<PAGE> 1
Filed pursuant to Rule 424(b)(1)
Registration No. 333-19081
GBC BANCORP, INC.
A Proposed Bank Holding Company for
GWINNETT BANKING COMPANY (In Organization)
Up to 1,200,000 Shares of Common Stock
(Par Value $1.00 Per Share)
(Minimum Purchase: 500 Shares)
This Prospectus relates to the offering by GBC Bancorp, Inc., a
Georgia corporation (the "Company") of a minimum of 950,000 shares and a
maximum of 1,200,000 shares of its common stock, $1.00 par value per share (the
"Common Stock"), at $10.00 per share (the "Offering"). The Company has been
organized to hold, upon receipt of regulatory approvals, all of the common
stock of Gwinnett Banking Company (In Organization) (the "Bank"),
Lawrenceville, Georgia. The organizers of the Company and the Bank intend to
subscribe for an aggregate of at least 110,000 of the shares of Common Stock
sold in the Offering (approximately 11.6% of the minimum and 9.2% of the
maximum number of shares to be sold). The organizers of the Bank will not be
granted options or warrants in connection with the formation of the Bank;
instead, the organizers will be entitled to purchase shares on the same basis
as all other investors. The Company and the Bank have not conducted active
business operations. The commencement of business operations is contingent
upon various regulatory approvals by state and federal agencies and the sale of
a minimum of 950,000 shares of the Common Stock offered hereby. All
subscriptions are binding and irrevocable until the "Expiration Date" as
defined herein. In the event (a) that the Company is unable to sell 950,000
shares of Common Stock, or (b) that the Company and the Bank do not satisfy, or
make a determination that they will not satisfy, the conditions included in
their respective regulatory approvals, the organizers of the Company will pay
all incurred expenses, and all escrowed subscription proceeds will be returned
promptly to investors without interest. See "THE OFFERING - Release From
Escrow," page 5.
INVESTMENT IN THESE SECURITIES INVOLVES A SUBSTANTIAL
DEGREE OF RISK. SEE "RISK FACTORS" - Pages 3 to 4.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR
OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY.
<TABLE>
<CAPTION>
=======================================================================================================
Price to Underwriting Discounts Proceeds to
Public(1) and Commissions (2) Company(3)
=======================================================================================================
<S> <C> <C> <C>
Per Share . . . . . . . . . . $10.00 -0- $10.00
- -------------------------------------------------------------------------------------------------------
Total Minimum(4) . . . . . . $9,500,000 -0- $9,500,000
- -------------------------------------------------------------------------------------------------------
Total Maximum(5) . . . . . . $12,000,000 -0- $12,000,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
_____________________
(1) The Offering price has been arbitrarily established by the
Company. See "RISK FACTORS - Offering Price Arbitrarily
Determined."
(2) Offers and sales of the Common Stock will be made on behalf of
the Company on a best efforts basis by its officers and
directors, who will receive no commissions or other
remuneration in connection with such activities, but they will
be reimbursed for their reasonable expenses incurred in the
Offering. In reliance on Rule 3a4-1 of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the
Company believes such officers and directors will not be
deemed to be brokers and/or dealers under the Exchange Act.
(3) Before deducting Offering, organizational and pre-opening
operating expenses of the Company and the Bank. Such expenses
are estimated to be approximately $458,748.
(4) Subscription proceeds will be deposited promptly in an escrow
account with Columbus Bank and Trust Company, Columbus,
Georgia, pending receipt of subscriptions for not less than
950,000 shares and completion of certain other matters on or
before July 15, 1997 the expiration date of the Offering
(unless the Offering is terminated sooner or extended).
Subscription funds will be released from escrow (a) upon the
receipt of $9,500,000 of subscription proceeds, and (b) upon a
determination by the organizers that the remaining conditions
set forth in the preliminary approvals issued by the
applicable regulatory agencies will be satisfied. See "THE
OFFERING - Terms of the Offering." The Company will return to
each subscriber, without interest, the amount of any proceeds
received in full with respect to subscriptions that are not
accepted.
(5) The Company reserves the right to issue up to 1,200,000 shares
at $10.00 per share. See "THE OFFERING - Terms of the
Offering."
<PAGE> 2
The date of this Prospectus is April 16, 1997.
2
<PAGE> 3
REPORTS TO SHAREHOLDERS
The Company is not a reporting company as defined by the Securities
and Exchange Commission ("SEC"). The Company will furnish its shareholders
with annual reports containing audited financial information for each fiscal
year on or before the date of the annual meeting of shareholders as required by
Rule 80-6-1-.05 of the Georgia Department of Banking and Finance ("Department
of Banking"). The Company's fiscal year ends on December 31. Additionally,
the Company will also furnish such other reports as it may determine to be
appropriate or as otherwise may be required by law.
Upon the effective date of the Registration Statement, the Company
will be subject to the reporting requirements of the Securities Exchange Act of
1934 (the "Exchange Act'), which include requirements to file annual reports on
Form 10-K and quarterly reports on Form 10-Q with the SEC. This reporting
obligation will exist for at least one year and will continue for fiscal years
thereafter, except that such reporting obligations may be suspended for any
subsequent fiscal year if at the beginning of such year the Common Stock of the
Company is held of record by less than three hundred persons.
ADDITIONAL INFORMATION
The Company has filed with the SEC a Registration Statement under the
Securities Act of 1933, as amended, with respect to the Common Stock offered
hereby. This Prospectus does not contain all of the information set forth in
the Registration Statement. For further information with respect to the
Company and the Common Stock, reference is made to the Registration Statement
and the exhibits thereto. The Registration Statement may be examined at, and
copies of the Registration Statement may be obtained at prescribed rates from
the Public Reference Section of the SEC, Room 1024, 450 Fifth Street, N.W.,
Washington, DC 20549. The SEC maintains a Web site that contains reports,
proxy and information statements and other information regarding issuers that
file electronically with the SEC. The address of such site is
(http://www.sec.gov).
The Company and the organizers have filed various applications with
the Federal Deposit Insurance Corporation, the Federal Reserve Bank of Atlanta
and the Department of Banking. Prospective investors should rely only on
information contained in this Prospectus and in the Company's related
Registration Statement in making an investment decision. To the extent that
other available information not presented in this Prospectus, including
information available from the Company and information in public files and
records maintained by the Federal Deposit Insurance Corporation, the Federal
Reserve Bank of Atlanta and the Department of Banking, is inconsistent with
information presented in this Prospectus or provides additional information,
such other information is superseded by the information presented in this
Prospectus and should not be relied on. Projections appearing in the
applications are based on assumptions that the organizers believe are
reasonable, but as to which no assurances can be made. The Company
specifically disaffirms those projections for purposes of this Prospectus and
cautions prospective investors against placing reliance on them for purposes of
making an investment decision.
iii
<PAGE> 4
SUMMARY
The following Summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
THE COMPANY
The Company was incorporated under the laws of the State of Georgia on
August 21, 1996 primarily to serve as the holding company for a state bank and
trust company. The Company has filed applications with the Federal Reserve
Bank of Atlanta (the "Federal Reserve") and the Georgia Department of Banking
and Finance (the "Department of Banking") for prior approval to become a bank
holding company by using the proceeds of this Offering to acquire all of the
capital stock of the Bank. The organizers anticipate receiving such approvals
during the second quarter of 1997. Such approvals will require the Company to
sell at least 950,000 shares of its Common Stock, but are not expected to
contain other conditions. See "RISK FACTORS - Regulatory Approvals Required."
Following acquisition of the Bank, the initial business of the Company will be
conducted through the Bank. See "BUSINESS OF THE COMPANY AND THE BANK."
THE BANK
The Bank is in the process of being organized as a state-chartered
bank and trust company under Georgia law. It has filed an application with the
Department of Banking for this purpose and with the Federal Deposit Insurance
Corporation (the "FDIC") for deposit insurance. The Bank's application with
the Department of Banking was approved on February 28, 1997 and the FDIC
application was also approved on February 28, 1997. The Bank will not be
authorized to conduct its banking business until it receives a permit to begin
business from the Department of Banking. The issuance of the permit to begin
business will depend, among other things, upon the Bank's receiving $9,000,000
in capital from the Company and upon compliance with certain standard
conditions that have been imposed by the FDIC and the Department of Banking
which are generally designed to familiarize the Bank with certain applicable
operating requirements (e.g., no directors' fees are payable until the Bank
earns a cumulative profit) and to prepare the Bank to commence business
operations (e.g., the adoption of loan, investment and other policies to govern
the Bank's operations). The Bank expects to satisfy all conditions for
organizing the Bank and to open for business during the second quarter of 1997,
or as soon thereafter as practicable. See "RISK FACTORS -- Regulatory
Approvals Required" and "USE OF PROCEEDS." The Bank intends to engage in a
general commercial banking business, emphasizing the banking needs of
individuals and small to medium-sized businesses in its primary service area.
See "BUSINESS OF THE COMPANY AND THE BANK."
The philosophy of the management of the Bank with respect to its
initial operations will be to emphasize prompt and responsive personal service
to the residents of Gwinnett County in order to attract customers and acquire
market share now controlled by other financial institutions in the Bank's
market area. The organizers believe that the Bank offers the residents of
Gwinnett County and the surrounding areas the opportunity to have an ownership
interest in a community bank, while also receiving the benefits associated with
a locally owned and managed community bank. Through ownership in the Company,
the residents of the community will have a greater role in the development of
the Bank.
The offices of the Company and the Bank will be located at 165 Nash
Street, Lawrenceville, Georgia 30246. The current principal executive and
administrative offices of the Company and the Bank is located at 318 Pike
Street, Suite 475, Lawrenceville, Georgia 30246, and their telephone number at
that address is (770) 995-0000.
<TABLE>
<CAPTION>
THE OFFERING
<S> <C>
Securities . . . . . . . . . . . . . Common Stock, $1.00 par value, of the Company
Offering Price . . . . . . . . . . . $10.00 per share
Number of Shares Offered . . . . . . Minimum: 950,000
Maximum: 1,200,000
Use of Proceeds . . . . . . . . . . To purchase 100% of the Common Stock of the Bank; the remaining proceeds will
be applied to working capital and used to repay outstanding amounts under a
line of credit from the Gwinnett Banking Company Joint Venture (the "Joint
Venture") borrowed to pay certain organizational expenses of the Company and
certain expenses of this Offering.
</TABLE>
The Bank will use the proceeds of the sale of its common stock to the
Company to repay outstanding amounts under a line of credit from the Joint
Venture borrowed to pay certain organizational and pre-opening expenses of the
Bank, including paying officers' and employees' salaries; and, following the
commencement of business, to provide working capital to be used for business
purposes, including making loans and other investments. See "USE OF PROCEEDS."
1
<PAGE> 5
RISK FACTORS
Investment in the Common Stock involves a significant degree of risk,
including that (i) the Company has not received all of the regulatory approvals
required before it can become a bank holding company; (ii) the Bank, which is
the sole subsidiary of the Company is in organization and has no operating
history; (iii) the banking industry is highly competitive and is a highly
regulated, (iv) the results of operations of the Bank will be affected by
credit policies of monetary authorities; (v) the success of the Bank will
depend largely on the general economic conditions in the Bank's primary service
area; (vi) the Offering price for the Company's Common Stock has been
determined arbitrarily without particular reference to customary criteria;
(vii) it is the policy of the Board of Directors of the Company to reinvest
earnings and not pay dividends for the period of time necessary to ensure the
success of the Company's operations; and (viii) there is no public trading
market for the shares of the Company's Common Stock. See "RISK FACTORS."
2
<PAGE> 6
RISK FACTORS
Investment in the shares of the Common Stock offered hereby involves a
significant degree of risk. The shares of Common Stock should be purchased by
investors who can afford the loss of their entire investment. In addition to
considering factors set forth elsewhere in this Prospectus, persons interested
in purchasing shares of the Common Stock should carefully consider the
following risks before making a decision to subscribe.
