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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended December 31, 1996
Commission file number: 333-10909
FORSYTH BANCSHARES, INC.
(Exact name of registrant as specified in its charter)
Georgia 58-2231953
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
501 Tri-County Plaza, Highways 9 and 20, Cumming, Georgia 30130
(address of principal executive office)
(Registrant's telephone number, including area code): (770) 886-9500
Securities registered pursuant to Section 12(b) of the Act:
None None
(Title of each class) (Name of each exchange on which
registered)
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K ((S)229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant, based upon the sale price of common stock on March 1, 1997, was
approximately $6,307,500.
As of March 1, 1997, there were 800,000 shares of the registrant's common stock
outstanding.
List hereunder the documents incorporated by reference and the part of the Form
10-K (e.g., part I. Part II, etc.) into which the document is incorporated:
None.
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INDEX
PART I PAGE
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Item 1. Business............................................................................... 1
Item 2. Properties............................................................................. 12
Item 3. Legal Proceedings...................................................................... 12
Item 4. Submission of Matters to a Vote of Security Holders.................................... 12
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.................. 12
Item 6. Selected Financial Data................................................................ 13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.. 14
Item 8. Financial Statements and Supplementary Data............................................ 16
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 25
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 25
Item 11. Executive Compensation................................................................ 28
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 29
Item 13. Certain Relationships and Related Transactions........................................ 29
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K...................... 31
Signatures..................................................................................... 33
Exhibits....................................................................................... 35
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PART I
ITEM 1. BUSINESS
GENERAL
Forsyth Bancshares, Inc. (the "Company") was incorporated as a Georgia
corporation on February 14, 1996, primarily to own and control all of the
capital stock of The Citizens Bank of Forsyth County (the "Bank"). The Company
initially engages in no business other than owning and managing the Bank.
The Bank received final regulatory approval on January 30, 1997 from
Department of Banking and Finance of the State of Georgia (the "DBF") and the
Federal Deposit Insurance Corporation (the "FDIC") to begin business on February
3, 1997. The Company received final approval to acquire the capital stock of
the Bank from the DBF on October 15, 1996 and from the Federal Reserve Bank of
Atlanta (the "Federal Reserve"), as delegate of the Board of Governors of the
Federal Reserve System (the "Federal Reserve Board") on November 25, 1996. The
Bank commenced operations on February 3, 1997 as a commercial bank engaging 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
"Forsyth County Area").
The organizers of the Company and the Bank (the "Organizers") chose a
holding company structure under which the Company acquired all of the capital
stock of the Bank because, in the judgment of management, 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.
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, management believes that there is a void in the community
banking market in the Forsyth County Area and 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. Management, as long-time residents and business
people in the Forsyth County Area, has determined the credit needs of the area
through personal experience and communications with their business colleagues.
Management believes that the proposed community bank focus of the Bank is likely
to succeed in this market. Management believes 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.
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LOCATION AND SERVICE AREA
The Bank is 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 and telephone
number of both the Company and the Bank are located at 501 Tri-County Plaza,
Highways 9 and 20, Cumming, Georgia 30130, (770) 886-9500.
The Bank's primary service area is 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 offers 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 offers certain retirement account
services, such as Individual Retirement Accounts ("IRAs"). All deposit accounts
are insured by the FDIC up to the maximum amount allowed by law (generally,
$100,000 per depositor, subject to aggregation rules). The Bank solicits 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 emphasizes 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
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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. Management expects 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 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". 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
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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 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 has established 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 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
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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.
Management believes 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.
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
General Because it owns the outstanding capital stock of the Bank,
the Company is 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 is 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 Securities Exchange
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Act of 1934, as amended (the "Exchange Act") (which the Company would likely be
required to do with respect to the Company's common stock, no par value per
share (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.
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 non-banking 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 non-bank subsidiary (other than a non-bank 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 non-bank 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
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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
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. The Bank will operate as a state-chartered non-member 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 non-member 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
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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
$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 non-affiliated 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
- 8 -
<PAGE>
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. Recently, 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.
