, 1996 and preliminary
approval of the Bank's application for deposit insurance from the FDIC on July
3, 1996. The Company filed applications with the Federal Reserve on September
11, 1996 and the DBF on September 12, 1996 seeking approval to become a bank
holding company by acquiring all of the capital stock to be issued by the
Bank. If and when the Company and the Bank receive required final regulatory
approvals, the Company will use at least $6,500,000 of the aggregate net
proceeds of this offering to purchase all of the shares of the capital stock
of the Bank. See "Use of Proceeds." The Company initially will engage in no
business other than owning and managing the Bank.
The Bank will engage in a general commercial and retail banking business,
emphasizing the needs of small- to medium-sized businesses, professional
concerns and individuals, primarily in Cumming, Georgia and the surrounding
area. The Bank will initially consist of a principal facility located in the
city of Cumming, Georgia in Forsyth County. See "Proposed Business." David H.
Denton, President and Chief Executive Officer of the Company and the Bank, has
over 30 years of banking experience, including former lending responsibilities
with
10
<PAGE>
three community banks located in Georgia, two of which were located in the
city of Cumming. See "Management." The Organizers currently anticipate that
the Bank will open for business by December 1, 1996, although no assurance can
be given that the Bank can be opened or that the projected opening date can be
met. See "Proposed Business."
The Organizers of the Bank are Catherine M. Amos, Jeffrey S. Bagley, Bill H.
Barnett, Danny M. Bennett, Michael P. Bennett, Bryan L. Bettis, Talmadge W.
Bolton, Thomas L. Bower III, Charles R. Castleberry, David H. Denton, Charles
D. Ingram, Herbert A. Lang, Jr., John P. McGruder, James J. Myers, Danny L.
Reid, Charles R. Smith, Wyatt L. Willingham and Jerry M. Wood. Additional
individuals may be added as Organizers, subject to regulatory approval. All of
the Organizers will serve as directors of the Company, and Ms. Amos and
Messrs. Bagley, D. Bennett, M. Bennett, Bolton, Denton, Ingram, Lang,
McGruder, Myers, Reid, Smith, Willingham will serve as directors of the Bank.
See "Management."
The principal executive offices of both the Company and the Bank will be
located 501 Tri-County Plaza, Highways 9 and 20, Cumming, Georgia 30130, (770)
886-9500. Pending commencement of operations, the Company's interim address
and telephone number are 425 Tribble Gap Road, Cumming, Georgia 30130
(770) 886-9500.
11
<PAGE>
THE OFFERING
GENERAL
The Company is offering for sale a minimum of 665,000 shares and a maximum
of 800,000 shares of its Common Stock at a price of $10.00 per share to raise
gross proceeds of between $6,650,000 and $8,000,000 for the Company. The
minimum purchase for any investor is 200 shares and the maximum purchase for
any investor (together with the investor's affiliates) is 5% of the offering
unless the Company, in its sole discretion, accepts a subscription for a
lesser or greater number of shares. Subscribers should be aware that
beneficial ownership of as little as 5% of the outstanding shares could
obligate the beneficial owner to comply with certain reporting and disclosure
requirements of federal and state banking and securities laws.
The Organizers intend to purchase an aggregate of at least 140,500 shares of
the Common Stock to be sold in this offering. Subject to prior regulatory
approval, the Organizers may subscribe for up to 100% of the shares in the
offering if necessary to help the Company achieve the minimum subscription
level necessary to release subscription proceeds from escrow, and some
Organizers may decide to purchase additional shares even if the minimum
subscription amount has been achieved. However, none of the Organizers have
committed to purchase additional shares of Common Stock in order for the
offering to meet the minimum subscription level. All shares purchased by the
Organizers will be purchased for investment and not with a view to the resale
of such shares and such purchases will be counted in determining whether the
minimum number of share purchases has been met. Investors, therefore, should
not consider that the sale of the specified minimum number of shares, or in
excess of that minimum, indicates that such sales have been made to parties
with no financial or other interest in the offering, or who otherwise are
applying independent investment discretion. See "Description of Capital Stock
of the Company--Shares Eligible for Future Sale." Because purchases by the
Organizers may be substantial, investors should not place any reliance on the
sale of a specified minimum offering amount as an indication of the merits of
this offering or that an Organizer's investment decision is shared by
unaffiliated investors. See "Management."
Subscriptions to purchase shares will be received through 11:59 p.m.,
Cumming, Georgia time, on December 31, 1996, unless all of the shares are
earlier sold or the offering is earlier terminated or extended by the Company.
See "Conditions to the Offering and Release of Funds." The Company reserves
the right to terminate the offering at any time or to extend the expiration
date for additional periods not to extend beyond August 31, 1997. The date the
offering terminates is referred to herein as the "Expiration Date." No written
notice of an extension of the offering period need be given prior to any
extension and any such extension will not alter the binding nature of
subscriptions already accepted by the Company. Once the Company is subject to
the reporting requirements of the Exchange Act, it will file with the
Commission quarterly and annual reports and other information and will make
such documents available to subscribers who request a copy. In addition, the
Company intends to provide quarterly communications to all subscribers which
will include information concerning any extensions of the offering. Extension
of the Expiration Date might cause an increase in the Company's organizational
and pre-opening expenses and in the expenses incurred with this offering.
Following acceptance by the Company, subscriptions will be binding on
subscribers and may not be revoked by subscribers except with the consent of
the Company. In addition, the Company reserves the right to cancel accepted
subscriptions at any time and for any reason until the proceeds of this
offering are released from escrow (as discussed in greater detail in
"Conditions to the Offering and Release of Funds" below), and the Company
reserves the right to reject, in whole or in part and in its sole discretion,
any subscription. The Company may, in its sole discretion, allocate shares
among subscribers in the event of an over subscription for the shares. In
determining which subscriptions to accept, in whole or in part, the Company
may take into account any factors it considers relevant, including the order
in which subscriptions are received, a subscriber's potential to do business
with, or to direct customers to, the Bank, and the Company's desire to have a
broad distribution of stock ownership. If the Company rejects any
subscription, or accepts a subscription but in its discretion subsequently
elects to cancel all or part of such subscription, the Company will refund
promptly the amount remitted that corresponds to $10.00 multiplied by the
number of shares as to which the subscription is rejected or canceled, without
interest. Certificates representing shares duly subscribed and paid for will
be issued by the Company promptly after the offering conditions are satisfied
and escrowed funds are delivered to the Company.
12
<PAGE>
CONDITIONS TO THE OFFERING AND RELEASE OF FUNDS
Subscription proceeds accepted by the Company for the initial 665,000 shares
subscribed for in this offering will be promptly deposited in an escrow
account with the Escrow Agent until the conditions to this offering have been
satisfied or the offering has been terminated. The offering will be
terminated, no shares will be issued, and no subscription proceeds will be
released from escrow to the Company, unless on or before the Expiration Date:
(i) the Company has accepted subscriptions and payment in full for a minimum
of 665,000 shares; and (ii) the Company has obtained approval of the Federal
Reserve and the DBF to acquire the capital stock of the Bank and thereafter to
become a bank holding company. Any subscription proceeds accepted after
satisfaction of the conditions set forth above but before termination of this
offering will not be deposited in pre-opening escrow, but will be available
for immediate use by the Company to fund pre-opening and organizational
expenses and for working capital. It is the DBF's policy to encourage
community support and wide distribution of stock ownership of de novo banks
such as the Bank. In furtherance of that policy, the DBF will require as a
condition to granting the Bank's Charter that the Company has at least 100
shareholders with 75% of both the number of shareholders and the total number
of shares to be owned by subscribers residing or working in the proposed
Bank's market area. The Company anticipates that it will meet such conditions.
If such conditions are not met, the Company will seek regulatory approval from
the DBF for a waiver of these requirements.
If the above conditions are not satisfied on or before the Expiration Date
or the offering is otherwise earlier terminated, accepted subscription
agreements will be of no further force or effect and the full amount of all
subscription funds will be returned promptly to subscribers without interest.
The Company will retain any interest earned on such funds to repay the
expenses incurred by the Company and guaranteed by the Organizers in
organizing the Company and the Bank. Any expenses not paid with such interest
will be paid by the Organizers.
The Escrow Agent has not investigated the desirability or advisability of an
investment in the shares by prospective investors and has not approved,
endorsed or passed upon the merits of an investment in the shares.
Subscription funds held in escrow will be invested in interest-bearing savings
accounts, short-term United States government securities, FDIC-insured bank
deposits or such other investments as the Escrow Agent and the Company shall
agree and, if applicable, that are permissible under Rule 15c2-4 under the
Exchange Act. The Organizers do not intend to invest the subscription proceeds
held in escrow in instruments that would mature after the Expiration Date of
the offering.
If the above conditions are satisfied, the subscription amounts held in
escrow may be paid to the Company and shares issued to subscribers. Once the
Company has met the conditions for the offering, the Escrow Agreement will be
terminated, and any subscription proceeds accepted after satisfaction of the
conditions before termination of this offering will not be deposited in escrow
but will be available for immediate use by the Company to fund organizational
and pre-opening expenses and for working capital. When the subscription funds
are released to the Company, the Company will use a portion of the proceeds to
repay borrowings under a loan, guaranteed by the Organizers, incurred to pay
organizational and pre-opening expenses.
If the conditions for releasing subscription funds from escrow are met and
such funds are released, but final regulatory approval to commence banking
operations is not obtained from the DBF or the Bank does not open for any
other reason, the Board of Directors intends to propose that the shareholders
approve a plan to liquidate the Company. Upon such a liquidation, the Company
would be dissolved and the Company's net assets (generally consisting of the
amounts received in this offering plus any interest earned thereon, less the
amount of all costs and expenses incurred by the Company and the Bank,
including the salaries of employees of the Bank and other pre-opening
expenses) would be distributed to the shareholders. In such event, the Company
will have incurred numerous expenses related to the organization of the
Company and the Bank, and the amount distributed to shareholders may be
substantially less than the subscription amount, and in an extreme case,
shareholders may lose the entire amount of their investment.
13
<PAGE>
PLAN OF DISTRIBUTION
Offers and sales of the Common Stock will be made on behalf of the Company
by certain of its officers and directors. The officers and directors will
receive no Commissions or other remuneration in connection with such
activities, but they will be reimbursed for reasonable expenses incurred in
the offering.
HOW TO SUBSCRIBE
Shares may be subscribed for by delivering the subscription agreement (the
"Subscription Agreement") attached hereto as Exhibit A, completed and
executed, to the Company, on or prior to the Expiration Date. Unless waived by
the Company, a minimum of 200 shares and a maximum of 5% of the shares sold in
the offering may be purchased. Subscribers should retain a copy of the
completed Subscription Agreement for their records. The subscription price is
due and payable when the Subscription Agreement is delivered. Payment must be
made in United States dollars by cash or by check, bank draft or money order
drawn to the order of The Bankers Bank, Atlanta, Georgia, Escrow Account for
Forsyth Bancshares, Inc., in the amount of $10.00 multiplied by the number of
shares subscribed for. No subscriptions may be made prior to the date that the
Registration Statement of which this Prospectus is a part is declared
effective by the Commission.
USE OF PROCEEDS
BY THE COMPANY
Upon satisfaction of all of the conditions discussed in "The Offering--
Conditions to the Offering and Release of Funds," all subscription funds held
in escrow will be released and will become capital of the Company. The gross
proceeds to the Company from the sale of the shares offered hereby will be
between $6,650,000 and $8,000,000. The Company currently plans to use up to
approximately $650,000 of the gross proceeds of the offerings to repay a loan
which the Company obtained through a line of credit with The Bankers Bank,
Atlanta, Georgia. The line of credit bears interest at the prime rate, matures
on August 1, 1997 and is guaranteed by the Organizers. The Company established
the line of credit to pay the organizational and offering expenses of the
Company and the organizational and pre-opening expenses of the Bank. The
organizational and offering expenses of the Company will consist primarily of
legal, accounting, marketing and printing expenses and filing fees, which the
Company anticipates will not exceed $100,000.
After payment of these expenses, the Company will use a minimum of
$6,500,000 and a maximum of $7,850,000 of the gross proceeds to purchase all
of the capital stock of the Bank. The Company will retain the balance of the
proceeds and initially invest such monies in United States government
securities or as a deposit with the Bank. In the long-term, the Company will
use such monies for working capital and other general corporate purposes,
including payment of expenses of the Company and the provision of additional
capital for the Bank, if necessary.
The following table sets forth the anticipated use of proceeds by the
Company based on the sale of the minimum number and maximum number of shares
in this offering.
<TABLE>
<CAPTION>
MINIMUM MAXIMUM
OFFERING(1) OFFERING(2)
----------- -----------
<S> <C> <C>
Gross proceeds from offering.................... $ 6,650,000 $ 8,000,000
Expenses for organization and issuance and
distribution of Common Stock................... (100,000) (100,000)
Investment in capital stock of the Bank......... (6,500,000) (6,500,000)
----------- -----------
Remaining proceeds.............................. 50,000(3) 1,400,000(3)
=========== ===========
</TABLE>
- --------
(1) Assumes that 665,000 shares of Common Stock are sold in this offering.
(2) Assumes that 800,000 shares of Common Stock are sold in this offering.
(3) This amount will be used by the Company for working capital and may be
used to provide additional capital for the Bank, if necessary.
14
<PAGE>
If sufficient proceeds are available, the Company may choose to capitalize
the Bank at a level in excess of $6,500,000. If the Company raises in excess
of the minimum offering, the Company plans to retain the excess sums at the
holding company level and initially invest the sums in United States
government securities or as a deposit at the Bank. If the Company meets the
minimum subscription amount but is unable to obtain final regulatory approval
from the DBF, the FDIC or the Federal Reserve, then it is possible that the
Bank will be unable to commence banking operations and that the amount
returned to subscribers upon liquidation could be substantially less than
their original investment, and in an extreme case, subscribers could loss the
entire amount of their investment.
BY THE BANK
The Bank currently plans to use up to approximately $307,000 of the proceeds
it receives from the sale of its stock to the Company to reimburse the Company
and the Organizers for amounts advanced by the Company and the Organizers to
pay organizational and offering expenses of the Bank. Organizational expenses
of the Bank, estimated at $65,000, include consulting fees, expenses for
market analysis and feasibility studies and legal fees and expenses. Pre-
opening expenses, estimated at $105,000, include officers' and employees'
salaries and benefits (assuming the Bank opens for business on its target date
of December 1, 1996). The Bank expects to spend $67,500, $69,525, $71,611 and
$73,759 for base annual rent for the principal facility in years one through
four, respectively, due under a Sublease Agreement with NationsBank, N.A.
(South), for a total of approximately $282,400. The Bank expects to use
approximately $118,000 for the renovation and initial site preparation of the
facility. In addition, the Bank expects to use approximately $225,000 for
furniture, fixtures and equipment for the Bank's principal facility. The
balance of the proceeds to be received by the Bank and available for use in
the first year will be used for loans to customers, investments and other
general corporate purposes.