THE SHARES OF COMMON STOCK OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS,
DEPOSITS OR OTHER OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENTAL AGENCY.
REGULATORY APPROVALS REQUIRED
The Company must receive the approval of the Federal Reserve and the
Department of Banking before it can become the holding company of the Bank.
Applications for such approvals have been filed with such agencies and are
pending. The organizers anticipate receiving such approvals during the second
quarter of 1997. Such approvals will require the Company to sell at least
950,000 shares of its Common Stock but are not expected to contain other
conditions.
The Bank's application to organize a new state bank and for federal
deposit insurance was filed with the Department of Banking and the FDIC and
both such authorities issued their approvals on February 28, 1997. Both
approvals are subject to the condition that at least $9,000,000 be invested in
the Bank by the Company, as well as a number of other standard conditions which
are regularly imposed by the Department of Banking and the FDIC which are
generally designed to familiarize the Bank with certain applicable operating
requirements (e.g., no directors' fees are payable until the Bank earns a
cumulative profit) and to prepare the Bank to commence business operations
(e.g., the adoption of loan, investment and other policies to govern the Bank's
operations).
NO OPERATING HISTORY
The Bank, which will be the sole subsidiary of the Company, is in
organization and has no operating history on which to base any estimate of its
future prospects. The Company's initial profitability will depend entirely
upon the Bank's operations. The Bank's proposed operations are subject to
risks inherent in the establishment of a new business and, specifically, of a
new bank. Initially, all of the Bank's loans will be new loans to new
borrowers. Accordingly, it will take several years to determine the borrowers'
payment histories and, therefore, the quality of the Bank's loan portfolio
cannot be determined until that time. If the Bank is ultimately unsuccessful,
there is no assurance that shareholders will recover all or any part of their
investment in the Common Stock of the Company.
COMPETITIVE INDUSTRY
The banking business is highly competitive. The Bank will compete as
a financial intermediary with other commercial banks, savings and loan
associations, credit unions, finance companies, mutual funds, insurance
companies, and brokerage and investment banking firms soliciting business from
residents of Gwinnett County, Georgia, many of which have greater resources
than will be available to the Bank or the Company. See "BUSINESS OF THE
COMPANY AND THE BANK -- The Bank -- Competition and Historic Deposit Trends."
HIGHLY REGULATED INDUSTRY
The potential success or failure of the Bank will depend not only upon
competitive factors, but also upon state and federal regulations affecting
banks and bank holding companies generally. Regulations now affecting the
Company and the Bank may be changed at any time, and there is no assurance that
such changes will not adversely affect the business of the Company and the
Bank.
EFFECT OF MONETARY POLICIES
The results of operations of the Bank will be affected by credit
policies of monetary authorities, particularly the Board of Governors of the
Federal Reserve System. There can be no assurance that the effect of actions
by monetary and fiscal authorities, including the Federal Reserve, will not
have an adverse effect on the deposit levels, loan demand or the business and
earnings of the Bank. See "SUPERVISION AND REGULATION -- Monetary Policies."
3
<PAGE> 7
SUCCESS DEPENDS ON ECONOMIC CONDITIONS
The success of the Bank will depend largely on the general economic
conditions in the Bank's primary service area ("PSA") of Gwinnett County,
Georgia. Although the Bank expects favorable economic development in this
market area, there is no assurance that favorable economic development will
occur or that the Bank's expectation of corresponding growth will be achieved.
See "BUSINESS OF THE COMPANY AND THE BANK."
OFFERING PRICE ARBITRARILY DETERMINED
Since the Company and the Bank are in the process of being organized,
the Offering price of $10.00 per share has been determined arbitrarily by the
organizers without particular reference to historical or projected earnings,
book value or other customary criteria. The organizers did not retain an
independent investment banking firm to assist in determining the Offering
price. Should a market develop for the Common Stock of the Company, there is
no assurance that any of the Common Stock offered hereby could be resold for
the Offering price or any other amount.
NO DIVIDENDS
Since the Company and the Bank are both start-up operations, it will
be the policy of the Board of Directors of the Company to reinvest earnings for
the period of time necessary to help ensure the success of their operations.
As a result, the Company has no current plans to initiate the payment of cash
dividends, and its future dividend policy will depend on the Bank's earnings,
capital requirements, financial condition and other factors considered relevant
by the Board of Directors of the Company. See "DIVIDENDS." It is the
Company's policy not to pay dividends until the Bank is currently and
cumulatively profitable.
NO ESTABLISHED TRADING MARKET
There is no public trading market for the shares of the Common Stock
of the Company, and it is not anticipated that a market for the Common Stock
will develop as a result of this Offering. As a result, investors who may wish
or need to dispose of all or a part of their investment in the Common Stock,
may not be able to do so except by private direct negotiations with third
parties assuming that third parties are willing to purchase the Common Stock.
ANTITAKEOVER PROVISIONS IN THE COMPANY'S ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation of the Company contain certain
provisions which would have the effect of impending an attempt to change or
remove management of the Company or to gain control of the Company in a
transaction not supported by the Company's Board of Directors. Although the
Company's management believes that these protective provisions in the Company's
Articles of Incorporation and Bylaws are beneficial to shareholders of the
Company, such provisions also may tend to discourage some takeover bids. As a
result, shareholders of the Company may be deprived of opportunities to sell
some or all of their shares at prices that represent a premium over prevailing
market prices. See "Antitakeover Provisions of the Company's Articles of
Incorporation and Bylaws."
THE OFFERING
TERMS OF THE OFFERING
Minimum/Maximum. The Company is offering a minimum of 950,000 shares
and a maximum of 1,200,000 shares of its Common Stock for a price of $10.00 per
share, for an aggregate minimum Offering price of $9,500,000 and an aggregate
maximum Offering price of $12,000,000. The minimum purchase for any investor
(together with the investor's affiliates) is 500 shares of Common Stock
($5,000) unless the Company, in its sole discretion, accepts a subscription for
a lesser number of shares.
Organizer Subscriptions. The organizers of the Company intend to
purchase an aggregate of 110,000 shares of Common Stock sold in the Offering
(approximately 11.6% of the minimum and 9.2% of the maximum number of shares to
be sold). No organizer intends to individually purchase more than 5% of shares
sold in this Offering.
Offering Period and Expiration Date. The Offering period for the
shares will terminate at the earlier of the date all shares offered hereby are
sold or 4:00 p.m. Atlanta, Georgia time, on July 15, 1997). This date may be
extended at the discretion of the Company for additional periods not exceeding
an aggregate of 180 days (i.e., until October 13, 1997). Written notice of any
such extension will be given to all persons who are already subscribers at the
time of the extension. The date on which this Offering terminates plus any
extension thereof is referred to in this Prospectus as the "Expiration Date."
Subscription. As indicated below under "How to Subscribe," upon
execution and delivery of a subscription agreement for shares of the Common
Stock, subscribers will be required to deliver to the Company a check in the
amount of $10.00 times the number of shares subscribed for. All subscriptions
will be binding and irrevocable until the Expiration Date.
4
<PAGE> 8
Escrow. Subscription proceeds will be deposited in an escrow account
with the Escrow Agent for the Company pending completion of this Offering.
Subscription proceeds held in the escrow account will be invested in a separate
account designated as "GBC Bancorp, Inc. Escrow Account." The Escrow Agent has
not investigated the desirability or advisability of an investment in the
Company, and has not approved, endorsed or passed upon the merits of the Common
Stock.
Company Discretion. The Company reserves the right, in its sole
discretion, to accept or reject any subscription in whole or in part on or
before the Expiration Date. Without limiting the generality of the foregoing,
the Company also reserves the right to accept subscriptions on a prorated basis
if it receives subscriptions for more than 1,200,000 shares. The Company will
notify all subscribers within five business days after the Expiration Date
whether their subscriptions have been accepted. With respect to any
subscriptions which are not accepted, in whole or in part, by the Company, the
notification will be accompanied by the unaccepted portion of the subscription
funds, without interest.
Termination. The Company reserves the right to terminate the Offering
at any time after 950,000 shares have been subscribed for if the Company
determines that the total amount of subscriptions will provide adequate
capitalization for the Company after payment of expenses.
Release From Escrow. Subscription proceeds will be released from
escrow to the Company upon the occurrence of all of the following events: (a)
the sale by the Company of at least 950,000 shares of its Common Stock, (b)
receipt by the Company of approval from the Federal Reserve and the Department
of Banking to become a bank holding company, (c) satisfaction by the Company
of, or a determination by the Company that it will satisfy, all of the
conditions that the Federal Reserve and the Department of Banking may impose in
their approvals to the Company, and (d) satisfaction by the Bank of, or a
determination by the Bank that it will satisfy, all of the conditions that the
Department of Banking and the FDIC have imposed in their approvals to the Bank.
If the above conditions are met, the Company intends to instruct the
Escrow Agent to release to the Company the amount of subscription proceeds
relating to subscriptions or portions thereof accepted by the Company, together
with any interest earned thereon. The Company will pay any interest earned on
the first $9,000,000 deposited with the Escrow Agent to the Bank. Shares of
the Company's Common Stock will be issued to subscribers once the subscription
proceeds have been released from escrow. Any subscription proceeds received
after the above conditions are met but before termination of this Offering will
not be deposited in the escrow account, and will be available for immediate use
by the Company, to the extent accepted by the Company.
The Bank received approvals from the Department of Banking and from
the FDIC on February 28, 1997. The Company expects to receive approvals from
the Federal Reserve and the Department of Banking during the second quarter of
1997. In the opinion of the organizers, the only significant condition to all
of the foregoing approvals will be that a minimum of 950,000 shares of Common
Stock of the Company has to be sold in this Offering. If the requisite shares
are not sold, or if the Company or the Bank determine that they cannot satisfy
the other conditions included in the approvals by the Expiration Date, then the
subscription agreements will be of no further force or effect, and the Escrow
Agent shall return promptly by regular mail, to each subscriber at the address
shown on the subscriber's payment, all collected funds received from each
subscriber, without interest; and the Escrow Agent shall pay over and deliver
to the Company all interest earned on the collected funds received from each
subscriber to be used solely by the Company to pay organizational expenses of
the Company and the Bank.
It is possible that subsequent to the release of the subscription
funds from escrow (the requisite shares having been sold and the determination
having been made that the other regulatory conditions will be satisfied) events
could occur which could have the effect of preventing the Bank from commencing
business. If that were to occur, the Company intends to liquidate and would
return to the then shareholders of the Company the portion of their investment
which is equal to their total investment less their pro rata share of the
expenses incurred by the Company and the Bank. See "USE OF PROCEEDS,"
"ESTIMATED EXPENDITURES" and "PRO FORMA CAPITALIZATION." While no assurance
can be given that the foregoing will not take place, the organizers cannot
foresee any such events and believe it is highly unlikely that such events will
occur. After consulting with applicable regulatory authorities, the organizers
are not aware of any Georgia state banks which failed to commence business
after they or their holding companies had raised the required capital.
Additionally, based on conversations with applicable regulatory authorities,
there are no indications that the Company and the Bank will have any difficulty
in satisfying the applicable regulatory conditions.
Plan of Distribution. Offers and sales of the Common Stock will be
made on behalf of the Company primarily by certain of its officers and
directors. The officers and directors will receive no commissions or other
remuneration in connection with such activities, but they will be reimbursed
for their reasonable expenses incurred in the Offering. In reliance on Rule
3a4-1 of the Exchange Act, the Company believes such officers and directors
will not be deemed to be brokers and/or dealers under the Exchange Act.