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 stockholders' equity, qualifying perpetual preferred stock and
minority interests
- 9 -
<PAGE>
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 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, management expects
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-
- 10 -
<PAGE>
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 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,
- 11 -
<PAGE>
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.
EMPLOYEES
The Bank had five full-time employees at December 31, 1996 and 12
full-time employees upon commencement of operations on February 3, 1997. 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.
ITEM 2. PROPERTIES
The site of the Bank's principal facility is 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 Company has completed 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. The Company believes that the
facilities will adequately serve the Bank's needs for its first several years of
operation.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Company or the
Bank or any of their properties are subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
There is currently no market for the shares of Common Stock and it is
not likely that an active trading market will develop for the shares in the
future. There are no present plans for the Company's Common Stock to be traded
on any stock exchange or over-the-counter market. As a result, investors who
need or wish to dispose of all or part of their shares may be unable to do so
except in private, directly negotiated sales.
- 12 -
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following selected financial data for the Company for the period
from February 14, 1996 (inception) until December 31, 1996, is derived from the
financial statements and other data of the Company.
<TABLE>
<CAPTION>
AS OF AND FOR THE
PERIOD ENDED
DECEMBER 31, 1996
INCOME STATEMENT DATA: -----------------
<S> <C>
Interest income on restricted cash........... $ 28,939
Salaries and employee benefits............... 133,129
Interest..................................... 10,751
Rent......................................... 38,950
Other operating expenses..................... 24,479
Net loss..................................... (178,370)
BALANCE SHEET DATA:
Cash......................................... $ 38,993
Restricted cash.............................. 5,986,074
Premises and equipment....................... 303,405
Organization costs........................... 71,288
Deferred offering expenses................... 20,469
Other assets................................. 14,298
Accrued expenses............................. 11,773
Subscribers' deposits........................ 5,986,074
Note payable - line of credit................ 615,000
Deficit accumulated during the............... (178,370)
development stage Stockholder's deficit...... (178,320)
WEIGHTED AVERAGE SHARES OUTSTANDING............. 800,000
PER SHARE DATA:
Net loss..................................... $ (178,370)
Stockholder's deficit per share.............. $ (0.22)
</TABLE>
- 13 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company was organized on February 14, 1996 (the "Inception").
Since the Inception, the Company's principal activities have been related to its
organization, the conducting of its initial public offering, the pursuit of
approvals from the DBF and the FDIC of its application to charter the Bank, and
the pursuit of approvals from the Federal Reserve Board for the Company to
acquire control of the Bank.
At December 31, 1996, the Company had total assets of $6,434,527.
These assets consisted principally of restricted cash from stock subscriptions
of $5,986,074, premises and equipment of $303,405, organization costs of
$71,288, cash of $38,993 and other deferred charges. Premises and equipment
consists primarily of modifications for the Bank's main office site, for which
the Company plans to spend a total of approximately $415,000 in improvements to
the current structure. The organization costs relate to the organization of the
Company and the Bank and have been capitalized and will be amortized over five
years.
The Company's liabilities at December 31, 1996 were $6,612,847, and
consisted primarily of subscribers' deposits of $5,986,074, advances under a
line of credit from a bank of $615,000 and other accrued expenses. The
Company's line of credit with The Bankers Bank is in the amount of $650,000, and
the balance of $35,000 is available to fund future organization expenses and
improvements to be made to the building prior to breaking escrow on the
subscribers' deposits. The Company had a stockholder's deficit of $178,320 at
December 31, 1996.
The Company had a net loss of $178,3 70, from February 14, 1996
(Inception) through December 31, 1996, or a pro forma net loss of $0.22 per
share (assuming the sale of the 800,000 shares in the offering were outstanding
during the entire period). This loss resulted from expenses incurred in
connection with activities related to the organization of the Company and the
Bank. These activities included (without limitation) the preparation and filing
of an application with the DBF and the FDIC to charter the Bank, the preparation
of an application with the Federal Reserve Board for approval of the Company to
acquire the Bank, responding to questions and providing additional information
to the DBF, the FDIC and the Federal Reserve Board in connection with the
application process, a Prospectus and filing a Registration Statement with the
Securities and Exchange Commission (the "Commission") and the preparation of a
Prospectus, the selling of the Common Stock, meetings and discussions among
various organizers regarding application and Commission filing information,
target markets and capitalization issues, hiring qualified personnel to work for
the Bank, conducting public relation 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 was
in the organization stage, it had no operations from which to generate revenues
other than the interest earned on the escrowed deposits.