The following table depicts the anticipated use of proceeds by the Bank. All
proceeds received by the Bank will be in the form of an investment by the
Company in the Bank's capital stock. The initial amount of the Company's
initial investment will not vary based on the number of shares sold in the
offering.
<TABLE>
<S> <C>
Investment by the Company in the Bank's capital stock......... $6,500,000
Reimbursement to the Company and Organizers for amounts
advanced to the Bank for organizational and pre-opening
expenses of the Bank......................................... (477,000)
Furniture, Fixtures and Equipment............................. (225,000)
Rent, Renovations and Initial Site Preparation................ (400,400)
----------
Remaining Proceeds............................................ $5,397,600(1)
==========
</TABLE>
- --------
(1) The Bank will use the remaining proceeds of the Offering for loans to
customers, investments and other general corporate purposes.
Although the amounts set forth above provide an indication of the proposed
use of funds based on the Organizers' plans and estimates, actual expenses may
vary from the estimates. These estimates were based on assumptions that the
Organizers believed were reasonable, but as to which no assurances can be
given. The Organizers believe that the estimated minimum net proceeds from the
offering, together with funds generated from operations, will satisfy the cash
requirements of the Company and the Bank for their respective first five years
of operations and that neither the Company nor the Bank will need to raise
additional funds for operations during this period, but there can be no
assurance that this will be the case.
The Organizers have obtained a line of credit for the Company in the amount
of $650,000 with The Bankers Bank, Atlanta, Georgia to be used by the Company
for the exclusive purpose of paying expenses incurred in connection with the
organization of the Company and the Bank, this offering and the commencement
of business by the Bank. The unsecured line of credit bears interest at the
prime rate, matures on August 1, 1997 and is guaranteed by the Organizers. Any
amounts required to pay organizational, pre-opening and offering expenses that
exceed the amounts available under these lines of credit will be advanced by
the Organizers. All funds advanced by the Organizers and by the Company will
be repaid from the proceeds of this offering.
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1996, and the pro forma consolidated capitalization of the Company and the
Bank, as adjusted to give effect to the sale of the minimum of 665,000 shares
in this offering. The Bank has established December 1, 1996, as the target
date for opening the Bank; accordingly, the "As Adjusted" column reflects
estimated offering expenses of the Company and the Bank through December 1,
1996.
<TABLE>
<CAPTION>
JUNE 30,
SHAREHOLDERS' EQUITY 1996 AS ADJUSTED
-------------------- -------- -----------
<S> <C> <C>
Common Stock, no par value per share; 10,000,000 shares
authorized; five shares issued and outstanding(1);
665,000 shares issued and outstanding as adjusted
(minimum offering)(2)................................... $ 50 $6,550,000
Preferred Stock, no par value per share; 1,000,000 shares
authorized; no shares issued and outstanding............ 0 0
Deficit accumulated during the offering stage(3)......... (913) (105,000)
----- ----------
Total shareholders' equity(4)............................ $(863) $6,445,000
===== ==========
</TABLE>
- --------
(1) James J. Myers, Chairman of the Board of the Company and the Bank was
issued five shares upon organization of the Company which will be redeemed
for $10.00 per share (the price at which they were issued) upon the first
issuance of shares offered hereby.
(2) The expenses of the offering will be charged against this account. These
expenses are estimated to be approximately $100,000, and this amount has
been used in the calculation of the amount shown in the "As Adjusted"
column.
(3) The deficit results from the expensing of pre-opening expenses, estimated
to be approximately $105,000 for both the Company and the Bank, $65,000 of
organizational costs and up to $343,000 of capitalizable property costs
for renovations to the principal facility and for the purchase of
furniture, fixtures and equipment are expected to be incurred by the
Company and the Bank prior to the commencement of operations (assumed to
occur on December 1, 1996). However, no assurances can be given that the
Bank will open by this time or at all, and the amount of offering expenses
and organizational costs could ultimately be greater than currently
estimated. As of June 30, 1996, the Company had incurred approximately
$58,000 of organizational costs. Offering expenses will be charged against
the no par value Common Stock. Organizational expenses will be deferred
and amortized over a five-year period. Furniture, fixtures and equipment
will be capitalized and amortized over the life of the lease or over the
estimated useful life of the asset. The Company will retain any interest
earned on subscription payments held in escrow prior to conclusion of the
offering. Such interest will be used to help offset the deficit
accumulated during the offering stage, but the figures shown above do not
include any estimate of the interest which may be earned.
(4) The shareholders are likely to experience additional dilution due to
operating losses expected to be incurred during the initial years of the
Bank's operations.
16
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data for the Company for the period from
inception until June 30, 1996, is derived from the consolidated financial
statements and other data of the Company.
<TABLE>
<CAPTION>
AS OF AND FOR THE
PERIOD ENDED
JUNE 30, 1996
-----------------
<S> <C>
INCOME STATEMENT DATA:
Noninterest expense......................................... $ 913
Net (loss).................................................. (913)
BALANCE SHEET DATA:
Cash........................................................ $ 10,050
Due from organizers......................................... 25,520
Deferred offering expenses.................................. 5,000
Other assets................................................ 5,625
Organizational costs capitalized............................ 57,942
Due to organizers........................................... 105,000
(Deficit) accumulated during development stage.............. (913)
Shareholders' deficit....................................... (863)
WEIGHTED AVERAGE SHARES OUTSTANDING........................... 5
PER SHARE DATA:
Net loss.................................................... $ (183)
Shareholders deficit per share.............................. $ (173)
</TABLE>
DIVIDEND POLICY
The Board of Directors expects initially to follow a policy of retaining any
earnings to provide funds to operate and expand the business. Consequently, it
is unlikely that any cash dividends will be paid in the near future. The
Company's ability to pay any cash dividends to its shareholders in the future
will depend primarily on the Bank's ability to pay dividends to the Company.
In order to pay dividends to the Company, the Bank must comply with the
requirements of all applicable laws and regulations. See "Supervision and
Regulation--The Bank--Dividends" and "Supervision and Regulation--Capital
Regulations." In addition to the availability of funds from the Bank, the
future dividend policy of the Company is subject to the discretion of the
Board of Directors and will depend upon a number of factors, including future
earnings, financial condition, cash needs and general business conditions. If
dividends should be declared in the future, the amount of such dividends
presently cannot be estimated and it cannot be known whether such dividends
would continue for future periods.
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PROPOSED BUSINESS
GENERAL
The Company was incorporated as a Georgia corporation on February 14, 1996,
primarily to own and control all of the capital stock of the Bank. The Company
initially will engage in no business other than owning and managing the Bank.
The Organizers have chosen a holding company structure under which the Company
will acquire all of the capital stock of the Bank because, in the judgment of
the Organizers, the holding company structure provides flexibility that would
not otherwise be available.
The holding company structure can assist the Bank in maintaining its
required capital ratios because, subject to compliance with Federal Reserve
Board debt guidelines, the Company may borrow money and contribute the
proceeds to the Bank as primary capital. Moreover, a holding company may
engage in certain non-banking activities that the Federal Reserve Board has
deemed to be closely related to banking. See "Supervision and Regulation."
Although the Company has no present intention of engaging in any of these
activities, if circumstances should lead the Company's management to believe
that there is a need for these services in the Bank's market area and that
such activities could be profitably conducted, management of the Company would
have the flexibility of commencing these activities upon filing a notice or
application with the Federal Reserve.
The Bank is being organized as a state-chartered nonmember bank under the
laws of the State of Georgia and, subject to final regulatory approval, will
engage in a commercial banking business from its office in the Forsyth County
Area, with deposits insured by the FDIC. The Bank will not be a member of the
Federal Reserve System. The Bank may not commence business until the DBF
issues a charter for the Bank and the FDIC grants deposit insurance to the
Bank. There is no assurance that the Bank will be successful in receiving
final regulatory approval and satisfying any conditions that may be imposed
upon the Bank by the DBF or the FDIC prior to the commencement of its
business.
MARKETING FOCUS
Most of the banks in the Forsyth County Area are now local branches of large
regional banks. Although size gives the larger banks certain advantages in
competing for business from large corporations, including higher lending
limits and the ability to offer services in other areas of Georgia and the
Forsyth County Area, the Organizers believe that there is a void in the
community banking market in the Forsyth County Area and believe that the Bank
can successfully fill this void. As a result, the Company generally will not
attempt to compete for the banking relationships of large corporations, but
will concentrate its efforts on small- to medium-sized businesses and on
individuals.
The Bank plans to advertise aggressively, using all forms of media, as well
as direct mail, to target market segments and will emphasize the Company's
local ownership, community bank nature and ability to provide more
personalized service than its competition. The Organizers, as long-time
residents and business people in the Forsyth County Area, have determined the
credit needs of the area through personal experience and communications with
their business colleagues. The Organizers believe that the proposed community
bank focus of the Bank is likely to succeed in this market. The Organizers
believe that the area will react favorably to the Bank's emphasis on service
to small businesses, professional concerns and individuals. However, no
assurances in this respect can be given.
LOCATION AND SERVICE AREA
The Bank will engage in a general commercial and retail banking business,
emphasizing the needs of small- to medium-sized businesses, professional
concerns and individuals, primarily in Cumming, Georgia and the surrounding
area, including Forsyth County. The principal executive offices of both the
Company and the Bank are located at 501 Tri-County Plaza, Highways 9 and 20,
Cumming, Georgia 30130. Pending commencement of operations, the Company's
interim address and telephone number are 425 Tribble Gap Road, Cumming,
Georgia 30130, (770) 886-9500. See "Facilities."
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The Bank's primary service area will be Forsyth County, Georgia, which is
located in North Georgia. Forsyth County had an estimated population of 52,700
in 1994 and 60,311 in 1995. The average estimated effective buying income per
household of $49,035 in 1994. The estimated unemployment rates in Forsyth
County were 5.4%, 3.8% and 3.3% in 1992, 1993 and 1994, respectively. The
estimated number of households in Forsyth County grew from 15,938 in 1990 to
21,828 in 1995. Cumming is the only city in the county and may be reached via
major highways including Georgia Highways 9, 20, 141, 306, 369 and 400.
The principal components of the economy of Forsyth County are wholesale and
retail trade, manufacturing, services and construction industries. According
to the Cumming/Forsyth County Chamber of Commerce, the largest employers in
the county include Tyson Foods, Inc., Siemans Industrial Automation and
Scientific Games, Inc. Dozens of manufacturing industries operate in Forsyth
County and industrial and business developments may expand and establish
additional facilities in Forsyth County.
DEPOSITS
The Bank intends to offer a full range of deposit services that are
typically available in most banks and savings and loan associations, including
checking accounts, NOW accounts, savings accounts and other time deposits of
various types, ranging from daily money market accounts to longer-term
certificates of deposit. The transaction accounts and time certificates will
be tailored to the Bank's principal market area at rates competitive to those
offered in the Forsyth County Area. In addition, the Bank intends to offer
certain retirement account services, such as Individual Retirement Accounts
("IRAs"). All deposit accounts will be insured by the FDIC up to the maximum
amount allowed by law (generally, $100,000 per depositor, subject to
aggregation rules). The Bank intends to solicit these accounts from
individuals, businesses, associations, organizations and governmental
authorities. The Bank currently expects deposits to be allocated among certain
categories as follows: 13% demand deposits, 11% NOW accounts, 73% time
deposits and 3% government deposits.
LENDING ACTIVITIES
General. The Bank intends to emphasize a range of lending services,
including real estate, commercial and consumer loans, to small- to medium-
sized businesses, professional concerns and individuals that are located in or
conduct a substantial portion of their business in the Bank's market area. The
Bank has established policies, which are subject to change, that limit the
loans in each general category to the following percentage: 35% real estate
loans, 25% commercial loans and 40% consumer loans.
Credit Risk. There are certain risks inherent in making all loans. A
principal economic risk inherent in making loans is the creditworthiness of
the borrower. Other risks inherent in making loans include risks with respect
to the period of time over which loans may be repaid, risks resulting from
changes in economic and industry conditions, risks inherent in dealing with
individual borrowers and, in the case of a collateralized loan, risks
resulting from uncertainties as to the future value of the collateral.
Management will maintain an allowance for loan losses based on, among other
things, an evaluation of economic conditions and regular reviews of
delinquencies and loan portfolio quality. Based upon such factors, management
will make various assumptions and judgments about the ultimate collectibility
of the loan portfolio and provide an allowance for potential loan losses based
upon a percentage of the outstanding balances and for specific loans when
their ultimate collectibility is considered questionable. Certain specific
risks with regard to each category of loans are described under the separate
subheading for each type of loan below.
Real Estate Loans. The Organizers expect that one of the primary components
of the Bank's loan portfolio will be loans secured by first or second
mortgages on real estate. These loans will generally consist of commercial
real estate loans, construction and development loans and residential real
estate loans (but will exclude home equity loans, which are classified as
consumer loans). Loan terms generally will be limited to five years or less,
although payments may be structured on a longer amortization basis. Interest
rates may be fixed or adjustable, and will more likely be fixed in the case of
shorter term loans. The Bank will generally charge an origination fee.
Management will attempt to reduce credit risk in the commercial real estate
portfolio by emphasizing loans on owner-occupied office and retail buildings
where the loan-to-value ratio, established by independent appraisals, does not
exceed 80%. The Bank's policy is for the loan-to-value ratio for (i) first and
second mortgage loans and (ii) construction loans not to exceed 80% and 75%,
respectively. In addition, the
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Bank may require personal guarantees of the principal owners of the property
backed with a review by the Bank of the personal financial statements of the
principal owners. The principal economic risk associated with each category of
anticipated loans, including real estate loans, is the creditworthiness of the
Bank's borrowers. The risks associated with real estate loans vary with many
economic factors, including employment levels and fluctuations in the value of
real estate. The Bank will compete for real estate loans with a number of bank
competitors which are well-established in the Forsyth County Area. Most of
these competitors have substantially greater resources and lending limits than
the Bank. As a result, the Bank may have to charge lower interest rates to
attract borrowers. See "--Competition" below. The Bank may also originate
loans for sale into the secondary market. The Bank intends to limit interest
rate risk and credit risk on these loans by locking the interest rate for each
loan with the secondary investor and receiving the investor's underwriting
approval prior to originating the loan.
Commercial Loans. The Bank will make loans for commercial purposes in
various lines of businesses. Commercial loans include both secured and
unsecured loans for working capital (including inventory and receivables),
business expansion (including acquisition of real estate and improvements) and
purchases of equipment and machinery. Equipment loans will typically be made
for a term of five years or less at fixed or variable rates, with the loan
fully amortized over the term and secured by the financed equipment and with a
loan-to-value ratio of 80% or less. Working capital loans will typically have
terms not exceeding one year and will usually be secured by accounts
receivable, inventory or personal guarantees of the principals of the
business. For loans secured by accounts receivable or inventory, principal
will typically be repaid as the assets securing the loan are converted into
cash, and in other cases principal will typically be due at maturity. The
principal economic risk associated with each category of anticipated loans,
including commercial loans, is the creditworthiness of the Bank's borrowers.