It is expected that the organizers will purchase a total of 110,000 of
the shares of Common Stock offered hereby. Any shares purchased by the
organizers in excess of their original commitment will be subject to regulatory
approval.
5
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HOW TO SUBSCRIBE
Each prospective investor who (together with the investor's affiliates)
desires to purchase 500 or more shares must:
1. Complete, date and execute the Subscription Agreement, which is
attached as Exhibit "A" to this Prospectus.
2. Make a check payable to " Columbus Bank and Trust Company--Escrow
Account for GBC Bancorp, Inc." in an amount equal to $10.00 multiplied
by the number of shares subscribed for.
3. Return the completed Subscription Agreement as follows:
<TABLE>
<S> <C>
BY HAND OR OVERNIGHT DELIVERY: BY U.S. MAIL DELIVERY:
----------------------------- ---------------------
GBC Bancorp, Inc. GBC Bancorp, Inc.
318 W. Pike Street, Suite 475 P.O. Box 1719
Lawrenceville, Georgia 30246 Lawrenceville, Georgia 30246
Attention: Larry D. Key, President Attention: Larry D. Key, President
</TABLE>
4. UPON RECEIPT BY THE COMPANY OF PAYMENT FOR THE SHARES SUBSCRIBED FOR,
THE SUBSCRIPTION AGREEMENT WILL BECOME FINAL AND BINDING AND WILL BE
IRREVOCABLE.
USE OF PROCEEDS
The proceeds to the Company from the sale of shares of the Common
Stock offered hereby will be used to pay expenses of this Offering and
organizational expenses of the Company, which are estimated not to exceed
$40,000, and to repay in full a line of credit loan from the Joint Venture in
the approximate amount of $350,100 at December 31, 1996 and then to capitalize
the Bank through the purchase of 450,000 shares of the Bank's common stock,
$10.00 par value, at $20.00 per share.
The Company has established a $500,000 line of credit from the
Gwinnett Banking Joint Venture which is a joint venture formed by the
organizers of the Company and the Bank. Funds advanced to the Company under
the line of credit were used to pay certain organizational and Offering
expenses to the Company, including a portion of certain salaries of the
officers of the Company. The line of credit has a one-year term ending on July
17, 1997 and bears interest initially at 9.25%. The interest rate on the line
of credit will fluctuate automatically with the prime rate at a level of 1%
above the prime rate. Interest is paid monthly. At December 31, 1996, the
aggregate outstanding balance on the lines of credit from the Joint Venture to
the Company and the Bank was $350,100. See "ESTIMATED EXPENDITURES" and "PRO
FORMA CAPITALIZATION."
The Bank will use the $9,000,000 proceeds from the sale of its common
stock to the Company to pay expenses incurred in connection with the
organization of the Bank (estimated at $117,000), including consulting fees for
market analysis and feasibility studies, and legal and accounting fees and
expenses, and expenses incurred in connection with certain pre-opening
operations of the Bank (estimated at $301,748), including officers' and
employees' salaries, rent and occupancy, and interest expense. The total
Offering, organizational and pre-opening operating expenses as described above
of the Company and the Bank are not expected to exceed $458,748. The Bank has
established a $500,000 line of credit from the Joint Venture. The line of
credit has a one-year term ending on July 17, 1997 and bears interest initially
at 9.25%. The interest rate on the line of credit will fluctuate automatically
with the prime rate at a level of 1% above the prime rate. Interest is paid
monthly. Funds advanced to the Bank under the line of credit were used to pay
certain organizational and pre-opening expenses of the Bank.
The estimates of pre-opening operating expenses assume that the Bank
will open in the second quarter of 1997. While no assurance can be given that
the Bank will open by then, the organizers are hopeful that the Bank will
actually open during the second quarter of 1997.
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ESTIMATED EXPENDITURES
In the opinion of the Company, the minimum gross proceeds of
$9,500,000 from the Offering will satisfy the cash requirements of the Company
and the Bank for their respective first five years of operation. The Bank is
required to maintain capital of 6% over its initial five years of operations.
It is not anticipated that the Company will find it necessary to raise
additional funds to meet expenditures required to operate the business of the
Company and the Bank over the next five years. All anticipated material
expenditures for such period have been identified and provided for out of the
proceeds of this Offering.
The following table illustrates the intended use by the Company and
the Bank of the gross proceeds of this Offering. Although the amounts set
forth below provide an indication of the proposed use of funds based upon the
plans and estimates of the organizers of the Company and the Bank, actual
expenditures may vary from the estimates.
<TABLE>
<CAPTION>
Minimum Offering Maximum Offering
---------------- ----------------
<S> <C> <C>
Gross Proceeds From This Offering (1) . . . . . . . . . . . . $9,500,000 $12,000,000
--------------------------------- ---------- -----------
Anticipated Use of Proceeds by the Company
------------------------------------------
Offering and Organizational Expenses (2) . . . . . . . . . . $ 40,000 $ 40,000
Working Capital . . . . . . . . . . . . . . . . . . . . . . . 460,000 2,960,000
Capitalization of Bank through Purchase of
Common Stock of the Bank . . . . . . . . . . . . . . 9,000,000 9,000,000
---------- -----------
Total . . . . . . . . . . . . . . . . . . . . . $9,500,000 $12,000,000
========== ===========
Anticipated Use of Capital by the Bank
--------------------------------------
Organizational Expenses (2) . . . . . . . . . . . . . . . . $ 117,000 $ 117,000
Pre-opening Operating Expenses (2) . . . . . . . . . . . . . 301,748 301,748
Working Capital . . . . . . . . . . . . . . . . . . . . . . . 8,581,252 8,581,252
---------- -----------
Total . . . . . . . . . . . . . . . . . . . . . $9,000,000 $ 9,000,000
========== ===========
</TABLE>
______________
(1) Assuming sale of 950,000 shares and 1,200,000 shares, respectively, at
$10.00 per share.
(2) Reflects expenses to be paid directly out of the proceeds of this Offering
and amounts advanced under the lines of credit from the Joint Venture.
Funds advanced under the lines of credit have been utilized to pay various
organizational and pre-offering expenses of the Bank and the Company. The
Company's line of credit will be repaid in full by the Company from the
proceeds of the Offering. The Bank's line of credit will be repaid in full
by the Bank from the proceeds of the sale of its common stock to the
Company.
7
<PAGE> 11
PRO FORMA CAPITALIZATION
The following table sets forth the capitalization as of December 31,
1996, and pro forma capitalization as of completion of the Offering, of the
Company assuming that 950,000 shares and 1,200,000 shares of the Common Stock,
respectively, are sold and the proceeds therefrom are invested as described
under "USE OF PROCEEDS" and "ESTIMATED EXPENDITURES."
<TABLE>
<CAPTION>
After the (1)
-----------------------------
Actual as of
December 31, Minimum Maximum
1996 Offering Offering
--------------- -------- --------
<S> <C> <C> <C>
Debt
----
Total Debt (1) . . . . . . . . . . . . $ 386,980 $ -0- $ -0-
Shareholders' Equity
--------------------
Common Stock, $1.00 par value,
3,000,000 shares authorized
(950,000 and 1,200,000 shares,
respectively, issued and outstanding)(2) . . . $ 80 (3) $ 950,080 $ 1,200,080
Additional paid-in capital . . . . . . . . . . 720 (3) 8,550,720 10,800,720
Deficit accumulated during the pre-opening
development stage (4) . . . . . . . . . . . . . (238,538) (458,748) (458,748)
----------- -----------
Total shareholders' equity . . . . . . . . . . $ (237,738) $ 9,042,052 $11,542,052
========== =========== ===========
</TABLE>
______________________
(1) Represents amounts outstanding under the Company's line of credit and
accounts payable to Gwinnett Banking Company Joint Venture.
(2) Represents the Company's sale of 950,000 shares and 1,200,000 shares of
Common Stock, respectively, at $10.00 per share.
(3) Represents 10 shares purchased by each organizer of the Company for $10.00
per share.
(4) The expenses of the Offering are charged against this account. These
expenses are estimated to be $40,000 and such amount was used in the
calculation of the amounts shown in columns two and three. Offering costs
incurred through December 31, 1996 consist primarily of legal expenses
totaling approximately $28,000.
DIVIDENDS
Since the Company and the Bank are both start-up operations, it will
be the policy of the Board of Directors of the Company to reinvest earnings for
the period of time necessary to help ensure the success of their operations.
It is the Company's policy not to pay dividends until the Bank is currently and
cumulatively profitable. As a result, the Company has no current plans to
initiate the payment of cash dividends. See "SUPERVISION AND REGULATION --
Bank Regulation."
8
<PAGE> 12
BUSINESS OF THE COMPANY
AND THE BANK
THE COMPANY
The Company was incorporated as a Georgia business corporation on
August 21, 1996 to become a bank holding company by acquiring all the common
stock of the Bank upon its formation. Initially, the Bank will be the sole
operating subsidiary of the Company. The Company will apply to the Federal
Reserve and the Department of Banking for prior approval to use $9,000,000 of
the proceeds of this Offering to acquire the Bank. If such approvals are
granted, upon its acquisition of the common stock of the Bank, the Company will
become a bank holding company within the meaning of the Bank Holding Company
Act of 1956, as amended, and the Georgia Bank Holding Company Act. See
"SUPERVISION AND REGULATION."
The Company has been organized to facilitate the Bank's ability to
serve its future customers' requirements for financial services. The holding
company structure will provide flexibility for expansion of the Company's
banking business through the possible acquisition of other financial
institutions and the provision of additional banking- related services which
the traditional commercial bank may not provide under present laws. For
example, banking regulations require that the Bank maintain a minimum ratio of
capital to assets. In event that the Bank's growth is such that this minimum
ratio is not maintained, the Company may borrow funds, subject to capital
adequacy guidelines of the Federal Reserve, and contribute them to the capital
of the Bank and otherwise raise capital in a manner which is unavailable to the
Bank under existing banking regulations.
The Company has no present plans to acquire any operating subsidiaries
other than the Bank or to acquire any significant assets. It is expected,
however, that the Company may make additional acquisitions in the future in the
event that the Company becomes profitable and such acquisitions are deemed to
be in the best interest of the Company and its shareholders. Such
acquisitions, if any, will be subject to certain regulatory approvals and
requirements. See "SUPERVISION AND REGULATION." It is not anticipated that
the Company will need to raise additional funds to meet its cash requirements
for the next five years.
THE BANK
General. The organizers filed an application on behalf of the Bank
with the Department of Banking and with the FDIC on October 9, 1996, for
authority to organize as a state bank and trust company, the deposits of which
will be federally insured, and to conduct a commercial banking business from
Gwinnett County, Georgia. The organizers received approvals from the
Department of Banking and from the FDIC on February 28, 1997. The Bank will
not commence business until all pre-opening conditions imposed by its
regulators have been satisfied and the Department of Banking has issued the
Bank a permit to begin business.
The Bank intends to be a full service commercial bank with trust
powers to be exercised at some time after opening. The principal business of
the Bank will be to accept deposits from the public and to make loans and other
investments. The principal source of funds for the bank's loans and
investments are expected to be demand, time, savings, and other deposits
(including negotiable orders of withdrawal or NOW accounts), amortization and
prepayments of loans and borrowings. A portion of the net proceeds of the
Offering will be used by the Bank to fund loans. The principal sources of
income for the Bank are expected to be interest and fees collected on loans,
interest and dividends collected on other investments and service charges. The
principal expenses of the Bank are expected to be interest paid on savings and
other deposits (including NOW accounts) interest paid on other borrowings by
the Bank, employee compensation, office expenses and other overhead expenses.