$6,500,000 of the net proceeds of the Company's initial public
offering were used to capitalize the Bank, and the remainder was used to pay
organization expenses of the Company and provide working capital, including
additional capital for investment in the Bank, if needed. The Company believes
this amount will be sufficient to fund the activities of the Bank in its initial
stages of operations, and that the Bank will generate sufficient income from
operations to fund its activities on an ongoing basis. The Bank opened for
business as a commercial bank to serve the Forsyth County Area on February 3,
1997. 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; however,
there can be no assurance that either the Bank or the Company will achieve any
particular level of profitability.
- 14 -
<PAGE>
FORWARD-LOOKING STATEMENTS
The Company may from time to time make written or oral forward-looking
statements, including statements contained in the Company's fillings with the
Commission. Statements made in this Annual Report on Form 10-K (the "Annual
Report"), other than those concerning historical information, should be
considered forward-looking and subject to various risks and uncertainties. Such
forward-looking statements are made based on management's belief as of the date
thereof as well as assumptions made by, and information currently available to,
management pursuant to "safe harbor" provisions of the Private Securities
Litigation Reform Act of 1995. The Company's actual results may differ
materially from the results anticipated in these forward-looking statements due
to a variety of factors, including, without limitation, risk associated with
those items set forth under the caption "Risk Factors" on pages 7 through 10 of
the Company's Prospectus dated November 5, 1996 as well as the effects of future
economic conditions; governmental monetary and fiscal policies on deposit
levels, loan demand, loan management, loan collateral values, securities
portfolio values and interest rate risk management; the effects of competition
in the banking business 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 Company's market area and
elsewhere, including institutions operating locally, regionally, nationally and
internationally, including firms with offerings by mail, telephone, computer and
the Internet; changes in government regulation relating to the banking industry,
including regulations relating to branching and acquisitions, failure of
assumptions underlying the establishment of reserves for possible loan losses,
including the value of collateral underlying delinquent loans. The Company
cautions that such factors are not exclusive. The Company does not undertake to
update any forward-looking statement that may be made from time to time by, or
on behalf of, the Company.
- 15 -
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
FORSYTH BANCSHARES, INC. PAGE
----
<S> <C>
Report of Independent Certified Public Accountants...................... 17
Balance Sheet as of December 31, 1996.................................... 18
Statements of Operations for the Period from February 14, 1996
(inception) to December 31, 1996........................................ 19
Statement of Changes in Stockholder's Equity for the Period from
February 14, 1996 (inception) to December 31, 1996...................... 20
Statement of Cash Flows for the Period from February 14, 1996
(inception) to December 31, 1996........................................ 21
Notes to Financial Statements............................................ 22
</TABLE>
- 16 -
<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. as of December 31, 1996, and the related statements of operations, changes
in stockholder's equity and cash flows for the period from February 14, 1996
(inception) to December 31, 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 December 31, 1996 and the results of its operations and its cash
flows from February 14, 1996 (inception) to December 31, 1996 in conformity with
generally accepted accounting principles.
PORTER KEADLE MOORE, LLP
/s/ Porter Keadle Moore, LLP
Successor to the practice of
Evans, Porter, Bryan & Co.
Atlanta, Georgia
March 17, 1997
- 17 -
<PAGE>
FORSYTH BANCSHARES, INC.
BALANCE SHEET
DECEMBER 31, 1996
ASSETS
------
<TABLE>
<CAPTION>
<S> <C>
Cash........................................................ $ 38,993
Restricted cash............................................. 5,986,074
Premises and equipment...................................... 303,405
Organization costs.......................................... 71,288
Deferred offering expenses.................................. 20,469
Other assets................................................ 14,298
----------
$6,434,527
==========
LIABILITIES AND STOCKHOLDER'S EQUITY
------------------------------------
Accrued expenses.......................................... $ 11,773
Subscribers' deposits..................................... 5,986,074
Note payable - line of credit............................. 615,000
Total liabilities....................... 6,612,847
Commitments
Stockholder's equity:
Preferred stock, no par value; 1,000,000 shares
authorized; no shares issued and outstanding........... --
Common Stock, no par value; 10,000,000 shares
authorized; 5 shares issued and outstanding............ 50
Deficit accumulated during the development stage........ (178,370)
Total stockholder's equity.............................. (178,320)
----------
$6,434,527
==========
</TABLE>
See accompanying notes to financial statements.