The risks associated with commercial loans vary with many economic factors,
including the economy in the Forsyth County Area. The well-established banks
in the Forsyth County Area will make proportionately more loans to medium- to
large-sized businesses than the Bank. Many of the Bank's anticipated
commercial loans will likely be made to small- to medium-sized businesses
which may be less able to withstand competitive, economic and financial
conditions than larger borrowers.
Consumer Loans. The Bank will make a variety of loans to individuals for
personal and household purposes, including secured and unsecured installment
and term loans, home equity loans and lines of credit and revolving lines of
credit such as credit cards. These loans typically will carry balances of less
than $25,000 and, in the case of non-revolving loans, will be amortized over a
period not exceeding 48 months or will be 90-day term loans, in each case
bearing interest at a fixed rate. The revolving loans will typically bear
interest at a fixed rate and require monthly payments of interest and a
portion of the principal balance. The underwriting criteria for home equity
loans and lines of credit will generally be the same as applied by the Bank
when making a first mortgage loan, as described above, and home equity lines
of credit will typically expire 10 years or less after origination. As with
the other categories of loans, the principal economic risk associated with
consumer loans is the creditworthiness of the Bank's borrowers, and the
principal competitors for consumer loans will be the established banks in the
Forsyth County Area.
Loan Approval and Review. The Bank's loan approval policies will provide for
various levels of officer lending authority. When the amount of aggregate
loans to a single borrower exceeds that individual officer's lending
authority, the loan request will be considered and approved by an officer with
a higher lending limit or the officers' loan committee. The Bank will
establish an officers' loan committee that has lending limits, and any loan in
excess of this lending limit will be approved by the loan committee. The Bank
will not make any loans to any director, officer or employee of the Bank
unless the loan is approved by the Bank's Board of Directors, or a committee
thereof, and is made on terms not more favorable to such person than would be
available to a person not affiliated with the Bank.
Lending Limit. Under the Georgia Financial Institutions Code (the "Financial
Institutions Code"), the Bank is limited in the amount it can loan to a single
borrower (including the borrower's related interests) by the amount of the
Bank's statutory capital base. The limit is 15% of the statutory capital base
unless each loan in excess of the 15% is approved by the Bank's Board of
Directors, or a committee thereof, and unless the entire amount of the loan is
secured by good collateral or other ample security. In no event, however, may
the aggregate
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amount loaned to any borrower exceed 25% of the Bank's statutory capital base,
subject to certain exceptions relating to the type and adequacy of the
collateral for such loan. These limits will increase and decrease as the
Bank's statutory capital base increases and decreases. The Bank does not have
any internal policy restrictions concerning loans to one borrower other than
the limits imposed by the Financial Institutions Code and those relating to
loans to affiliates. See "Supervision and Regulation--The Bank--Transaction
With Affiliates and Insiders." Unless the Bank is able to sell participations
in its loans to other financial institutions, the Bank will not be able to
meet all the lending needs of loan customers requiring aggregate extensions of
credit above these limits.
OTHER BANKING SERVICES
Other anticipated bank services include cash management services, safe
deposit boxes, travelers checks, direct deposits of payroll and social
security checks and automatic drafts for various accounts. The Bank plans to
become associated with a shared network of automated teller machines that may
be used by Bank customers throughout Georgia and other regions. The Bank does
not plan to exercise trust powers during its initial years of operation. The
Bank may in the future offer a full-service trust department, but cannot do so
without the prior approval of the DBF.
COMPETITION
The banking business is highly competitive. The Bank will compete as a
financial intermediary with other commercial banks, savings and loan
associations, mortgage banking firms, consumer finance companies, credit
unions, securities brokerage firms, insurance companies, money market mutual
funds and other financial institutions operating in the Forsyth County Area
and elsewhere. As of June 30, 1996, there were six commercial banks, with 14
commercial bank branches, no savings institutions and one credit union
operating in Forsyth County. A number of these competitors are well-
established in the Forsyth County Area. Most of these institutions have
substantially greater resources and lending limits than the Bank and offer
certain services, such as extensive and established branch networks and trust
services, that the Bank either does not expect to provide or will not provide
initially. As a result of these competitive factors, the Bank may have to pay
higher rates of interest to attract deposits. In addition, non-depository
institution competitors are generally not subject to the extensive regulations
applicable to the Company and the Bank. Recent federal legislation permits
commercial banks to establish operations nationwide, further increasing
competition from out-of-state financial institutions. Furthermore, recently
enacted Georgia legislation greatly diminishes the historical legal
restrictions on establishing branch banks across county lines in Georgia, thus
creating further opportunities for other financial institutions to compete
with the Bank. Generally, from July 1, 1996 to July 1, 1998, any bank located
in Georgia may branch into any three additional Georgia counties regardless of
the location of the parent bank. After July 1, 1998, banks may establish
branch banks statewide without limitation. In addition, on-line computer
banking via the Internet or otherwise may also become an increasing source of
competition for community financial institutions such as the Bank. As a result
of these competitive factors, the Bank may have to pay higher rates of
interest to attract deposits. The Organizers believe that the Bank will be
able to compete effectively with these institutions in the Bank's proposed
markets, but no assurances can be given in this regard.
FACILITIES
Principal Executive Offices. Both the Company's and the Bank's principal
offices initially will be located at 425 Tribble Gap Road, Cumming, Georgia
30130. The proposed site of the Bank's principal facility will be located at
501 Tri-County Plaza, Highways 9 and 20, Cumming, Georgia 30130. The Company
will lease the principal facility consisting of approximately 4,500 square
feet under a Sublease Agreement, as amended, with NationsBank, N.A. (South),
the initial term of which expires August 31, 2000. The base annual rent under
the sublease is approximately $67,500, $69,525, $71,611 and $73,759 in years
one through four, respectively. The Sublease Agreement is contingent upon the
receipt of final government regulatory approvals. The Company intends to
complete building renovations and initial site preparation of the facility, at
a cost of approximately $118,000, increasing the facility size to at least
6,000 square feet. Renovations of this facility are expected to begin after
completion of the offering. Furniture, fixtures and equipment for the facility
are expected to cost approximately $225,000. The Company believes that the
facilities will adequately serve the Bank's needs for its first several years
of operation. See "Use of Proceeds--By the Bank."
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EMPLOYEES
The Company anticipates that, upon commencement of operations, the Bank will
have approximately 15 full-time employees. The Company will not have any
employees other than its officers, none of whom will initially receive any
remuneration for their services to the Company.
LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or the Bank or
any of their properties are subject.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
As of June 30, 1996, the Company had total assets aggregating approximately
$104,137. These assets consisted principally of cash of $10,050, amounts due
from organizers of $25,520, organizational costs of $57,942, deferred offering
expenses of $5,000 and other assets of $5,625. The organizational costs relate
to the organization of the Company and the Bank and will be capitalized and
amortized over a five-year period. The Company's total liabilities at this
date were $105,000 and consisted of amounts due to Organizers. The Company had
a shareholder's deficit of $863 at June 30, 1996.
The Company had a net loss from February 14, 1996 (the Company's inception
date), through June 30, 1996, of $913. This loss resulted from expenses
incurred in connection with activities related to the initial organization of
the Company and the Bank and includes expenses incurred on behalf of the
Company by the Organizers prior to the Company's incorporation date. These
activities included, without limitation, the preparation and filing of an
application with the DBF for a state nonmember bank charter and the
preparation and filing of a registration statement for the offering of the
Common Stock.
Assuming that the offering is successfully completed, the Company's initial
activities will be devoted to organizing the Bank and opening and commencing
the business of the Bank. These organizational activities will include
completing all required steps for approval from the DBF for a state nonmember
bank charter, furnishing and equipping the proposed facility, hiring qualified
personnel to work at the Bank, conducting public relations activities on
behalf of the Bank, developing prospective business contacts for the Bank and
the Company and taking other actions necessary for a successful bank opening.
Because the Company is in the organizational stage, it has had no operations
from which to generate revenues and, until the Bank opens for business, the
Company's only source of revenues will be interest earned on subscriptions.
Because these revenues will be less than the expenses incurred in connection
with activities related to the initial organization of the Company and the
Bank, the Company will incur a net loss through the date of the opening of the
Bank. In addition, the Company anticipates incurring continuing operating
losses during the Bank's early stages of operations.
A minimum of $6,500,000 of the proceeds of this offering will be used to
capitalize the Bank and the remainder will be used to pay organizational
expenses of the Company and provide working capital, including additional
capital for investment in the Bank, if needed. See "Use of Proceeds." The
Company believes that this amount will be sufficient to fund the activities of
the Bank in its initial stages of operation and that the Bank will generate
sufficient income from operations to fund its activities on an ongoing basis
for at least five years. In addition, the Company believes that income from
the operations of the Bank will be sufficient to fund the activities of the
Company on an ongoing basis for at least five years. However, there can be no
assurance that either the Bank or the Company will achieve any particular
level of profitability. In the event the proceeds of the offering are
insufficient to provide the minimum initial funding needed for the Bank to
begin operations, the Company will have to seek alternative sources of
funding. Management has not identified any such alternatives.
Once the Bank opens, the largest component of the Company's net income will
be its net interest income, which will be the difference between the income
earned on assets and interest paid on deposits and borrowings used to support
such assets. Net interest income is determined by the rates earned on the
Company's interest-earning assets, the rates paid on its interest-bearing
liabilities, the relative amounts of interest-earning assets and interest-
bearing liabilities, and the degree of mismatch and the maturity and repricing
characteristics of its interest-earning assets and interest bearing
liabilities. Because the Bank may initially pay above average rates on
deposits and charge below average rates on loans, the Company's net interest
income may be less during the Bank's initial years of operation than that of
its competitors. However, the Organizers believe that any such rate
concessions will be temporary and, even during the first several years of the
Bank's operations, will not have a significant impact on the Company's
operating results.
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As described above under "Proposed Business--Lending Activities," the Bank
intends to offer primarily real estate, commercial and consumer loans to
small- to medium-sized businesses, professional concerns and individuals in
the Bank's market area. Each of these categories of loans will present
different risks for the Bank which could adversely affect the Company's
operating results in any period. See "Proposed Business--Lending Activities"
for a discussion of these lending risks.
SUPERVISION AND REGULATION
The Company and the Bank are subject to state and federal banking laws and
regulations which impose specific requirements or restrictions on and provide
for general regulatory oversight with respect to virtually all aspects of
operations. These laws and regulations are generally intended to protect
depositors, not shareholders. To the extent that the following summary
describes statutory or regulatory provisions, it is qualified in its entirety
by reference to the particular statutory and regulatory provisions. Any change
in applicable laws or regulations may have a material effect on the business
and prospects of the Company. Beginning with the enactment of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") and
following with the FDICIA, which was enacted in 1991, numerous additional
regulatory requirements have been placed on the banking industry in the past
five years, and additional changes have been proposed. The banking industry is
also likely to change significantly as a result of the passage of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate
Banking Act"). The operations of the Company and the Bank may be affected by
legislative changes and the policies of various regulatory authorities. The
Company is unable to predict the nature or the extent of the effect on its
business and earnings that fiscal or monetary policies, economic control, or
new federal or state legislation may have in the future.
THE COMPANY
Because it will own the outstanding capital stock of the Bank, the Company
will be a bank holding company within the meaning of the Federal Bank Holding
Company Act of 1956 (the "BHCA") and the Financial Institutions Code. The
activities of the Company will also be governed by the Glass-Steagall Act of
1933 (the "Glass-Steagall Act").
The BHCA. Under the BHCA, the Company will be subject to periodic
examination by the Federal Reserve and will be required to file periodic
reports of its operations and such additional information as the Federal
Reserve may require. The Company's and the Bank's activities are limited to
banking, managing or controlling banks; furnishing services to or performing
services for its subsidiaries and engaging in other activities that the
Federal Reserve determines to be so closely related to banking, managing or
controlling banks as to be a proper incident thereto.
Investments, Control and Activities. With certain limited exceptions, the
BHCA requires every bank holding company to obtain the prior approval of the
Federal Reserve before: (i) acquiring substantially all the assets of any
bank; (ii) acquiring direct or indirect ownership or control of any voting
shares of any bank if after such acquisition it would own or control more than
5% of the voting shares of such bank (unless it already owns or controls the
majority of such shares); or (iii) merging or consolidating with another bank
holding company.
In addition, and subject to certain exceptions, the BHCA and the Change in
Bank Control Act, together with regulations thereunder, require Federal
Reserve approval (or, depending on the circumstances, no notice of
disapproval) prior to any person or company acquiring "control" of a bank
holding company, such as the Company. Control is conclusively presumed to
exist if an individual or company acquires 25% or more of any class of voting
securities of the bank holding company. Control is rebuttably presumed to
exist if a person acquires 10% or more, but less than 25%, of any class of
voting securities and either the company has registered securities under
Section 12 of the Exchange Act (which the Company would likely be required to
do with respect to the Common Stock once it has more than 500 shareholders of
record) or no other person will own a greater percentage of that class of
voting securities immediately after the transaction. The regulations provide a
procedure for challenge of the rebuttable control presumption.
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Under the BHCA, a bank holding company is generally prohibited from engaging
in, or acquiring direct or indirect control of, more than 5% of the voting
shares of any company engaged in nonbanking activities, unless the Federal
Reserve Board, by order or regulation, has found those activities to be so
closely related to banking or managing or controlling banks as to be a proper
incident thereto. Some of the activities that the Federal Reserve Board has
determined by regulation to be proper incidents to the business of a bank
holding company include making or servicing loans and certain types of leases,
engaging in certain insurance and discount brokerage activities, performing
certain data processing services, acting in certain circumstances as a
fiduciary or investment or financial adviser, owning savings associations and
making investments in certain corporations or projects designed primarily to
promote community welfare.
The Federal Reserve Board will impose certain capital requirements on the
Company under the BHCA, including a minimum leverage ratio and a minimum ratio
of "qualifying" capital to risk-weighted assets. These requirements are
described below under "--Capital Regulations." Subject to its capital
requirements and certain other restrictions, the Company will be able to
borrow money to make a capital contribution to the Bank, and such loans may be
repaid from dividends paid from the Bank to the Company (although the ability
of the Bank to pay dividends will be subject to regulatory restrictions as
described below in "--The Bank--Dividends"). The Company will also be able to
raise capital for contribution to the Bank by issuing securities without
having to receive regulatory approval, subject to compliance with federal and
state securities laws.
Source of Strength. In accordance with Federal Reserve Board policy, the
Company is expected to act as a source of financial strength to the Bank and
to commit resources to support the Bank in circumstances in which the Company
might not otherwise do so. Under the BHCA, the Federal Reserve Board may
require a bank holding company to terminate any activity or relinquish control
of a nonbank subsidiary (other than a nonbank subsidiary of a bank) upon the
Federal Reserve Board's determination that such activity or control
constitutes a serious risk to the financial soundness or stability of any
subsidiary depository institution of the bank holding company. Further,
federal bank regulatory authorities have additional discretion to require a
bank holding company to divest itself of any bank or nonbank subsidiary if the
agency determines that divestiture may aid the depository institution's
financial condition.