Philosophy. Management's philosophy with respect to the initial
operations of the Bank will be to emphasize prompt and responsive personal
service to the residents of Gwinnett County in order to attract customers and
acquire market share now controlled by other financial institutions in the
Bank's market area. The organizers believe that the Bank offers the residents
of Gwinnett County and the surrounding areas the opportunity to have an
ownership interest in a community bank, while also receiving the benefits
associated with a locally owned and managed community bank. Although other
community banks are located in the Gwinnett County area, the Bank will be
unique in that ownership of the Company's stock will be available to residents
in the community. Through ownership in the Company, the residents of the
community will have a greater role in the development of the Bank.
9
<PAGE> 13
Management of the Bank intends to implement an active officer and
director call program to promote these efforts. The purpose of this call
program will be to describe the products, services and philosophy of the Bank
to both existing and new business prospects. In addition, the organizers of
the Bank represent a strong, stable, diversified cross-section of the business
and professional community which is at the core of the Bank's primary trade
area. Six members of the senior management team of the Company and the Bank
have 125 collective years of banking experience, and served key roles in the
development of three banks. Given the changes and consolidation in the
Gwinnett County's banks, management believes that there is a need for a strong,
stable community bank that will be responsive to the small business and
consumer banking needs of residents of Gwinnett County.
BANK LOCATION AND FACILITIES
The Bank will be located in Lawrenceville, Georgia in Gwinnett County
in a two-story building leased from the Joint Venture. The site selected for
the proposed Bank is 165 Nash Street, Lawrenceville, Georgia. Branch offices
are not contemplated during the first five years of operation.
The Bank plans to provide services to Gwinnett County residents, as
well as to residents from the adjacent counties of Fulton, DeKalb and Cobb in
Georgia. The City of Lawrenceville is the county seat of Gwinnett County.
Lawrenceville had an estimated population of 17,300 as of April 1, 1994 and was
the largest city in the county followed by Snellville, Duluth, Lilburn, Buford,
Sugar Hill and Norcross.
The Bank will enter into a primary lease agreement with the Joint
Venture to lease permanent office space for the Bank located at 165 Nash Street
(the "Permanent Premises") for five years beginning on the completion of the
construction of the Permanent Premises with two five-year renewal options (the
"Lease Agreement"). Pursuant to the proposed Lease Agreement, the initial
annual rental for the 9,000 square feet office space is $135,000 or $15.00 per
square foot. The rental for the renewal will be increased based on the
increase in the Consumer Price Index.
The Bank will lease temporary facilities at 165 Nash Street from the
Joint Venture for a rental of $5,000 a month beginning on the opening of the
Bank which is expected to occur in the second quarter of 1997 and until the
Permanent Premises are constructed. Upon completion of the construction of
Permanent Premises, the temporary modular office will be removed and temporary
operation and administrative offices will be vacated.
The organizers of the Bank obtained two appraisals for the fair rental
value of the Permanent Premises. One appraisal, dated October 8, 1996,
provided a range of market rental for the Permanent Premises. The mid point of
such range was $16.00 per square foot. The other appraisal, also dated October
8, 1996, determined that fair market rental of the premises to be $15.66 per
square foot. Copies of the appraisals for the Permanent Premises were filed
with the Bank's application to the Department of Banking and the FDIC.
The owner of the property and the building where the temporary and
Permanent Premises are located is the Joint Venture. The members of the Joint
Venture include directors of the Company and organizers of the Bank. In the
opinion of such organizers, the terms of the Lease Agreement are at least as
favorable to the Bank as terms available from unrelated third parties.
The Permanent Premises when completed will include a full-service
teller line and drive-in and walk-up windows. The Bank will offer safe deposit
boxes.
PRIMARY SERVICE AREA
The Bank's primary service area ("PSA") is defined as all of Gwinnett
County, Georgia. The Bank also expects to serve the adjacent counties or parts
thereof of Cobb, DeKalb and Fulton. Gwinnett County is easily accessible from
all directions by several major roadways: I-85, U.S. Highways 23, 29 and 78
and Georgia Highways 316, 985, 141, 20 and 120. The I-285 perimeter highway
around Atlanta passes within five miles of the Gwinnett County border.
Lawrenceville is approximately 35 miles northeast of downtown Atlanta and is
approximately 40 miles from Athens, Georgia.
ECONOMIC AND DEMOGRAPHIC FACTORS
The City of Lawrenceville is served by the CSX Family Lines Railroad
and the Southern Railway on lines between Atlanta and Athens. Over 60
interstate/intrastate motor freight carriers serve Gwinnett County and many of
these maintain break/bulk terminals within Gwinnett County. General aviation
services are provided at Gwinnett County's Briscoe Field
10
<PAGE> 14
adjacent to Lawrenceville. Gwinnett County is within 45 minutes of Atlanta's
Hartsfield International Airport. Gwinnett County currently does not have any
public transportation.
Gwinnett County has grown during each census since 1930. Its
aggregate rate of population growth between 1930 and 1990 was 1167.2%, making
it Georgia's second fastest growing county over this 60-year period. Gwinnett
County was one of only 38 counties (out of Georgia's 159) that did not
experience at least one population decline in the six censuses since 1930.
While Gwinnett County was Georgia's 17th most populous county in 1930, it was
the 4th most populous in 1990. In each of the two decades between 1970 and
1990, Gwinnett County's rate of growth exceeded 100%. From 1980 to 1990, it
was the third fastest growing county in Georgia. For three of the past 10
years, its rate of growth has been so rapid that it ranks as the fastest
growing county in the nation. Visions 2020: Baseline Forecasts has projected
that Gwinnett County will pass both Cobb and DeKalb Counties to become
Georgia's second most populous county during the second decade of the next
century. Given the fact that estimates of Gwinnett County's rate of population
growth have been continually revised upward during the past five years, the
editors of Georgia Trend Magazine indicate that it is not inconceivable that
the County could challenge Fulton County for first place by the year 2020.
According to the 1990 Census figures, 245,416 residents of Gwinnett
County, or 69.5% of the total population of 352,910, were over the age of
nineteen and thus potential customers of the proposed Bank. With only 4.8% of
the county's residents 65 years old or older, the third lowest percentage of
any county in the Atlanta metropolitan statistical area ("MSA"), management
believes that the banking market will be characterized by a strong loan demand
for consumer, commercial, and mortgage loans.
Gwinnett County has a diverse employment base. According to the
Gwinnett County Chamber of Commerce, approximately 383 high-tech companies,
over 700 manufacturing firms and 274 international firms are located in
Gwinnett County. The largest employer in Gwinnett County is the Gwinnett
County Public School System with 8,400 employees. AT&T Atlanta Works and
Scientific Atlanta follow with 3,500 and 3,000 employees, respectively. There
is also a wide variety of manufacturing activity in Gwinnett County which
contributes to its economic stability.
Employment growth has also been strong. According to the Atlanta
Regional Commission, Gwinnett County has created 10,800 new jobs per year since
1985 which is 1,100 more new jobs than second place Fulton County at 9,700.
Gwinnett County's projected rate of job increase between 1995 and 2000 is 12.7%
which is the highest expected increase in the Atlanta MSA.
Gwinnett County also has low unemployment. In only two years between
1987 and 1993 did Gwinnett County's unemployment rate exceed 4.0%. Gwinnett
County has always been well below Georgia's average unemployment rate.
Gwinnett County's unemployment rate for 1993 was lower than any of the counties
contiguous to it. At the end of 1995, unemployment in Gwinnett County was at
3.6%.
The housing and construction market in Gwinnett County has been and,
according to all forecasts, will continue to be strong. Housing units in
Gwinnett County increased by 137.2% during the decade 1980-1990 and by 15.8%
between 1990 and 1994. The bulk of the increase in housing was in single
family/duplex housing as opposed to multi-family dwellings or mobile homes, and
an inspection of Gwinnett County's many new residential subdivisions reveals
new units in a wide range of prices. For the month of June, 1996, Gwinnett
County led the Atlanta MSA (and all other counties in Georgia) in the number of
both single-family residential and total building permits. According to
statistics published by the Gwinnett County Chamber of Commerce, Gwinnett
County has also held first place in both categories of permits for every month
since the end of 1994.
In terms of office development, the Atlanta Regional Commission has
reported that Gwinnett County has a total inventory of 5.7 million square feet
in 194 buildings, with an overall vacancy rate of 10%. In terms of industrial
space, Gwinnett County accounts for more than 30% of the total in the MSA and
has been the MSA's most active market in new construction and absorption.
Gwinnett County has a total inventory of 53.5 million square feet of industrial
space and a current vacancy rate of 7.7%. The total inventory of retail space
is nine million square feet, and the vacancy rate is 7.8%. The Gwinnett County
Chamber of Commerce's 1996 Absorption Study, which provides a twelve-year
history of office and industrial growth in Gwinnett County, reports an annual
average of 248 projects and 5.2 million square feet. In 1995, 303 projects
were reported for Gwinnett County. According to the Gwinnett County Chamber of
Commerce between 1984 and 1996, the number of hotels/motels in Gwinnett County
has grown from six to 66, with 25 facilities added in 1995-96 alone. Over the
past 12 years, the number of motel rooms has increased from 548 to 8,212.
During 1995, 2,360 apartment units were permitted in Gwinnett County.
11
<PAGE> 15
COMPETITION AND HISTORICAL DEPOSIT TRENDS
Management believes that Gwinnett County has a very active and
competitive banking market. According to the Gwinnett County Chamber of
Commerce, Gwinnett County's bank deposits have shown a very healthy, steady
growth rate with the average annual growth rate at 17.13%. There have been a
number of mergers and acquisitions that have changed the general structure of
the industry with a reduction in the number of community banks based in
Gwinnett County. The largest financial institutions serving Gwinnett County as
of June 30, 1996, were NationsBank of Georgia, N.A., SunTrust Bank, Atlanta,
Wachovia Bank of Georgia, N.A. and First Union Bank of Georgia, N.A., who had
$1,317,407,000, $566,636,000, $570,529,000 and $477,587,000, respectively in
deposits. The largest Gwinnett County based banks as of June 30, 1996, are
Bank of Gwinnett, Lawrenceville; Brand Banking Co., Lawrenceville; and Peoples
Bank, Buford, which have approximately $187,595,000; $174,332,000 and
$126,160,000 respectively in deposits. Based on published information, there
are 18 banks, one thrift institution and three credit unions that operate 100
offices in Gwinnett County. There are approximately 18 financial institutions
that have offices in the immediate vicinity of the main office of the Bank.
Management believes that deposits will increase in Gwinnett County in
the next three years. With regard to the Bank, deposit growth will consist of
two components: (i) the normal annual deposit growth for an existing
institution; and (ii) deposits attracted by management from previously
established relationships. Management believes that initially the Bank will
not attract 100% of the normal deposit growth due to the initial size of the
Bank and its single location. However, management believes that at least 25%
of the normal deposit growth will be attracted due to the personal services
offered by the community bank and its centralized location in Gwinnett County.
Assuming that the Bank acquires 25% of the average deposit growth per bank,
deposits from the market growth in the next three years would be $11,050,000;
$17,182,000 and $21,773,000, respectively.
LENDING POLICY
The Bank is being established initially to support Gwinnett County and
plans to expand its support to the immediately-surrounding counties of Cobb,
DeKalb and Fulton in Georgia. The Bank will be authorized to make both secured
and unsecured loans to individuals, partnerships, corporations and other public
and private entities. Management believes that the Bank's lending business
will consist principally of making loans to small- and medium-sized businesses
and to their owners, officers and employees, loans to independent single-family
residential contractors, loans that are guaranteed by the Small Business
Administration and loans to individual consumers.
The Bank's legal lending limits will be 15% of its statutory capital
base (its capital stock, surplus, and appropriated retained earnings) for
unsecured loans and 25% of its statutory capital base for secured loans.
Statutory limits with respect to loans to a single entity may restrict the
ability of the Bank to originate large commercial or construction and
development loans. However, such loans may be originated in cooperation with
other financial institutions that commit to purchase such loans originated by
the Bank.