- 18 -
<PAGE>
FORSYTH BANCSHARES, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C>
Interest income on restricted cash...... $ 28,939
Expenses:
Salaries and employee benefits........ 133,129
Interest.............................. 10,751
Rent.................................. 38,950
Other operating....................... 24,479
---------
Total expenses.................... 207,309
---------
Net loss.......................... $(178,370)
=========
Pro forma net loss per share...... $ (0.22)
=========
</TABLE>
See accompanying notes to financial statements.
- 19 -
<PAGE>
FORSYTH BANCSHARES, INC.
STATEMENT OF CHANGES IN STOCKHOLDER'S EQUITY
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Proceeds from the sale of organization $50 -- 50
shares
Net loss -- (178,370) (178,320)
--- --------- ---------
Balance, December 31, 1996 $50 (178,370) (178,320)
=== ========= =========
</TABLE>
See accompanying notes to financial statements.
- 20 -
<PAGE>
FORSYTH BANCSHARES, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM FEBRUARY 14, 1996 (INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss............................................... $(178,370)
Adjustments to reconcile net loss to net cash used
in operating activities:
Interest income received on restricted cash............ (28,939)
Increase in other assets............................... (14,298)
Increase in other liabilities.......................... 11,773
---------
Net cash used in operating activities........... (209,834)
=========
Cash flows from investing activities:
Purchases from premises and eqipment................... (303,405)
Organization costs..................................... (71,288)
Payments for stock offering expenses................... (20,469)
---------
Net cash used in investing activities.................. (395,162)
=========
Cash flows from financing activities:
Proceeds from note payable............................. 615,000
Proceeds from the sale of organization shares.......... 50
---------
Net cash provided by financing activities....... 615,050
=========
Net increase in cash and cash equivalents....... 10,054
Cash and cash equivalents at beginning of period.......... --
---------
Cash and cash equivalents at end of period................ $ 10,054
=========
Supplemental cash flow information:
Cash paid for interest................................. $ 3,978
During the period ended December 31, 1996 restricted cash
increased $5,986,074 as a result of subscriptions
for Common Stock and corresponding deposits to the
escrow account.
</TABLE>
See accompanying notes to financial statements.
- 21 -
<PAGE>
FORSYTH BANCSHARES, INC.
NOTES TO FINANCIAL STATEMENTS
(1) ORGANIZATION
------------
Forsyth Bancshares, Inc. (the "Company") was incorporated for the purpose
of becoming a bank holding company. The Company, which is subject to
regulation by the Federal Reserve Bank, conducts its business through its
wholly-owned bank subsidiary, The Citizens Bank of Forsyth County (the
"Bank"), which will operate initially in the Cumming/Forsyth County,
Georgia area.
The Company raised $8,000,000 through an offering of its no par value
common stock (the "Common Stock") at $10 per share, of which $6,500,000 was
used to initially capitalize the Bank. The organizers subscribed for
approximately $1,405,000 of the Company's stock.
Operations through December 31, 1996 relate primarily to expenditures for
incorporating and organizing the Company, including raising capital and
securing banking facilities. The Company was reported on as a development
stage entity as of June 30, 1996.
On February 3, 1997, the Bank opened for business to serve the
Cumming/Forsyth County, Georgia area as a commercial bank. The Bank is
chartered and regulated by the Department of Banking and Finance of the
State of Georgia and is insured by and subject to regulation by the Federal
Deposit Insurance Corporation.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
CASH FLOWS
For purposes of reporting cash flows, cash consists of amounts due from
banks that are not restricted as to their use.
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 amortized over five years, beginning when banking
operations commenced.