The Financial Institutions Code. All Georgia bank holding companies must
register with the DBF under the Financial Institutions Code. A registered bank
holding company must provide the DBF with information with respect to the
financial condition, operations, management and inter-company relationships of
the holding company and its subsidiaries. The DBF may also require such other
information as is necessary to keep itself informed about whether the
provisions of Georgia law and the regulations and orders issued thereunder by
the DBF have been complied with, and the DBF may make examinations of any bank
holding company and its subsidiaries.
Under the Financial Institutions Code, it is unlawful without the prior
approval of the DBF: (i) for any bank holding company to acquire direct or
indirect ownership or control of more than 5% of the voting shares of the
bank; (ii) for any bank holding company or subsidiary thereof, other than a
bank, to acquire all or substantially all of the assets of a bank; or (iii)
for any bank holding company to merge or consolidate with any other bank
holding company. It is also unlawful for any bank holding company to acquire
direct or indirect ownership or control of more than 5% of the voting shares
of any bank unless such bank has been in existence and continuously operating
or incorporated as a bank for a period of five years or more prior to the date
of application to the DBF for approval of such acquisition. In addition, in
any such acquisition by an existing bank holding company, the initial banking
subsidiary of such bank holding company must have been incorporated for not
less than two years before the holding company can acquire another bank.
The Financial Institutions Code and applicable provisions of federal law
allow interstate banking by permitting bank holding companies to acquire
Georgia banking organizations so long as the Georgia-based banks to be
acquired have been in existence and continuously operated as banks for five
years or more. Georgia bank holding companies are likewise permitted to
acquire banking organizations in other states, subject to similar aging
requirements. Effective June 1, 1977, banks located in every state (other than
Texas) may merge or
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consolidate with Georgia-based banks that satisfy the five-year age
requirement. Following such mergers or consolidations, the resulting bank may
expand in each state where its predecessors were located, subject to the
branching laws of that particular state. Those acquisitions and transactions
are generally subject to federal and Georgia approval as described above. See
"The Bank--Branching."
Glass-Steagall Act. The Company will also be restricted in its activities by
the provisions of the Glass-Steagall Act, which will prohibit the Company from
owning subsidiaries that are engaged principally in the issue, flotation,
underwriting, public sale or distribution of Securities. The interpretation,
scope and application of the provisions of the Glass-Steagall Act currently
are being considered and reviewed by regulators and legislators, and the
interpretation and application of those provisions have been challenged in the
federal courts.
THE BANK
General. Subject to receipt of the necessary approvals of its pending
applications, the Bank will operate as a state-chartered nonmember bank
organized under the laws of the State of Georgia and subject to examination by
the DBF. Deposits in the Bank will be insured by the FDIC up to a maximum
amount (generally $100,000 per depositor, subject to aggregation rules). The
DBF and the FDIC will regulate or monitor virtually all areas of the Bank's
operations, including security devices and procedures, adequacy of
capitalization and loss reserves, loans, investments, borrowings, deposits,
mergers, issuances of securities, payment of dividends, interest rates payable
on deposits, interest rates or fees chargeable on loans, establishment of
branches, corporate reorganizations, maintenance of books and records and
adequacy of staff training to carry on safe lending and deposit gathering
practices. The DBF will require the Bank to maintain certain capital ratios
and will impose limitations on the Bank's aggregate investment in real estate,
bank premises, furniture and fixtures. The Bank will be required by the DBF to
prepare quarterly reports on the Bank's financial condition and to conduct an
annual audit of its financial affairs in compliance with minimum standards and
procedures prescribed by the DBF.
Under FDICIA, all insured institutions must undergo regular on site
examinations by their appropriate banking agency. The cost of examinations of
insured depository institutions and any affiliates may be assessed by the
appropriate agency against each institution or affiliate as it deems necessary
or appropriate. Insured institutions are required to submit annual reports to
the FDIC and the appropriate agency (and state supervisor when applicable).
FDICIA also directs the FDIC to develop with other appropriate agencies a
method for insured depository institutions to provide supplemental disclosure
of the estimated fair market value of assets and liabilities, to the extent
feasible and practicable, in any balance sheet, financial statement, report of
condition or any other report of any insured depository institution. FDICIA
also requires the federal banking regulatory agencies to prescribe, by
regulation, standards for all insured depository institutions and depository
institution holding companies relating, among other things, to: (i) internal
controls, information systems and audit systems; (ii) loan documentation;
(iii) credit underwriting; (iv) interest rate risk exposure; and (v) asset
quality.
State nonmember banks and their holding companies which have been chartered
or registered or have undergone a change in control within the past two years
or which have been deemed by the DBF or the Federal Reserve Board,
respectively, to be troubled institutions must give the DBF or the Federal
Reserve Board, respectively, 30 days prior notice of the appointment of any
senior executive officer or director. Within the 30-day period, the DBF or the
Federal Reserve Board, as the case may be, may approve or disapprove any such
appointment. The Company and the Bank will meet the criteria which trigger
this additional approval during the first two years after they are registered
or chartered, respectively.
Deposit Insurance. The FDIC establishes rates for the payment of premiums by
federally insured banks and thrifts for deposit insurance. A separate Bank
Insurance Fund ("BIF") and Savings Association Insurance Fund ("SAIF") are
maintained for commercial banks and thrifts, respectively, with insurance
premiums from the industry used to offset losses from insurance payouts when
banks and thrifts fail. Due to the high rate of failures in recent years, the
fees that commercial banks and thrifts pay to BIF and SAIF have increased.
Since 1993, insured depository institutions, such as the Bank, have paid for
deposit insurance under a risk-based premium system. Under this system, until
mid-1995 depositor institutions paid to BIF or SAIF from $0.23 to
26
<PAGE>
$0.31 per $100 of deposits depending on its capital levels and risk profile,
as determined by its primary federal regulator on a semi-annual basis. Once
the BIF reached its legally mandated reserve ratio in mid-1995, the FDIC
substantially lowered premiums for well-capitalized BIF-insured banks. The
current range of premiums for BIF-insured banks ranges from $2,000 per year to
$.31 per $100 of deposits. During its initial months of operations, it is
likely that the Bank's assessment rate will be $2,000 per year. Increases in
deposit insurance premiums will increase the Bank's cost of funds, and there
can be no assurance that deposit insurance premiums will not increase in the
future.
Transactions With Affiliates and Insiders. The Bank is subject to the
provisions of Section 23A of the Federal Reserve Act, which place limits on
the amount of loans or extensions of credit to, or investments in or certain
other transactions with, affiliates and on the amount of advances to third
parties collateralized by the securities or obligations of affiliates. The
aggregate of all covered transactions is limited in amount, as to any one
affiliate, to 10% of a bank's capital and surplus and, as to all affiliates
combined, to 20% of a bank's capital and surplus. Furthermore, within the
foregoing limitations as to amount, each covered transaction must meet
specified collateral requirements. Compliance is also required with certain
provisions designed to avoid the taking of low quality assets.
The Bank is also subject to the provisions of Section 23B of the Federal
Reserve Act which, among other things, prohibit an institution from engaging
in certain transactions with certain affiliates unless the transactions are on
terms substantially the same, or at least as favorable to such institution or
its subsidiaries as those prevailing at the time for comparable transactions
with nonaffiliated companies. The Bank is subject to certain restrictions on
extensions of credit to executive officers, directors, certain principal
shareholders and their related interests. Such extensions of credit: (i) must
be made on substantially the same terms, including interest rates and
collateral, as those prevailing at the time for comparable transactions with
third parties; and (ii) must not involve more than the normal risk of
repayment or present other unfavorable features.
Dividends. The principal source of the Company's cash revenues will come
from dividends received from the Bank. Under the Financial Institutions Code,
cash dividends on the Bank's common stock may be declared and paid only out of
its retained earnings, and dividends may not be declared at any time at which
the Bank's paid-in capital and appropriated retained earnings do not, in
combination, equal at least 20% of its capital stock account. In addition, the
DBF's current rules and regulations require prior DBF approval before cash
dividends may be declared and paid if: (i) the Bank's ratio of equity capital
to adjusted total assets is less than 6%; (ii) the aggregate amount of
dividends declared or anticipated to be declared in that calendar year exceeds
50% of the Bank's net profits, after taxes but before dividends, for the
previous calendar year; or (iii) the percentage of the Bank's assets
classified as adverse as to repayment or recovery by the DBF at the most
recent examination of the Bank exceeds 80% of the Bank's equity capital as
reflected at such examination. In addition, the Federal Reserve Board has
stated that bank holding companies should refrain from or limit dividend
increases or reduce or eliminate dividends under circumstances in which the
bank holding company fails to meet minimum capital requirements or in which
its earnings are impaired. Current federal law would prohibit, except under
certain circumstances and with prior regulatory approval, an insured
depository institution, such as the Bank from paying dividends or making any
other capital distribution if, after making the payment or distribution, the
institution would be considered "undercapitalized," as the term is defined in
the applicable regulations.
Branching. The Bank currently has no plans to establish a branch office.
Recent Georgia legislation greatly diminishes the historical legal
restrictions on establishing branch banks across county lines in Georgia.
Under Georgia law currently in effect, generally, from July 1, 1996 to July 1,
1998, any bank located in Georgia may branch into three additional Georgia
counties regardless of the location of the parent bank. After July 1, 1998,
banks may establish branch banks statewide without limitation. In addition,
the Company, with prior regulatory approval, and following the passage of 24
months from the date of incorporation of the Bank, will be permitted to
acquire interests in and operate banks throughout the state and under current
Georgia law, any bank acquired by the Company could be merged into the Bank
and its offices could then be operated as branches of the Bank. Although the
Bank currently has no definitive plans for opening any branch offices,
depending on profitability and community needs, other branches may be
considered in the future.
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<PAGE>
Community Reinvestment Act. The Community Reinvestment Act requires that, in
connection with examinations of financial institutions within their respective
jurisdictions, the Federal Reserve, the FDIC and the DBF shall evaluate the
record of the financial institutions in meeting the credit needs of their
local communities, including low and moderate income neighborhoods, consistent
with the safe and sound operation of those institutions. These factors are
also considered in evaluating mergers, acquisitions and applications to open a
branch or facility.
Other Regulations. Interest and certain other charges collected or
contracted for by the Bank are subject to state usury laws and certain federal
laws concerning interest rates. The Bank's loan operations are also subject to
certain federal laws applicable to credit transactions, such as: (i) the
federal Truth-In-Lending Act, governing disclosures of credit terms to
consumer borrowers; (ii) the Home Mortgage Disclosure Act of 1975, requiring
financial institutions to provide information to enable the public and public
officials to determine whether a financial institution will be fulfilling its
obligation to help meet the housing needs of the community it serves; (iii)
the Equal Credit Opportunity Act, prohibiting discrimination on the basis of
race, creed or other prohibited factors in extending credit; (iv) the Fair
Credit Reporting Act of 1978, governing the use and provision of information
to credit reporting agencies; (v) the Fair Debt Collection Act, governing the
manner in which consumer debts may be collected by collection agencies; and
(vi) the rules and regulations of the various federal agencies charged with
the responsibility of implementing such federal laws. The deposit operations
of the Bank also are subject to the Right to Financial Privacy Act, which
imposes a duty to maintain confidentiality of consumer financial records and
prescribes procedures for complying with administrative subpoenas of financial
records, and the Electronic Funds Transfer Act and Regulation E issued by the
Federal Reserve Board to implement that act, which governs automatic deposits
to and withdrawals from deposit accounts and customers' rights and liabilities
arising from the use of automated teller machines and other electronic banking
services.
CAPITAL REGULATIONS
The federal bank regulatory authorities have adopted risk-based capital
guidelines for banks and bank holding companies that are designed to make
regulatory capital requirements more sensitive to differences in risk profiles
among banks and bank holding companies and account for off-balance sheet
items. The guidelines are minimums, and the federal regulators have noted that
banks and bank holding companies contemplating significant expansion programs
should not allow expansion to diminish their capital ratios and should
maintain ratios in excess of the minimums. Neither the Company nor the Bank
has received any notice indicating that either entity will be subject to
higher capital requirements. The current guidelines require all bank holding
companies and federally-regulated banks to maintain a minimum risk-based total
capital ratio equal to 8%, of which at least 4% must be Tier 1 capital. Tier 1
capital includes common shareholders' equity, qualifying perpetual preferred
stock and minority interests in equity accounts of consolidated subsidiaries,
but excludes goodwill and most other intangibles and excludes the allowance
for loan and lease losses. Tier 2 capital includes the excess of any preferred
stock not included in Tier 1 capital, mandatory convertible Securities, hybrid
capital instruments, subordinated debt and intermediate term-preferred stock
and general reserves for loan and lease losses up to 1.25% of risk-weighted
assets.
Under these guidelines, banks' and bank holding companies' assets are given
risk-weights of 0%, 20%, 50% or 100%. In addition, certain off-balance sheet
items are given credit conversion factors to convert them to asset equivalent
amounts to which an appropriate risk-weight will apply. These computations
result in the total risk-weighted assets. Most loans are assigned to the 100%
risk category, except for first mortgage loans fully secured by residential
property and, under certain circumstances, residential construction loans,
both of which carry a 50% rating. Most investment securities are assigned to
the 20% category, except for municipal or state revenue bonds, which have a
50% rating and direct obligations of or obligations guaranteed by the United
States Treasury or United States government agencies, which have a 0% rating.
The federal bank regulatory authorities have also implemented a leverage
ratio, which is equal to Tier 1 capital as a percentage of average total
assets less intangibles, to be used as a supplement to the risk-based
guidelines. The principal objective of the leverage ratio is to place a
constraint on the maximum degree to which
28
<PAGE>
a bank holding company may leverage its equity capital base. The minimum
required leverage ratio for top-rated institutions is 3%, but most
institutions are required to maintain an additional cushion of at least 100 to
200 basis points.
FDICIA established a new capital-based regulatory scheme designed to promote
early intervention for troubled banks which requires the FDIC to choose the
least expensive resolution of bank failures. The new capital-based regulatory
framework contains five categories of compliance with regulatory capital
requirements, including "well-capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" and "critically
undercapitalized." To qualify as a "well-capitalized" institution, a bank must
have a leverage ratio of no less than 5%, a Tier 1 risk-based ratio of no less
than 6% and a total risk-based capital ratio of no less than 10%, and the bank
must not be under any order or directive from the appropriate regulatory
agency to meet and maintain a specific capital level. Initially, the
Organizers expect the Bank to qualify as "well-capitalized."