Management anticipates that the Bank will focus its lending on the
extension of relatively short-term loans or, to the extent it makes long-term
loans, the extension of loans with variable or adjustable interest rates in an
effort to retain a positive spread between its interest income and expenses.
Management of the Bank anticipates at least 80% of the Bank's loan portfolio
will consist of variable-rate loans. The Bank's loan portfolio will consist of
42.5% single-family residential construction loans, 42.5% commercial loans, 10%
consumer and 5% Small Business Administration loans. Construction loans and
commercial loans are short-term obligations with interest rates based on prime
plus some percentage point. Therefore, more than 80% of the Bank's loan
portfolio's interest rate will be adjusted annually.
Management plans to take advantage of the 180-day turnover in
construction loans so that management can better match the interest rates
earned on the Bank's loans to the interest rates paid on the Bank's deposits.
Of the Bank's initial $9,000,000 in capital, $3,000,000 will be allocated to
common stock, $5,100,000 to paid-in capital, and $900,000 will be set aside as
an expense fund to cover pre-opening expenses and potential losses in its first
year of operation. The $900,000 expense fund will not be included in the
Bank's statutory capital base. Accordingly, the Bank's initial legal lending
limits will be $1,215,000 for unsecured loans and $2,025,000 for secured loans.
While the Bank expects generally to employ more conservative lending limits,
the Board of Directors will have discretion to lend up to the legal lending
limits as described above.
Real Estate Loans. The Bank will make and hold real estate
loans, consisting primarily of single-family residential construction loans
for one-to-four unit family structures. The Bank will require a first lien
position on the land
12
<PAGE> 16
associated with the construction project and will offer these loans to
professional building contractors and homeowners. Loan disbursements will
require on-site inspections to assure the project is on budget and that the
loan proceeds are being used for the construction project and not being
diverted to another project. The loan-to-value ratio for such loans will be
predominantly 75% of the lower of the as-built appraised value or project cost,
and will be a maximum of 80% if the loan is amortized. Loans for construction
can present a high degree of risk to the lender, depending upon, among other
things, whether the builder can sell the home to a buyer, whether the buyer can
obtain permanent financing, whether the transaction produces income in the
interim and the nature of changing economic conditions.
Consumer Loans. The Bank plans to make consumer loans,
consisting primarily of installment loans to individuals for personal, family
and household purposes, including loans for automobiles, home improvements and
investments. Risks associated with consumer loans include, but are not limited
to, fraud, deteriorated or non-existing collateral, general economic downturn
and customer financial problems. The Bank's consumer loans will be both
secured and unsecured loans. Unsecured loans, however, will be only made to
customers of sound net worth, above average liquidity, and unquestionable
repayment ability. Unsecured loans will have maturities of less than one year.
Secured loans will be margined so that money received from collateral in a
foreclosure situation would repay the loan.
Commercial Loans. Commercial lending will be directed
principally toward small to mid-size businesses whose demand for funds falls
within the legal lending limits of the Bank. This category of loans includes
loans made to individual, partnership or corporate borrowers, and obtained for
a variety of business purposes. Risks associated with these loans can be
significant and include, but are not limited to, fraud, bankruptcy, economic
downturn, deteriorated or non-existing collateral and changes in interest
rates. The Bank will make secured and unsecured commercial loans. Unsecured
commercial loans, however, will be only made to customers who demonstrate sound
net worth, above average liquidity, and unquestionable repayment ability.
Unsecured loans will have maturities of less than one year. Secured loans will
be margined so that money received from collateral in a foreclosure situation
would repay the loan.
INVESTMENTS
In addition to loans, the Bank will make other investments in
obligations of the United States guaranteed as to principal and interest by the
United States and other taxable securities. No investment in any of those
instruments will exceed any applicable limitation imposed by law or regulation.
DEPOSITS
The primary sources of deposits will be residents of, and businesses
and their employees located initially in Gwinnett County, and to a lesser
extent Cobb County, DeKalb County, Fulton County in Georgia obtained through
personal solicitation by the Bank's officers and directors. The Bank will be
authorized to accept and pay interest on deposits received from individuals,
corporations, partnerships and any other type of legal entity, including
fiduciaries (such as private trusts) subject to the requirements of the
Department of Banking and the FDIC with regard to the maximum rates of interest
payable on deposits, the manner in which such interest may be calculated and
paid, the frequency of payment and penalties for early withdrawal of deposits.
Management anticipates that the total deposit mix will consist of 20%
non-interest-bearing demand deposits, 26% interest bearing demand and money
market deposits, 4% savings deposits, 10% time deposits of $100,000 or more
and 40% other time deposits. The Bank will not utilize or permit the use of
brokered deposits. Qualified deposits will be insured by the FDIC in an amount
up to $100,000.
TRUST POWERS
The Bank's Charter authorizes it to execute trust powers in accordance
with the Financial Institutions Code of Georgia. The Bank will not be
permitted to exercise such trust powers without approval from the Department of
Banking and the FDIC. Management of the Bank does not anticipate that the Bank
will seek approval to exercise its trust powers in the immediately foreseeable
future.
ASSET AND LIABILITY MANAGEMENT
The Bank intends to manage its assets and liabilities to provide an
optimum and stable net interest margin, a profitable after-tax return on assets
and return on equity, and adequate liquidity. These management functions will
be conducted within the framework of written loan and investment policies which
the Bank will adopt. The Bank will attempt to maintain a balanced position
between rate sensitive assets and rate sensitive liabilities. Specifically, it
will chart assets
13
<PAGE> 17
and liabilities on a matrix by maturity, effective duration, and interest
adjustment period, and endeavor to manage any gaps in maturity ranges.
EMPLOYEES
Upon commencement of operations, the Bank is expected to have
approximately 15 full-time employees and no part-time employees. The Company
is not expected to have any employees who are not also employees of the Bank.
There are no expected significant changes in the number of employees of the
Company or the Bank.
DATA PROCESSING SERVICES
The Bank has entered into a three-year contract with Provesa, Inc.
whereby Provesa will provide data processing and item processing/imaging
services for the Bank. Data processing services are a normal service provided
by data processing entities and used by small community banks.
MANAGEMENT
OFFICERS AND DIRECTORS
On August 21, 1996, the Board of Directors of the Company elected the
following persons as officers of the Company:
<TABLE>
<S> <C> <C>
Larry D. Key President, Chief Executive Officer
John T. Hopkins III Executive Vice President, Chief Financial Officer, Secretary and Treasurer
</TABLE>
The Bylaws of the Company provide that there shall be nine members of
the Board of Directors. There are currently six members of the Board of
Directors of the Company and three vacancies. The current directors plan to
fill these vacancies with persons who have strong ties to Gwinnett County.
The following table sets forth for the current members of the Board of
Directors and senior and executive officers of the Company and the Bank (a)
their names, addresses and ages at April 1, 1997, (b) the positions they will
hold in the Bank, if any, (c) the number of shares of Common Stock for which
they intend to subscribe, and (d) the approximate percentage of outstanding
shares such number will represent if the minimum number of shares are sold in
this Offering and if the maximum number of shares are sold in this Offering.
<TABLE>
<CAPTION>
POSITION NUMBER OF % AFTER % AFTER
NAME AND ADDRESS AGE TO BE HELD SHARES(1) MINIMUM MAXIMUM
---------------- --- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
Larry D. Key 51 President, Chief 20,010 2.1% 1.7%
3300 Jim Moore Road Executive
Dacula, Georgia 30211 Officer and
Chairman
John T. Hopkins III 55 Executive Vice 5,010 .5% .4%
4310 Antelope Lane President, Chief
Lithonia, Georgia 30058 Financial
Officer,
Secretary and
Treasurer
Paul C. Birkhead 52 Senior Vice 20,010 2.1% 1.7%
4651 Warrior Trail President -
Lilburn, Georgia 30247 Commercial Loan
Officer
</TABLE>
14
<PAGE> 18
<TABLE>
<CAPTION>
POSITION NUMBER OF % AFTER % AFTER
NAME AND ADDRESS AGE TO BE HELD SHARES(1) MINIMUM MAXIMUM
---------------- --- ---------- --------- ------- -------
<S> <C> <C> <C> <C> <C>
James B. Ballard 52 Director 10,010 1.0% .8%
2400 Bagley Road
Cumming, Georgia 30130
Jerry M. Boles 56 Director 25,010 2.6% 2.0%
Boles Parts Supply, Inc.
1057 Boulevard, S.E.
Atlanta, Georgia 30312
W. H. Britt 58 Director 5,010 .5% .4%
W. H. Britt & Assoc., Inc.
535 Grayson Parkway
Grayson, Georgia 30221
Norris J. Nash 69 Director 5,010 .5% .4%
Gwinnett DeKalb Realty, Inc.
4830 Lawrenceville Hwy.
Lilburn, Georgia 30247-3845
William S. Stanton 41 Director 20,010 2.1% 1.7%
Print Direction, Inc.
1455 Oakbrook Drive
Norcross, Georgia 30093
- -------------
</TABLE>
(1) Each of the Directors of the Company, Mr. Hopkins and Mr. Birkhead
purchased 10 shares of common stock of the Company for $10.00 per share
in connection with the initial organization of the Company.
In addition, Marcia N. Watkins will serve as Senior Vice President and
Chief Operating Officer of the Bank. She does not serve on the Board of
Directors of the Company or the Bank.
BIOGRAPHIES
JAMES B. BALLARD was the Chief Executive Officer, founder and a member
of the board of directors from 1972 until January 1996 of Spartan Constructors,
Inc., an industrial constructor serving the continental United States as well
as the international market. Mr. Ballard currently serves as a consultant to
Day and Zimmerman.
PAUL C. BIRKHEAD was Executive Vice President and Senior Lending
Officer of Commercial Bank of Georgia from 1988 when Commercial Bank opened
until July 1995 when he resigned to participate in current organizing group of
the Company. Mr. Birkhead was Group Vice President of Commercial Lending of
Heritage Bank from 1984 until November 1987, when Heritage merged with Bank
South, N.A. Mr. Birkhead was Vice President of Commercial Lending for Bank
South, N.A. until he resigned in January 1988 to join the organizing group of
Commercial Bank of Georgia.
JERRY M. BOLES has been in the wholesale automotive after-market for
35 years. Mr. Boles is owner and president of Boles Parts Supply, Inc., which
was founded in 1964, with headquarters in Atlanta, Georgia and distribution
warehouses in Oklahoma City, Oklahoma; Tappahannock, Virginia and Dahlonega,
Georgia.
W. H. BRITT has been an active businessman in the Gwinnett County area
since 1975. He is the founder and owner of H & H Truck and Tractor, Inc., an
equipment sales company and W. H. Britt and Associates, Inc., a real estate
brokerage and development company. Mr. Britt was an organizer of Gwinnett
County Bank (Heritage Bank) in 1972 and served as a director until 1987 when
the bank was sold.
JOHN T. HOPKINS III was the Chief Financial Officer and Executive Vice
President of Commercial Bank of Georgia until he resigned in July 1996 to
participate in the Company's organizing group. Mr. Hopkins was Chief Financial
15
<PAGE> 19
Officer and Chief Operating Officer of Paragon Mortgage from 1993 to 1995. He
was Chief Financial Officer of West Corp. which operated commercial,
electrical and mechanical contracting companies from 1989 to 1993. From 1985
to 1989, he was Internal Auditor and Chief Financial Officer of Heritage Bank
and Corporate Accountant of Williams Service Group. Prior to 1985, Mr. Hopkins
was a partner with H. H. Brunet and Company, Certified Public Accountants,
specializing in the financial services industry.