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 additional paid in
capital.
PRE-OPENING EXPENSES
Costs incurred for overhead and other operating expenses are included in
the current period's operating results.
PRO FORMA NET LOSS PER COMMON SHARE
Pro forma net loss per common share is calculated by dividing net loss by
the 800,000 shares of Common Stock which were successfully sold in the
initial public offering, as prescribed in Staff Accounting Bulletin Topic
1:B.
- 22 -
<PAGE>
(3) RESTRICTED CASH
---------------
At December 31, 1996, subscribers' deposits of $5,986,074 were held in
escrow. The escrow agreement prohibits the release of funds until
subscriptions for at least 665,000 shares, or $6,650,000, have been
received, the Company has obtained regulatory approval to acquire the stock
of the Bank and thereafter become a bank holding company, and the Bank has
received preliminary approval for its application for a charter from the
regulatory authorities. These conditions were satisfied in February 1997.
(4) LINE OF CREDIT
--------------
Organization, offering and pre-opening costs incurred prior to the opening
for business were funded under a $650,000 line of credit with a bank. The
terms of the existing line of credit, which is guaranteed by the
organizers, include a maturity of August 1, 1997 and interest which is
payable quarterly calculated at the prime interest rate.
(5) PREFERRED STOCK
---------------
Shares of preferred stock may be issued from time to time in one or more
series as established by resolution of the Board of Directors of the
Company up to a maximum of 1,000,000 shares. Each resolution shall include
the number of shares issued, preferences, special rights and limitations as
determined by the Board.
(6) COMMITMENTS
-----------
On February 9, 1996 the Company entered into an operating lease agreement
through August 31, 2000 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. Based on the Company's occupation of this building
on July 1, 1996 (which is deemed the inception of the lease), the
anticipated minimum lease payments are as follows:
AMOUNT
---------
1997 $33,750
1998 68,513
1999 70,568
2000 72,685
2001 50,279
Additionally, the agreement provides for options to extend the lease beyond
its original term at prevailing market rates, as well as an option to
purchase the facility.
In regards to this lease, certain expenditures for modifications to the
existing structure are anticipated to prepare the building to serve as the
main office of the Company and the Bank. It is management's estimate that
these total costs should not exceed $415,000.
The Company entered into an employment agreement with its President and
Chief Executive Officer, providing 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 President's family. The
agreement further provides for other perquisites, and subjects the
President to certain non-compete restrictions.
- 23 -
<PAGE>
(7) INCOME TAXES
------------
At December 31, 1996, the Company had a net operating loss carryforward for
federal and state income tax purposes of approximately $11,000, which will
expire in 2011, if not previously utilized. No income tax expense or
benefit was recorded for the period ended December 31, 1996, due to this
loss carryforward.
The following summarizes the sources and expected tax consequences of
future taxable deductions which comprise the net deferred taxes at December
31, 1996:
<TABLE>
DEFERRED TAX ASSETS:
<S> <C>
Pre-opening expenses................... $ 63,676
Operating loss carryforwards........... 4,085
Total gross deferred tax assets........ 67,761
Less valuation allowance............... (67,761)
--------
Net deferred taxes..................... $ --
========
</TABLE>
The future tax consequences of the differences between the financial
reporting and tax basis of the Company's assets and liabilities resulted in
a net deferred tax asset. A valuation allowance was established for the
net deferred tax asset, as the realization of these deferred tax assets is
dependent on future taxable income.