Under the FDICIA regulations, the applicable agency can treat an institution
as if it were in the next lower category if the agency determines (after
notice and an opportunity for hearing) that the institution is in an unsafe or
unsound condition or is engaging in an unsafe or unsound practice. The degree
of regulatory scrutiny of a financial institution will increase, and the
permissible activities of the institution will decrease, as it moves downward
through the capital categories. Institutions that fall into one of the three
undercapitalized categories may be required to: (i) submit a capital
restoration plan; (ii) raise additional capital; (iii) restrict their growth,
deposit interest rates, and other activities; (iv) improve their management;
(v) eliminate management fees; or (vi) divest themselves of all or a part of
their operations. Bank holding companies controlling financial institutions
can be called upon to boost the institutions' capital and to partially
guarantee the institutions' performance under their capital restoration plans.
These capital guidelines can affect the Company in several ways. After
completion of this offering, the Company's capital levels will initially be
more than adequate. However, rapid growth, poor loan portfolio performance or
poor earnings performance or a combination of these factors, could change the
Company's capital position in a relatively short period of time, making an
additional capital infusion necessary.
FDICIA requires the federal banking regulators to revise the risk-based
capital standards to provide for explicit consideration of interest-rate risk,
concentration of credit risk and the risks of non-traditional activities. It
is uncertain what effect these regulations, when implemented, would have on
the Company and the Bank.
Failure to meet these capital requirements would mean that a bank would be
required to develop and file a plan with its primary federal banking regulator
describing the means and a schedule for achieving the minimum capital
requirements. In addition, such a bank would generally not receive regulatory
approval of any application that requires the consideration of capital
adequacy, such as a branch or merger application, unless the bank could
demonstrate a reasonable plan to meet the capital requirement within a
reasonable period of time.
The DBF will require the Bank to maintain a ratio (the "Primary Capital
Ratio") of total capital (which is essentially Tier 1 capital plus the
allowance for loan losses) to total assets (defined as balance sheet assets
plus the allowance for loan losses) of at least 6%. In addition, the Bank
expects that, in accordance with DBF policy and prior practice, the Bank will
be required to maintain a Primary Capital Ratio of 8% during its first three
years of operation.
ENFORCEMENT POWERS
FIRREA expanded and increased civil and criminal penalties available for use
by the federal regulatory agencies against depository institutions and certain
"institution-affiliated parties" (primarily including management, employees
and agents of a financial institution and independent contractors such as
attorneys, accountants and others, who participate in the conduct of the
financial institution's affairs). These practices can include the failure of
an institution to timely file required reports or the filing of false or
misleading information
29
<PAGE>
or the submission of inaccurate reports. Civil penalties may be as high as
$1,000,000 a day for such violations. Criminal penalties for some financial
institution crimes have been increased to 20 years. In addition, regulators
are provided with greater flexibility to commence enforcement actions against
institutions and institution-affiliated parties. Possible enforcement actions
include the termination of deposit insurance. Furthermore, FIRREA expanded the
appropriate banking agencies' power to issue cease-and-desist orders that may,
among other things, require affirmative action to correct any harm resulting
from a violation or practice, including restitution, reimbursement,
indemnifications or guarantees against loss. A financial institution may also
be ordered to restrict its growth, dispose of certain assets, rescind
agreements or contracts, or take other actions as determined by the ordering
agency to be appropriate.
RECENT LEGISLATIVE DEVELOPMENTS
The Interstate Banking Act was passed by Congress in 1994 and provides for
unrestricted interstate bank mergers, unrestricted interstate acquisition of
banks by bank holding companies, and interstate de novo branching by banks.
The States, however, may opt in or opt out of several of such Act's
provisions. As a result of these laws and proposed legislation, the number of
competitors in the Company's market may increase. However, the Company
believes it can compete effectively in the market and that the legislation
will not have a material adverse impact on the Company or the Bank. From time
to time, various bills are introduced in the United States Congress and the
Georgia legislature with respect to the regulation of financial institutions.
Certain of these proposals, if adopted, could significantly change the
regulation of banks and the financial services industry. The Company cannot
predict whether any of these proposals will be adopted or, if adopted, how
these proposals would affect the Company. See also "The Company--The Financial
Institutions Code" and "--The Bank--Branching."
EFFECT OF GOVERNMENTAL MONETARY POLICIES
The earnings of the Bank will be affected by domestic economic conditions
and the monetary and fiscal policies of the United States government and its
agencies. The Federal Reserve Board's monetary policies have had, and will
likely continue to have, an important impact on the operating results of
commercial banks through its power to implement national monetary policy in
order, among other things, to curb inflation or combat a recession. The
monetary policies of the Federal Reserve Board have major effects upon the
levels of bank loans, investments and deposits through its open market
operations in United States government securities and through its regulation
of the discount rate on borrowings of member banks and the reserve
requirements against member bank deposits. It is not possible to predict the
nature or impact of future changes in monetary and fiscal policies.
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<PAGE>
MANAGEMENT
GENERAL
The following table sets forth the respective names, ages, positions with
the Company and the Bank, and anticipated subscriptions of the Organizers.
Subject to prior regulatory approval, the Organizers may elect to purchase
more than the shares indicated below.
<TABLE>
<CAPTION>
ANTICIPATED SUBSCRIPTION
---------------------------------
PERCENTAGE PERCENTAGE
POSITION WITH NUMBER OF OF MINIMUM OF MAXIMUM
NAME (AGE) COMPANY/BANK(1) SHARES(2) OFFERING(3) OFFERING(4)
---------- ------------------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Catherine M. Amos (44)................ Organizer 8,000 1.2% 1.0%
Jeffrey S. Bagley (34)................ Organizer and Vice
Chairman of the
Board 5,000 0.8% 0.6%
Bill H. Barnett (55).................. Organizer 10,000 1.5% 1.3%
Danny M. Bennett (35)................. Organizer 5,000 0.8% 0.6%
Michael P. Bennett (51)............... Organizer 7,500 1.1% 0.9%
Bryan L. Bettis (34).................. Organizer 5,000 0.8% 0.6%
Talmadge W. Bolton (62)............... Organizer 10,000 1.5% 1.3%
Thomas L. Bower III (44).............. Organizer 10,000 1.5% 1.3%
Charles R. Castleberry (42)........... Organizer 5,000 0.8% 0.6%
David H. Denton (51).................. Organizer,
President, Chief
Executive Officer 5,000 0.8% 0.6%
Charles D. Ingram (53)................ Organizer and
Secretary 5,000 0.8% 0.6%
Herbert A. Lang, Jr. (44)............. Organizer 10,000 1.5% 1.3%
John P. McGruder (54)................. Organizer 10,000 1.5% 1.3%
James J. Myers (46)................... Organizer and
Chairman of the
Board 5,000 0.8% 0.6%
Danny L. Reid (43).................... Organizer 5,000 0.8% 0.6%
Charles R. Smith (67)................. Organizer 25,000 3.8% 3.1%
Wyatt L. Willingham (43).............. Organizer 5,000 0.8% 0.6%
Jerry M. Wood (47).................... Organizer 5,000 0.8% 0.6%
------- ---- ----
TOTAL................................. 140,500 21.6% 17.5%
======= ==== ====
</TABLE>
- --------
(1) The Organizers will also be serving as directors of the Company. The
Organizers who will also be serving as directors of the Bank are Ms. Amos
and Messrs. Bagley, D. Bennett, M. Bennett, Bolton, Denton, Ingram, Lang,
McGruder, Myers, Reid, Smith and Willingham. David H. Denton will serve as
President and Chief Executive Officer of both the Bank and the Company.
(2) All of such purchases will be at a price of $10.00 per share, the same
price at which shares are being offered to the public. No person is
expected to own more than 5% of the shares of the Common Stock immediately
after the offering. However, subject to prior regulatory approval, the
Organizers may purchase up to 100% of the shares in the offering if
necessary for the Company to achieve the minimum capital requirement and
also may decide to purchase additional shares in the offering even if the
minimum offering is fully subscribed. Any shares purchased by the
Organizers in excess of their original commitment will be purchased for
investment and not with a view to the resale of such shares. Although each
Organizer has agreed with the other Organizers that he will subscribe for
the number of shares indicated above, neither the Organizers nor any other
subscriber will be obligated to purchase shares except pursuant to a valid
subscription agreement executed after receipt of this Prospectus. This
table includes shares which are expected to be beneficially owned by the
Organizers upon completion of the offering.
(3) Assumes that the minimum number of 665,000 shares are sold in this
offering.
(4) Assumes that the maximum number of 800,000 shares are sold in this
offering.
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<PAGE>
Biographical information concerning the Organizers is set forth below. None
of the Organizers are related, except that John P. McGruder's wife is a first
cousin to Catherine M. Amos.
Catherine M. Amos is a native of Forsyth County. She has been the President
of Amos Properties, Inc., an owner of Commercial real estate properties, since
1989, and the Secretary/Treasurer and co-owner of Amos Plumbing & Electrical
Co., Inc., a contracting firm, since 1978. Ms. Amos is currently the Chairman
of Lake Lanier Islands Authority, as well as a member of several other civic,
social and community organizations.
Jeffrey S. Bagley is a native of Forsyth County, Georgia and has been an
attorney with the law firm of Boling, Rice, Bettis, Bagley & Martin since 1987
and a partner since 1992.
Bill H. Barnett is a native of Forsyth County and is a former member of the
Georgia House of Representatives and the Forsyth County Board of
Commissioners. Mr. Barnett has been the President of Bill H. Barnett, Inc., a
real estate investment and development company in Cumming, Georgia, since
1991.
Danny M. Bennett is a native of Forsyth County, Georgia and is the President
of GeoCorp Development Co., Inc., a land development company in Cumming,
Georgia. Mr. Bennett is also Vice President and a construction engineer for
Georgia North Contracting, Inc. Mr. Bennett has been an officer of each of
these companies since 1988.
Michael P. Bennett is a resident of Forsyth County, Georgia and is on the
Board of Directors for Forsyth County Farm Bureau. Mr. Bennett is also the
Chief Financial Officer and Secretary of 5 Bennett Farms, Inc. and served on
the Forsyth County Commission from 1987 to 1994. Mr. Bennett has been a self-
employed farmer since 1975.
Bryan L. Bettis is a native of Forsyth County, Georgia and has been the Vice
President of Midway Building Supply, Inc. in Alpharetta, Georgia, since 1983.
Mr. Bettis is also the President of Bettis Construction, Inc., a residential
construction company, and a member of the South Forsyth Rotary Club.
Talmadge W. Bolton is a native of Forsyth County, Georgia and has been the
Chief Executive Officer of Bolton's Truck Parts, Inc., since 1978. He is a
member of Lafayette Masonic Lodge No. 44 and a board member of Forsyth County
Department of Family & Children Services and Forsyth County Zoning Department.
Thomas L. Bower III has been a resident of Gainesville, Georgia for 21
years. Mr. Bower is the Secretary/Treasurer of Clipper Petroleum, Inc. with
whom he has been associated since 1974, and a partner in B&B Associates, a
real estate and convenience store partnership. Mr. Bower also serves on the
Board of Directors for the Hall County Humane Society.
Charles R. Castleberry is a native of Forsyth County and has been employed
by Progressive Lighting, Inc. as a manager and representative since 1985. Mr.
Castleberry is a member of South Forsyth Rotary Club, a member and past
director of the Cumming Chamber of Commerce and past Chairman of the Board for
the Forsyth County Planning and Development Board.
David H. Denton is a resident of Forsyth County, Georgia and has over 30
years of banking experience in the State of Georgia. Mr. Denton served as
Senior Vice President of The Peoples Bank of Forsyth County from 1990 through
June 1996. Mr. Denton is a graduate of the University of Georgia and the
Graduate School of Banking of the South. He is a member of the Rotary Club of
South Forsyth County, Boy Scouts of America, Band Boosters of Forsyth Central
High School and South Forsyth High School and an alumni of Leadership Forsyth.
Charles D. Ingram is a native of Forsyth County, Georgia and has been a co-
owner, Secretary and Treasurer of Ingram-Stafford Ford-Mercury, Inc. since
1989. He has served on the advisory board of directors for Wachovia Bank and
is a graduate of the Graduate School of Banking of the South.
Herbert A. Lang, Jr. is a long-time resident of Forsyth County and has been
the owner of Lang Signs, a sign manufacturer, since 1973. Mr. Lang is a member
of the South Forsyth Rotary Club.
John P. McGruder is a resident of Cumming, Georgia and has been the co-owner
of Crestview Animal Hospital since 1984. Mr. McGruder serves as a member of
the Forsyth County Humane Society.
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<PAGE>
James J. Myers is a resident of Cumming, Georgia and has been the owner of
James J. Myers, CPA, PC. since 1991. Mr. Myers has been a CPA since 1976 and
serves as a member of South Forsyth Rotary Club, Cumming Forsyth Optimist Club
and Leadership Forsyth County Georgia.
Danny L. Reid is a native of Forsyth County, Georgia and has been a co-owner
of Reid & Reid Grading and Pipeline, Inc., a grading contractor and developer,
since 1970.
Charles R. Smith is a resident of Forsyth County and has presided as a Judge
of the Municipal Court of Cumming, Georgia, since 1992. Mr. Smith is a retired
former partner of Smith & Smith, Attorneys with whom he was a partner since
1956. Mr. Smith was an organizer, director and former Chairman of the Board of
The Peoples Bank of Forsyth County.
Wyatt L. Willingham is a resident of Cumming, Georgia and is the Vice
President and General Manager of North Georgia Fast Foods, Inc., with whom he
has been employed since 1973. Mr. Willingham is a member of the Mount Zion
Lodge and the Yaarab Temple.
Jerry M. Wood is a long-time resident of Forsyth County and has been the
President of Jerry Wood Hardware Co., doing business as Wood Ace Hardware in
Alpharetta, Georgia, since 1980. Mr. Wood is a founding member of the South
Forsyth Rotary Club and has served as Chairman of Finance for the Midway
United Methodist Church.
Biographical information concerning the other executive officers of the
Company and the Bank is set forth below:
Jimmy S. Fagan is a long-time resident of Cumming, Georgia and has over 31
years of banking experience in Forsyth County, Georgia. Mr. Fagan has been
Vice President of the Company and Executive Vice President of the Bank since
1996. Prior to joining the Company, he served as Vice Chairman and President
of The Peoples Bank of Forsyth County with whom he was associated since 1984.
He is a member of the South Forsyth Rotary Club and Forsyth Development
Authority.
Vicki D. Melton is a resident of north Gwinnett County and has over 15 years
of banking experience in the State of Georgia. Ms. Melton has been the Chief
Financial Officer of the Company and the Vice President and Chief Financial
Officer of the Bank since 1996. Prior to joining the Company, she served as
Senior Vice President, Operations and Chief Financial Officer of White County
Bank from 1993 through 1995 and was Senior Vice-President, Operations and
Chief Financial Officer of Eastside Bank & Trust Company from 1989 through
1993. Ms. Melton is a graduate of the University of Georgia, the Georgia
Bankers School and the American Institute of Banking.
Timothy M. Perry is a resident of Cumming, Georgia and has over 15 years of
banking experience in the State of Georgia. Mr. Perry has been Senior Lending
Officer and Senior Vice President of the Bank since 1996. Prior to joining the
Company, he was associated with First National Bancorp since 1986--as Senior
Vice President/Senior Credit Officer of Barrow Bank & Trust Company from 1995
through June 1996 and Vice President, Commercial Lending of The Peoples Bank
of Forsyth County from 1986 through 1995. Mr. Perry is a graduate of West
Georgia College and the Graduate School of Banking of the South.