LARRY D. KEY was the Executive Vice President and Chief Lending
Officer of Commercial Bank of Georgia from the merger of Commercial Bank of
Georgia and Commercial Bank of Gwinnett in March 1995 until he resigned in July
1996 to participate in current organizing group. Mr. Key served as President
and Chief Executive Officer of the former Commercial Bank of Georgia from 1994
until merger. He served as Executive Vice President and Chief Credit Officer
of the former Commercial Bank of Georgia from 1992 until 1994. Mr. Key was
Senior Vice President from the opening of the former Commercial Bank of Georgia
in 1988 until 1992. He was Group Vice President and an advisory director of
Heritage Bank from 1984 until 1987. Mr. Key managed Moores Building Center,
Inc. in Dahlonega, Georgia from 1987 to 1988. Mr. Key served as a director of
Commercial Bancorp of Georgia, Inc. and Commercial Bank of Georgia from their
initial organization in 1988 until July 1996.
NORRIS J. NASH is the President of Metropolitan Land Development and
Investment Corporation and Gwinnett-DeKalb, Inc. He has been a real estate
developer since 1962. Mr. Nash has served as director of the former Gwinnett
County Bank, and on the Advisory Board of Wachovia Bank of Georgia, N.A. Mr.
Nash was a member of the House of Representatives for Gwinnett County, District
22, Post #1 from 1967 to 1969.
WILLIAM S. STANTON is President of Print Direction, Inc. and Atlanta
Screen Print, Inc. Mr. Stanton has served as President of Print Direction
since its inception in 1984 and Atlanta Screen Print since 1988. He was an
Account Representative with Xerox Corporation from 1977 to 1981.
MARCIA N. WATKINS is Senior Vice President and Chief Operating Officer
of the Bank. Prior to serving as Senior Vice President and Chief Operating
Officer, Ms. Watkins served as Senior Vice President and Chief Operations
Officer of Commercial Bank of Georgia from its inception in February 1988 to
June 1996. Ms. Watkins was one of the original seven employees involved in the
opening of Gwinnett County Bank, a/k/a Heritage Bank, in February 1971. Ms.
Watkins served as Senior Operations Officer of Heritage Trust from February
1986 to February 1988. Ms. Watkins held various positions with the Heritage
Bank, including Vice President and Cashier between 1971 and 1986.
CASH COMPENSATION
While no employment agreements exist or are presently contemplated, it
is anticipated that the Company will pay initial annual salaries to its
officers as follows:
<TABLE>
<CAPTION>
Person Position Salary
------ -------- ------
<S> <C> <C>
Larry D. Key President; Chief Executive Officer and $ 130,000 (1)
Chairman
John T. Hopkins III Executive Vice President, Chief $ 95,000 (1)
Financial Officer, Secretary and
Treasurer
</TABLE>
In addition, the Bank will pay initial annual salaries to its officers
as follows:
<TABLE>
<CAPTION>
Person Position Salary
------ -------- ------
<S> <C> <C>
Paul C. Birkhead Senior Vice President $ 80,000
Marcia N. Watkins Senior Vice President and Chief $ 55,000
Operating Officer
- --------------
</TABLE>
16
<PAGE> 20
(1) Through the organization of the Bank and until the Bank commences
business, the Joint Venture will pay 5% of the compensation expense for
these persons.
The Bank plans to also hire a chief credit officer/senior loan officer
and to pay such officer an annual salary of $90,000. The employment of such
officer will be subject to the approval of the Department of Banking.
The officers of the Company and the Bank will also receive health, life
and disability insurance under the same plan and terms as other employees of
the Bank. In addition, Messrs. Key and Hopkins will each receive an automobile
allowance of $650 per month. In the case of Messrs. Key and Hopkins, 5% of
their automobile allowances will be paid by the Joint Venture until the Bank
commences business.
Directors of the Bank will not be compensated for their services as
directors until the Bank earns a profit both currently and cumulatively.
CERTAIN TRANSACTIONS
It is possible that the Company and the Bank will have banking and other
business transactions in the ordinary course of business with directors and
officers of the Company and the Bank, including members of their families or
corporations, partnerships or other organizations in which such directors and
officers have a controlling interest. If such transactions occur, they will be
on substantially the same terms (including price, interest rate and collateral)
as those prevailing at the time for comparable transactions with unrelated
parties, and any banking transactions will not be expected to involve more than
the normal risk of collectibility or present other unfavorable features to the
Company and the Bank.
In addition, the Company and the Bank each have a line of credit loan
from the Joint Venture which consists of the organizers of the Company and the
Bank in the aggregate amount of $500,000 to pay organizational and pre-opening
expenses for the Company and Bank. The line of credit has a one-year term
ending on July 17, 1997 and bears interest at an initial rate of 9.25% which
interest rate will fluctuate automatically with the prime rate at a level of
1.0% above prime rate. Interest on the amounts advanced under the line of
credit are payable monthly on the last day of each calendar month. The line of
credit and interest costs will be repaid by the Company from the proceeds of
this Offering. See "USE OF PROCEEDS." The line of credit and interest costs
will be repaid by the Bank from the proceeds of the sale of its common stock to
the Company. Management believe that the terms of the Company's line of credit
with the Joint Venture are as or more favorable than the Company could have
obtained from a non-affiliated lending institution. Neither the Company nor
the Bank will borrow from the Joint Venture after completion of the Offering.
It is anticipated that Columbus Bank and Trust Company, the Bankers Bank
and SunTrust Bank, Atlanta will operate as correspondent banks for the Bank.
The Bankers Bank will provide correspondent bank services such as check
clearing, international services, wire transfers and various additional
services for the Bank. Columbus Bank and Trust Company will serve as the
Escrow Agent in connection with the Offering and will serve the Bank through
purchasing and selling federal funds. SunTrust Bank, Atlanta will also assist
the Bank in purchasing and selling federal funds and with the Bank's
investments.
All of the relationships established or to be established with the banks
providing correspondent banking services were at arms-length. There is no
affiliation between the Bank and any of its officers and directors and any of
the Bank's correspondent Banks.
The Bank will enter into a Lease Agreement with the Joint Venture to
lease the Permanent Premises. Most of the members of the Joint Venture are
directors of the Company and organizers of the Bank. The Permanent Premises
lease rate is market rental value established by two MAI appraisals and,
therefore, is as favorable as rates obtainable from an unaffiliated third
party. In addition, during the period during which the Permanent Premises is
being constructed, the Bank will lease from a third party the temporary
premises. See "BUSINESS OF THE COMPANY" and "THE BANK--Bank Location and
Facilities."
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER 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 Common Stock in
the future. There are no present plans for the Company's Common Stock to be
traded
17
<PAGE> 21
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.
DESCRIPTION OF COMMON STOCK OF THE COMPANY
GENERAL
The Company's Articles of Incorporation authorize the Company to issue
up to 3,000,000 shares of Common Stock, par value $1.00 per share, of which a
minimum of 950,000 shares and a maximum of 1,200,000 shares will be issued
pursuant to this Offering. Eighty shares of Common Stock were issued prior to
the Offering to the initial organizers of the Company.
All shares of Common Stock of the Company will be entitled to share
equally in dividends from funds legally available therefor, when, as and if
declared by the Board of Directors, and upon liquidation or dissolution of the
Company, whether voluntary or involuntary, to share equally in all assets of
the Company available for distribution to the shareholders. It is not
anticipated that the Company will pay any cash dividends on the Common Stock in
the near future. See "DIVIDENDS." Each holder of Common Stock will be
entitled to one vote for each share on all matters submitted to the
shareholders. Holders of Common Stock will not have any preemptive right to
acquire authorized but unissued capital stock of the Company. There is no
cumulative voting, redemption right, sinking fund provision, or right of
conversion in existence with respect to the Common Stock. All shares of the
Common Stock issued in accordance with the terms of this Offering as described
in this Prospectus will be fully-paid and non-assessable.
SHARES HELD BY AFFILIATES
Upon completion of this Offering, the Company will have a minimum of
950,000 shares and a maximum of 1,200,000 shares outstanding from the Offering.
All of these shares will be freely tradeable without restriction or
registration under the Securities Act of 1933, as amended (the "1933 Act"),
except for shares purchased in this Offering by the officers and directors of
the Company.
Such officers and directors are "affiliates" of the Company (as that
term is defined in Rule 144 adopted under the 1933 Act) and, as a result, their
shares will be subject to certain resale restrictions.
Rule 144 generally provides that a person (including an affiliate of the
Company) who has beneficially owned shares for at least two years would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of the Common Stock or
the average weekly trading volume of the Common Stock during the four calendar
weeks preceding such sale, whichever is greater. While affiliates may
generally sell nonrestricted shares under Rule 144 without regard to the length
of their holding period, all shares purchased by the officers and directors
will be purchased for investment purposes and not with a present intention of
redistribution.
There can be no assurance that a public market for the Common Stock will
exist at any time subsequent to this Offering. As a result, investors who may
wish or who need to dispose of all or a part of their investment in the Common
Stock may not be able to do so except for private direct negotiations with
third parties, assuming that third parties are willing to purchase the Common
Stock.
ANTITAKEOVER PROVISIONS OF THE COMPANY'S
ARTICLES OF INCORPORATION AND BYLAWS
The Articles of Incorporation of the Company contain certain provisions
which would have the effect of impeding an attempt to change or remove
management of the Company or to gain control of the Company in a transaction
not supported by its Board of Directors (the "Protective Provisions"). In
general, one purpose of the Protective Provisions is to assist the Company's
Board of Directors in playing a role in connection with attempts to acquire
control of the Company, so that the Board of Directors of the Company can
further and protect the interests of the Company and its shareholders as
appropriate under the circumstances, including if the Board of Directors
determines that a sale of control is in the best interest of the Company and
its shareholders, by enhancing the Board's ability to maximize the value to be
received by the shareholders upon such sale.
18
<PAGE> 22
Although the Company's management believes the Protective Provisions
are, therefore, beneficial to shareholders of the Company, the Protective
Provisions also may tend to discourage some takeover bids. As a result,
shareholders of the Company may be deprived of opportunities to sell some or
all of their shares at prices that represent a premium over prevailing market
prices. On the other hand, defeating undesirable acquisition offers can be a
very expensive and time-consuming process. To the extent that the Protective
Provisions discourage undesirable proposals, the Company may be able to avoid
those expenditures of time and money.
The Protective Provisions also may discourage open market purchases by a
potential acquirer. Such purchases may increase the market price of the
Company's Common Stock temporarily, enabling shareholders to sell their shares
at a price higher than that which otherwise would prevail. In addition, the
Protective Provisions may decrease the market price of the Company's Common
Stock by making the stock less attractive to persons who invest in securities
in anticipation of price increases from potential acquisition attempts. The
Protective Provisions also may make it more difficult and time consuming for a
potential acquirer to obtain control of the Company through replacing the Board
of Directors and management. Furthermore, the Protective Provisions may make
it more difficult for shareholders of the Company to replace the Board of
Directors or management, even if a majority of the shareholders believes such
replacement is in the best interests of the Company. As a result, the
Protective Provisions may tend to perpetuate the incumbent Board of Directors
and management.
The Articles of Incorporation of the Company also contain a provision
which eliminates the potential personal liability of directors for monetary
damages. In addition, the Bylaws of the Company contain certain provisions
which provide indemnification for directors of the Company.
The Protective Provisions and the provisions relating to elimination of
liability and indemnification of directors are discussed more fully below.
CHANGE IN NUMBER OF DIRECTORS
Article 7 of the Articles of Incorporation of the Company provides that
any change in the number of directors of the Company, as set forth in its
Bylaws, would have to be made by the affirmative vote of 2/3 of the entire
Board of Directors or by the affirmative vote of the holders of at least 2/3 of
the outstanding shares of Common Stock.