- 24 -
<PAGE>
ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information regarding the
Company's executive officers and directors:
<TABLE>
<CAPTION>
NAME (AGE) POSITION WITH COMPANY POSITION WITH BANK
- ---------- --------------------- ------------------------
<S> <C> <C>
Catherine M. Amos (44) Director Director
Jeffrey S. Bagley (34) Vice Chairman of the Vice Chairman of the
Board Board
Bill H. Barnett (55) Director --
Danny M. Bennett (35) Director Director
Michael P. Bennett (51) Director Director
Bryan L. Bettis (34) Director --
Talmadge W. Bolton (62) Director Director
Thomas L. Bower III (44) Director --
Charles R. Castleberry (42) Director --
David H. Denton (51) President, Chief President, Chief
Executive Officer and Executive Officer and
Director Director
Jimmy S. Fagan (60) Vice President Executive Vice President
Charles D. Ingram (53) Secretary and Director Director
Herbert A. Lang, Jr. (44) Director Director
John P. McGruder (54) Director Director
Vicki D. Melton (44) Chief Financial Officer Vice President and
Chief Financial Officer
James J. Myers (46) Chairman of the Board Chairman of the Board
Timothy M. Perry (36) -- Senior Lending Officer
and Senior Vice
President
Danny L. Reid (43) Director Director
Charles R. Smith (67) Director Director
Wyatt L. Willingham (43) Director Director
Jerry M. Wood (47) Director Director
</TABLE>
Biographical information concerning management is set forth below. None
of the members of management 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 and is the President of
Amos Properties, Inc. and the Secretary/Treasurer of Amos Plumbing & Electrical
Co., Inc. Ms. Amos is currently the Chairman of Lake Lanier Islands Authority,
as well as a member of several other civic, social and community organizations.
- 25 -
<PAGE>
Jeffrey S. Bagley is a native of Forsyth County, Georgia and is a partner
in the law firm of Boling, Rice, Bettis, Bagley & Martin.
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 is the President of Bill H. Barnett, Inc., a real
estate investment and development company in Cumming, Georgia.
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.
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.
Bryan L. Bettis is a native of Forsyth County, Georgia and is the Vice
President of Midway Building Supply, Inc. in Alpharetta, Georgia. 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 is the
Chief Executive Officer of Bolton's Truck Parts, Inc. 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. 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 is currently
employed by Progressive Lighting, Inc. 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 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.
Jimmy S. Fagan is a long-time resident of Cumming, Georgia and have 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.
Charles D. Ingram is a native of Forsyth County, Georgia and is co-owner,
Secretary and Treasurer of Ingram-Stafford Ford-Mercury, Inc. 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 the
owner of Lang Signs. Mr. Lang is a member of the South Forsyth Rotary Club.
John P. McGruder is a resident of Cumming, Georgia and co-owner of
Crestview Animal Hospital. Mr. McGruder serves as a member of the Forsyth
County Humane Society.
- 26 -
<PAGE>
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.
James J. Myers is a resident of Cumming, Georgia and is the owner of
James J. Myers, CPA, PC. Mr. Myers serves as a member of South Forsyth Rotary
Club, Cumming Forsyth Optimist Club and Leadership Forsyth County Georgia.
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.
Danny L. Reid is a native of Forsyth County, Georgia and is a co-owner of
Reid & Reid Grading and Pipeline, Inc., a grading contractor and developer.
Charles R. Smith is a resident of Forsyth County and presides as a Judge
of the Municipal Court of Cumming, Georgia. Mr. Smith is a retired former
partner of Smith & Smith, Attorneys and was an organizer, director and former
Chairman of the Board of 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. 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 is President
of Jerry Wood Hardware Co., doing business as Wood Ace Hardware in Alpharetta,
Georgia. 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.
- 27 -
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the total compensation paid by the
Company to its President and Chief Executive Officer for the period from
February 14, 1996 (inception) to December 31, 1996. No other executive officer
of the Company earned over $100,000 in salary and bonus for the period from
February 14, 1996 (inception) to December 31, 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------------- ----------------------
AWARDS PAYOUTS
------ -------
OTHER RESTRICTED ALL
ANNUAL STOCK OPTIONS/ LTIP OTHER
NAME AND POSITION YEAR SALARY BONUS COMPENSATION AWARDS SARs PAYOUTS COMPENSATION
- ----------------- ---- ------ ----- ------------ ------ ---- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David H. Denton 1996 $42,498 -- -- -- -- -- --
President and Chief Executive
Officer
</TABLE>
EMPLOYMENT AGREEMENT
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 maintains a key man life insurance policy on Mr. Denton providing for
death benefits in the amount of $600,000 payable to the Company 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 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
The Company is not subject to filings required by Section 16 of the
Exchange Act. The Company is filing this Annual Report pursuant to Section
15(d) of the Exchange Act.