DIRECTOR COMPENSATION
David H. Denton and the Company have entered into an Employment Agreement
pursuant to which Mr. Denton will serve as the President and Chief Executive
Officer of the Company and the Bank. The Employment Agreement provides for a
starting salary of $85,000 per annum, plus medical insurance premiums until
the Bank opens for business. Thereafter, Mr. Denton will be paid a salary of
$98,000 plus his yearly medical insurance premium. Mr. Denton will be eligible
to participate in any management incentive program of the Bank or any long-
term equity incentive program and will be eligible for grants of stock options
and other awards thereunder. Additionally, Mr. Denton will participate in the
Bank's retirement, welfare and other benefit programs and is entitled to
reimbursement for automobile expenses and travel and business expenses. The
Company will maintain a term life insurance policy on Mr. Denton providing for
death benefits in the amount of $600,000 payable to the Organizers and
$400,000 payable to Mr. Denton's family.
The Employment Agreement provides for an initial term of five years and can
be extended by the Bank at the end of each year of the term for an additional
year, so that the remaining term shall continue to be five years. If the
Company terminates Mr. Denton's employment without cause or if Mr. Denton's
employment is
33
<PAGE>
terminated due to a sale, merger or dissolution of the Company or the Bank,
the Company will be obligated to continue his salary and bonus for the first
twelve months thereafter plus one-half of his salary for the second twelve
months thereafter. Furthermore, the Company must remove any restrictions on
outstanding incentive awards so that all such awards vest immediately and the
Company must continue to provide his life insurance and medical benefits until
he reaches the age of 65.
In addition, the Employment Agreement provides that following termination of
his employment with the Bank and for a period of twelve months thereafter, Mr.
Denton may not: (i) be employed in the banking business as a director, officer
at the vice president level or higher, or organizer or promoter of, or provide
executive management services to, any financial institution within Forsyth
County; (ii) solicit major customers of the Bank for the purpose of providing
financial services; or (iii) solicit employees of the Bank for employment.
The Organizers do not intend for the Company or the Bank to pay directors'
fees until such time as the Bank is cumulatively profitable. However, the
Company and the Bank reserve the right to pay directors' fees.
COMMITTEES OF THE BOARD
The directors receive no compensation for attending Board meetings or
meetings of committees of the Board. There are currently no committees of the
Company's Board, however, the Bank will have several committees. It is
anticipated that Messrs. Ingram, McGruder, Myers and Willingham will serve as
the Loan Committee of the Bank, which will oversee loan review activity and
will review and pass on all unsecured credit in excess of $50,000 and secured
credit in excess of $150,000. It is also anticipated that Messrs. Bagley,
D. Bennett, Lang, Myers and Reid will serve as the Investment Committee of the
Bank, which will review and pre-approve all purchases and sales of Securities
and administer asset and liability policies. In addition, it is anticipated
that Ms. Amos and Messrs. Michael P. Bennett, Bolton, Myers and Smith will
serve on as the Audit Committee of the Bank, which will receive all
examination and audit reports and will be responsible for taking corrective
action where necessary and for overseeing compliance with regulatory
requirements.
No director or executive officer of the Bank or Company is related to any
other director or executive officer, except that John P. McGruder's wife is a
first cousin to Catherine Amos.
STOCK OPTION PLAN
Although the Company has no specific plans, the Company may adopt a Stock
Option Plan pursuant to which officers, directors, key employees and advisors
of the Company and the Bank may be granted options to purchase shares of the
Company's stock as compensation for past services or as incentive for services
to be rendered. The Plan has not yet been adopted, and if adopted by the Board
of Directors, will be submitted to the shareholders of the Company for
approval or ratification. The Organizers contemplate that the number of shares
of the Company's Common Stock authorized to be issued pursuant to any stock
option plan will not exceed 20% of the shares to be issued by the Company in
this offering (133,000 shares if the minimum number of shares are sold in the
offering and 160,000 if the maximum number are sold). Exercise of any such
options could have a dilutive effect on the shareholders' interest in the
Company's earnings and book value. In the future, it is possible that the
Company could issue additional shares of its Common Stock. Any such stock
offering by its nature could be dilutive to the holdings of purchasers in this
offering.
CERTAIN TRANSACTIONS
The Organizers set up a partnership, FCO Partners ("FCO"), which provided
the Company with the necessary funds to operate and carry on the business of
organizing the Company and the Bank. The Organizers have contributed a total
of $105,000 to FCO as of June 30, 1996. The advanced funds are not callable by
the Organizers. The Company established a line of credit, which is guaranteed
by the Organizers, and repaid all monies advanced by the Organizers to
organize the Bank and the Company. The line of credit is anticipated to be
repaid with the proceeds of the offering which will result in a release of the
Organizers from the guarantee. The Company and the Bank expect to have banking
and other transactions in the ordinary course of business with Organizers,
directors and officers of the Company and the Bank and their affiliates,
including members of their families or corporations, partnerships or other
organizations in which such Organizers, officers or directors have a
controlling interest, on substantially the same terms (including price, or
interest rates and collateral) as those prevailing at the time for comparable
transactions with unrelated parties. Such transactions are not expected
34
<PAGE>
to involve more than the normal risk of collectibility nor present other
unfavorable features to the Company and the Bank. Loans to individual
directors and officers must also comply with the Bank's lending policies and
statutory lending limits, and directors with a personal interest in any loan
application will be excluded from the consideration of such loan application.
The Company intends for all of its transactions with Organizers or other
affiliates of the Company or the Bank to be on terms no less favorable to the
Company than could be obtained from an unaffiliated third party and to be
approved by a majority of the Company's disinterested directors.
EXCULPATION AND INDEMNIFICATION
The Articles of Incorporation of the Company contain a provision which
eliminates the liability of a director to the Company or its shareholders for
monetary damages for breach of the duty of care or any other duty as a
director. This provision does not eliminate such liability to the extent the
director engaged in willful misconduct or a knowing violation of criminal law
or of any federal or state securities law, including, without limitation, laws
proscribing insider trading or manipulation of the market for any security.
The Bylaws of the Company require the Company to indemnify any person who
was, is, or is threatened to be made a defendant or respondent in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of service by such person
as a director of the Company or the Bank or any other corporation which he
served as such at the request of the Company. Except as noted in the next
paragraph, directors are entitled to be indemnified against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by the
director in connection with the proceeding. Directors are also entitled to
have the Company advance any such expenses prior to final disposition of the
proceeding, upon delivery of a written affirmation by the director of his good
faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to repay the amounts advanced if it is
ultimately determined that the standard of conduct has not been met.
Under the Bylaws, indemnification will be disallowed if it is established
that the director: (i) appropriated, in violation of his duties, any business
opportunity of the Company; (ii) engaged in willful misconduct or a knowing
violation of law; (iii) permitted any unlawful distribution; or (iv) derived
an improper personal benefit.
The Board of Directors also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors,
subject to all of the accompanying conditions and obligations. The Board of
Directors has extended or intends to extend indemnification rights to all of
its executive officers.
DESCRIPTION OF CAPITAL STOCK OF THE COMPANY
GENERAL
The authorized capital stock of the Company consists of 10,000,000 shares of
Common Stock, no par value per share, and 1,000,000 shares of preferred stock,
no par value per share (the "Preferred Stock"). The following summary
describes the material terms of the Company's capital stock. Reference is made
to the Articles of Incorporation of the Company, which is filed as an exhibit
to the Registration Statement of which this Prospectus forms a part, for a
detailed description of the provisions thereof summarized below.
COMMON STOCK
Holders of shares of the Common Stock are entitled to receive such dividends
as may from time to time be declared by the Board of Directors out of funds
legally available therefor. The Company does not plan to declare any dividends
in the foreseeable future. See "Dividend Policy." Holders of Common Stock are
entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote and do not have any cumulative voting rights.
Shareholders have no preemptive, conversion, redemption or sinking fund
rights. In the event of a liquidation, dissolution or winding-up of the
Company, holders of Common Stock are entitled to share equally and ratably in
the assets of the Company, if any, remaining after the payment of all debts
and liabilities of the Company and the liquidation preference of any
outstanding Preferred Stock. The outstanding shares of Common Stock are, and
the shares of Common Stock offered by the Company hereby when issued will be,
fully paid and nonassessable. The rights, preferences and privileges of
holders of Common Stock are subject to any classes or series of Preferred
Stock that the Company may issue in the future.
35
<PAGE>
There currently is no market for the shares and, although the Company has
filed a registration statement with the Commission to register the issuance of
the Common Stock in the offering under the Securities Act, it is not likely
that any trading market will develop for the shares in the future. There are
no present plans for the Common Stock to be traded on any stock exchange or in
the over-the-counter market.
PREFERRED STOCK
The Articles provide that the Board of Directors is authorized, without
further action by the holders of the Common Stock, to provide for the issuance
of shares of Preferred Stock in one or more classes or series and to fix the
designations, powers, preferences and relative, participating, optional and
other rights, qualifications, limitations and restrictions thereof, including
the dividend rate, conversion rights, voting rights, redemption price and
liquidation preference and to fix the number of shares to be included in any
such classes or series. Any Preferred Stock so issued may rank senior to the
Common Stock with respect to the payment of dividends or amounts upon
liquidation, dissolution or winding-up, or both. In addition, any such shares
of Preferred Stock may have class or series voting rights. Upon completion of
this offering, the Company will not have any shares of Preferred Stock
outstanding. Issuances of Preferred Stock, while providing the Company with
flexibility in connection with general corporate purposes, may, among other
things, have an adverse effect on the rights of holders of Common Stock, and
in certain circumstances such issuances could have the effect of decreasing
the market price of the Common Stock. The Company has no present plan to issue
any shares of Preferred Stock.
CERTAIN ANTI-TAKEOVER CONSIDERATIONS
The provisions of the Company's Articles of Incorporation and Bylaws and the
Corporation Code summarized in the following paragraphs may be deemed to have
anti-takeover effects and may delay, defer or prevent a tender offer or
takeover attempt that a shareholder might consider to be in such shareholder's
best interest, including those attempts that might result in a premium over
the market price for the shares held by shareholders, and may make removal of
management more difficult.
Authorized but Unissued Stock. The authorized but unissued shares of Common
Stock will be available for future issuance without shareholder approval.
These additional shares may be utilized for a variety of corporate purposes,
including future public offerings to raise additional capital, corporate
acquisitions and employee benefit plans. The existence of authorized but
unissued and unreserved Common Stock may enable the Company's Board of
Directors to issue shares to persons friendly to current management, which
could render more difficult or discourage any attempt to obtain control of the
Company by means of a proxy contest, tender offer, merger or otherwise, and
thereby protect the continuity of the Company's management.
Preferred Stock. The Company's Board of Directors will have the ability to
issue up to 1,000,000 shares of Preferred Stock, no par value per share, with
such preferences, limitations and relative rights as they may determine,
without obtaining shareholder approval. Any such shares of Preferred Stock may
have voting rights. The existence of this Preferred Stock may impede the
takeover of the Company without the approval of the Company's Board of
Directors by enabling the Company's Board of Directors to issue shares to
persons friendly to current management, which could render more difficult or
discourage any attempt to gain control of the Company through a proxy contest,
tender offer, merger or otherwise. In addition, the issuance of shares of
Preferred Stock with voting rights may have an adverse effect on the rights of
holders of Common Stock, and in certain circumstances such issuances of
Preferred Stock could decrease the market price of the Common Stock.
Georgia "Fair Price" and "Business Combination" Statutes. Pursuant to
Sections 9.6 and 9.7 of its Bylaws, the Company has elected to adopt Georgia's
"Fair Price" statute as set forth in Sections 14-2-1110 through 14-2-1113 of
the Corporation Code and the "Business Combination" statute as set forth in
Sections 14-2-1131 through 14-2-1133 of the Corporation Code. Subject to
certain exclusions summarized below, the Corporation Code requires that a
"Business Combination" with an "Interested Shareholder" shall be: (i)
unanimously approved by the continuing directors who must constitute at least
three members of the Board of Directors at the time of such approval; or (ii)
recommended by at least two-thirds of the continuing directors and approved by
a majority of the shareholders excluding the Interested Shareholder. In
addition, subject to certain exclusions summarized below, Section 14-2-1132 of
the Corporation Code prohibits any "interested shareholder" from engaging in a
"business combination" with a Georgia corporation for five years following the
date such person became an interested shareholder.
36
<PAGE>
An "interested shareholder" generally includes: any person who is the
beneficial owner of 10% or more of the voting power of the outstanding voting
shares of the corporation or any person who is an affiliate of the corporation
and who was the beneficial owner of 10% or more of the voting power of the
outstanding shares of the corporation at any time within two years before the
date on which such person's status as an interested shareholder is determined,
and the affiliates of such person. Subject to certain exceptions, a "business
combination" includes, among other things: (i) any merger, consolidation,
share exchange or any sale, transfer or other disposition (or series of
related sales or transfers) of assets of the Company having an aggregate book
value of 10% or more of the Company's net assets (measured as of the end of
the most recent fiscal quarter), with an interested shareholder of the Company
or any other corporation which is or, after giving effect to such business
combination, becomes an affiliate of any such interested shareholder; (ii) the
liquidation or dissolution of the Company; (iii) the receipt by an interested
shareholder of any benefit from any loan, advance, guarantee, pledge, tax
credit or other financial benefit from the Company, other than in the ordinary
course of business; and (iv) certain other transactions involving the issuance
or reclassification of securities of the Company which produce the result that
5% or more of the total equity shares of the Company, or of any class or
series thereof, is owned by an interested shareholder. An interested
shareholder may not receive a direct or indirect benefit, except
proportionately as a shareholder, or any loans, advances, guarantees, pledges
or other financial assistance or any tax credits or other tax advantages
provided by the corporation or its subsidiaries, either in anticipation of or
in connection with such business combination or otherwise.
Section 14-2-1132 does not apply to a business combination if: (i) before a
person became an interested shareholder, the board of directors of the
corporation approved either the transaction in which the interested
shareholder became an interested shareholder or the business combination; (ii)
upon consummation of the transaction that resulted in the person becoming an
interested shareholder, the interested shareholder owned at least 90% of the
voting stock of the corporation outstanding at the time the transaction
commenced (other than certain excluded shares); or (iii) following a
transaction in which the person became an interested shareholder, the business
combination is approved by the holders of a majority of the voting stock of
the corporation not owned by the interested shareholder and other excluded
shares.