Under Georgia law, the number of directors may be increased or decreased
from time to time by amendment to the Bylaws, unless the Articles of
Incorporation provide otherwise or unless the number of directors is otherwise
fixed by the shareholders.
REMOVAL OF DIRECTORS
Article 8 of the Articles of Incorporation of the Company provides that
directors of the Company may be removed during their terms with or without
cause by the affirmative vote of the holders of a majority of the outstanding
shares of Common Stock. "Cause" for this purpose is defined as final
conviction of a felony, request or demand for removal by any bank regulatory
authority having jurisdiction over the Company, or determination by at least
2/3 of the incumbent directors of the Company that the conduct of the director
to be removed has been inimical to the best interests of the Company.
Under Georgia law, any or all of the directors of a corporation may be
removed with or without cause by the affirmative vote of a majority of the
shares represented at a meeting at which a quorum is represented and entitled
to vote thereon, unless the Articles of Incorporation provide otherwise.
LIMITATION OF LIABILITY
Article 10 of the Company's Articles of Incorporation, subject to
certain exceptions, eliminates the potential personal liability of a director
for monetary damages to the Company and to the shareholders of the Company for
breach of a duty as a director. There is no elimination of liability for (a) a
breach of duty involving appropriation of a business opportunity of the
Company, (b) an act or omission not in good faith or involving intentional
misconduct or a knowing violation of law, (c) a transaction from which the
director derives an improper material tangible personal benefit, or (d) as to
any payment of a dividend or approval of a stock repurchase that is illegal
under the Georgia Business Corporation Code. Article 10 does not eliminate or
limit the right of the Company or its shareholders to seek injunctive or other
equitable relief not involving monetary damages.
19
<PAGE> 23
Article 10 was adopted by the Company pursuant to the Georgia Business
Corporation Code which allows Georgia corporations, with the approval of their
shareholders, to include in their Articles of Incorporation a provision
eliminating or limiting the liability of directors, except in the circumstances
described above. Article 10 was included in the Company's Articles of
Incorporation to encourage qualified individuals to serve and remain as
directors of the Company. While the Company has not experienced any problems
in locating directors, it could experience difficulty in the future as the
Company's business activities increase and diversify. Article 10 was also
included to enhance the Company's ability to secure liability insurance for its
directors at a reasonable cost. While the Company intends to obtain liability
insurance covering actions taken by its directors in their capacities as
directors, the Board of Directors believes that the current director's
liability insurance environment, and the environment for the foreseeable
future, is characterized by increasing premiums, reduced coverage and an
increasing risk of litigation and liability. The Board of Directors believes
that Article 10 will enable the Company to secure such insurance on terms more
favorable than if such a provision were not included in the Articles of
Incorporation.
SUPERMAJORITY VOTING ON CERTAIN TRANSACTIONS
Under Article 12 of the Articles of Incorporation of the Company, with
certain exceptions, any merger or consolidation involving the Company or any
sale or other disposition of all or substantially all of its assets will
require the affirmative vote of the holders of at least 2/3 of the outstanding
shares of Common Stock. However, if the Board of Directors of the Company has
approved the particular transaction by the affirmative vote of 2/3 of the
entire Board, then the applicable provisions of Georgia law would govern and
shareholder approval of the transaction would require the affirmative vote of
the holders of only a majority of the outstanding shares of Common Stock
entitled to vote thereon.
The primary purpose of this Article is to discourage any party from
attempting to acquire control of the Company through the acquisition of a
substantial number of shares of Common Stock followed by a forced merger or
sale of assets without negotiation with management. Such a merger or sale
might not be in the best interests of the Company or its shareholders. This
provision may also serve to reduce the risk of a potential conflict of interest
between a substantial shareholder on the one hand and the Company and its other
shareholders on the other.
The foregoing provision could enable a minority of the Company
shareholders to prevent a transaction favored by the majority of the
shareholders. Also, in some circumstances, the directors could cause a 2/3
vote to be required to approve the transaction by withholding their consent to
such a transaction, thereby enhancing their positions with the Company and the
Bank. However, of the nine persons who are directors of the Company, only one
will be affiliated with the Company and with the Bank in a full-time management
position.
EVALUATION OF AN ACQUISITION PROPOSAL
Article 13 of the Company's Articles of Incorporation provides that the
response of the Company to any acquisition proposal made by another party will
be based on the Board's evaluation of the best interests of the Company and its
shareholders. As used herein, the term "acquisition proposal" refers to any
offer of another party (a) to make a tender offer or exchange offer for any
equity security of the Company, (b) to merge or consolidate the Company with
another corporation, or (c) to purchase or otherwise acquire all or
substantially all of the properties and assets owned by the Company.
Article 13 charges the Board, in evaluating an acquisition proposal, to
consider all relevant factors, including (a) the expected social and economic
effects of the transaction on the employees, customers and other constituents
(e.g., suppliers of goods and services) of the Company and the Bank, (b) the
expected social and economic effects on the communities within which the
Company and the Bank operate, and (c) the consideration being offered by the
other corporation in relation (i) to the then current value of the Company as
determined by a freely negotiated transaction and (ii) to the Board of
Directors' then estimate of the Company's future value as an independent
entity. The enumerated factors are not exclusive, and the Board may consider
other relevant factors.
This Article has been included in the Company's Articles of
Incorporation because the Bank is charged with providing support to and being
involved with the communities it serves, and the Board believes its obligations
in evaluating an acquisition proposal extend beyond evaluating merely the
consideration being offered in relation to the then market or book value of the
Common Stock. No provisions of Georgia law specifically enumerate the factors
a corporation's board of directors should consider in the event the corporation
is presented with an acquisition proposal.
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<PAGE> 24
While the value of the consideration offered to shareholders is the main
factor when weighing the benefits of an acquisition proposal, the Board
believes it appropriate also to consider all other relevant factors. For
example, this Article directs the Board to evaluate the consideration being
offered in relation to the then current value of the Company determined in a
freely negotiated transaction and in relation to the Board's then estimate of
the future value of the Company as an independent concern. A takeover bid
often places the target corporation virtually in the position of making a
forced sale, sometimes when the market price of its stock may be depressed.
The Board believes that frequently the consideration offered in such a
situation, even though it may be in excess of the then market value (i.e., the
value at which shares are then currently trading), it is less than that which
could be obtained in a freely negotiated transaction. In a freely negotiated
transaction, management would have the opportunity to seek a suitable partner
at a time of its choosing and to negotiate for the most favorable price and
terms which reflect not only the current value, but also the future value of
the Company.
One effect of this Article may be to discourage a tender offer in
advance. Often an offeror consults the Board of a target corporation prior to
or after commencing a tender offer in an attempt to prevent a contest from
developing. In the opinion of the Board, this provision will strengthen its
position in dealing with any potential offeror which might attempt to acquire
the Company through a hostile tender offer. Another effect of this Article may
be to dissuade shareholders who might be displeased with the Board's response
to an acquisition proposal from engaging the Company in costly litigation.
This provision, however, does not affect the right of a shareholder displeased
with the Board's response to an acquisition proposal to institute litigation
against the Company and to allege that the Board breached an obligation to
shareholders by not limiting its evaluation of an acquisition proposal to the
value of the consideration being offered in relation to the then market or book
value of the Common Stock.
Article 13 would not make an acquisition proposal regarded by the Board
as being in the best interests of the Company more difficult to accomplish. It
would, however, permit the Board to determine that an acquisition proposal was
not in the best interests of the Company (and thus to oppose it) on the basis
of the various factors deemed relevant. In some cases, such opposition by the
Board might have the effect of maintaining the positions of incumbent
management.
AMENDMENT OF PROVISIONS
Any amendment of Articles 7, 8, 10, 12, and 13 of the Company's Articles
of Incorporation requires the affirmative vote of the holders of at least 2/3
of the outstanding shares of Common Stock, unless 2/3 of the entire Board of
Directors approves the amendment. If 2/3 of the Board approves the amendment,
the applicable provisions of Georgia law would govern, and the approval of only
a majority of the outstanding shares of Common Stock would be required.
INDEMNIFICATION
The Bylaws of the Company contain certain indemnification provisions
which provide that directors, officers, employees or agents of the Company will
be indemnified against expenses actually and reasonably incurred by them if
they are successful on the merits of a claim or proceeding.
When a case or dispute is not ultimately determined on its merits (i.e.,
it is settled), the indemnification provisions provide that the Company will
indemnify directors when they meet the applicable standard of conduct. The
applicable standard of conduct is met if the director acted in a manner he or
she reasonably believed to be in or not opposed to the best interests of the
Company and, with respect to any criminal action or proceeding, if the director
had no reasonable cause to believe his or her conduct was unlawful. Whether
the applicable standard of conduct has been met is determined by the Board of
Directors, the shareholders or independent legal counsel in each specific case.
The Bylaws of the Company also provide that the indemnification rights
set forth therein are not exclusive of other indemnification rights to which a
director may be entitled under any bylaw, resolution or agreement, either
specifically or in general terms approved by the affirmative vote of the
holders of a majority of the shares entitled to vote thereon. The Company can
also provide for greater indemnification than that set forth in the Bylaws if
it chooses to do so, subject to approval by the Company's shareholders. The
Company may not, however, indemnify a director for liability arising out of
circumstances which constitute exceptions to limitation of a director's
liability for monetary damages.
The indemnification provisions of the Bylaws specifically provide that
the Company may purchase and maintain insurance on behalf of any director
against any liability asserted against such person and incurred by him in any
such capacity, whether or not the Company would have had the power to indemnify
against such liability.
21
<PAGE> 25
The Company is not aware of any pending or threatened action, suit or
proceeding involving any of its directors or officers for which indemnification
from the Company may be sought.
Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been
advised that in the opinion of the SEC such indemnification is against public
policy as expressed in the 1933 Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities other than the
payment by the Company of expenses incurred or paid by a director, officer or
controlling person of the Company in the successful defense of any action, suit
or proceeding is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
SUPERVISION AND REGULATION
Bank holding companies and banks are extensively regulated under both
federal and state law. The following is a brief summary of certain statutes,
rules and regulations affecting the Company and the Bank. This summary is
qualified in its entirety by reference to the particular statutory and
regulatory provision referred to below and is not intended to be an exhaustive
description of the statutes or regulations applicable to the business of the
Company and the Bank. Supervision, regulation and examination of the Company
and the Bank by the bank regulatory agencies are intended primarily for the
protection of depositors rather than shareholders of the Company.
BANK HOLDING COMPANY REGULATION
The Company will be a registered holding company under the Bank Holding
Company Act of 1956 (the "BHC Act") and the Georgia Bank Holding Company Act
(the "Georgia BHC Act") and will be regulated under such acts by the Board of
Governors of the Federal Reserve System (the "Federal Reserve") and by the
Department of Banking, respectively.
As a bank holding company, the Company is required to file annual
reports with the Federal Reserve and the Department of Banking and such
additional information as the applicable regulator may require pursuant to the
BHC Act and the Georgia BHC Act. The Federal Reserve and the Department of
Banking may also conduct examinations of the Company to determine whether it is
in compliance with both the BHC Act and the Georgia BHC Act and the regulations
promulgated thereunder.
The BHC Act also requires every bank holding company to obtain prior
approval from the Federal Reserve before acquiring direct or indirect ownership
or control of more than 5% of the voting shares of any bank which is not
already majority owned or controlled by that bank holding company. Acquisition
of any additional banks would also require prior approval from the Department
of Banking.
On September 29, 1994, President Clinton signed the Riegle-Neal
Interstate Banking and Branching Efficiency Act of 1994 (the "Interstate Act")
which amended federal law to permit bank holding companies to acquire existing
banks in any state effective September 29, 1995, and any interstate bank
holding company is permitted to merge its various bank subsidiaries into a
single bank with interstate branches effective June 1, 1997. States have the
authority to authorize interstate branching prior to June 1, 1997, or
alternatively, to opt out of interstate branching prior to that date.