- 28 -
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth the beneficial ownership of the
Company's Common Stock as of March 1, 1997 with respect to the following: (i)
each director; (ii) each executive officer; and (iii) all directors and
executive officers of the Company as a group. No person known to the Company is
the beneficial owner of more than 5% of the Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
----------------------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------ ------ -------
<S> <C> <C>
Catherine M. Amos....................... 19,500 2.44
Jeffrey S. Bagley....................... 5,000 *
Bill H. Barnett......................... 10,250 1.28
Danny M. Bennett........................ 10,000 1.25
Michael P. Bennett...................... 7,500 *
Bryan L. Bettis......................... 5,000 *
Talmadge W. Bolton...................... 10,000 1.25
Thomas L. Bower III..................... 10,000 1.25
Charles R. Castleberry.................. 5,000 *
David H. Denton......................... 7,000 *
Jimmy S. Fagan.......................... 10,000 1.25
Charles D. Ingram....................... 5,000 *
Herbert A. Lang, Jr..................... 10,000 1.25
John P. McGruder........................ 10,000 1.25
Vicki D. Melton......................... 5,000 *
James J. Myers.......................... 7,500 *
Timothy M. Perry........................ 2,000 *
Danny L. Reid........................... 10,000 1.25
Charles R. Smith........................ 25,000 3.13
Wyatt L. Willingham..................... 7,500 *
Jerry M. Wood........................... 5,000 *
All directors and executive officers
as a group (21 persons)............... 186,250 23.28
</TABLE>
* Represents less than one percent of the outstanding Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Organizers had 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 had contributed
a total of $125,520 to FCO as of June 30, 1996. Although the advanced funds
were not callable by the Organizers, the Company has fully reimbursed the monies
contributed by the Organizers by advancing funds obtained from an unsecured line
of credit. The line of credit was obtained August 1, 1996 for $650,000 to fund
organization, offering and pre-opening expenses. The line of credit matures on
August 1, 1997 and accrues interest which is payable quarterly at the lender's
prime rate of interest. Each Organizer has guaranteed a pro rata portion of the
line of credit.
- 29 -
<PAGE>
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 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.
- 30 -
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
The financial statements listed in the index set forth in
Item 8 of this Annual Report are filed as part of this Annual
Report.
2. Financial Statement Schedules
Not Applicable.
3. Exhibits
3.1. Articles of Incorporation./(1)/
3.2. Bylaws./(1)/
4.1. Specimen Stock Certificate./(1)/
10.1. Sublease Agreement by and among the Company, the
Bank and NationsBank, N.A. (South) dated February 9,
1996./(1)/
10.2 First Amendment to Sublease Agreement by and among
the Company, the Bank and NationsBank, N.A. (South), dated
February 16, 1996./(1)/
10.3 Second Amendment to Sublease Agreement by and among
the Company, the Bank and NationsBank, N.A. (South) dated
May 10, 1996./(1)/
10.4. Form of Escrow Agreement to be entered into by and
between the Company and The Bankers Bank, Atlanta,
Georgia./(1)/
10.5. Employment Agreement by and between the Company
and David H. Denton dated June 28, 1996./(1)/
10.6. Line of Credit Note by the Company to The Bankers
Bank, Atlanta, Georgia dated August 1, 1996./(1)/
21.1 Subsidiaries of the Company.
27 Financial Data Schedule.
_____________________
/ (1) /Incorporated by reference to exhibits of the same
number in the Company's Registration Statement on Form S-1
(File No. 333-10909).
(b) Reports on Form 8-K
Not Applicable.
- 31 -
<PAGE>
(c) Exhibits
See Item 14(a) above.
(d) Financial Statement Schedule
See Item 14(a) above.
- 32 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
FORSYTH BANCSHARES, INC.