Certain Nomination Requirements. Pursuant to Section 3.8 of its Bylaws, the
Company has established certain nomination requirements for an individual to
be elected as a director of the Company at any annual or special meeting of
the shareholders. Those requirements include, but are not limited to, the
requirement that the nominating shareholder provide the Company: (i) notice of
any proposed director within certain time frames; (ii) the name and certain
biographical information on the nominee; and (iii) the notice be accompanied
by a sworn or certified statement by the shareholder which indicates that the
nominee has consented to the nomination and that the shareholder believes that
the nominee will stand for election and will serve if elected. The chairman of
any meeting of the shareholders may, for good cause shown and with proper
regard for the orderly conduct of the meeting, waive in whole or in part the
operation of Section 3.8 of the Company's Bylaws. These provisions could
reduce the likelihood that a third party could nominate and elect individuals
to serve on the Company's Board of Directors.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, the Company will have a minimum of 665,000
and a maximum of 800,000 shares of Common Stock outstanding. The shares sold
in this offering will be freely tradable, without restriction or registration
under the Securities Act, except for shares purchased by "affiliates" of the
Company, which will be subject to resale restrictions under the Securities
Act. An affiliate of the issuer is defined in Rule 144 under the Securities
Act as a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by or is under common control with the
issuer. Rule 405 under the Securities Act defines the term "control" to mean
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the person whether through the
ownership of voting Securities, by contract or otherwise. Directors of the
Company and the Bank will likely be deemed to be affiliates. These Securities
held by affiliates may be sold without registration in accordance with the
provisions of Rule 144 or another exemption from registration.
37
<PAGE>
In general, under Rule 144, an affiliate of the Company or a person holding
restricted shares may sell, within any three-month period, a number of shares
no greater than 1% of the then outstanding shares of the Common Stock or the
average weekly trading volume of the Common Stock during the four calendar
weeks preceding the sale, whichever is greater. Rule 144 also requires that
the Securities must be sold in "brokers' transactions," as defined in the
Securities Act, and the person selling the Securities may not solicit orders
or make any payment in connection with the offer or sale of Securities to any
person other than the broker who executes the order to sell the Securities.
This requirement may make the sale of the Common Stock by affiliates of the
Company pursuant to Rule 144 difficult if no trading market develops in the
Common Stock. Rule 144 also requires persons holding restricted Securities to
hold the shares for at least two years prior to sale. The Commission has
proposed to reduce the two-year holding period of Rule 144 to one year.
However, no assurances can be given that such proposal will be adopted, or
will be adopted in the form proposed.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Alston & Bird, Atlanta, Georgia.
EXPERTS
The financial statements of the Company dated June 30, 1996, and for the
period from February 14, 1996 (inception), until June 30, 1996, have been
audited by Evans, Porter, Bryan & Co., independent certified public
accountants, as stated in their report appearing elsewhere herein, and have
been so included in reliance on the report of such firm given upon their
authority as an expert in accounting and auditing.
38
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Independent Accountant's Report.......................................... F-2
Financial Statements:
Balance Sheet as of June 30, 1996...................................... F-3
Statement of Operations for the Period of February 14, 1996 (Inception)
to June 30, 1996...................................................... F-4
Statement of Changes in Shareholders' Equity for the Period of February
14, 1996 (Inception) to June 30, 1996................................. F-5
Statement of Cash Flows for the Period of February 14, 1996 (Inception)
to June 30, 1996...................................................... F-6
Notes to Financial Statements.......................................... F-7-9
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors
Forsyth Bancshares, Inc.
We have audited the accompanying balance sheet of Forsyth Bancshares, Inc.
(a development stage corporation) as of June 30, 1996, and the related
statements of operations, changes in shareholder's equity and cash flows for
the period from February 14, 1996 (inception) to June 30, 1996. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides 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 Forsyth Bancshares, Inc.
as of June 30, 1996 and the results of its operations and its cash flows from
February 14, 1996 (inception) to June 30, 1996 in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Forsyth Bancshares, Inc. will continue as a going concern. As discussed in
note 1 to the financial statements, the Company is in the organization stage
and has not commenced operations. Also, as discussed in note 1, the Company's
future operations are dependent on obtaining capital through an initial stock
offering and obtaining the necessary regulatory approvals. These factors and
the expense associated with development of a new banking institution raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are described in note 8. The
financial statements do not include any adjustments relating to the
recoverability of reported asset amounts or the amounts of liabilities that
might result from the outcome of this uncertainty.
Evans, Porter, Bryan & Co.
Atlanta, Georgia
August 10, 1996
F-2
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
BALANCE SHEET
JUNE 30, 1996
<TABLE>
<S> <C>
ASSETS
Cash................................................................. $ 10,050
Due from organizers.................................................. 25,520
Organization costs................................................... 57,942
Deferred offering expenses........................................... 5,000
Other assets......................................................... 5,625
--------
$104,137
========
LIABILITIES AND SHAREHOLDER'S EQUITY
Due to organizers.................................................... $105,000
--------
Commitments and Contingencies
Shareholder's equity:
Preferred stock, no par value; 1,000,000 shares authorized; no
shares issued or outstanding...................................... --
Common stock, no par value; 10,000,000 shares authorized; 5 shares
issued and outstanding............................................ 50
Deficit accumulated during the development stage................... (913)
--------
Total shareholder's equity....................................... (863)
--------
$104,137
========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<S> <C>
Net loss, consisting of other operating expenses....................... $ 913
=======
Net loss per common share.............................................. $182.60
=======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CHANGES IN SHAREHOLDER'S EQUITY
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
DURING THE
PREFERRED COMMON DEVELOPMENT
STOCK STOCK STAGE TOTAL
--------- ------ ----------- -----
<S> <C> <C> <C> <C>
Proceeds from the sale of organizational
shares.................................... $-- 50 -- 50
Net loss................................... -- -- (913) (913)
---- --- ---- ----
Balance, June 30, 1996..................... $-- 50 (913) (863)
==== === ==== ====
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO JUNE 30, 1996
<TABLE>
<S> <C>
Cash flows from operating activities:
Net loss........................................................... $ (913)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Increase in other assets......................................... (5,625)
--------
Net cash provided by used activities........................... (6,538)
--------
Cash flows from investing activities:
Increase in due from organizers.................................. (25,520)
Organization costs................................................. (57,942)
Deferred offering expenses......................................... (5,000)
--------
Net cash used by investing activities.......................... (88,462)
--------
Cash flows from financing activities:
Increase in due to organizers.................................... 105,000
Proceeds from sale of organization shares............................ 50
--------
Net cash provided by financing activities...................... 105,050
--------
Net increase in cash and cash equivalents............................ 10,050
Cash at beginning of period.......................................... --
--------
Cash at end of period................................................ $ 10,050
========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
Forsyth Bancshares, Inc. (the "Company") was incorporated for the purpose of
becoming a bank holding company. The Company intends to acquire 100% of the
outstanding common stock of The Citizens Bank of Forsyth County (the "Bank"),
which will operate in the Cumming/Forsyth County area. The organizers of the
Bank have received preliminary regulatory approval to charter the Bank with
the Department of Banking and Finance and the Federal Deposit Insurance
Corporation. Provided that the application is approved timely and necessary
capital is raised, it is expected that the operations will commence on
December 1, 1996. The Company intends to file an application to become a bank
holding company with the Federal Reserve Bank of Atlanta.
Operations through June 30, 1996 relate primarily to expenditures by the
organizers for incorporating and organizing the Company. All expenditures by
the organizers are considered expenditures of the Company.
The Company plans to raise between $6,650,000 and $8,000,000 through an
offering of its common stock at $10 per share. The organizers expect to
subscribe for a minimum of approximately $1,405,000 of the Company's common
stock.
Upon chartering of the Bank and approval of the Company as a bank holding
company, the Company and its Bank subsidiary will assume certain obligations
from the organizers, including the lease obligation on the building and
certain organization costs and offering expenses. Upon the successful
completion of the sale of common stock, the organizers will be reimbursed from
the proceeds from the offering; if the offering is not successful, all of
these expenses will be absorbed by the organizers and will not become an
obligation of the Company.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Flows
For purposes of reporting cash flows, cash consists of amounts due from
banks.
Organization Costs
Costs incurred for the organization of the Company and the Bank (consisting
principally of legal, accounting, consulting and incorporation fees) are being
capitalized and will be amortized over five years. Amortization of the
organization costs will begin when banking operations commence.
Deferred Offering Expenses
Costs incurred in connection with the stock offering, consisting of direct,
incremental costs of the offering, are being deferred and will be offset
against the proceeds of the stock sale as a charge to the no par value common
stock.
Pre-Opening Expenses
Costs incurred for overhead and other operating expenses are included in the
current period's operating results.
Net Loss Per Common Share
Net loss per common share is calculated by dividing net loss by the weighted
average number of common shares outstanding during the period.
F-7
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(3) RELATED PARTY TRANSACTIONS
The organizers of the Company have set up a partnership, FCO Partners
("FCO"), which provides the Company with the necessary funds to operate and
carry on the business of organizing the Company and the bank. The organizers
have contributed a total of $105,000 to FCO as of June 30, 1996, which has
been reflected on the balance sheet as a liability of the Company. Additional
funds which have been contributed to FCO that are available for future Company
expenditures amounted to $25,520 as of June 30, 1996, and are reflected as an
asset of the Company. The amounts advanced are not callable by the organizers,
but are to be repaid from the proceeds of the stock offering. The Company will
have no continuing obligation under the contemplated arrangements should the
proceeds from the stock offering be insufficient to consummate formation of
the Company or the Bank or if all regulatory approvals required to commence
operations are not obtained.
(4) LINES OF CREDIT
On August 1, 1996, the Company executed a $650,000 line of credit agreement
with a bank to fund its organization, offering and pre-opening expenses. This
unsecured line of credit matures on August 1, 1997 and accrues interest which
is payable quarterly at the lender's prime interest rate. Each organizer has
guaranteed a pro rata portion of this line of credit.
(5) PREFERRED STOCK
Shares of preferred stock may be issued from time to time in one or more
series as may be established by resolution of the board of directors of the
Company. Each resolution shall include the number of shares issued,
preferences, dividend provisions, special rights and limitations as determined
by the board.
(6) INCOME TAXES
At June 30, 1996, the Company had a net operating loss carryforward for tax
purposes of approximately $900, which will expire in 2011 if not previously
utilized. No income tax expense or benefit was recorded for the period ended
June 30, 1996 due to this loss carry forward.
(7) COMMITMENTS
On February 9, 1996, the Company entered into an operating lease agreement
for a building which will serve as the main office of the Company and the
Bank, contingent upon the receipt of all required regulatory approvals. The
inception of the lease will be the earlier of the occupation of the facility
or receipt of final regulatory approval. The anticipated minimum lease
payments related to this lease are as follows:
<TABLE>
<CAPTION>
AMOUNT
-------
<S> <C>
Year 1........................................... $67,500
Year 2........................................... 69,525
Year 3........................................... 71,611
Year 4........................................... 73,759
</TABLE>
The lease will be canceled should the Company and the Bank not receive the
required regulatory approvals.
The proposed President has executed an employment agreement with the Company
which provides for an initial term of five years commencing June 28, 1996, and
can be extended by the Company each year so that the remaining term will
continue to be five years. The Company is to maintain a $1,000,000 key man
life insurance policy, with $600,000 payable to the Company and $400,000
payable to the proposed President's family. The agreement further provides for
other perquisits, and subjects the proposed President to certain non-compete
restrictions.
(8) LIQUIDITY AND GOING CONCERN CONSIDERATIONS
The Company incurred a net loss of $913 for the period February 14, 1996
(date of inception) through June 30, 1996. At June 30, 1996, liabilities
exceeded assets by $863.
F-8
<PAGE>
FORSYTH BANCSHARES, INC.
(A DEVELOPMENT STAGE CORPORATION)
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
At June 30, 1996, the Company had additional funds of approximately $25,000
available from the organizers partnership, FCO. Subsequent to June 30, 1996,
the company has obtained a line of credit for $650,000. Management believes,
considering funds available from FCO and under the line of credit, the Company
has adequate resources to meet existing obligations and fund current
operations, but obtaining regulatory approvals and commencing banking
operations is dependent on successfully completing the stock offering.
To provide permanent funding for its operation the Company is currently
offering a minimum of 665,000 and a maximum of 800,000 shares of its no par
value common stock at $10 per share in an initial public offering. Costs
related to the organization and registration of the Company's common stock
will be paid from the gross proceeds of the offering. Shares issued which are
outstanding at June 30, 1996 will be redeemed concurrently with the
consummation of the offering. Should subscriptions for the minimum offering
not be obtained, amounts paid by subscribers with their subscriptions will be
returned and the offer withdrawn.
F-9
<PAGE>
FORSYTH BANCSHARES, INC.
TO:
Forsyth Bancshares, Inc.
425 Tribble Gap Road
Cumming, Georgia 30130
(770) 886-9500
Ladies and Gentlemen:
You have informed me that Forsyth Bancshares, Inc., a Georgia corporation
(the "Company"), is offering up to 800,000 shares of its Common Stock, no par
value per share (the "Common Stock"), at a price of $10.00 per share payable
as provided herein and as described in and offered pursuant to the Prospectus
furnished with this Subscription Agreement to the undersigned (the
"Prospectus").
1. SUBSCRIPTION. Subject to the terms and conditions hereof, the
undersigned hereby tenders this subscription, together with payment in
United States currency by check, bank draft or money order payable to "The
Bankers Bank, Atlanta, Georgia, as Escrow Agent for Forsyth Bancshares,
Inc." the amount indicated below (the "Funds"), representing the payment of
$10.00 per share for the number of shares of Common Stock indicated below.
The total subscription price must be paid at the time the Subscription
Agreement is executed.
2. ACCEPTANCE OF SUBSCRIPTION. It is understood and agreed that the
Company shall have the right to accept or reject this subscription in whole
or in part, for any reason whatsoever. The Company may reduce the number of
shares for which the undersigned has subscribed, indicating acceptance of
less than all of the shares subscribed on its written form of acceptance.
3. ACKNOWLEDGMENTS. The undersigned hereby acknowledges that he or she
has received a copy of the Prospectus. This Subscription Agreement creates
a legally binding obligation and the undersigned agrees to be bound by the
terms of this Agreement.
4. REVOCATION. The undersigned agrees that once this Subscription
Agreement is tendered to the Company, it may not be withdrawn and that this
Agreement shall survive the death or disability of the undersigned.
BY EXECUTING THIS AGREEMENT, THE SUBSCRIBER IS NOT WAIVING ANY RIGHTS HE OR
SHE MAY HAVE UNDER FEDERAL SECURITIES LAWS, INCLUDING THE SECURITIES ACT OF
1933 AND THE SECURITIES EXCHANGE ACT OF 1934.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS OR SAVINGS
DEPOSITS ACCOUNTS AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
A-1
<PAGE>
Please indicate in the space provided below the exact name or names and
address in which the stock certificate representing shares subscribed for
hereunder should be registered.
- ------------------------------- --------------------------------------------
Number of Shares Subscribed Name or Names of Subscribers (Please
for (minimum 200 shares) Print)
$
---------------------------- --------------------------------------------
Total Subscription Price at Please indicate form of ownership desired
$10.00 per share (funds must be (individual,
enclosed) joint tenants with right of survivorship,
tenants in
common, trust corporation, partnership,
custodian, etc.)