In addition to having the right to acquire ownership or control of other
banks, a bank holding company is authorized to acquire ownership or control of
non-banking companies, provided the activities of such companies are so closely
related to banking or managing or controlling banks that the Federal Reserve
considers such activities to be proper to the operation and control of banks.
Regulation Y, promulgated by the Federal Reserve, sets forth those activities
which are regarded as closely related to banking or managing or controlling
banks and, thus, are permissible activities for bank holding companies, subject
to approval by the Federal Reserve in individual cases.
Federal Reserve policy requires a bank holding company to act as a
source of financial strength and to take measures to preserve and protect bank
subsidiaries in situations where additional investments in a troubled bank may
not be warranted. Under these provisions, a bank holding company may be
required to loan money to its subsidiaries in the form of capital notes or
other instruments which qualify for capital under regulatory rules. Any loans
by the holding
22
<PAGE> 26
company to such subsidiary banks are likely to be unsecured and subordinated to
such bank's depositors and perhaps to its other creditors.
BANK REGULATION
The Company will initially have one subsidiary bank. The Bank will be a
state bank chartered under the laws of the State of Georgia and will be subject
to examination by the Department of Banking. The Department of Banking
regulates or monitors all areas of a bank's operations and activities,
including reserves, loans, mergers, issuance of securities, payment of
dividends, interest rates and establishment of branches.
The Bank will also be insured and regulated by the Federal Deposit
Insurance Corporation (the "FDIC"). The major functions of the FDIC with
respect to insured banks include paying depositors to the extent provided by
law in the event an insured bank is closed without adequately providing for
payment of the claims of depositors, acting as a receiver of state banks placed
in receivership when so appointed by state authorities, and preventing the
continuance or development of unsound and unsafe banking practices. In
addition, the FDIC is authorized to examine insured state banks which are not
members of the Federal Reserve to determine the condition of such banks for
insurance purposes. The FDIC also approves conversions, mergers,
consolidations and assumption of deposit liability transactions between insured
banks and noninsured banks or institutions to prevent capital or surplus
diminution in such transactions where the resulting, continued or assuming bank
is an insured non-member state bank.
Subsidiary banks of a bank holding company are subject to certain
restrictions imposed by the BHC Act on any extension of credit to the bank
holding company or any of its subsidiaries, on investment in the stock or other
securities of the bank holding company or its subsidiaries, and on the taking
of such stock or securities as collateral for loans to any borrower. In
addition, a bank holding company and its subsidiaries are prohibited from
engaging in certain tying arrangements in connection with any extension of
credit or provision of any property or services.
CAPITAL REQUIREMENTS
Regulatory agencies measure capital adequacy with a framework that makes
capital requirements sensitive to the risk profile of the individual banking
institution. The guidelines define capital as either Tier 1 capital (primarily
shareholders equity) or Tier 2 capital (certain debt instruments and a portion
of the reserve for loan losses). There are two measures of capital adequacy
for bank holding companies and their subsidiary banks: the Tier 1 leverage
ratio and the risk-based capital requirements. Bank holding companies and
their subsidiary banks must maintain a minimum Tier 1 leverage ratio of 4%. In
addition, Tier 1 capital must equal 4% of risk-weighted assets, and total
capital (Tier 1 plus Tier 2) must equal 8% of risk-weighted assets. These are
minimum requirements, however, and institutions experiencing internal growth
(which will initially be the case for the Bank) or making acquisitions, as well
as institutions with supervisory or operational weaknesses, will be expected to
maintain capital positions well above these minimum levels.
The federal banking agencies have proposed amending the capital adequacy
standards to provide for the consideration of interest rate risk in the overall
determination of a bank's capital ratio and to require banks with greater
interest rate risk to maintain adequate capital for the risk. It is uncertain
what effect these regulations, when implemented, would have on the Company and
the Bank.
The Federal Deposit Insurance Corporation Improvement Act of 1991 (the
"1991 Act") imposes a regulatory matrix which requires the federal banking
agencies to take prompt corrective action to deal with depository institutions
that fail to meet their minimum capital requirements or are otherwise in a
troubled condition. The prompt corrective action provisions require
undercapitalized institutions to become subject to an increasingly stringent
array of restrictions, requirements and prohibitions, as their capital levels
deteriorate and supervisory problems mount. Should these corrective measures
prove unsuccessful in recapitalizing the institution and correcting its
problems, the 1991 Act mandates that the institution be placed in receivership.
Pursuant to regulations promulgated under the 1991 Act, the corrective
actions that the banking agencies either must or may take are tied primarily to
an institution's capital levels. In accordance with the framework adopted by
the 1991 Act, the banking agencies have developed a classification system,
pursuant to which all banks and thrifts are placed into one of five categories:
well-capitalized institutions, adequately capitalized institutions,
undercapitalized institutions, significantly undercapitalized institutions and
critically undercapitalized institutions. The capital thresholds established
for each of the categories are as follows:
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<TABLE>
<CAPTION>
Total Tier 1 Risk-
Capital Category Tier 1 Capital Risk-Based Capital Based Capital Other
---------------- -------------- ------------------ ------------- -----
<S> <C> <C> <C> <C>
Well Capitalized 5% or more 10% or more 6% or more Not subject to
a capital
directive
Adequately 4% or more 8% or more 4% or more --
Capitalized
Undercapitalized less than 4% less than 8% less than 4% --
Significantly less than 3% less than 6% less than 3% --
Undercapitalized
Critically 2% or less -- -- --
Undercapitalized tangible equity
</TABLE>
The Department of Banking 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 will be required to maintain a primary capital ratio of 8% during its
first three years of operation.
The capital guidelines can affect the Company and the Bank in several
ways. After completion of this Offering, the Company and the Bank will both
have capital ratios which are significantly greater than those required for
"well capitalized" institutions. However, rapid growth, poor loan portfolio
performance, poor earnings performance, or a combination of these factors,
could change the capital position of the Company and the Bank, making an
additional capital infusion necessary.
CRA AND FAIR LENDING
On April 19, 1995, the federal bank regulatory agencies adopted
revisions to the regulations promulgated pursuant to the Community Reinvestment
Act (the "CRA"), which are intended to set distinct assessment standards for
financial institutions. The revised regulation contains three evaluation
tests: (a) a lending test which will compare the institution's market share of
loans in low- and moderate-income areas to its market share of loans in its
entire service area and the percentage of a bank's outstanding loans to low-
and moderate-income areas or individuals, (b) a services test which will
evaluate the provision of services that promote the availability of credit to
low- and moderate-income areas, and (c) an investment test, which will evaluate
an institution's record of investments in organizations designed to foster
community development, small- and minority-owned businesses and affordable
housing lending, including state and local government housing or revenue bonds.
The regulation is designed to reduce the paperwork requirements of the current
regulations and provide regulators, institutions and community groups with a
more objective and predictable manner with which to evaluate the CRA
performance of financial institutions. The rule became effective on January 1,
1996 when evaluation under streamlined procedures began for institutions with
assets of less than $250 million that are owned by a holding company with total
assets of less than $1 billion.
Congress and various federal agencies (including, in addition to the
bank regulatory agencies, the Department of Housing and Urban Development, the
Federal Trade Commission and the Department of Justice) (collectively the
"Federal Agencies") responsible for implementing the nation's fair lending laws
have been increasingly concerned that prospective home buyers and other
borrowers are experiencing discrimination in their efforts to obtain loans. In
recent years, the Department of Justice has filed suit against financial
institutions which it determined had discriminated, seeking fines and
restitution for borrowers who allegedly suffered from discriminatory practices.
Most, if not all, of these suits have been settled (some for substantial sums)
without a full adjudication on the merits.
On March 8, 1994, the Federal Agencies, in an effort to clarify what
constitutes lending discrimination and to specify the factors the agencies will
consider in determining if lending discrimination exists, announced a joint
policy statement detailing specific discriminatory practices prohibited under
the Equal Credit Opportunity Act and the Fair Housing Act. In the policy
statement, three methods of proving lending discrimination were identified: (a)
overt evidence of discrimination, when a lender blatantly discriminates on a
prohibited basis; (b) evidence of disparate treatment, when
24
<PAGE> 28
a lender treats applicants differently based on a prohibited factor even where
there is no showing that the treatment was motivated by prejudice or a
conscious intention to discriminate against a person, and (c) evidence of
disparate impact, when a lender applies a practice uniformly to all applicants,
but the practice has a discriminatory effect, even where such practices are
neutral on their face and are applied equally, unless the practice can be
justified on the basis of business necessity.
FDIC INSURANCE ASSESSMENTS
The Bank will be subject to FDIC deposit insurance assessments for the
Bank Insurance Fund. The FDIC has implemented a risk-based assessment system
whereby banks are assessed on a sliding scale depending on their placement in
nine separate supervisory categories. Beginning in January, 1996, the
highest-rated institutions were required to pay the statutory annual minimum of
$2,000 for FDIC insurance. Rates for all other institutions were reduced by
four cents per $100 as well, leaving a premium range of 3 cents to 27 cents per
$100.
FUTURE REQUIREMENTS
Statutes and regulations are regularly proposed which contain
wide-ranging proposals for altering the structures, regulations and competitive
relationships of the nation's financial institutions. It cannot be predicted
whether or what form any proposed statute or regulation will be adopted or the
extent to which the business of the Company and the Bank may be affected by
such statute or regulation.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for
the Company by Womble Carlyle Sandridge & Rice, PLLC, Atlanta, Georgia.
EXPERTS
The financial statements of the Company at December 31, 1996, and for
the period from July 17, 1996 until December 31, 1996, set forth herein have
been so included in reliance on the report of Mauldin & Jenkins, LLC
independent certified public accountants, given on the authority of that firm
as experts in accounting and auditing.
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================================================================================
The Company reserves the right, in its sole discretion, to reject any and all
subscriptions, and no subscription will be effective until accepted by the
Company.
No person has been authorized by the Company to give any information or to make
any representations not contained in this Prospectus, and any information or
statement not contained herein must not be relied upon as having been
authorized by the Company. The delivery of this Prospectus does not imply that
the information contained herein is correct as of any time subsequent to its
date.
The Company has undertaken to update this Prospectus to reflect any facts or
events arising after the date hereof, which individually or in the aggregate
represent a fundamental change in the information set forth herein and to
include any material information with respect to the plan of distribution not
previously disclosed in this Prospectus or any material changes to such
information.
Each subscriber should consult his or her own counsel, accountants and other
professional advisors as to all matters concerning his or her investment in
shares of the Common Stock.
The shares of Common Stock of the Company offered hereby are not deposits
insured by the Federal Deposit Insurance Corporation.
This Prospectus does not constitute an offer to sell in any jurisdiction or a
solicitation of an offer to buy any of the shares of the Common Stock to any
person in any jurisdiction in which such offer or solicitation is unlawful.
TABLE OF CONTENTS
<TABLE>
<S> <C>
REPORTS TO SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ii
SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
THE OFFERING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
ESTIMATED EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PRO FORMA CAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
BUSINESS OF THE COMPANY AND THE BANK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
MARKET FOR COMMON STOCK AND RELATED
SHAREHOLDER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
DESCRIPTION OF COMMON STOCK OF THE
COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ANTITAKEOVER PROVISIONS OF THE
COMPANY'S ARTICLES OF INCORPORATION
AND BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SUPERVISION AND REGULATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
GBC BANCORP, INC.
A PROPOSED BANK HOLDING COMPANY
FOR
GWINNETT BANKING COMPANY
A PROPOSED STATE BANK
UP TO 1,200,000
SHARES OF
COMMON STOCK
PROSPECTUS
================================================================================
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