By: /s/ David H. Denton
--------------------
President and Chief Executive Officer
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- -----
<S> <C> <C>
/s/ Catherine M. Amos Director March 30, 1997
- ---------------------------
Catherine M. Amos
/s/ Jeffrey S. Bagley Vice Chairman of the Board March 30, 1997
- ---------------------------
Jeffrey S. Bagley
/s/ Bill H. Barnett Director March 30, 1997
- ---------------------------
Bill H. Barnett
/s/ Danny M. Bennett Director March 30, 1997
- ---------------------------
Danny M. Bennett
/s/ Michael P. Bennett Director March 30, 1997
- ---------------------------
Michael P. Bennett
/s/ Bryan L. Bettis Director March 30, 1997
- ---------------------------
Bryan L. Bettis
/s/ Talmadge W. Bolton Director March 30, 1997
- ---------------------------
Talmadge W. Bolton
/s/ Thomas L. Bower III Director March 30, 1997
- ---------------------------
Thomas L. Bower III
/s/ Charles R. Castleberry Director March 30, 1997
- ---------------------------
Charles R. Castleberry
/s/ David H. Denton President, Chief Executive Officer March 30, 1997
- --------------------------- and Director
David H. Denton
/s/ Charles D. Ingram Secretary and Director March 30, 1997
- ---------------------------
Charles D. Ingram
</TABLE>
- 33 -
<PAGE>
/s/ Herbert A. Lang, Jr. Director March 30, 1997
- ---------------------------
Herbert A. Lang, Jr.
/s/ John P. McGruder Director March 30, 1997
- ---------------------------
John P. McGruder
/s/ Vicki D. Melton Chief Financial Officer March 30, 1997
- ---------------------------
Vicki D. Melton
/s/ James J. Myers Chairman of the Board March 30, 1997
- ---------------------------
James J. Myers
/s/ Danny L. Reid Director March 30, 1997
- ---------------------------
Danny L. Reid
/s/ Charles R. Smith Director March 30, 1997
- ---------------------------
Charles R. Smith
/s/ Wyatt L. Willingham Director March 30, 1997
- ---------------------------
Wyatt L. Willingham
/s/ Jerry M. Wood Director March 30, 1997
- ---------------------------
Jerry M. Wood
- 34 -
<PAGE>
EXHIBIT INDEX
3.1 Articles of Incorporation./(1)/
3.2 Bylaws./(1)/
4.1 Specimen Stock Certificate./(1)/
10.1 Sublease Agreement by and among the Company, the Bank and
NationsBank, N.A. (South) dated February 9, 1996./(1)/
10.2 First Amendment to Sublease Agreement by and among the Company, the
Bank and NationsBank, N.A. (South), dated February 16, 1996./(1)/
10.3 Second Amendment to Sublease Agreement by and among the Company, the
Bank and NationsBank, N.A. (South) dated May 10, 1996./(1)/
10.4 Form of Escrow Agreement to be entered into by and between the
Company and The Bankers Bank, Atlanta, Georgia./(1)/
10.5 Employment Agreement by and between the Company and David H. Denton
dated June 28, 1996./(1)/
10.6 Line of Credit Note by the Company to The Bankers Bank, Atlanta,
Georgia dated August 1, 1996./(1)/
21.1 Subsidiaries of the Company.
27 Financial Data Schedule.
________________
/(1) /Incorporated by reference to exhibits of the same number in the Company's
Registration Statement on Form S-1 (File No. 333-10909).
- 35 -
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
The Citizens Bank of Forsyth County
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of Forsyth Bancshares, Inc. for the period ended December
31, 1996 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR<F1>
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> FEB-14-1996
<PERIOD-END> DEC-31-1996
<CASH> 10,054
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 0
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 0
<ALLOWANCE> 0
<TOTAL-ASSETS> 6,434,527
<DEPOSITS> 0
<SHORT-TERM> 615,000
<LIABILITIES-OTHER> 5,986,074
<LONG-TERM> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITIES-AND-EQUITY> 6,434,527
<INTEREST-LOAN> 0
<INTEREST-INVEST> 28,939
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 28,939
<INTEREST-DEPOSIT> 0
<INTEREST-EXPENSE> 10,751
<INTEREST-INCOME-NET> 18,188
<LOAN-LOSSES> 0
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 196,557
<INCOME-PRETAX> (178,370)
<INCOME-PRE-EXTRAORDINARY> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (178,370)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 0
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>For the period of February 14, 1996 (inception) to December 31, 1996.
</FN>
</TABLE>