Date: (L.S.)
------------------------- -------------------------------------
Signature of Subscriber(s)*
(L.S.)
- ------------------------------- -------------------------------------
Social Security Number or Federal Signature of Subscriber(s)*
Taxpayer Identification Number
Street (Residence) Address:
- -------------------------------
--------------------------------------------
- -------------------------------
--------------------------------------------
- -------------------------------
--------------------------------------------
City, State and Zip Code
When signing as attorney, trustee, administrator or guardian, please give
your full title as such. If a corporation, please sign in full corporate name
by president or other authorized officer. In the case of joint tenants or
tenants in common, each owner must sign.
FEDERAL INCOME TAX BACKUP WITHHOLDING
In order to prevent the application of federal income tax backup
withholding, each subscriber must provide the Escrow Agent with a correct
Taxpayer Identification Number ("TIN"). An individual's social Security number
is his or her TIN. The TIN should be provided in the space provided in the
Substitute Form W-9, which is set forth below.
Under federal income tax law, any person who is required to furnish his or
her correct TIN to another person, and who fails to comply with such
requirements, may be subject to a $50 penalty imposed by the IRS.
Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If backup withholding results in an overpayment of taxes, a refund
may be obtained from the IRS. Certain taxpayers, including all corporations,
are not subject to these backup withholding and reporting requirements.
A-2
<PAGE>
If the shareholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future, "Applied For" should be written
in the space provided for the TIN on the Substitute Form W-9.
SUBSTITUTE FORM W-9
Under penalties of perjury, I certify that: (i) the number shown on this
form is my correct Taxpayer Identification Number (or I am waiting for a
Taxpayer Identification Number to be issued to me), and (ii) I am not subject
to backup withholding because: (a) I am exempt from backup withholding; or (b)
I have not been notified by the Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of a failure to report all interest
or dividends; or (c) the IRS has notified me that I am no longer subject to
backup withholding.
You must cross out item (ii) above if you have been notified by the IRS that
you are subject to backup withholding because of under reporting interest or
dividends on your tax return. However, if after being notified by the IRS that
you were subject to backup withholding you received another notification from
the IRS that you are not longer subject to backup withholding, do not cross
out item (ii).
Each subscriber should complete this Section.
- ------------------------------------- -------------------------------------
Signature of Subscriber Signature of Subscriber
- ------------------------------------- -------------------------------------
Printed Name Printed Name
- ------------------------------------- -------------------------------------
Social Security or Employer Social Security or Employer
Identification No. Identification No.
TO BE COMPLETED BY THE COMPANY:
Accepted as of , 199 , as to shares.
FORSYTH BANCSHARES, INC.
By:
----------------------------------
A-3
<PAGE>
===============================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS IN CONNECTION WITH THE OFFER MADE HEREBY. IF GIVEN OR MADE, SUCH IN-
FORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHO-
RIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HERE-
UNDER AT ANY TIME SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT
THE INFORMATION HEREIN IS CORRECT AT ANY TIME AFTER THE DATE HEREOF.
---------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Reports to Shareholders.......................................... Inside Cover
Additional Information........................................... Inside Cover
Summary.......................................................................3
Risk Factors..................................................................7
The Company and The Bank.....................................................10
The Offering.................................................................12
Use of Proceeds..............................................................14
Capitalization...............................................................16
Selected Financial Data......................................................17
Dividend Policy..............................................................17
Proposed Business............................................................18
Management's Discussion and
Analysis of Financial Condition
and Results of Operations...................................................23
Supervision and Regulation...................................................24
Management...................................................................31
Description of Capital Stock of the
Company.....................................................................35
Legal Matters................................................................38
Experts......................................................................38
Financial Statements........................................................ F-1
Subscription Agreement...................................................... A-1
</TABLE>
---------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECU-
RITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DE-
LIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UN-
SOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
800,000 SHARES
FORSYTH BANCSHARES, INC.
A HOLDING COMPANY FOR
THE CITIZENS BANK OF FORSYTH COUNTY
COMMON STOCK
---------------
PROSPECTUS
---------------
October, 1996
===============================================================================
<PAGE>
PART II
INDEMNIFICATION OF DIRECTORS AND OFFICERS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting Commissions) of the sale of the
shares of Common Stock are as follows:
<TABLE>
<S> <C>
Registration Fee................................................... $ 2,759
Blue Sky Fees and Expenses......................................... 250
Printing and Engraving............................................. 20,000
Legal Fees, Accounting Fees and Miscellaneous Expenses............. 76,991
--------
Total.......................................................... $100,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Articles of Incorporation of the Company contain a conditional provision
which, subject to certain exceptions described below, eliminates the liability
of a director to the Company or its shareholders for monetary damages for
breach of the duty of care or any other duty as a director. This provision
does not eliminate such liability to the extent the director engaged in
willful misconduct or a knowing violation of criminal law or of any federal or
state Securities law, including, without limitation, laws proscribing insider
trading or manipulation of the market for any security.
The Bylaws of the Company require the Company to indemnify any person who
was, is or is threatened to be made a named defendant or respondent in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of service by such person
as a director of the Company or the Bank or any other corporation which he
served as such at the request of the Company. Except as noted in the next
paragraph, directors are entitled to be indemnified against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by the
director in connection with the proceeding. Directors are also entitled to
have the Company advance any such expenses prior to final disposition of the
proceeding, upon delivery of a written affirmation by the director of his good
faith belief that the standard of conduct necessary for indemnification has
been met and a written undertaking to repay the amounts advanced if it is
ultimately determined that the standard of conduct has not been met.
Under the Bylaws, indemnification will be disallowed if it is established
that the director: (i) appropriated, in violation of his duties, any business
opportunity of the Company; (ii) engaged in willful misconduct or a knowing
violation of law; (iii) permitted any unlawful distribution; or (iv) derived
an improper personal benefit. In addition to the Bylaws of the Company,
Section 14-2-852 of the Corporation Code provides for mandatory
indemnification by the Company "to the extent that a director has been
successful, on the merits or otherwise, in the defense of any proceeding to
which he was a party, or in defense of any claim, issue, or matter therein,
because he is or was a director of the Company." The Corporation Code also
provides that upon application of a director a court may order indemnification
if it determines that the director is entitled to such indemnification under
the applicable legal standard.
The Board of Directors also has the authority to extend to officers,
employees and agents the same indemnification rights held by directors,
subject to all of the accompanying conditions and obligations. The Board of
Directors has extended or intends to extend indemnification rights to all of
its executive officers.
The Company has the power to purchase and maintain insurance on behalf of
any person who is or was a director, officer, employee or agent of the Company
against any liability asserted against him or incurred by him in any such
capacity, whether or not the Company would have the power to indemnify him
against such liability under the bylaws.
II-1
<PAGE>
ITEM 15. EXHIBITS.
<TABLE>
<C> <S>
3.1. Articles of Incorporation.+
3.2. Bylaws.+
4.1. Specimen Stock Certificate.
5.1. Opinion of Alston & Bird, counsel to the Company, as to the legality
of the shares being registered.
10.1. Sublease Agreement by and among the Company, the Bank and
NationsBank, N.A. (South) dated February 9, 1996.+
10.2 First Amendment to Sublease Agreement by and among the Company, the
Bank and NationsBank, N.A. (South) dated February 16, 1996.+
10.3 Second Amendment to Sublease Agreement by and among the Company, the
Bank and NationsBank, N.A. (South) dated May 10, 1996.+
10.4. Form of Escrow Agreement to be entered into by and between the
Company and The Bankers Bank, Atlanta, Georgia.+
10.5. Employment Agreement by and between the Company and David H. Denton
dated June 28, 1996.+
10.6. Line of Credit Note by the Company to The Bankers Bank, Atlanta,
Georgia dated August 1, 1996.+
23.1. Consent of Evans, Porter, Bryan & Co.
23.2. Consent of Alston & Bird (included as part of Exhibit 5.1).
24.1. Power of Attorney (contained on the signature page of this filing).+
</TABLE>
- --------
+ Previously filed with the Company's Registration Statement on Form S-1 (333-
10909) filed August 27, 1996.
ITEM 16. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
(the "Act") may be permitted to directors, officers and controlling persons of
the Company pursuant to the provisions described in Item 14 above or
otherwise, the Company has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the Securities
being registered, the Company will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned Company hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of Securities offered (if the total
dollar value of Securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the
II-2
<PAGE>
form of prospectus filed with the Commission pursuant to Rule 424(b)
if, in the aggregate, the changes in volume and price represent no more
than a 20 percent change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the Securities offered therein, and
the offering of such Securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the Securities being registered which remain unsold at the
termination of the offering.
II-3
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
CUMMING, STATE OF GEORGIA, ON OCTOBER 15, 1996.
Forsyth Bancshares, Inc.
/s/ David H. Denton
By: _________________________________
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING IN THE CAPACITIES AND
ON THE DATES INDICATED.
SIGNATURE TITLE DATE
Director
* October 15,
- ------------------------------------- 1996
CATHERINE M. AMOS
Director and Vice
* Chairman of the October 15,
- ------------------------------------- Board 1996
JEFFREY S. BAGLEY
Director
* October 15,
- ------------------------------------- 1996
BILL H. BARNETT
Director
* October 15,
- ------------------------------------- 1996
DANNY M. BENNETT
Director
* October 15,
- ------------------------------------- 1996
MICHAEL P. BENNETT
Director
* October 15,
- ------------------------------------- 1996
BRYAN L. BETTIS
Director
* October 15,
- ------------------------------------- 1996
TALMADGE W. BOLTON
II-4
<PAGE>
Director
* October 15,
- ------------------------------------- 1996
THOMAS L. BOWER III
Director
* October 15,
- ------------------------------------- 1996
CHARLES R. CASTLEBERRY
/s/ David H. Denton President, Chief
- ------------------------------------- Executive Officer October 15,
DAVID H. DENTON and Director 1996
Director and
* Secretary October 15,
- ------------------------------------- 1996
CHARLES D. INGRAM
Director
* October 15,
- ------------------------------------- 1996
HERBERT A. LANG, JR.
Director
* October 15,
- ------------------------------------- 1996
JOHN P. MCGRUDER
Chief Financial
* Officer (Principal October 15,
- ------------------------------------- Financial and 1996
VICKI D. MELTON Accounting Officer)
Director and
* Chairman of the October 15,
- ------------------------------------- Board 1996
JAMES J. MYERS
Director
* October 15,
- ------------------------------------- 1996
DANNY L. REID
Director
* October 15,
- ------------------------------------- 1996
CHARLES R. SMITH
Director
* October 15,
- ------------------------------------- 1996
WYATT L. WILLINGHAM
Director
* October 15,
- ------------------------------------- 1996
JERRY M. WOOD
*By: /s/ David H. Denton
---------------------------------
DAVID H. DENTON, ATTORNEY-IN-FACT
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
3.1. Articles of Incorporation+........................................
3.2. Bylaws+...........................................................
4.1. Specimen Stock Certificate........................................
5.1. Opinion of Alston & Bird, counsel to the Company, as to the
legality of the shares being registered..........................
10.1. Sublease Agreement by and among the Company, the Bank and
NationsBank, N.A. (South) dated February 9, 1996+................
10.2 First Amendment to Sublease Agreement by and among the Company,
the Bank and NationsBank, N.A. (South) dated February 16, 1996+..
10.3 Second Amendment to Sublease Agreement by and among the Company,
the Bank and NationsBank, N.A. (South) dated May 10, 1996+.......
10.4. Form of Escrow Agreement to be entered into by and between the
Company and The Bankers Bank, Atlanta, Georgia+..................
10.5. Employment Agreement by and between the Company and David H.
Denton dated June 28, 1996+......................................
10.6. Line of Credit Note by the Company to The Bankers Bank, Atlanta,
Georgia dated August 1, 1996+....................................
23.1. Consent of Evans, Porter, Bryan & Co. ............................
23.2. Consent of Alston & Bird (included as part of Exhibit 5.1)........
24.1. Power of Attorney (contained on the signature page of this
filing)+.........................................................
</TABLE>
- --------
+ Previously filed with the Company's Registration Statement on Form S-1 (333-
10909) filed August 27, 1996.
<PAGE>
NUMBER SHARES
FORSYTH BANCSHARES, INC.
Authorized To Issue 10,000,000 Shares of Common Stock - No Par Value
THIS CERTIFIES THAT SPECIMEN is the
----------------------------------------------
registered holder of Shares
------------------------------------------------
of the authorized common stock of Forsyth Bancshares, Inc. which are fully paid
and non-assessable and which are transferable only on the books of the
Corporation by the holder hereof in person or by Attorney upon surrender of this
Certificate properly endorsed.
IN WITNESS WHEREOF, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and its Corporate Seal to be hereunto
affixed this day of A.D., 19
------- ----------------- ---
- ------------------- -------------------
Secretary President
<PAGE>
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 thought 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 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,
--------------------------
--------------------------------------------
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>
EXHIBIT 5.1
[Letterhead of Alston & Bird Appears Here]
October 11, 1996
Forsyth Bancshares, Inc.
P.O. Box 2820
Cumming, Georgia 30128
Ladies and Gentlemen:
This opinion is given in connection with the filing of a Registration
Statement on Form S-1 (the "Registration Statement") with the Securities and
Exchange Commission, by Forsyth Bancshares, Inc., a corporation organized and
existing under the laws of the State of Georgia (the "Company"), with respect to
the registration under the Securities Act of 1933, as amended, of up to 800,000
shares of the Company's no par value common stock (the "Common Stock").
As counsel for the Company in connection with the sale of the Common Stock,
we have examined such corporate records and documents as we have deemed relevant
and necessary as the basis for the opinion set forth herein. We are familiar
with or have reviewed the actions taken by the Company in connection with the
authorization, registration, issuance and sale of the Common Stock.
In conducting our examination, we have assumed the genuineness of all
signatures, the legal capacity of all natural persons, the authenticity of all
documents submitted to us as originals, the conformity to original documents of
all documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such documents.
Based upon the foregoing, it is our opinion that the shares of Common Stock
covered by the Registration Statement have been duly authorized and, the Shares
when issued and sold to the public, will be validly issued, fully paid and non-
assessable by the Company under the General Corporation Law of the State of
Georgia as in effect on the date hereof.
<PAGE>
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the reference made to our firm under the caption "Legal
Matters" in the Prospectus constituting part of the Registration Statement.
ALSTON & BIRD
By: /s/ Jeffrey A. Allred
----------------------------------
Jeffrey A. Allred, Esq., A Partner
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITOR
We have issued our report dated August 10, 1996, accompanying the financial
statements of Forsyth Bancshares, Inc. contained in the Form S-1 Registration
Statement and Prospectus. We consent to the use of the aforementioned report in
the Registration Statement and Prospectus, and to the use of our name as it
appears under the caption "Experts".
/s/ Evans, Porter, Bryan & Co.
Atlanta, Georgia
October 11, 1996
